SORTIS RE Presentation 20090403 En

Corporate Presentation

Sofia

April 2009

Overview

Shareholders

Services Real Estate Investment Advisory

Real Estate Portfolio Management

Property Fund Management

Mezzanine Real Estate Financing

Investment Process

Board of Directors

Key Team Members

Investment Portfolio

Appendix – Bulgaria Overview

CONTENTS

Corporate Presentation 2

SORTIS Real Estate is a joint venture between:

SORTIS Invest

BMF Bulgaria

Mr. Joel Baquiche

Strong management team with significant real estate and private

equity investment experience in Bulgaria and internationally.

Applying best international corporate governance and compliance

practices.

Member of FIABCI Bulgaria, the Bulgarian chapter of FIABCI (The

International Real Estate Federation)

Real estate investment management company, offering the following

services on the territory of Republic of Bulgaria:

Real estate investment advisory

Real estate portfolio management

Property fund management

Mezzanine real estate financing

OVERVIEW


SHAREHOLDERS SORTIS Invest - investment advisory firm providing

services in the fields of private equity, venture

capital, corporate finance, mergers & acquisitions.

Assisting entrepreneurs in obtaining financing - equity,

quasi-equity, mezzanine loans and project financing

Wholly owned by Martin Paev, CFA, an investment banker

with significant M&A, private equity, asset management and

real estate experience, who structured the first Real Estate Investment Trust in Bulgaria

BMF Bulgaria – an investment holding company owned by Mr. Thomas

Higgins, an investment banker with 16+ years of asset management and

private equity experience in Bulgaria. Selected investments:

TFS, the Bulgarian investment advisor for the Balkan Accession Fund, a EUR 110 m

private equity and mezzanine finance investment fund for the Balkans.

Job Tiger, an online and offline Bulgaria focused recruitment company.

Mr. Joel Baquiche – an experienced investor in private equity and

international real estate with numerous investments in start-ups and SMEs,

listed and unlisted companies.


SERVICES SORTIS Real Estate structures individual and collective investment

schemes that enable its client-investors to benefit from the real estate

opportunities the Company has sourced and secured in Bulgaria.

Our aim is to generate attractive risk-adjusted returns to our investor

partners over the pre-agreed investment horizon.

We create robust investment structures in conjunction with

assessing, managing and, where possible, mitigating risk.

We are active in all major Real Estate Sectors, including:

Residential

Office

Retail

Industrial

Hotels


REAL ESTATE INVESTMENT ADVISORY

SORTIS Real Estate acts as investment advisor to property

funds, institutional and individual investors for their real estate

related activities in Bulgaria.

We help our advisory clients determine an appropriate real estate investment strategy and then implement it.

Our extensive network of brokers and partners throughout the

country enables us to identify attractive investment opportunities, to structure and secure investment transactions.

We make investment proposals to

our clients based on extensive

market analysis, financial modeling

and risk assessment.


SORTIS Real Estate provides real estate portfolio management

services to both institutional and individual clients.

Investment strategy is determined based on Client’s

investment profile and risk-return objectives taking into

consideration global and local market conditions and long-

term trends.

Careful analysis of short- to medium-term trends and deal

characteristics results in investment/disposal proposals or

recommendations.

Ongoing review of changes in market

conditions is essential for proper timing

of entry and exit in property investments.

Currently building capabilities for implementation of development projects where we do not act in partnership with

a reputed developer.


REAL ESTATE PORTFOLIO MANAGEMENT

PROPERTY FUND MANAGEMENT

Our team has substantial experience in structuring and managing

regulated and unregulated investment vehicles, both in Bulgaria and

internationally.

Mr. Martin Paev, CFA, General Manager of SORTIS Real Estate : structured and managed TBI-BAC REIT (now Prime Property REIT), the first Real Estate

Investment Trust in Bulgaria. During his directorship, the REIT provided a return to its investors of 73%, realized over a period of 18 months (Oct 2003-Mar 2005)

worked on structuring Bulgarian Land Development, a GBP 40 mln property investment

fund, listed on the AIM Market of the London Stock Exchange.

Mr. Thomas Higgins, Board Member and Investor : ex-Managing Director and Chief Investment Officer of the Bulgarian-American Enterprise

Fund

ex-Executive Director in charge of SME and hotel lending at Bulgarian-American Credit

Bank

co-founder and Managing Partner of Balkan Accession Fund, a EUR 110 mln private equity and mezzanine investment fund

Mr. Joel Baquiche, Board Member and Investor : active real estate investor in Europe and the USA

investor in numerous private equity and venture capital deals

committee member of London Business Angels Network and London Seed Capital Fund.


MEZZANINE REAL ESTATE FINANCING

SORTIS Real Estate structures mezzanine financing deals to

support experienced property developers.

Between 60 and 80% of the equity component required for a

development project may be provided in

the form of a mezzanine loan.

Investors take a quasi-equity position thus

achieving attractive risk-adjusted returns: transfer large part of project risks to the developer

keep part of the upside exposure.

Mezzanine financing enables developers to implement large

projects with limited own equity exposure.

Overall project management remains with the developer.

Facilitates bank financing for the project.

Mezzanine financing may be provided for projects in all sectors.


We combine systematic top-down approach with opportunity driven

project identification.

Local market understanding enhanced by global perspective.

Determine clear and viable exit strategy prior to investment decision.

Structure deals with focus on managing project risks (e.g. hiring

experienced contractors or co-investment with reputable developers)

Professional advice used in a cost efficient manner.

Hands-on approach to project development to ensure

quality, timeliness and flexibility.

Careful ongoing market analysis to determine the right timing for exit.

INVESTMENT PROCESS

Project

Identification

Deal

Structure

Due

Diligence

Deal

Closing

Project

DevelopmentExit


BOARD OF DIRECTORSMr. Martin Paev, CFA (born 1975, Bulgarian) – Chief Executive Officer

Mr. Paev structured the first Real Estate Investment Trust in Bulgaria (TBI-BAC REIT) and acted as the REIT’s Executive Director from its

establishment until he joined Address Group as Executive Director of ADDRESS Investment & Development in 2005. In 2006 he

established SORTIS Invest, an investment advisory firm, providing services in the fields of private equity, venture capital, corporate

finance and mergers & acquisitions.

Martin Paev has 7+ years of investment banking, M&A and asset management experience at the investment banks ING Barings in

Frankfurt/Main (Germany), ETEBA (National Bank of Greece Group) in Sofia, Bulgaria, Balkan Advisory Company (an independent

investment banking boutique in South-Eastern Europe) in Sofia, Bulgaria and SORTIS Invest in Sofia, Bulgaria.

Educated in Bulgaria, Netherlands & Germany, he has Master’s degree in Banking & Finance and Bachelor’s Degree in Business

Administration. Mr. Paev is CFA® Charterholder and served two mandates as Board member of the Bulgarian CFA Society.

Mr. Thomas Higgins (born 1966, US citizen) – Board Member, Investor

Mr. Higgins is an investment professional who has been living and working in Bulgaria for the last 15 years. From 1993 to 2005 he worked

for the Bulgarian-American Enterprise Fund (BAEF) where he become Managing Director and Chief Investment Officer in 1997.

In 2005 Mr. Higgins co-founded and become Co-Managing Partner of the Balkan Accession Fund (BAF), a EUR 110 million private equity

& mezzanine finance investment fund primarily focused on helping successful Bulgarian and Romanian companies expand in the

region. He has previously worked also with Coopers & Lybrand and Equitable Real Estate in New York.

Mr. Higgins has held significant leadership positions in the Bulgarian business community, which currently includes Financial Director and

Board Member of the Confederation of Employers & Industrialists in Bulgaria, Board Member of the American Chamber of Commerce in

Bulgaria, Member of the University Council of the American University in Bulgaria and Co-Founder and Board Member of the Bulgarian

Business Foundation for Education.

Mr. Higgins is an MBA graduate from the Kellogg School of Management at Northwestern University and received a B.Sc. degree in

Finance and Management Information Systems from the University at Albany – summa cum laude. Mr. Higgins speaks Bulgarian.

Mr. Joel Baquiche (born 1951, British) – Board Member, Investor

Mr. Baquiche is an experienced investor in private equity and international real estate. He has been doing real estate development in

Paris (France) and overseeing family property interests in New York, Atlanta and Florida (USA). Mr. Baquiche is an active investor in real

estate projects in the UK since 1987 and in Bulgaria and Romania since 2005.

In the period 1974-1980 Mr. Baquiche has represented European companies in the transport, trading and construction sectors in Egypt.

In 1982 he became Founder and 50% shareholder of Checkout Computer Systems, an EPOS manufacturer for the hospitality industry.

Mr. Baquiche has made numerous investments in start-ups and SMEs, listed and unlisted companies.

Mr. Baquiche studied Economics at Manchester University. He has been a Committee member of London Business Angels Network and

London Seed Capital Fund for many years.


Eng. Ivaylo Angelov, (born 1968, Bulgarian) – Project Manager

Ivaylo Angelov has significant project management and technical experience in the construction and real

estate business. He has 16+ years of professional experience and has completed numerous developments of

office, industrial and residential buildings with aggregate gross built-up area of about 200 000 sq.m.

Mr. Angelov has worked as Site Engineer and Project Manager on a number of construction sites, some of

which are: Business Park Sofia - Construction of Building B2 (GBA 20,000 sq.m.); Residential complexes at

Manastirski Livadi, Sofia (aggregate GBA 30,000 sq.m.) and Malinova Dolina, Sofia (GBA 16,700 sq.m.);

Apartment buildings - Borovetz (GBA 24,500 sq.m); Office building – Gorubliane, Sofia (GBA 20,000 sq.m.).

Mr. Angelov has a degree in Civil Engineering from the Military Construction Academy in Sofia, Bulgaria.

Ms. Teodora Eftimova, (born 1979, Bulgarian) – Investment Officer

Teodora Eftimova has professional experience in the fields of financial planning, investment analysis and

business valuation of real estate investment projects. She has been involved in the development of gated

community projects with sizes between 15 000 sq.m. and 45 000 sq.m. GBA in the outskirts of Sofia city. Ms.

Eftimova has comprehensive experience in various procedures related to the construction and real estate

business, such as land acquisition, regulating land, market evaluation and research, investment project

financing, tax and accounting and administrative requirements regarding the property investment process.

Ms. Eftimova has a Master’s degree in Accounting and Financial Control from the University of National and

World Economy in Sofia, Bulgaria.


KEY TEAM MEMBERS

INVESTMENT PORTFOLIO

Location: close to the new Terminal 2 of Sofia International Airport

The Area: Sofia Airport is a fast-developing office district and a well-

established industrial and logistics area.

Transport: Frontage on current road to

Terminal 2 and on the new highway

connecting it to Downtown Sofia; existing

bus stop.

Plot size: 5,464 sq.m.

Project Type: development of office and

hotel complex with GBA ca. 19,124 sq.m.

Project Duration: 36 months

Project Status: currently in design stage

13

AIRPORT BUSINESS PARK PROJECT – SOFIA, BULGARIA

APPENDIX

BULGARIA OVERVIEW


GENERAL

Population: 7.7 mln

Area: 111,910 sq. km

Coastline: 354 km

POLITICS

NATO member since April 2004

EU member since January 2007

Stable political situation

Decreasing long-term political risk

A funding member of OSCE since 1995

ECONOMICS

Sustainable high real GDP growth rate (6.0% in 2008), inflation (12.5% in 2007)

Currency pegged to the EURO via currency board (EUR 1 = BGN 1.95583) since 1997

Investment grade credit rating (Moody’s: Baa3; Fitch: BBB-; S&P: BBB)

Developed financial sector – predominantly foreign owned

Strengthening economy and rising disposable income

Substantial foreign investments (EUR 6.1 bln in 2007, of which 35% in real estate and 12% in

construction and approximately EUR 6.0 bln in 2008 )

Sound fiscal policy (budget surplus)

Flat corporate and personal income tax rate of 10%, the lowest in EU

Booming tourism industry (EUR 1+ bln net revenues in 2007, 10% growth YoY)

ABOUT BULGARIA - INTRODUCTION


The Bulgarian property market is an emerging real estate market.

Rapid growth over the past 6 years.

Strong growth of investment activity.

Lack of investment grade products.

Financial crisis resulted in increasing yields and suspension of several large development projects due to lack of financing.

The market offers attractive investment returns (8% to 12%), but saturation is expected in some property segments.

Investment opportunities in distressed properties emerge.

Office segment is most developed, industrial has the highest yields.

IRR of 25+ % is achievable, but projects should be carefully selected.

Thoughtful design, accurate implementation and strong marketing are essential to a successful project.

Investment timing and location are key factors to success.

PROPERTY MARKET OVERVIEW


Sales prices stabilized after several years of high growth

Strong growth in demand expected in industrial properties:

Industrial zones

Modern logistics centers

In-town warehousing

Demand for more retail space throughout the country:

Shopping malls

Hypermarkets

Strip malls in the largest Bulgarian cities

Power Centers

Insufficient quality office space in cities:

Sofia office market – undersupply, saturation expected over the next 2-3 years

Opportunities exist for quality office space in broader center locations in Sofia

Demand for Class B office space in Sofia and in other large cities

PROPERTY MARKET TRENDS


Sofia is the main office space market, Varna, Plovdiv and Bourgas follow

Total office stock in Sofia – over 883 507 sq.m., 173 000 sq.m. completed in 2008

Office space of 990 000 sq.m. under construction, 700 000 sq.m. in design phase

Undersupply of investment-grade product. Yields increased to 10+ % (Q4 2008).

Lease terms – 3-5 years, max. 10 years

Vacancy rates in Sofia – 9.4% (2008), lowest in broad center – 2.5%

Office developments in Sofia shift towards the main boulevards, dynamicdevelopment of Ring Road and Sofia Airport areas

BULGARIAN OFFICE MARKET

Corporate Presentation 18Source: Forton International

0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005 2006 2007 Q3,2008 Q4,2008

%EUR

Prime office rental rates & Yields (EUR/sq.m./month)

Prime Office Rental rates Prime Office Yields

Undersupply of investment-grade products

Yields for prime retail space are increasing from their pre-crisis levels of 6-7% in primary cities,

8-10% in secondary cities

Construction of several shopping malls started in 2008 – Plovdiv, Pazardzhik, Bourgas, etc.

New players continue their expansion on the market (e.g. Carrefour, Baumax, Lidl)

New retail formats will be developed in the major cities – outlet centers, retail parks

Expansion of the big-box/retail warehouse segment, penetration in new areas of the country

International brands shift from high streets towards shopping centers

Penetration level of supermarkets and hypermarkets is still low

Untapped potential for development of Power Centers

BULGARIAN RETAIL MARKET


0%

2%

4%

6%

8%

10%

12%

14%

16%

0

200

400

600

800

1000

1200

1400

1600

2000 2001 2002 2003 2004 2005 2006 2007 Q3, 2008 Q4,2008

Sofia High Street Rents & Yields (€/sq.m./yr)

Sofia High Street Rents Sofia High Street Yields

EUR

The most underdeveloped segment of the Bulgarian property market

Several well developed industrial zones exist

Existing stock – predominantly built-to-suit and owner-occupied premises

New industrial zones currently being designed or developed

Government initiatives for formation of 100 industrial zones by the end of 2013

Tax incentives for investments in regions with high unemployment

Growing demand and attractive yields (currently 11,5-12%)

Potential for further investments in the sector

BULGARIAN INDUSTRIAL MARKET


0

2

4

6

8

10

12

14

16

18

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006 2007 Q3,2008 Q4,2008

%EUR

Prime Industrial/Logistics Rents & Yields (€/sq.m./yr)

Prime Industrial/Logistics Rents Prime Industrial/Logistics Yields

CONTACTS

Mr. Martin Paev, CFACEO

SORTIS Real Estate

Tel: +359 2 946-39-15

Fax: +359 2 946-39-16

Mobile: +359 88 50-50-200e-mail: [email protected]

Mr. Joel BaquicheBoard Member, Investor

SORTIS Real Estate

Tel/Fax: +44 (207) 368-65-66

Mobile: +44 (7930) 39-82-80e-mail: [email protected]

[email protected]

Mr. Thomas HigginsBoard Member, Investor

SORTIS Real Estate

Tel: +359 2 946-39-15

Fax: +359 2 946-39-16

Mobile: +359 888 45-20-51e-mail: [email protected]

Corporate Presentation

SORTIS REAL ESTATE

21

www.sortis.bg

Documents

SORTIS RE Presentation 20090403 En