Sortis Re Presentation 20100428 En

Corporate Presentation

Sofia

April 2010

CONTENTS

Corporate Presentation 2

Overview

Shareholders

Services

3

5

6

7Real Estate Investment

Real Estate Portfolio Management

Property Fund Management

Mezzanine Real Estate Financing

8

9

10

11Distressed Investment Opportunities

Investment Process 12

Board of Directors 13

Key Team Members 14

Investment Portfolio

Appendix Bulgaria Overview

About Bulgaria

15

16

17

18Bulgaria – Economic Outlook

Property Market Overview

Property Market Trends

Bulgaria Office Market

19

20

21

22Bulgaria Retail Market

Bulgaria Industrial Market 23

Contacts 24

SORTIS Group 4

OVERVIEW


Real estate

Investment

advisory

Real estate

portfolio management

Mezzanine real

estate financing

Property

fund

management

SORTIS Real Estate is a Bulgaria-based real estate investment company

focused on providing advisory and asset management services to

client-investors for their real estate related activities in Bulgaria.

Strong management team experienced in real estate and private equity

investment in Bulgaria and internationally

Applying best international corporate governance practices

AREAS OF EXPERTISE

Investment Banking Boutique

Financial advisory services

to companies and fund

managers:

Private equity and

venture capital

Corporate finance

Mergers and acquisitions

EU grants funding

Fundraising for fund

managers (GPs)

SORTIS GROUP

4

SORTIS Real Estate is part of the SORTIS Group that includes:

Real Estate Investment Management Company

Sources and structures

individual and collective

investment schemes:

RE investment advisory

RE portfolio

management

Property fund

management

Mezzanine RE financing

Active in all major real

estate sectors

Loan and Leasing Advisory Company

Advisory services to

companies and individuals:

Mortgage loans

Investment loans

Consumer loans

Leasing

Partnership agreements

with the leading

banks, non-banking and

leasing financial institutions

in Bulgaria


SHAREHOLDERS


SORTIS Invest - investment banking boutique owned

by Mr. Martin Paev with areas of expertise private

equity, venture capital, fundraising, corporate

finance, mergers & acquisitions.

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.

Recent major investment - TFS, the Bulgarian investment advisor for the

Balkan Accession Fund, a EUR 110 m private equity & mezzanine finance

investment fund for the Balkans.

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 secured in Bulgaria.

Our close relationship with leading brokerage companies results in sourcing

attractive investment opportunities despite the challenging business

environment.

We aim 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:

Hotels

Residential

Office

Retail

Industrial

REAL ESTATE INVESTMENT ADVISORY


We provide investors with professional advice in identifying and

implementing the most suitable strategy for real estate investments in

Bulgaria.

Investment proposals are based on extensive market analysis, financial

modeling and risk assessment.

As investors‟ representative, SORTIS Real Estate negotiates value-adding

solutions on behalf of investors throughout the investment process.

Property funds

Institutional investors

Individual investors

Real Estate Project


REAL ESTATE PORTFOLIO MANAGEMENT

Determine Client’s risk-return objectives Real estate portfolio management

services to both institutional and

individual clients.

Implementation of development

projects where we do not act in

partnership with a reputed

developer.

Careful analysis of market trends

and deal characteristics results in

investment/disposal proposals or

recommendations.

Ongoing review of market

conditions is essential for proper

timing of entry and exit from a

property investment.

Define suitable investment policy

Review Market conditions & long-term trends

Source investment opportunities

Structure Potential Transaction

Deal Closing

Add Value / Develop Project

Monitor Investment

EXIT

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, Chief Executive Officer 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.

With MezzanineWithout Mezzanine

40 %

MEZZANINE REAL ESTATE FINANCING

We structure mezzanine financing deals to support experienced developers

Up to 80% of the equity required for a development project may be mezzanine

Attractive risk-adjusted returns to investors

Enable developers to implement large projects with limited own equity

Overall project management remains with the developer

Facilitates bank financing for the project

Mezzanine may be provided for projects in all real estate market sectors


30 %

10 % Equity

Mezzanine

60 % Senior Debt

Senior Debt

Equity

60 %

DISTRESSED INVESTMENT OPPORTUNITIES


Short to medium-term deterioration on the property market in Bulgaria, after

several years of a robust growth and a peak in 2007-2008

Construction and real estate badly hit by the global credit crunch.

Announced mega projects totalling EUR 2 – 2.5 bln EUR were put on

hold, according to the Bulgarian Construction Chamber

Many players on the property market, incl. investors, landlords, tenants, property

service providers, suffer from some form of distress currently

Positive effects - winding up low-quality projects & sifting out good projects

Major challenges - financial and operational restructurings, debt

refinancing, debt for equity, joint ventures

Our network of partners throughout Bulgaria

helps us source quality real estate projects with

distressed vendors

Investors could take advantage of the

emerging distressed investment opportunities

Hands-on approach to project development to ensure

quality, timeliness and flexibility

INVESTMENT PROCESS


We combine systematic top-down approach with opportunity

driven project identification

Local market understanding enhanced by global perspective to add value to the real estate project

Determine clear and viable exit strategy prior to investment

decision; Professional advice used in a cost efficient manner

Structure deals with focus on managing and mitigating project

risks

Careful ongoing market analysis to determine the right timing

for exit

Project

Identification

Deal

Structure

Due

Diligence

Deal

Closing

Project

Development

Exit

BOARD OF DIRECTORS


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

Experienced in private equity and international real estate; developing real estate in France and overseeing familyproperty interests in USA. Active investor in real estate in the UK since 1987 and in Bulgaria and Romania since 2005.

Representing European companies in the transport, trading and construction sectors in Egypt (1974-1980).

In 1982 co-established Checkout Computer Systems, an EPOS manufacturer for the hospitality industry. Madenumerous investments in start-ups and SMEs, listed and unlisted companies.

Read Economics and Business Finance at Manchester University.

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

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

Managing Director of the Bulgarian-American Enterprise Fund (BAEF) – 1997-2005.

Co-founded in 2005 Balkan Accession Fund (BAF), Managing Partner of BAF, EUR 110 mln investment fund assistingexpansion of successful Bulgarian and Romanian companies. Worked previously also with Coopers & Lybrand and

Equitable Real Estate in New York.

Board Member of the Confederation of Employers & Industrialists and the American Chamber of Commerce inBulgaria, Member of the University Council of AUBG and Board Member of the Bulgarian Business Foundation forEducation.

MBA graduate from the Kellogg School of Management, Northwestern University; B.Sc. degree in Finance &Management Information Systems, the University at Albany – summa cum laude.

Mr. Martin Paev, CFA (born 1975, Bulgarian) – Chief Executive Officer

12+ years of investment banking, M&A and asset management experience - ING Barings in Frankfurt(Germany), ETEBA in Bulgaria, Balkan Advisory Company (an investment banking boutique in SEE region) in Bulgaria.

Structured and managed the first REIT in Bulgaria (TBI-BAC) until joining in 2005 ADDRESS Investment& Development asExecutive Director. Worked on structuring of the Bulgarian Land Development, GBP 40 mln property fund. Establishedin 2006 SORTIS Invest – an investment banking boutique.

Educated in Bulgaria, Netherlands & Germany; M.Sc. degree in Banking & Finance, B.Sc. Degree in Business

Administration. CFA® Charterholder - served two mandates as Board member of the Bulgarian CFA Society.

KEY TEAM MEMBERS


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

Experienced in the fields of financial planning, investment analysis and business valuation of real estate

investment projects. Involved in the development of gated community projects with sizes of 15,000 sq m-45,000

sq m GBA in the outskirts of Sofia.

Experienced in various procedures related to the construction and real estate business, such as land

acquisition & zoning, investment project financing, taxes & accounting issues related to the investment

process.

Holds a MSc degree in Accounting & Financial Control from the UNWE (Sofia, Bulgaria).

Mr. Liron Or (born 1971, Israeli) – Associate Partner

10+ years management experience in leading real estate companies in Israel and Bulgaria (Engel East

Europe, Amot Investments, Mivnei Ta‟asiya (IBC) - the largest profit-yielding real-estate company in Israel).

Proven experience in residential projects development and management as CEO of Engel East Europe in

Bulgaria (one of the leading residential developers in EE region) – since 2006 managed 4 projects with total

of 850+ units currently in different stages of construction.

Expertise in management of profit-yielding assets - Amot Investments Limited (2004-2006); As Central Region

Manager of IBC (2000-2004) managed ca. 450,000 sq.m. of land for industry, trade and Hi-Tech, in charge of

the architectural & engineering, construction-supervision aspects, financial and legal issues.

Expertise in tax law – worked for the Economic Company for Saving (1995-1999) and established a nation-

wide system for assessment of the municipality taxes and duties.

3 years experience as a Lecturer at the Interdisciplinary Center Herzliya: Schools of Law and Business - Real-

Estate Taxation course

MBA graduate from the Derby University – Israel branch; Speaks Hebrew, English and Bulgarian

INVESTMENT PORTFOLIO

Transport: Frontage on current road to Terminal 2

and on the new highway connecting it to

Downtown Sofia; existing bus stop at the site.

Plot size: 5,464 sq.m.

Project: Business hotel and Class A office

building - GBA ca. 19,100 sq.m.

Project Duration: 36 months

Project Status: construction permit (Jan „10)

Location: Close to the new Terminal 2 of

Sofia International Airport

15

AIRPORT BUSINESS PARK PROJECT – SOFIA, BULGARIA

The area: Sofia Airport is a fast-developing office

district and a well-established industrial and

logistics area.


APPENDIX

BULGARIA OVERVIEW


GENERAL

Population: 7.7 mln

Area: 111,910 sq km

Capital: Sofia

Coastline: 354 km

Strategic location on the international map

Short flight time to major European capitals

ABOUT BULGARIA - INTRODUCTION


POLITICS

NATO member since April 2004

EU member since January 2007

Expected to join the Euro zone by mid - 2013

Stable political situation

Decreasing long-term political risk

A funding member of OSCE since 1995

BULGARIA – ECONOMIC OUTLOOK


GDP growth : ca. 6% p.a. (2006-2008). Decline of 6% estimated for 2009

Lowest EU GDP per capita => greatest potential for growth

EU Convergence Programs prerequisite for long term growth

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

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

Developed financial sector – ca. 90% foreign owned

Unemployment - 10.14% (April 2010)

Inflation (CPI) - 0.6% for 2009

Favorable taxation:

Corporate and personal income tax - flat rate of 10% , the lowest in the EU

VAT – 20%

Dividend tax – 5% (qualified EU-based investors may be exempt)

The Bulgarian property market is still an emerging real estate market.

Rapid growth and strong investment activity over the past 6 years.

Limited investment activity - landlords are not willing to accept opportunistic yields

Attractive investment yields (up to 12%), but saturation is observed in some property

segments.

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

Investment activity is expected to start picking up slowly

PROPERTY MARKET OVERVIEW


Functionaldesign

Investmenttiming

Project

financing

Strong

marketing

Location

TitleKey factors

for successfulproject

Accurateimplementation

Well-performing market until the end of 2008 and sharp drop in rents and prices thereafter

Prime rents and sales prices declined after several years of high growth.

Few distressed deals until recently

Good long-term potential for growth compared to other European countries

Stabilization expected in 2010

PROPERTY MARKET TRENDS


Industrial market

• Industrial zones

• Modern logistics centers

• In-town warehousing

• Growth in demand expected

Retail market

• Shopping malls (selectively)

• Hypermarkets

• Strip malls in the largest Bulgarian cities

• Power Centers

• Demand for more retail space throughout the country

Office market

• Class A in Sofia central locations and on main boulevards

• Buying completed office buildings without tenants• Lack of quality office space in secondary cities

• Oversupply in Sofia and prime cities

Potential Exists in the following market sub-segments

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

Office developments in Sofia along the main boulevards, Ring Road, Sofia Airport areas

Total office stock in Sofia – ca. 1,000,000 sq.m.

990,000 sq.m. under construction, 700,000 sq.m. in design stage

Undersupply of investment-grade product. Yields increased to 10+ % (Q3 2009).

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

Space for sub-lease or “Grey space” has grown during the crisis

Vacancy rates reached 13 % in Sofia (2009) and growing, lowest in CBD – 2.5%

Attractive incentive packages to attract tenants – rent-free periods, lower rents

Prime rents expected to remain resilient despite incentives offered

BULGARIAN OFFICE MARKET


Source: Forton International

0

2

4

6

8

10

12

14

16

02468

101214161820

2000 2001 2002 2003 2004 2005 2006 2007 2008 Q3,2009

%EUR

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

Prime Office Rental rates

Undersupply of investment-grade products

Increasing yields for prime retail space – 10+ % (Q3 2009)

Construction of shopping malls in large cities - Plovdiv, Ruse, Burgas, Varna, etc.

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

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

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

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

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 Q3,2009

Sofia High Street Rents & Yields (EUR/sq.m./month)

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 industrial zones formation

Tax incentives for investments in regions with high unemployment

Growing demand and attractive yields (currently 12+%)

Potential for further investments in the sector

BULGARIAN INDUSTRIAL MARKET



0

2

4

6

8

10

12

14

16

18

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 Q3,2009

%EUR

Prime Industrial/Logistics Rents & Yields (EUR/sq.m./month)

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 2 946-39-16e-mail: [email protected]


SORTIS REAL ESTATE

24

www.sortis.bg