Budget Report Antwerp

Report byJeroen Boeckx &Steff Van de Water

*CONFIDENTIAL*Budget report regarding two possible residential property investments in Antwerp| 12th of December 2013 |

Contents pageIntroduction 3Property A: Dambruggestraat 35 2060 Antwerp 4Summarized table of figures 4Investment evaluation figures 4Discussion budget report property A 4Property B: Korte Gasthuisstraat 36, 2000 Antwerp 5Summarized table of figures 5Investment evaluation figures 5Discussion budget report property B 5Comparison property A and Property B 6Break-even analyses 6Discussion of the comparison 6Appendix A 7Appendix A1: Details Property A + pictures 7Appendix A2: full table of figures property A 8Appendix A3: Share of annual costs property A 9Appendix B 10Appendix B1: Details Property B + pictures 10Appendix B2: full table of figures property B 12Appendix B3: Share of annual costs property P 13Appendix C 14Appendix C1: Appendix C1: calculation solicitors fees 14Appendix C2: Appendix C2: Interest rates: worst case/best case 14

Antwerp has become a very beloved region for investors who are looking for a profitable and overall safe investment. That should not come as a surprise looking at the fact that while Belgium is gently crawling out of the crisis, the housing market in Antwerp is booming. According to the predictions of financial consulting agency Standard&Poors, property prices will rise by 2% in 2014. The increase in Antwerp will probably be even bigger because, thanks to the enormous port, it is much more interwoven with the recovering global economy.Furthermore, demand will grow even more over the next decades. Antwerp is the fastest growing Belgian student town. Last year the student population grew by 15% which now makes a total of 40,000 students all over town. In addition, the city itself predicts that by 2030 the city population will grow by 100,000 citizens. All these people need a home which creates a huge rental market.When buying a house in Belgium there are a couple of administrative issues that need to be dealt with. There are a lot of different documents to sign during the process. At first you can take an option on the house. This may be useful to give you some time to think when one of the properties being proposed seems appealing. Next in line is the sales agreement. At this point you commit yourself to buying the house by paying a deposit (usually 10%). Once the sales agreement is signed you have 4 months to find the necessary funding. The last step is the notarial act. This makes the transfer of the ownership final. All these documents will be written in Dutch of French. However, the solicitor will be able to give you all the information you need in English.Any other key terms will be explained further on.Jones Lang LaSalle Inc. is known for its reliability and professional service with the investors interest at heart. The two properties that have been carefully selected by our team according to your terms will be discussed in the next paragraphs. The first one, located in the Dambruggestraat is few hundred meters away from public transport (Antwerpen-Centraal railway station and the Rooseveltplaats, the nerve centre of all Antwerp busses). Also the historical and commercial areas are not far away. The second property is situated in the Korte Gasthuisstraat, right in the centre of Antwerp. Restaurants, stores, public transport, university/colleges of high education, all of these are at walking distance. A map with both locations can be found in the appendix.On the next few pages both investment options will be elaborated and evaluated in terms of their long term potential rent, there individual price tag, their potential future value, etc. It is important to know that every added amount is based on reliable resources. Some numbers will be estimates, however these will all be well considered. Jones Lang LaSalle Inc. is known for its reliability and professional service with the investors interest at heart.Property A:Dambruggestraat 35 2060 Antwerp (90,000/74,790)Summarized table of figures

DescriptionAmount EURAmount GDP[footnoteRef:1] [1: Exchange rate as at 5/12/2013,EUR 1 = GDP 0.831]

Initial cash flows

Cost Of Purchase107,549.4089,373.52

Cost of credit facility[1,801.00-1,809.00][1,496.63-1503.28][footnoteRef:2] [2: Please note that some amounts may differ according to the chosen interest rate, these amounts are being presented by a range.]

Annual cash flows

Annual cost[4,909.31-4,936.91][4,079.64-4,103.57]

Annual income9,960.008,276.76

Cash flow after 25 years

Cost of sale6,023.205,005.28

Estimated Selling price188,440.00156,593.65

Investment evaluation figures

Break-even point17 years, 4 months

Roundtrip cost9.86%

Added Value on property in 203898,440/81,804

Annual Return on investment (ROI)9.44%

The table above gives a summarized overview of the cash flows for the Dambruggestraat property, a more elaborate version can be found in attachment A1. We have assumed that 90,000 (74,790) of your personal equity will be invested (since interest rates on savings are historically low, we tend to use as much of it as possible). The other 10,000 (8,310) can be used as a buffer for any unforeseen expenses. The remaining 20.000 (16,620) can be borrowed over a period of 10 years at a fixed interest rate of 4.45% or a variable interest rate of 4.20%.Both the purchase and the mortgage have specific administrative costs. First of all, the transfer of ownership needs to be registered at the registry office. Second of all the solicitor needs to be paid both a fee and a compensation for the costs he makes providing the necessary documents. Since the apartment is completely empty you may consider adding some decoration and furnishing such as curtains, a table, a sofa, etc. For this we have foreseen an amount of 5,000 (4,155).Considering the credit facility, a double repayment insurance for the full 100% has been included in the calculations. For the reselling value after 25 years an estimated annual increase in value of 3% (based on future forecast, see property B) has been foreseen. Property B:Korte Gasthuisstraat 36, 2000 Antwerp (96,000/79,776)Summarized table of figures

DescriptionAmount EURAmount GDP[footnoteRef:3] [3: Exchange rate as at 5/12/2013,EUR 1 = GDP 0.831]

Initial cash flows

Cost Of Purchase114,468.2095,123.11

Cost of credit facility[1,801.00-1,809.00][1,496.63-1503.28]

Annual cash flows

Annual cost[4,770.74-4,743.14][3,964.48-3941.55]

Annual income9,480.007877.88

Cash flow after 25 years

Cost of sale5,707.004,742.52

Estimated Selling price178,588.28148,406.86

Investment evaluation figures

Break-even point19 years, 8 months

Roundtrip cost9.54%

Added Value on property in 2038111,002.70

Annual Return on investment (ROI)9.32%

The table of figures above summarizes the most important costs according to buying the studio in the Korte gasthuisstraat. A detailed overview of the property can be found in appendix B1. A more elaborate version of the table of figures can be found in in the appendix B2. The cost of purchase not only includes the price of the apartment itself. The legal fees and the solicitors fees are taken into account as well.Stating the historical low interest rates, the allocated amount of the personal equity is maximised. A mortgage of 20,000(=16,620), to cover the other costs and create a small buffer for future expenses, is settled. See Appendix C2 for a full mortgage overview. The cash flows section indicates yearly costs and money inflows. Notice that the inflows are well above the costs, indicating an attractive yearly return on investment(9.32%)[footnoteRef:4]. Property prices in Belgium have risen by 5% a year during the last 25 years( table index). Although the NBB[footnoteRef:5] predicts a future slackening in the rise of apartment prices. For these reasons the selling price is calculated assuming a rise of apartment prices by 3% a year. [4: notice that the yearly cost includes the repayment of the mortgage, which ends after 10 years] [5: Belgiums national bank]

Costs of sale includes advertising costs and fees to be paid to the selling agent added up by the compulsory legal certificates needed to sell the apartment.

Comparison property A and Property B:Property AProperty B

Cost of purchase107,549.40114,468.20

Annual profit

Up to year 10After year 10[5,023.09-5,023.69]8935,78[4709,26-4736,86]7179,94

Break-even point17 years, 4 months19 years, 8 months

Roundtrip cost9.86%9.88%

Added Value on property in 203898,440111,002.70

Annual Return on investment (ROI)9.44%9.32%

Inflation adjusted ROI[footnoteRef:6] [6: Assuming an inflation rate of 2% a year]

7.44%7.32%

The table and graph above give a comparison of the two properties. Both have their advantages compared to one another. Property A meets its break-even point in a shorter amount of time, while property B has a higher added value in the end. Both properties require the same amount for the credit facility. Regarding this credit facility it seems a good idea to use a fixed interest rate. The reason for this is that rates are historically low at the moment and are very likely to go up over the next 10 years. A simulation of a worst case/best case scenario can be found in appendix C2. Possible tenants for both properties are students as well as young starters. This creates a very large target group.It is clear that both properties are good investment, with high payoffs. Purely based on the slightly higher performance and the facts the building is brand new (so the chance of any unforeseen maintenance costs is lower) we recommend an investment in property A.Appendix AAppendix A1: Property A details

Property details

TypeApartment (studio)

Address Dambruggestraat 35, box 3L2060 Antwerp

District Antwerpen-Centraal railway station

Price 90,000

Local property tax750

Construction year2011

Renovations Decoration and furnishing

Energy consumption268 kWh/m

Number of floors3

Apartments floor3

Net floor area35 m + 10m terrace (=484.38 ft)

Lay-out Installed American kitchen Living area with sleeping corner Separate toilet High ceilings and windows 10m terrace

Amenities Modern look In the heart of Antwerp but very quit because of a car-free street Ready to move into

Appendix A2: Property A: Full table of figuresDescriptionAmount EURAmount GDP[footnoteRef:7] [7: Exchange rate as at 5/12/2013,EUR 1 = GDP 0.831]

Initial cash flows

Cost Of Purchase

Property price90,000.0074,790.00

Registration fees (10%)9,000.007,479.00

Solicitors fees (VAT 21% included)1,859.361,545.13

Cost of deed of sale (VAT 21% included)1,150.00955.65

Decoration & furnishing5,000.004,155.00

Jones Lang LaSalle Inc. fees (0.6%)540.00448.74

TOTAL107,549.4089,373.52

Cost of credit facility

Registration mortgage220.00182.82

Mortgage agency fees133.00110.52

Solicitors fees (VAT 21% included)348.00289.19

Cost of deed of mortgage (VAT 21% included)726.00603.31

Repayment insurance

- Fixed interest rate (4.45%) - Variable interest rate (4.20%)382.00374.00317.44310.79

TOTAL[1,801.00-1,809.00][1,496.63-1503.28][footnoteRef:8] [8: Total amounts may vary according to the chosen interest rate]

Annual cash flows

Annual cost

Utilities (water, electricity, gas, etc.)1,440.001,193.64

Building maintenance250.00207.75

Building insurance127.50105.95

Additional property tax[footnoteRef:9] [9: Based on the local property tax of the property (750)]

548.63455.91

Council tax98.0981.51

Repayment credit facility (first 10 years)

- Fixed interest rate (205.89/month) - Variable interest rate (203.59/month)2,470.682,443.082,053.142,030.20

TOTAL[4,909.31-4,936.91][4,079.64-4,103.57]4

Annual income

Rental income (690/month)8,280.006,880.68

Provision utilities, maintenance, insurance (140/month)1,680.001,396.08

TOTAL9,960.008,276.76

Cash flow after 25 years

Cost of sale

Certificates (Electrics, EPC)370.00307.47

Various costs (Selling agents fees, publicity, etc.)5,653.204,697.81

TOTAL6,023.205,005.28

Selling price

Estimated selling price after 25 years188,440.00156,593.65

Appendix A3

Appendix BAppendix B1: Property B details

Property details

TypeApartment (studio)

Address Korte Gasthuisstraat 362000 Antwerp

District Centre of Antwerp

Price 96,000

Local property tax684

Construction year1975

Renovations none

Energy consumption109 kWh/m

Number of floors4

Apartments floor1

Net floor area35m (376.74ft)

Lay-out Entryway (with Cloakroom) Fully equipped kitchen (kitchen stove, Exhaust hood, refrigerator, built-in microwave) Living/sleeping room 1 Bathroom (shower, washbasin, toilet)

Amenities Car-free street Elevator Double glazing Nearby Public transport and shopping facilities

Appendix B2: Property B: Full table of figuresDescriptionAmount EURAmount GDP[footnoteRef:10] [10: Exchange rate as at 5/12/2013,EUR 1 = GDP 0.831]

Initial cash flows

Cost Of Purchase

Property price96,000.0079,776.00

Registration fees (10%)9,600.007,977.60

Solicitors fees (VAT 21% included)1,900.741,579.52

Cost of deed of sale (VAT 21% included)1,391.501,156.34

Future decoration & furnishing5,000.004,155.00

Jones Lang LaSalle Inc. fees (0.6%)576.00478.66

TOTAL

114,468.2095,123.11

Cost of credit facility( 20,000.00)

Registration mortgage220.00182.82

Mortgage agency fees133.00110.52

Solicitors fees (VAT 21% included)348.00289.19

Cost of deed of mortgage (VAT 21% included)726.00603.31

Repayment insurance

- Fixed interest rate (4.45%) - Variable interest rate (4.20%)382.00374.00317.44310.79

TOTAL[1,801.00-1,809.00][1,496.63-1503.28][footnoteRef:11] [11: Total amounts may vary according to the chosen interest rate]

Annual cash flows

Annual cost

Utilities (water, electricity, gas, etc.)1,440.001,196.64

Building maintenance200.00166.20

Building insurance105.0887.32

Additional property tax[footnoteRef:12] [12: Based on the local property tax of the property (684)]

500.26415.72

Council tax54.7245.47

Repayment credit facility (first 10 years)

- Fixed interest rate (205.89/month) - Variable interest rate (203.59/month)2,470.682,443.082,053.142,030.20

TOTAL[4,770.74-4,743.14][3,964.48-3941.55]6

Annual income

Rental income (650/month)7,800.006,481.80

Provision utilities, maintenance, insurance (140/month)1,680.001,396.08

TOTAL9,480.007877.88

Cash flow after 25 years

Cost of sale

Certificates (Electrics, EPC)370.00307.47

Various costs (Selling agents fees, publicity, etc.)6,030.085,011.00

TOTAL6,400.085,318.47

Selling price

Estimated selling price after 25 years201,002.68167,033.23

Appendix B3

Appendix CAppendix C1: calculation solicitors fees

Rangepercentageproperty AProperty B

Up to 7,5004,56%342342

From 7,500 to 17,5002,85%285285

From 17,500 to 30,0002,28%285285

From 30,000 to 45,4951,71%264,9645264,9645

From 45,495 to 64,0951,14%212,04212,04

From 64,095 tom 250,0950,57%147,6585181,8585

Above 250,0950,06%00

Total cost(VAT not included)1536,6631570,863

Total cost in GDP(VAT not included)1276,966951305,387153

Appendix C2: Interest rates: worst case/best case

MortgageOption 1Option 2

General information

Type of creditFixed interest rateVariable interest rate 1/1/+3/-3

Borrowed amount20,000.00EUR20,000.00EUR

Interest rate modificationsFirst fixed period10year1year

Next modificationnoneannual

Initial

Duration10year10year

Interest rate of your choice4.45%4.20%

Monthly interest rate0.363%0.343%

Monthly repayment205.89EUR203.59EUR

Total interest4,706.80EUR4,430.80EUR

Optimistic

Duration 10year10year

Annual interest rate4.45%1.20%

Monthly interest rate0.363%0.096%

Monthly repayment205.89EUR178.94EUR

Pessimistic

Duration 10year10year

Annual interest rate4.45%7.20%

Monthly interest rate0.363%0.590%

Monthly repayment205.89EUR227.43EUR