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Bolivia Avenue Project Arbitraging the Building Code: Preconstruction Opportunity in Uruguay John Tidd Director Horizon DEVCO www.horizon.vg February 20, 2007
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Bolivia Avenue ProjectArbitraging the Building Code:
Preconstruction Opportunity in Uruguay
John Tidd Director
Horizon DEVCOwww.horizon.vg
February 20, 2007
February 20, 2007 Page 2
Executive Summary
• The Concept Affordable Units in a Secure Green
environment for young families and empty nesters.
• The Opportunity A truly unique product given the size and
location of our project Unique Building code gives strategic
advantage
• The Potential 20%+ annual returns Priority for Phase II investing
February 20, 2007 Page 3
What We’ll Cover Today
• About us• Background on Uruguay • Montevideo Neighborhoods• Location, location, location • Design, design, design• Building Code Arbitrage• Potential Returns• Terms and conditions• Time table• Questions and answers
February 20, 2007 Page 4
About Us
• Our background is Investment Management with a focus on property through the Horizon Growth Fund N.V. 21% annualized returns over the last 7 years Participated in property development
companies in Indonesia, Philippines, Malaysia.
• Operating in Uruguay since 2003• Managing and Administering Capital in
attractive risk adjusted investments is our strength.
• Visit our website www.horizon.vg
February 20, 2007 Page 5
Background on Uruguay
• The Switzerland of Latin America 3 Million population, 1.4 Million in Montevideo Democratic Government Capital of the Mercosur regional group Experienced deep crisis in 2002-2003 with
property falling up to 50% in USD. Property emerging from crisis - Banks starting
to lend again (still 80%+ properties paid in cash)
Estimated positive cycle for up to 5 years Export growth – Agro related Tax-free zones in several areas creating call
center/IT jobs. Per the Economist Magazine “the next Chile”
February 20, 2007 Page 7
Montevideo Neighborhoods• Carrasco
Premium Residential suburb 8 mi from city center Mostly single family housing and small high end
multi-unit complexes. Land values at 300 USD/m2 - higher end multi-unit
projects at 2000 USD/m2 of new construction area.
• Pocitos Generally 10 storey buildings with only front and
limited back visibility – long narrow and dark apartments
Safe and secure environment Close to the coast and boardwalk Land values at 800/1000 USD/m2 and at 1200
USD/m2 of area in new construction apartments.
February 20, 2007 Page 8
Montevideo Neighborhoods
• Generally Growth has been Eastward along the coast.
• In the late-90s the Coast city saw explosive growth but increases in property taxes, poor infrastructure (roads and sewerage) and high gas prices (4.5 USD/gallon) have curtailed growth
• Growth has been generally eastward. The World Trade Center Business Park has moved the city center substantially eastward.
February 20, 2007 Page 9
What our research says Home Buyers Want
Buyers Motivation: How we Deliver:
Attractive Price Strategic Advantage with low land cost and Building Code Advantage
Security •Enclosed Environment •Access Controlled•CCTV•Police station in the park
Low Payments •Will make Financing Agreement with lender for 18 year term. Usually 10 years or less in Uruguay
Low Common Charges Size of Project provides low expenses per unit with extensive services. Many optionals.
February 20, 2007 Page 10
Why Smaller Units in Multi-unit
• Smaller size units is now preferred after the economic crisis limited bank lending Separation and divorce leads to smaller units down-sizing of older residents Short-term residents Demand for 2 Bedrooms is the highest.
• Security is a key driver away from single family homes. Gated communities are not permitted in single
family developments – only limited access points.
February 20, 2007 Page 11
Location Location Location
• Next to the 40 ha Rivera Park on one side 40 ha of Natural environment for walking, jogging,
biking, horse back riding.
• Permanent “Green areas” with cul de sac occupy approx. 35% of opposing side
• 0.3 Miles to Portones Shopping Center The major shopping center in Eastern Montevideo
• Short Drive to all the best schools American School (.6Mi), British School (0.8 Mi),
Anglo School (0.3 Mi), Italian School
• Police station in the park• 6 Miles to the city center via Italia Avenue
(.15 Mi)
February 20, 2007 Page 12
Next to the Park, close to shopping & the best schools
February 20, 2007 Page 13
The Park lane separating our project and the Rivera Park (i.e. not a major avenue)
February 20, 2007 Page 14
Arbitraging the Building Code
• Carrasco suburb has the highest property values in Montevideo (2000 USD/m2) due to strict building code 2 Floor maximum with 40% Land Occupancy 200 m2 of land per unit minimum With land at 300/400 USD per m2 land value
becomes 60k to 80k per unit forcing larger units to amortize land cost.
• Our project is across the street from Carrasco 4 story height 4 Floor Maximum with 60% land Occupancy
February 20, 2007 Page 15
Arbitraging the building code – why we can create a better product at a very
motivating price
Carrasco "Across" the Road"
Max Height 7.5 12
Floors (F) 2 4
Land Occupancy (LO) 40% 60%
Build able Area (BA) per m2 Land (FxLO) 0.8 2.4
Land Values per m2 (L) 300 200
Land Value per Build able m2 (L/BA) 375 83
Minimum m2 of Land per Unit 200 0
Land Value (for typical 80 m2 2 Bedroom Unit) 60,000 6,667
Building Cost 48,000 48,000
Total Cost 108,000 54,667
Developers Margin 37,800 19,133
Selling Price 145,800 73,800
February 20, 2007 Page 16
Size, Size, Size• Most Competing projects are built on 1000
– 4000 meters of land with no park next door
• We have over 20,000 m2 of land our project is problably the largest “private” multi-unit project in Montevideo
• Size creates cost effective opportunity to provide: Security Entertainment:
• Gym, • Kids Club, • Pool, • Tennis, • Playground
Services (Maid, Laundry, Delivery)• Plus all the advantages of the park
February 20, 2007 Page 17
Design, Design, Design
• Our Architect, Carlos Ott, has arguably the best local name recognition and international background More info at www.carlosott.com Modern Open Design Concept Small units – efficient design
• Low Density Land Occupancy to ensure Green surroundings
February 20, 2007 Page 22
Small, Open and Efficient Design Building 1- 2 and 3 Bedroom
February 20, 2007 Page 24
Phase I Summary
UnitsBedroom
s Bathsm2
Interiorm2
Terrazam2
Totales Ind. KitchenBed in Suite BBQ
8 3D 2.5 84 10 94 Si Si Si
12 2D 1.0 56 0 56 No No No
4 2D 1.5 63 0 63 Si No No
16 2D 2.0 69 10 79 Si Si Si
8 1D 1.0 43 0 43 No No No
February 20, 2007 Page 25
Amenities (preliminary)
• Clubhouse for mixed use• Kids Club• Playground• Gym• 2 Swimming Pools• Tennis• Golf Corner• Bike Racks
February 20, 2007 Page 26
Features
• Individual: Heat by AirConditioning Parking Storage Bin
• Common Laundry room with
washer/dryers Maid changing room
with lockers Maid service
(optional) 24 hour security
February 20, 2007 Page 27
Environment
• Condominium rules will be strict to ensure an attractive environment. (a/c on in designated installation areas)
• Pet Friendly buy must maintain clean and noise free environment
• The directors of the co-owners will be empowered to fine non-abiders including: Noise abuse Lack of care in common areas Lack of presence on building façade.
• Co-owners agreement to be reviewed with buyers committee prior to finalization
February 20, 2007 Page 28
Strategy and Schedule
• Phase I First 3 Buildings Club House and Pool
• Schedule
Construction Permit2Q07
Pre-constructio
n2H07
Construction2008 & 1Q09
Delivery2Q09
February 20, 2007 Page 29
Competition• BILU is probably our most direct and recent competitor
Located almost 4 miles further east away from the city center on a small artificial lake
More upscale focus with much larger units In our opinion, they are direct competition with single family houses
with too many large units Located in Canelones the next province but still a strict building code
• Our product is much more affordable and avoids competing with single family houses.
2 Bedroom Example
BOLIVIA BILU
Total m2 78 125
Price (x-garage)
78,000 150,000
Price/m2 1000 USD 1,200 USD
Avg Unit size 71 210
February 20, 2007 Page 30
Investor Terms and Conditions
• 2 Unit Minimum• Restriction on selling until 3 months before
delivery (we want investors not speculators)• Discount of 23% to Delivery Selling Price• Reservation Requests to be accepted
starting June 1st at 10 am on a first come first serve basis.
• Payment Schedule 10% deposit 20% at start of construction 50% during construction 20% on Delivery
February 20, 2007 Page 31
IRR- Return on Investment
Typical 2 Bedroom 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
% Paid 10% 20% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 24% 0%
Cash Flow USD (000s) -8.8 -17.6 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -21.3 0.0
Total Cash flow -8.8 -17.6 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -3.7 -21.3 0.0
IRR 38%
2 Bedroom Unit Costing 88,000 USD (1000 USD/m2) with Garage and reselling on completion at 111,400 USD (1300 USD/m2)
February 20, 2007 Page 32
Investor Returns
• Rising Property Values have the potential to substantially increase returns A 10% increase in estimated selling price
moves the IRR from 38% to 55%
• Given the novelty of our project, premium prices per m2 will probably prevail upon completion.
• An easy way to have leveraged returns on Uruguayan property
• Staged Capital Contribution creates attractive return while limiting risk
February 20, 2007 Page 33
Investor Services
• Payments as construction progress• Monthly Construction Updates• On-site sales office for Selling to end users• Administration for renting if desired –
estimated 8% Gross Yield + appreciation• Possibility to finance end user as mortgage
provider at 10% USD interest rate• Priority in Phase II Construction
February 20, 2007 Page 34
How to submit Priority Reservation Request
1. Prior to June 1st complete reservation form2. Submit or fax form on June 1st
3. 3 Business days to provide deposit 2000 USD/unit.
• Form available at www.horizon.vg/devco/bolivia/
• Reservations are non-binding to the buyer meaning can recind at any time up to the 10% deposit.
• Priority to choose specific unit in order or receipt
• We reserve the right to disqualify applications for any grounds.
• Reservation requests are non-transferable except immediate family members.
