parco levante project · cesenatico is well connected to the national motorway system, which has...

T.R.E. – Tamburini Real Estate

THE VALVERDE DI CESENATICO TOURISTIC/SPA THERMAL SCHEME

March 2013

Parco Levante Project – Valverde di Cesenatico Touristic/Spa Thermal Scheme - March 2013

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Contents

EXECUTIVE SUMMARY

BACKGROUND DATA

THE PROJECT AREA

THE PROJECT

THE PROJECT PROMOTERS

PROJECT STATUS

PROJECT BUSINESS PLAN


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EXECUTIVE SUMMARY

The purpose of this document is to present the project for the development of the new touristic/spa (spring water) scheme in Valverde di Cesenatico

The project involves the construction of an integrated complex covering a surface area of over 64,000 m2 consisting of: thermal baths/pools with relative spa, fitness and wellness centre; a touristic complex consisting of a hotel and a tourist village; a residential complex; a shopping/business area (bars/restaurants, offices, small shops etc.)

The promoter of the project is Parco Levante Srl, whose partners have considerable development, construction, and management experience; two of the partners havemany years’ experience in the thermal baths/spa facilities management field.

The project promoters intend to assess offers from potential investors interested in taking part in the enterprise.

The estimated overall investment is in the order of 57.9 million Euros, which includes 7.5 million Euros of expenses already sustained up to 2012.

The project is expected to generate a post-tax and post-financing return of 10.34% against an overall venture capital investment of 13.5 million Euros.


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BACKGROUND DATA: Cesenatico in brief

CESENATICO

Milan

Rome

Florence

nze

Venice


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BACKGROUND DATA: Cesenatico in brief (continued) Cesenatico, with a population of some

25 thousand inhabitants, is a seaside resort and holiday destination on the upper Adriatic coast in the region of Emilia Romagna (one of Italy’s richest and most productive); it lies between Rimini and Ravenna, about 15 km east of Cesena and 100 km east of Bologna.

Famous for the hotels that host thousands of summertime tourists, its main source of income was, until the start of the XX century, fishing; its port was the Adriatic’s third largest after those of Ravenna and Rimini.

The first holiday facility was established in 1878. The town gradually established a reputation for excellence, outstanding in its range of vacation and accommodation facilities and gaining a renown for hospitality.

After World War II many of the old villas were converted into hotels, and new facilities were built to host children during the summer; the construction of the famous ‘skyscraper’ that has, since the 1950s, defined the coastal skyline, subsequently marked the beginning of a new tourism-oriented phase of expansion.

The coastline

http://it.wikipedia.org/wiki/Rimini

http://it.wikipedia.org/wiki/Cesena


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BACKGROUND DATA: Cesenatico in brief (continued)

Cesenatico has a sandy shoreline that runs along the coast for 7 kilometres: it stretches from the pinewood of Zadina to the old town centre through which the Canal Port (designed by Leonardo da Vinci in 1502) runs; the latter is the hub of life in the old town centre, its picturesque plazas evoking its long seaside village and seafaring history (the Floating Marine History Museum and the Council Antiquarium are particularly interesting); the beach continues on to Valverde and Villamarina, districts with modern hotel facilities.

Today Cesenatico has sleeping accommodation for about 22,000 people and has some 3 million overnight stays per season; it lies at the heart of the Riviera Romagnola and, together with Cervia, Milano Marittima, Rimini and Riccione, represents a fundamental part of Emilia Romagna’s seaside tourist economy, famed worldwide for its now century-old tradition of hospitality and unique international holiday atmosphere.

The Canal Port


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BACKGROUND DATA: Accessibility

Cesenatico is well connected to the national motorway system, which has nearby entry/exit points at Cesena and “Valle del Rubicone” on the Bologna-Taranto section of the A14 which links the Adriatic coast from north to south. The Cesenatico area is also well served by several main roads (the main one being the S.S. 16 Adriatica that connects Ravenna to Rimini).

Cesenatico has a railway station on the Rimini-Ferrara line: the same line also has, within a radius of 10 km, stations at Cervia/Milano Marittima to the north and Gatteo a Mare to the south. The station of Cesena lies some 15 km away, providing a link to the main Bologna-Ancona line.

The closest airports are the “Federico Fellini” airport of Rimini-Miramare (25 km), the “Luigi Ridolfi” airport of Forlì (30

km) and the “Guglielmo Marconi” airport of Bologna (110 km); the latter is one of Italy’s main intercontinental airports

and handles 6 million passengers a year.

Distances from

- Bologna: 100 km - Florence: 140 km - Venice: 240 km - Milan: 313 km - Rome: 352 km


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BACKGROUND DATA: Accessibility (continued)

International destinations from Rimini and Forlì airports1:

- Basel

- Berlin

- Bucharest

- Düsseldorf

- Karlsruhe

- Krasnodar

- Luxemburg

- Marsa Alam

- Medjugorje

- Moscow

- Nuremburg

- Rostov

- St. Petersburg

- Sofia

- Stuttgart

- Timisoara

- Tirana

- Zurich

More specifically, the Airport of Rimini is the region’s second most important (after that of Bologna) and, in 2011/2012, handled an annual throughput of some 800-900,000 passengers; the recent increase in traffic has been considerable as the number of passengers in 2010 was about 500,000.

Cesenatico is also well served by public transport with bus routes connecting the main towns of Central and Northern Italy.

1 Figures updated 18/02/2013.

Cesenatico


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BACKGROUND DATA: Tourism

Tourism is an essential part of the local economy in and around Cesenatico. It constitutes an indispensable resource that takes advantage of the unique places, products, culture and traditions of an area with a vast network of accommodation facilities and restaurants offering genuine local cuisine; Cesenatico, then, provides visitors with vacations that go beyond pure enjoyment, offering an all-round experience that includes culture, wellbeing, relaxation and opportunities to practice sport and enjoy shopping.

It is in this context, then, that local tourism policies are ever-more focussed on the promotion of the area’s excellence, on emphasising its uniqueness and offering customers ever-vaster more varied opportunities to

experience the characteristic places of Romagna2.

For some time now there has been a steadily growing number of facilities and events/programmes aimed at boosting the level of Italian and foreign interest in what is a strategic area between north and south, between the sea and the mountains, an area capable of generating broad-spectrum tourism throughout the seasons. Numerous, varied events take place during the year, covering sports (especially cycling; Cesenatico is the birthplace of Marco Pantani), culture (the legendary film director Federico Fellini was from the area) and food and wine (with fairs, festivals and local wine/food tasting events).

2 For example the “Extended Local Marketing Plan” drawn up by the Chamber of Commerce of Forlì/Cesena and Ravenna contributed to the creation of the “Terre di Romagna”

(Lands of Romagna) and the “Strada dei vini e dei sapori dei colli di Forlì e Cesena” food and wine itinerary brands.

Traditional local cuisine


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BACKGROUND DATA: Tourism (continued)

Other key features that ensure tourism remains a pivotal item of excellence within the local economy and include better and better organisation of services, interconnected with a modern infrastructure network that is environmentally friendly and aims to improve quality of life and urban renovation with improvements to residential and hotel buildings in keeping with the goal of revitalising local town centres and tourist areas.

Of all the coastal resorts Cesenatico is the one that, at provincial level, is the most dynamic with some 500,000 arrivals and over 3.6 million visits overnight stays, with an upward trend in terms of both Italian and foreign visitors. Average annual growth in overnight stays at Cesenatico has, over the last five years, been 2.6% as opposed to an average of 0.5% at other local resorts.

As in other places, also in Cesenatico the last few years have seen a reduction in the overall number of hotels and other accommodation facilities but an increase in the number of available beds, indicating a concentration of facilities in favour of larger-scale tourist complexes. This tendency, however, is not as strong as that observed in other coastal resorts in the Region.

Federico Fellini


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THE PROJECT AREA: Characteristics of the area

The area is located in the Valverde zone of Cesenatico: to the north this area borders with Viale dei Mille (parallel with Viale Carducci, the main artery of the Cesenatico shoreline), to the east with Viale Dante Alighieri, to the west with the town’s public park and to the south with the S.S. 16 junction.

The area is also just a very short distance from the AGIP holiday camp, the Istituto alberghiero di stato (State Hotel Institute) and also borders with the extensive public park.

The distance from the beach is about 200 m.

The complex has an overall area of about 65,000 m2, of which 38,000 constitute a public area and over 18,000 m2 are indoors.


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THE PROJECT AREA: The surroundings

In the last few years there has been considerable urban/building renewal and improvements in the two Valverde and Villamarina zones (the latter borders Valverde to the east).

The immediate surrounding area is currently undergoing urban renewal work, to include renovation of street furniture (road surfaces, pavements, trees etc.).

These works concern several roads immediately adjacent to the planned scheme, including Viale Carducci, Via Dante, Via Pirandello and Via dei Mille, onto which the façade of the whole complex will face.


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THE PROJECT: Main characteristics

The project consists of the development of a mixed use complex of several buildings that, while independent, are formally linked according to a single plan that follows the fundamental criteria of environmental integration and enhancement of the relationship between nature and architecture.

It includes a thermal spring water pool and adjoining spa complex, a residential/tourist accommodation complex and a shopping/managerial area.

Spa pool 1,600 sqm

Spa center 3,200 sqm

Tourist village 2,400 sqm

Retail/office 4,000 sqm

Hotel and residential 6,800 sqm


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THE PROJECT: Main characteristics (continued)

The construction work is divided into three main phases:

1. urbanisation work and construction site set-up;

2. first lot, consisting of the spa complex, a section of the shopping/business area (the portion annexed to the spa centre), with immediate activation of spa complex, to ensure adequate service, and residences

3. construction of accommodation facilities consisting of the hotel and tourist village and completion of the

shopping area (the portion annexed to the hotel complex).

Completion of the entire complex will take about three years once planning permission has been obtained.


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THE PROJECT: The spa complex

The indoor/outdoor spa (spring water) pool constitutes the core and the image of the project.

The spring water is available and the rights for its use are currently being issued.

Next to the pool is the spa and wellness centre, a 2-floor building including: treatment rooms, wellness centre, inhalation therapy zone, rehabilitation zone etc. and a bar. Together, the pool and spa centre cover a surface area of about 4,800 sqm.

The building is linked to part of the shopping/business areas that complete the functional block and define the internal public plaza.


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THE PROJECT: The touristic-accommodation and residential complex

The touristic-accommodation and residential complex consists of: a hotel with about 90 rooms and 4 suites, spread over seven floors with an effective surface area of

3,500 m2. The hotel building is structured as follows: ground floor with foyer, hall, bar-restaurant, conference and relaxation area plus shopping zone (10

shops) first floor with hotel section, tourist village connecting terrace, office area; upper floors dedicated to hotel services. The suites are on the seventh floor, which includes terraces

and exclusive penthouses. about 60 apartments intended for private residential or timeshare use a tourist village with 88 four-bed bungalows with veranda and covered outdoor area totalling about

2,400 sqm. The village area has a direct connection with the hotel.


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THE PROJECT: The shopping and business area

The shopping and business area is split between the building that hosts the hotel complex and the building that hosts the spa centre.

The hotel building includes 10 shops on the ground floor and 12 offices on the first floor.

The portion annexed to the spa centre consists of two distinct 3-floor above-ground blocks separated by the roofed public plaza. The ground floor will have shops (9 shops) while the offices (14 offices) will be located on the first and second floors.


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THE PROJECT PROMOTERS

Name Share in Parco Levante srl Profile

LF s.a.s. di Morellini Angelo & Co 30%

Mr. Morellini has been a business partner and Managing Director of “Euroterme s.p.a.” in Bagno di Romagna for 20 years; this company was fully ceded some years ago.

Terme di Cervia e di Brisighella s.p.a. 30%

Proprietary-management company of Terme di Cervia and Brisighella for many years; the Legal Representative and Managing Director is Mr. Antonio Ferruzzi (a spa manager with decades of experience).

Sacchetti Nello S.r.l. 30% Constructor with over 50 years of building experience in Cesena, Cesenatico and Cervia.

A.E P.Proposte S.r.l. 9% Company in the project financing sector: has provided consultancy services on key project financing ventures in Romagna.

Gesturist Cesenatico s.p.a. 1%

Company based in Cesenatico (FC) with long-standing local tourist industry experience. Founded as a company part-owned by Cesenatico town council, whose shares have since been ceded to private entrepreneurs

TO DATE PARTNERS’ DEPOSITS AND CONTRIBUTIONS TO THE CAPITAL ACCOUNT AMOUNT TO €4,050,000


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CURRENT PROJECT STATUS: Planning

Definitive plans for the complex to be built have already been drawn up.

The executive plan is currently being drawn up and is at an advanced stage. With regard to urbanisation works, the executive plan has been completed.

The Planning Group consists of: Group Director: Prof. Arch. Paolo Portoghesi Coordinators: Farnedi-Miserocchi-Paolucci Architecural Studio Spa building: Ing. Silvio Montin Studio Structural design: Prof. Ing. Odine Manfroni Systems design: Tecne Engineering srl owned by Paolino Ing. Batani


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CURRENT PROJECT STATUS: Planning permission

Town planning (spa accommodation – hotel and shopping facilities) is legitimised by the 2005 Planning Agreement

The Parco Levante company subsequently proposed an amendment to the Agreement to increase the building size of the hotel section and modify the project architecture.

The Planning Agreement modification procedure has been executed (preliminary agreement, publication, observations, counterclaims) and the relative new town planning/architectural project has been approved. All the deeds and proceedings have already been approved by the Town Council.

Negotiations are currently in progress to allow the signing of the new Agreement in which, against an increase in expenses to be paid by Parco Levante, the construction of surface areas for residential use, which may be either private or timeshare, is proposed.

Should the negotiations fail to have a positive outcome the original version of the Agreement can still be signed.

Following the signing, it is estimated that it will take some 8-12 months to obtain building permission. before


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CURRENT PROJECT STATUS: Utilization of thermal spring waters

Thermal water search programmes have led to the identification of two water-bearing strata at depths between 350 and 520 metres. The deepest stratum has been chosen as it provides higher flow rates.

Full chemical and bacteriological analysis was carried out (following attainment of permission to carry out prospecting) as per legal requirements for four consecutive seasons, yielding favourable certified results..

Certification was acquired by the Council of the Federal Board of Health (Consiglio Superiore della Sanità), certifying the therapeutic properties of the water. This is salsobromoiodine water analogous to that present in the spa centres of Ravenna, Cervia, and Riccione.

Prospecting licenses for utilisation of the water-bearing stratum for 30 years have already been issued.


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PROJECT BUSINESS PLAN: a possible model for managing the complex

Pool and spa centre

Direct management by Parco Levante via

specialized operators within the corporate

structure

The potential catchment area is estimated to consist of about 980 thousand overnight stays per year, which corresponds to the average tourist inflow recorded in Cesenatico and its environs to which the resident population of the towns of Cesenatico and Cesena - not served by other spa centres – has been added.

Assuming that 5% of the catchment population uses the spa facilities and assuming an average pro-capita expenditure in the order of €200, potential annual revenues can be quantified in the order of 9.8 million Euros, corresponding to a gross pre-tax profit of about 2 million Euros (20% of expected revenues).

The royalty may be in the order of 5% of estimated construction costs.

Hotel and tourist village

To be managed by a specialised enterprise against payment of a

market royalty

Hotel management must be set up to ensure integration with the spa centre, thus allowing seasonal adjustment of attendance and, therefore, allowing the facility to remain open all year round.

The royalty may be in the order of 5% of estimated construction costs.

Residences Private residences to be

sold on the market; sale of undivided property to a specialised enterprise

Effective allocation will be defined following conclusion of negotiations with the Town Council.

As a prudential rule, an average sales price capable of ensuring a maximum gross margin of 1000 €/sqm is assumed.

Shopping and business areas 50% offered in trade-off to builder at a below-market

price; 50% sold at market prices

According to OMI (National Agency of Territory) data the value of shopping properties in the Cesenatico-Valverde area is in the order of 4,000-5,000 €/sqm

Given the particular prestige of the renewed area and the visitors attracted by the spa centre and tourist village, a market sale price of 4,500 €/ m2 is estimated.

The trade-off value is half the market price reduced by 11% (4,000 €/sqm).


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PROJECT BUSINESS PLAN: Investment

Investment timeline (millions of Euros)

To date the expenses already sustained for 2012 amount to about 7.6 million Euros, of which about 6 million regard land purchases and accessory costs.

Expenses already sustained are conventionally positioned in the first year of the model.

The indicative works programme estimates three years in total for completion of the entire complex.

In the second year the spa centre, residences and part of the shopping/business area is expected to be completed.

In the third year the hotel and relative portion of the shopping/business area are expected to be completed.

The tourist village and the spa centre represent about 56% of the overall cost.

The amount concerning urbanisation works includes €800,000 of works requested by the Administrator against modification of the Planning agreement.

7.59

6.60

5.80

4.00

10.00

5.68

18.28

0

10

20

30

40

50

60

70

1 2 3

Hotel and touristvillage

Divided or undividedresidential property

Spa/thermal centre

Spa pool

Urbanization works tobe ceded

Shopping/businessarea

Expenses alreadysustained

Total cost 57.95 mln €


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PROJECT BUSINESS PLAN: Sales revenues and incoming cash-flows The shopping/business quota earmarked for trade-off is assumed to be received at the same time as work progress.

The quota for the shopping/business areas earmarked for sale and the residences are assumed sold, with collection of amount due on the basis of the work progress, respectively 50% and 40% during the work, with the remaining amount being ceded in the two years following completion of work.

Value in mln € Expected revenue

Total cost Margin Margin % sqm Margin/

sqm

Shops/business – trade-off 11.0 4.7 6.3 57% 2,750 2,291 Shops/business – sale 12.4 4.7 7.7 62% 2,750 2,791 Residential 11.3 8.0 3.3 29% 3,300 1,000 TOTAL 34.7 17.4 17.3 50%

Sales: cash flow (mln €) Total cumulative revenue

Year 1:

Year 2:

Year 3:

Year 4:

Year 5:

6.7 mln €

13.7 mln€

21.8 mln €

32.2 mln €

34.7 mln € 0

1

2

3

4

5

6

7

8

1 2 3 4 5

Shopping/business area -trade-off

Shopping/business area - sale

Residential


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Other considerations

The net borrowing requirement, totalling 37.5 million Euros (net of earnings from advance sales and including borrowing costs capitalised) is assumed to be financed 40% via equity and the remaining 60% via debt.

The debt consists of a line of senior credit with an overall cost of 8.6% (IRS 15 years + spread 6.00%). The line has a total duration of 18 years (3 utilisation, 15 repayment).

The initial stage of the repayment plan is linked to the cash flow dynamics associated with sales; it is therefore expected that 30% of the capital will be repaid in the first two years following completion of work.

The overall project assessment time frame is 33 years of which 3 for construction and 30 of management. Following the conclusion of sales, managerial revenues will consist of the margin generated by management of the spa complex and the accommodation complex lease charges.

At the end of the assessment time frame, the residual value of the works to be managed (accommodation complex and spa centre) is estimated to be equal to the initial cost of their construction, including the share of accessory costs, that is about 40 million Euros.

IRR post tax and post finance 10.34%


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Restriction on use

The foregoing presentation (the “Presentation”) is conceived for qualified investors in one-on-one presentations on a confidential basis for informal purposes only. This Presentation does not constitute an investment advice or the basis for any binding agreement or an offer to sell or the solicitation of an offer to buy interests. Any such offer or solicitation shall be made only pursuant to the final confidential private placement memorandum (the “Memorandum”) relating to Project as amended or supplemented from time to time, and on the basis of the investor’s own due diligence of the fund and its judgment and business analysis thereof. The present Presentation set forth herein does not purport to be complete and is subject to change.

This Presentation has not been reviewed or approved by any authority in any jurisdiction nor has the formation of any investment vehicle herein contemplated or described been discussed with or approved by any such authority.

The Presentation does not constitute, and may not be used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation.

Analysis and conclusions express the views of Parco Levante SRL and may be subject to change without notice. Please note that due to its simplification, this Presentation is partial and the information can be subjective. All information herein presents T.R.E. - Tamburini Real Estate’s current knowledge and market estimation at the date of the Presentation. Reasonable care has been taken to ensure that the facts stated in this Presentation are true and accurate in all material respects and that there are no other material facts the omission of which would make misleading any statement in this Presentation.

Information included in the Presentation have been provided by the promoter of the project, Parco Levante SRL. A previous release of this Presentation (dated February 2012) has been drawn up by AREA Group, which also drew up the business plan.


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CONTACTS

Gualtiero TAMBURINI Tel: +39 3385276691

[email protected]

Daniela PERCOCO Tel. +39 3334374606

[email protected]

www.tamburini-re.com/parcolevante

mailto:[email protected]

mailto:[email protected]

parco levante project · cesenatico is well connected to the national motorway system, which has...

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