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6 Business Plan and Financials

The draft business plan for this development has been completed and follows this write up. Overall, it is an incredibly healthy business plan and provides significant revenue to be able to retire all debt associated with the construction by the end of year one.

6.1        Capital Expenditure

This has been calculated using some construction numbers from the market and some comparable countries. At this stage of a project, it is only possible to calculate expenditure this way so we have included a 10% contingency in the construction numbers. Once the detailed design phase is complete, the figures will be narrowed down to a much higher degree of accuracy. The capital expenditure also includes interest repayments on the construction loan and commissions.

6.2       Operating Costs

Realistic budgets have been allocated to the operating costs. It must be noted that these operating costs are only for the overall site management and not for all the individual areas as those are computed using cost of sales percentages later in the business plan.

6.3      Payroll

The staffing has been calculated for the overall site management, security, maintenance, site cleaning and also including the leasing of the retail and commercial areas plus the sales staff to sell the residential properties. A residential budget has been included for the non white-collared staff to live offsite in a labour accommodation area. An overall labour burden has been included at 20%.

6.4       Revenues

The sales revenue is self explanatory and has been based on average Kotor prices at the current levels. It is envisaged that the residential market will pick up a great deal within the next year and so those prices will be realistic for when we start selling. We have included all sales as one phase but realistically, we will phase the sales to gain a greater revenue from the rapidly rising real estate market.

The CAM charges have been applied to each property at low levels. This will just aid the maintenance cost in looking after the buildings and grounds.

Leasing revenues have been based on high end retail prices that are current. Again, by the time the site opens in 3-4 years these will be very low but are very satisfactory for the business plan as it currently stands.

Owner operated areas have been included in the next section with the hotels, holiday village (only a 25% booking fee), golf club, sports centre, tourism college and entertainment centre. All areas have very satisfactory numbers again based on current rates and current occupancy levels, the occupancy levels are low due to the seasons in Montenegro but the marketing team will come up with a way of increasing the season for this site.

Cost of Sales have been established based on industry norms and include all operating costs, staffing (where specifically mentioned), management fees, marketing etc.

6.5      Cash Flow

The cashflow shows the consolidated financial summary for the whole project. It shows the site from the day of opening and the debt has been allowed for in the capital expenditure. The ideal scenario is taking a 4 year term loan with interest only repayments during the construction with the final payment including the capital at the end. A management fee has been allowed for in the cash flow pages for a company to oversee the entire development to allow the owner to develop more sites in the region.

6.5     Summary

Overall, this business plan is extremely lucrative and is based on what we believe to be very conservative figures. It is important to keep the momentum of the project moving now to ensure we can build and develop the site to what has been outlined and commence pre-sales as soon as possible.

Investment Strategy

An equity/debt investor is now required to move the project forwards. The investment offering needs to be very lucrative for the investor as the developer needs to get mobilised very quickly. The authors believe that the best offer at the current time would be for an investor to contribute 170 million Euros as Equity immediately and provide a term loan for 70 million Euros that will be interest only (8%) during construction with capital and interest being paid off over 4 years from opening with no early repayments. In return for this investment, the investor would be given 50% equity in the project with management remaining with the existing developers but with equal board seats and a yearly financial audit occurring.

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