24th May 2007 07:00
Ottoman Fund Limited (The)24 May 2007 For immediate release 24 May 2007 The Ottoman Fund Limited Valuation and project update Following the recent announcement of its end-February interim results, TheOttoman Fund Limited ("Fund"), which invests in the development of local housingand holiday homes in the major cities and coastal resorts of Turkey, is pleasedto provide a general update for investors. Highlights •Proceeds from the Fund's launch in December 2005 (£139m net of launch costs) are now fully allocated. Of this, c.65% has been invested in the Fund's three land-site acquisitions and the provision of development finance at Alanya. The remaining funds are allocated to the build-out and marketing of the three development projects (Riva, Golturkbuku and Kazikli). A number of new investments are under review and further land acquisitions may be made depending on leverage opportunities and rates of sales. •Recent third-party valuations of land acquired by the Fund indicate an increase of 23% since acquisition as a result of the benefits of peripheral land aggregation, and planning and zoning improvements achieved by the Manager. This represents an uplift of c.14.5p per share. •According to recent project valuations carried out by Kuzey Bati, an international associate of Savills ("KB Savills"), the current estimated potential sales revenue of the Fund's three development projects is $634m*. •Land acquisition and KB Savills estimated development and construction costs for these developments total $363m, resulting in an aggregate KB Savills estimated potential project profit of $271m* (based on current zoning and planning). These existing projects are expected to be completed over the next 4 years via phased development and sales, with construction financed through a mixture of remaining capital, debt and off-plan sales. •These updated land valuations and potential project profits are set-out in the table below: Project Cost of Valuation % Construction Sales Gross profit land uplift costs (est.) revenue (pre tax and (est.) sales comm.) (est.) Golturkbuku $38.6m $43.5m 13% $37.6m $142m $65.8mRiva $111.2m $140.3m 29% $138.3m $400.2m $150.7mKazikli(50% $10m $12.35m 24% $27.7m $92.4m* $54.7m*share) Total $159.85m $196.15m 23% $203.6m $634.6m $271.2m *As referred to below, Colliers International also provided a sales valuationfor Kazikli. As this was marginally lower than that of KB Savills, the Collierssales valuation has been used in calculating the figures in this announcement. Development projects Golturkbuku, Bodrum Progress on the Fund's first land investment on the Bodrum peninsula has beenpromising. In addition to the original 166,825m(2) site, the Fund (via a localsubsidiary) has recently agreed to purchase two strategically important adjacentplots with a combined land area of 18,350 m(2) for $5.23m ($285/m(2)). 10% ofthe purchase price has been paid with the balance payable upon the transfer ofthe title deed (by no later than 31 July). Master-planning and architectural designs have been completed by WimberleyAllison Tong and Goo (WATG), the leading international hospitality, leisure andentertainment designers. WATG's past projects include The VenetianResort-Hotel-Casino, Las Vegas; Atlantis Paradise Island, Bahamas; TheRitz-Carlton, Bali; Hotel Bora Bora, French Polynesia and Disney's GrandFloridian Resort and Spa. Detailed application plans for the construction license are ready forsubmission. On-site excavations and construction of internal roads and a salesoffice have commenced. First phase sales are expected to commence shortly. Discussions have been held with a number of leading hotel and spa operators andthe Fund expects to announce its selection in the near future. KB Savills have recently valued the enlarged site at $43.5m, 13% above anacquisition cost of $38.6m. In addition, KB Savills have carried out a valuation of the project on currentdensity and zoning permissions. Based on their estimated sales valuation of$2,667/m2, KB Savills have estimated potential gross project profits (beforelocal taxes and sales commissions) of $65.8m. Approximately 85% of the project'srevenue will be derived from the sale of residential units with the remainderfrom the operation and eventual sale of the hotel and spa. Riva, Istanbul The original 917,900m2 site was purchased in September 2006 for $110m. Given thesize, importance and prime position of this area, the overall master-planningfor the region by the Istanbul municipality is on-going. The Manager's localteam are closely involved with other land-owners and developers in the area andthere appears to be satisfaction at the municipality level with the proposalsfrom leading US town-planners currently under consideration. The Manager expectsthat full zoning for the region will be in place within 6 months. The Fund is carrying out a process of land aggregation of neighbouring plots andsince January has purchased a further 13 plots with total land area of 9,083m(2)for $2.6m (c.$280/m(2)). In line with its existing planning permissions, the Fund intends to commencesales and construction of its first phase of development within three months,following approval of the detailed plans for this phase by the localmunicipality. KB Savills have recently carried out a revaluation of the enlarged site at$140.3m, 29% above the prevailing acquisition cost. In addition, KB Savills have carried out a valuation of the project. Based ontheir estimated sales valuation of $1,928/m2, KB Savills have estimatedpotential gross project profits (before local taxes and sales commissions) of$150.7m. Kazikli, Bodrum This most recent addition to the Fund's development portfolio is also reportinggood progress. The Fund's joint venture partner, Ado Group, is coordinating theplanning approval process and working with local architects. The joint venturehas obtained zoning for the majority of the site. In addition it has secured anincrease in the permitted density of building from 49,000 m(2) to 74,000 m(2),an increase of 51% in buildable area. The Manager is evaluating proposals from project management companies andinternational architects. Construction is expected to commence towards the endof the summer. Colliers International have previously revalued the Fund's share of the site at$12.35m, 24% above the acquisition cost of $10m. This valuation pre-dated theincrease in permitted density and a new valuation has been commissioned toreflect this and will be announced in due course. The Manager has had the project valued by KB Savills and by ColliersInternational (as to sales values) on the basis of the increased density andzoning permissions. Using the mid-point of the lower sales valuation of Colliersof $2,500/m2, the Fund's potential share of gross project profit (before localtaxes and sales commissions) is estimated at $54.7m. Development finance - Alanya As announced in the recent interim results, local valuers Elit have provided asales valuation which would indicate that the Fund's potential share of revenueat the Alanya site would be $18.5m against a total investment of $12.7m.However, sales at the site remain subdued, which the Manager believes stems froma combination of increased supply and lower pricing of developments in theimmediate area. Although the site remains one of the best in the vicinity it isincreasingly clear a more aggressive stance on pricing will be required. Political situation As referred to in the interim results, the Fund and the Manager continue tomonitor the present political uncertainty in Turkey closely to ascertain whatimpact this might have on the Fund. Attention will focus on the outcome of theforthcoming July elections but the Fund is well-positioned to move forward inany of the likely outcomes. List of contacts Development Capital Management 020 7355 7600Roger HornettErtan SevincTom Pridmore Buchanan Communications 020 7466 5000Charles RylandIsabel Podda Numis Securities 020 7260 1000Iain McDonaldBruce Garrow This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ottoman Fund