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Corporate Presentation

Sofia
April 2009
CONTENTS
 Overview
 Shareholders
 Services
 Real Estate Investment Advisory
 Real Estate Portfolio Management
 Property Fund Management
 Mezzanine Real Estate Financing

 Investment Process
 Board of Directors
 Key Team Members
 Investment Portfolio
 Appendix – Bulgaria Overview

Corporate Presentation 2
OVERVIEW
 SORTIS Real Estate is a joint venture between:
 SORTIS Invest
 BMF Bulgaria
 Mr. Joel Baquiche
 Strong management team with significant real estate and private
equity investment experience in Bulgaria and internationally.
 Applying best international corporate governance and compliance
practices.
 Member of FIABCI Bulgaria, the Bulgarian chapter of FIABCI (The
International Real Estate Federation)
 Real estate investment management company, offering the following
services on the territory of Republic of Bulgaria:
 Real estate investment advisory
 Real estate portfolio management
 Property fund management
 Mezzanine real estate financing

Corporate Presentation 3
SHAREHOLDERS
 SORTIS Invest - investment advisory firm providing
services in the fields of private equity, venture
capital, corporate finance, mergers & acquisitions.
 Assisting entrepreneurs in obtaining financing - equity,
quasi-equity, mezzanine loans and project financing
 Wholly owned by Martin Paev, CFA, an investment banker
with significant M&A, private equity, asset management and
real estate experience, who structured the first Real Estate Investment Trust in Bulgaria

 BMF Bulgaria – an investment holding company owned by Mr. Thomas


Higgins, an investment banker with 16+ years of asset management and
private equity experience in Bulgaria. Selected investments:
 TFS, the Bulgarian investment advisor for the Balkan Accession Fund, a EUR 110 m
private equity and mezzanine finance investment fund for the Balkans.
 Job Tiger, an online and offline Bulgaria focused recruitment company.

 Mr. Joel Baquiche – an experienced investor in private equity and


international real estate with numerous investments in start-ups and SMEs,
listed and unlisted companies.

Corporate Presentation 4
SERVICES
 SORTIS Real Estate structures individual and collective investment
schemes that enable its client-investors to benefit from the real estate
opportunities the Company has sourced and secured in Bulgaria.

 Our aim is to generate attractive risk-adjusted returns to our investor


partners over the pre-agreed investment horizon.

 We create robust investment structures in conjunction with


assessing, managing and, where possible, mitigating risk.

 We are active in all major Real Estate Sectors, including:


 Residential
 Office
 Retail
 Industrial
 Hotels

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REAL ESTATE INVESTMENT ADVISORY

 SORTIS Real Estate acts as investment advisor to property


funds, institutional and individual investors for their real estate
related activities in Bulgaria.

 We help our advisory clients determine an appropriate real


estate investment strategy and then implement it.

 Our extensive network of brokers and partners throughout the


country enables us to identify attractive investment
opportunities, to structure and secure investment transactions.

 We make investment proposals to


our clients based on extensive
market analysis, financial modeling
and risk assessment.

Corporate Presentation 6
REAL ESTATE PORTFOLIO MANAGEMENT

 SORTIS Real Estate provides real estate portfolio management


services to both institutional and individual clients.
 Investment strategy is determined based on Client’s
investment profile and risk-return objectives taking into
consideration global and local market conditions and long-
term trends.
 Careful analysis of short- to medium-term trends and deal
characteristics results in investment/disposal proposals or
recommendations.
 Ongoing review of changes in market
conditions is essential for proper timing
of entry and exit in property investments.
 Currently building capabilities for implementation of
development projects where we do not act in partnership with
a reputed developer.

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PROPERTY FUND MANAGEMENT
 Our team has substantial experience in structuring and managing
regulated and unregulated investment vehicles, both in Bulgaria and
internationally.
 Mr. Martin Paev, CFA, General Manager of SORTIS Real Estate :
 structured and managed TBI-BAC REIT (now Prime Property REIT), the first Real Estate
Investment Trust in Bulgaria. During his directorship, the REIT provided a return to its
investors of 73%, realized over a period of 18 months (Oct 2003-Mar 2005)
 worked on structuring Bulgarian Land Development, a GBP 40 mln property investment
fund, listed on the AIM Market of the London Stock Exchange.
 Mr. Thomas Higgins, Board Member and Investor :
 ex-Managing Director and Chief Investment Officer of the Bulgarian-American Enterprise
Fund
 ex-Executive Director in charge of SME and hotel lending at Bulgarian-American Credit
Bank
 co-founder and Managing Partner of Balkan Accession Fund, a EUR 110 mln private
equity and mezzanine investment fund
 Mr. Joel Baquiche, Board Member and Investor :
 active real estate investor in Europe and the USA
 investor in numerous private equity and venture capital deals
 committee member of London Business Angels Network and London Seed Capital Fund.

Corporate Presentation 8
MEZZANINE REAL ESTATE FINANCING
 SORTIS Real Estate structures mezzanine financing deals to
support experienced property developers.
 Between 60 and 80% of the equity component required for a
development project may be provided in
the form of a mezzanine loan.
 Investors take a quasi-equity position thus
achieving attractive risk-adjusted returns:
 transfer large part of project risks to the developer
 keep part of the upside exposure.

 Mezzanine financing enables developers to implement large


projects with limited own equity exposure.
 Overall project management remains with the developer.
 Facilitates bank financing for the project.
 Mezzanine financing may be provided for projects in all sectors.

Corporate Presentation 9
INVESTMENT PROCESS
Project Deal Due Deal Project
Exit
Identification Structure Diligence Closing Development

 We combine systematic top-down approach with opportunity driven


project identification.
 Local market understanding enhanced by global perspective.
 Determine clear and viable exit strategy prior to investment decision.
 Structure deals with focus on managing project risks (e.g. hiring
experienced contractors or co-investment with reputable developers)
 Professional advice used in a cost efficient manner.
 Hands-on approach to project development to ensure
quality, timeliness and flexibility.
 Careful ongoing market analysis to determine the right timing for exit.

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BOARD OF DIRECTORS
Mr. Martin Paev, CFA (born 1975, Bulgarian) – Chief Executive Officer
Mr. Paev structured the first Real Estate Investment Trust in Bulgaria (TBI-BAC REIT) and acted as the REIT’s Executive Director from its
establishment until he joined Address Group as Executive Director of ADDRESS Investment & Development in 2005. In 2006 he
established SORTIS Invest, an investment advisory firm, providing services in the fields of private equity, venture capital, corporate
finance and mergers & acquisitions.
Martin Paev has 7+ years of investment banking, M&A and asset management experience at the investment banks ING Barings in
Frankfurt/Main (Germany), ETEBA (National Bank of Greece Group) in Sofia, Bulgaria, Balkan Advisory Company (an independent
investment banking boutique in South-Eastern Europe) in Sofia, Bulgaria and SORTIS Invest in Sofia, Bulgaria.
Educated in Bulgaria, Netherlands & Germany, he has Master’s degree in Banking & Finance and Bachelor’s Degree in Business
Administration. Mr. Paev is CFA® Charterholder and served two mandates as Board member of the Bulgarian CFA Society.
Mr. Thomas Higgins (born 1966, US citizen) – Board Member, Investor
Mr. Higgins is an investment professional who has been living and working in Bulgaria for the last 15 years. From 1993 to 2005 he worked
for the Bulgarian-American Enterprise Fund (BAEF) where he become Managing Director and Chief Investment Officer in 1997.
In 2005 Mr. Higgins co-founded and become Co-Managing Partner of the Balkan Accession Fund (BAF), a EUR 110 million private equity
& mezzanine finance investment fund primarily focused on helping successful Bulgarian and Romanian companies expand in the
region. He has previously worked also with Coopers & Lybrand and Equitable Real Estate in New York.
Mr. Higgins has held significant leadership positions in the Bulgarian business community, which currently includes Financial Director and
Board Member of the Confederation of Employers & Industrialists in Bulgaria, Board Member of the American Chamber of Commerce in
Bulgaria, Member of the University Council of the American University in Bulgaria and Co-Founder and Board Member of the Bulgarian
Business Foundation for Education.
Mr. Higgins is an MBA graduate from the Kellogg School of Management at Northwestern University and received a B.Sc. degree in
Finance and Management Information Systems from the University at Albany – summa cum laude. Mr. Higgins speaks Bulgarian.
Mr. Joel Baquiche (born 1951, British) – Board Member, Investor
Mr. Baquiche is an experienced investor in private equity and international real estate. He has been doing real estate development in
Paris (France) and overseeing family property interests in New York, Atlanta and Florida (USA). Mr. Baquiche is an active investor in real
estate projects in the UK since 1987 and in Bulgaria and Romania since 2005.
In the period 1974-1980 Mr. Baquiche has represented European companies in the transport, trading and construction sectors in Egypt.
In 1982 he became Founder and 50% shareholder of Checkout Computer Systems, an EPOS manufacturer for the hospitality industry.
Mr. Baquiche has made numerous investments in start-ups and SMEs, listed and unlisted companies.
Mr. Baquiche studied Economics at Manchester University. He has been a Committee member of London Business Angels Network and
London Seed Capital Fund for many years.

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KEY TEAM MEMBERS
Eng. Ivaylo Angelov, (born 1968, Bulgarian) – Project Manager
Ivaylo Angelov has significant project management and technical experience in the construction and real
estate business. He has 16+ years of professional experience and has completed numerous developments of
office, industrial and residential buildings with aggregate gross built-up area of about 200 000 sq.m.
Mr. Angelov has worked as Site Engineer and Project Manager on a number of construction sites, some of
which are: Business Park Sofia - Construction of Building B2 (GBA 20,000 sq.m.); Residential complexes at
Manastirski Livadi, Sofia (aggregate GBA 30,000 sq.m.) and Malinova Dolina, Sofia (GBA 16,700 sq.m.);
Apartment buildings - Borovetz (GBA 24,500 sq.m); Office building – Gorubliane, Sofia (GBA 20,000 sq.m.).
Mr. Angelov has a degree in Civil Engineering from the Military Construction Academy in Sofia, Bulgaria.

Ms. Teodora Eftimova, (born 1979, Bulgarian) – Investment Officer


Teodora Eftimova has professional experience in the fields of financial planning, investment analysis and
business valuation of real estate investment projects. She has been involved in the development of gated
community projects with sizes between 15 000 sq.m. and 45 000 sq.m. GBA in the outskirts of Sofia city. Ms.
Eftimova has comprehensive experience in various procedures related to the construction and real estate
business, such as land acquisition, regulating land, market evaluation and research, investment project
financing, tax and accounting and administrative requirements regarding the property investment process.

Ms. Eftimova has a Master’s degree in Accounting and Financial Control from the University of National and
World Economy in Sofia, Bulgaria.

Corporate Presentation 12
INVESTMENT PORTFOLIO
AIRPORT BUSINESS PARK PROJECT – SOFIA, BULGARIA
 Location: close to the new Terminal 2 of Sofia International Airport
 The Area: Sofia Airport is a fast-developing office district and a well-
established industrial and logistics area.
 Transport: Frontage on current road to
Terminal 2 and on the new highway
connecting it to Downtown Sofia; existing
bus stop.

 Plot size: 5,464 sq.m.


 Project Type: development of office and
hotel complex with GBA ca. 19,124 sq.m.
 Project Duration: 36 months
 Project Status: currently in design stage

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APPENDIX
BULGARIA OVERVIEW

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ABOUT BULGARIA - INTRODUCTION
GENERAL
 Population: 7.7 mln
 Area: 111,910 sq. km
 Coastline: 354 km

POLITICS
 NATO member since April 2004
 EU member since January 2007
 Stable political situation
 Decreasing long-term political risk
 A funding member of OSCE since 1995

ECONOMICS
 Sustainable high real GDP growth rate (6.0% in 2008), inflation (12.5% in 2007)
 Currency pegged to the EURO via currency board (EUR 1 = BGN 1.95583) since 1997
 Investment grade credit rating (Moody’s: Baa3; Fitch: BBB-; S&P: BBB)
 Developed financial sector – predominantly foreign owned
 Strengthening economy and rising disposable income
 Substantial foreign investments (EUR 6.1 bln in 2007, of which 35% in real estate and 12% in
construction and approximately EUR 6.0 bln in 2008 )
 Sound fiscal policy (budget surplus)
 Flat corporate and personal income tax rate of 10%, the lowest in EU
 Booming tourism industry (EUR 1+ bln net revenues in 2007, 10% growth YoY)
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PROPERTY MARKET OVERVIEW
 The Bulgarian property market is an emerging real estate market.
 Rapid growth over the past 6 years.
 Strong growth of investment activity.
 Lack of investment grade products.
 Financial crisis resulted in increasing yields and suspension of several large
development projects due to lack of financing.
 The market offers attractive investment returns (8% to 12%), but saturation is
expected in some property segments.
 Investment opportunities in distressed properties emerge.
 Office segment is most developed, industrial has the highest yields.
 IRR of 25+ % is achievable, but projects should be carefully selected.
 Thoughtful design, accurate implementation and strong marketing are
essential to a successful project.
 Investment timing and location are key factors to success.

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PROPERTY MARKET TRENDS

 Sales prices stabilized after several years of high growth


 Strong growth in demand expected in industrial properties:
 Industrial zones
 Modern logistics centers
 In-town warehousing
 Demand for more retail space throughout the country:
 Shopping malls
 Hypermarkets
 Strip malls in the largest Bulgarian cities
 Power Centers
 Insufficient quality office space in cities:
 Sofia office market – undersupply, saturation expected over the next 2-3 years
 Opportunities exist for quality office space in broader center locations in Sofia
 Demand for Class B office space in Sofia and in other large cities

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BULGARIAN OFFICE MARKET
 Sofia is the main office space market, Varna, Plovdiv and Bourgas follow
 Total office stock in Sofia – over 883 507 sq.m., 173 000 sq.m. completed in 2008
 Office space of 990 000 sq.m. under construction, 700 000 sq.m. in design phase
 Undersupply of investment-grade product. Yields increased to 10+ % (Q4 2008).
 Lease terms – 3-5 years, max. 10 years
 Vacancy rates in Sofia – 9.4% (2008), lowest in broad center – 2.5%
 Office developments in Sofia shift towards the main boulevards, dynamic
development of Ring Road and Sofia Airport areas

Prime office rental rates & Yields (EUR/sq.m./month)


20 16
18 14
16
12
14
12 10
EUR 10 8 %
8 6
6
4
4
2 2
0 0
2000 2001 2002 2003 2004 2005 2006 2007 Q3,2008 Q4,2008

Prime Office Rental rates Prime Office Yields

Corporate Presentation Source: Forton International 18


BULGARIAN RETAIL MARKET
 Undersupply of investment-grade products
 Yields for prime retail space are increasing from their pre-crisis levels of 6-7% in primary cities,
8-10% in secondary cities
 Construction of several shopping malls started in 2008 – Plovdiv, Pazardzhik, Bourgas, etc.
 New players continue their expansion on the market (e.g. Carrefour, Baumax, Lidl)
 New retail formats will be developed in the major cities – outlet centers, retail parks
 Expansion of the big-box/retail warehouse segment, penetration in new areas of the country
 International brands shift from high streets towards shopping centers
 Penetration level of supermarkets and hypermarkets is still low
 Untapped potential for development of Power Centers

1600
Sofia High Street Rents & Yields (€/sq.m./yr) 16%
1400 14%
1200 12%
1000 10%
EUR 800 8%
600 6%
400 4%
200 2%
0 0%
2000 2001 2002 2003 2004 2005 2006 2007 Q3, 2008 Q4,2008
Sofia High Street Rents Sofia High Street Yields

Corporate Presentation Source: Forton International 19


BULGARIAN INDUSTRIAL MARKET
 The most underdeveloped segment of the Bulgarian property market
 Several well developed industrial zones exist
 Existing stock – predominantly built-to-suit and owner-occupied premises
 New industrial zones currently being designed or developed
 Government initiatives for formation of 100 industrial zones by the end of 2013
 Tax incentives for investments in regions with high unemployment
 Growing demand and attractive yields (currently 11,5-12%)
 Potential for further investments in the sector

Prime Industrial/Logistics Rents & Yields (€/sq.m./yr)

90 18
80 16
70 14
60 12
50 10
EUR %
40 8
30 6
20 4
10 2
0 0
2000 2001 2002 2003 2004 2005 2006 2007 Q3,2008 Q4,2008

Prime Industrial/Logistics Rents Prime Industrial/Logistics Yields

Corporate Presentation Source: Forton International 20


CONTACTS

SORTIS REAL ESTATE


Mr. Martin Paev, CFA Mr. Joel Baquiche Mr. Thomas Higgins
CEO Board Member, Investor Board Member, Investor
SORTIS Real Estate SORTIS Real Estate SORTIS Real Estate

Tel: +359 2 946-39-15 Tel/Fax: +44 (207) 368-65-66 Tel: +359 2 946-39-15
Fax: +359 2 946-39-16 Mobile: +44 (7930) 39-82-80 Fax: +359 2 946-39-16
Mobile: +359 88 50-50-200 e-mail: baquiche@btinternet.com Mobile: +359 888 45-20-51
e-mail: paev@sortis.bg baquiche@sortis.bg e-mail: higgins@sortis.bg

www.sortis.bg
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