Investment Proposal 1

Construction and Sale of an 8-level building

Our first proposal regarding Amazon Tower XIV is that of the construction of an 8-level building with 5 ultra-luxurious apartments. Three scenarios are then considered, that of selling all the apartments on the first year which is the best case scenario; that of selling one apartment per year, and that of selling all properties within two years, and how that will affect the investor's potential for profit.

Equity Scenarios
Scenarios Full Acquisition Joint Venture Scenario
Shareholder's Status Investor Landowner (Amazon)
Equity Contribution €4,506,100 €1,846,100 €2,660,000
Equity Shares 100% 41% 59%
Apartments' Selling Price
Apartments Selling price per square meter (€ / sq. m.) Area (sq. m.) Cost (€)
101 (2-BD) €8,325.00 150 €1,248,750
201 (3-BD) €8,475.00 150 €1,271,250
301 (2-BD) €8,325.00 150 €1,248,750
401 (3-BD) €8,475.00 150 €1,271,250
501 (3-BD) €11,017.50 150 €1,652,625
Total 1655 €6,692,625
  • Scenario 1.1

    Sell all properties on the first year

    The first scenario is the best case scenario – that of all the apartments being sold on the first year, with an initial yield of 29.5%.

    SCENARIO 1ST - SELL ALL PROPERTIES ON THE FIRST YEAR
    Selling Price €6,692,625
    Marketing Expenses €669,263
    Corporate Tax €189,658
    Net Sales €5,833,705
    ROI (First Year) 29.5%
  • Scenario 1.2

    Sell one apartment per year

    The second scenario is the worst realistic scenario, as we consider that the first apartment will only be sold on the second year after the construction of the building, the penthouse will be sold the year after and subsequently an apartment will be sold each year, with an IRR for the potential investor of 12.1% in case of full acquisition and 34.2% for a joint venture.

    SCENARIO 2ND - NET CASH FLOWS AND IRR FOR THE INVESTOR
    Years Full Acquisition Joint Venture ROI FOR INVESTOR
    1 (€3,121,525) (€461,525)
    2 €609,754 €152,438 33%
    3 €696,472 €174,118 38%
    4 €1,047,254 €261,813 57%
    5 €1,065,957 €266,489 58%
    6 €1,065,957 €266,489 58%
    Total cash flows €1,363,869 €659,824
    IRR 12.1% 34.2%
    SCENARIO 2ND - NET PRESENT VALUE FOR THE INVESTOR
    Years Full Acquisition Joint Venture
    1 (€875,546) (€664,596)
    2 €621,804 €254,746
    3 €932,103 €381,872
    4 €963,828 €394,870
    5 €906,486 €371,377
    6 €871,621 €357,094
    NPV €3,420,297 €1,095,364
  • Scenario 1.3

    Sell all properties in two years

    The third scenario is the most realistic one out of the three. We consider that no apartment will be sold on the first year of the building's construction. On the second year we consider that a two-bedroom apartment and the penthouse will be sold, followed by the rest of the apartments which will be sold on the following year, with an IRR of 27% in case of full acquisition and 112% for the joint venture.

    SCENARIO 3RD - NET CASH FLOWS AND IRR FOR THE INVESTOR
    Years Full Acquisition Joint Venture
    1 (€3,435,546) (€664,596)
    2 €2,089,649 €856,106
    3 €2,855,123 €1,169,713
    Total cash flows €1,509,226 €1,361,223
    IRR 27% 112%
    SCENARIO 3RD - NET PRESENT VALUE FOR THE INVESTOR
    Years Full Acquisition Joint Venture
    1 (€3,435,546) (€664,596)
    2 €2,009,278 €823,179
    3 €2,639,722 €1,081,465
    NPV €1,213,454 €1,240,049

Investment Proposal 2

Construction and Sale of a 10-level building with 19 luxury apartments

This investment proposal is the one we consider to be more realistic. It involves the construction of the first high-rise building on the main seaside road in Paphos, a building with 10 levels and 19 apartments of the utmost luxury.

Equity Scenarios
Scenarios Full Acquisition Joint Venture Scenario
Shareholders' Status Investor Landowner
Equity Contribution €6,416,850 €3,756,850 €2,660,000
Equity Shares 40% 60%
  • Scenario 2.1

    Sell all properties on the first year

    According to this scenario, all the apartments are sold on the first year of the building's construction, with an initial yield of 104.8%.

    SCENARIO 1ST - SELL ALL PROPERTIES ON THE FIRST YEAR
    Selling Price €9,324,000
    Agents Commission (10%) €932,400
    Corporate Tax €697,666
    Net Sales €7,693,934
    ROI 104.8%
  • Scenario 2.2

    Sell all apartments in two years

    2ND SCENARIO - NET CASH FLOWS AND IRR IN THE CASE OF FULL ACQUISITION AND JOINT VENTURE
    Net Cash Flows Full Acquisition Joint Venture
    2019 (€4,162,740) (€1,502,740)
    2020 €3,046,494 €1,218.598
    2021 €2,819,235 €1,127,694
    Total cash flows €1,702,989 €843,552
    IRR 27% 36%
  • Scenario 2.3

    Sell all apartments in five years

    3RD SCENARIO - NET CASH FLOWS AND IRR IN THE CASE OF FULL ACQUISITION AND JOINT VENTURE
    Years Full Acquisition Joint Venture
    1 (€4,162,740) (€1,502,740)
    2 €951,744 €380,698
    3 €291,570 €116,628
    4 €1,480,290 €592,116
    5 €1,571,063 €628,425
    6 €1,571,063 €628,425
    Total cash flows €1,702,989 €843,552
    IRR 10.8% 14.5%
    3RD SCENARIO - NET PRESENT VALUES (BEFORE TAXES) FOR THE INVESTOR
    Years Full Acquisition Joint Venture
    1 (€4,162,740) (€1,502,740)
    2 €915,139 €366,055
    3 €269,573 €107,829
    4 €1,315,972 €526,389
    5 €1,342,951 €537,180
    6 €1,291,299 €516,520
    NPV €972,193 €551,233

Investment Proposal 3

Rental business of an 8-story building with 5 ultra-luxury apartments

Our investment proposal in this case concerns the construction of an 8-level building containing just 5 ultra-luxurious apartments, which will be consequently rented.

BUILDING'S AREA (sq.m.)
AREAS IN EACH FLOOR Covered Area Covered Veranda Uncovered Veranda Total
1. Underground Parking 1 265 0 0 265
2. Underground Parking 2 265 0 0 265
3. Ground Floor 165 0 0 175
4. First Floor 110 40 7 175
5. Second Floor 130 20 7 175
6. Third Floor 114 36 7 175
7. Fourth Floor 138 12 7 175
8. Fifth Floor 145 5 7 175
9. Roof Garden 175 0 0 175
TOTAL AREA 1332 113 35 1755
APARTMENTS' AREA (sq.m.)
Apartments Covered Area Covered Veranda Uncovered Veranda Total Area
101 (2-BD) 110 40 7 157
201 (3-BD) 130 20 7 157
301 (2-BD) 114 36 7 157
401 (3-BD) 138 12 7 157
501 (3-BD) 145 5 7 157
TOTAL AREA 727 113 35 875

The total revenues from rentals are presented in the table below. As can be seen, there are two sources of revenue. The first is from rentals. The second is from the operation of the small roof garden café. The estimated net revenues (excluding the labour cost) from the café are particularly reserved, since we have estimated them at around just 75,000 euro per year.

TOTAL REVENUE (RENTAL BUSINESS) €
Year 1 4 7 10
Total Revenue from Rentals 280742 396978 433788 474012
Net Additional Revenue from Roof Garden 75000 81955 89554 97858
Total Revenue 355742 478932 523342 571870

We have considered three scenarios regarding total revenue (the first scenario is our main analysis). In the second scenario we consider that a macroeconomic shock in the economy leads to a decrease of total revenues by 10%. The third scenario is more extreme, since we consider a shrinkage of total revenue by 21%. The scenario is related to unpredicted and violent political risk.

In the tables below we present how the two scenarios affect the total revenues.

TOTAL REVENUES (SCENARIOS) €
Period 1 4 7 10
Scenario 1st (TR) - 426441 508099 555213
Scenario 2nd (TR -10%) - 383797 457289 499692
Scenario 3rd (TR -21%) - 338364 403156 440540

In addition, we have calculated the unleveraged NPV for the three total revenue scenarios and for a discounting rate in the range of 5% - 10%. The results are shown in the table below. The discount rate of the Amazon Building XIV project is defined as the rate of return (RoR) that could be earned by investing in an average complex of luxury apartments.

NPV / UNLEVERAGED (MIL €) EARNINGS BEFORE TAXES (EBT) EARNINGS AFTER TAXES (EAT)
Interest Rate / Scenarios 1st 2nd 3rd 1st 2nd 3rd
5% 2,54 2,24 1,93 2,37 2,11 1,84
6% 1,99 1,72 1,42 1,84 1,59 1,34
7% 1,5 1,25 0,97 1,36 1,13 0,89
8% 1,07 0,82 0,56 0,93 0,72 0,49
9% 0,68 0,45 0,21 0,55 0,35 0,13
10% 0,33 0,11 -0,11 0,21 0,23 -0,18
IRR 11% 10% 10% 11% 10% 9%

As can be observed in the table below, the IRR ranges between 9.42 - 11.08%. This rate reveals an excellent investment opportunity since the majority of luxury properties for sale fail to outreach the margin of 8%.

Both the high NPV and IRR are results of the stable and high cash flows from rents.

IRR EBT EAT
Scenario 1st 11,08% 10,69%
Scenario 2nd 10,38% 10,07%
Scenario 3rd 9,63% 9,42%

Investment Proposal 4

10-Story Hotel with 26 Ultra Luxury Apartments

This scenario concerns the construction of a ten-level boutique-style hotel with 26 luxurious apartments. The project will include a gym, spa facilities and two swimming pools, one on the ground floor and another one in the roof garden found on the top floor.

We have taken three scenarios into consideration regarding the revenue and profit of the hotel for the first ten years of its operation. The first scenario is our main analysis, while in the second scenario we consider that a shock in the economy leads to a decrease of total revenues by 10%. The third scenario is more extreme and far less likely, since we consider a shrinkage of total revenue by 21%.

In the tables below we present how our main scenario and two alternative scenarios affect the total revenues and the net profit.

TOTAL REVENUES (SCENARIOS) €
Year 1 4 7 10
Scenario 1st (TR) - 2243622 2597273 3006668
Scenario 2nd (TR -10%) - 2019260 2337546 2706002
Scenario 3rd (TR -21%) - 1794898 2077819 2405335
Net Present Value (NPV) Analysis on Sensitivity Scenarios
EARNINGS BEFORE TAX €
Year 1 4 7 10
Scenario 1st (TR) -7438950 1124910 1387507 1694685
Scenario 2nd (TR -10%) -7438950 954239 1188501 1462804
Scenario 3rd (TR -21%) -7438950 773568 979494 1220924
EARNINGS AFTER TAX €
Year 1 4 7 10
Scenario 1st (TR) -7438950 1017714 1245203 1510352
Scenario 2nd (TR -10%) -7438950 868377 1071072 1307457
Scenario 3rd (TR -21%) -7438950 710291 888192 1095812

We have calculated the unleveraged NPV for the three total revenue scenarios and for a discounting rate in the range of 5% - 10%. The results are shown in the table below. The discount rate of the project is defined as the rate of return (RoR) that could be earned on a hotel with luxury apartments.

NPV / UNLEVERAGED (MIL €) EARNINGS BEFORE TAXES (EBT) EARNINGS AFTER TAXES (EAT)
Interest Rate / Scenarios 1st 2nd 3rd 1st 2nd 3rd
5% 8,55 7,14 5,65 7,58 6,35 5,05
6% 7,44 6,11 4,71 6,53 5,37 4,14
7% 6,43 5,18 3,86 5,58 4,48 3,33
8% 5,52 4,34 3,10 4,72 3,69 2,60
9% 4,70 3,59 2,42 3,95 2,98 1,95
10% 3,96 2,91 1,80 3,25 2,33 1,36
IRR 18% 16% 14% 17% 15% 13%

As can be observed in the table below, the IRR ranges between 12.82 – 18.12%. Both the high NPV and IRR are results of the stable and high cash flows from the rented hotel apartments.

IRR EBT EAT
Scenario 1st 18,12% 16,70%
Scenario 2nd 15,98% 14,81%
Scenario 3rd 13,71% 12,82%