Kronstadt Estate - Brasov

1. Your Home in Romania

About The Development

The Kronstadt estate apartment buildings are set in landscaped parkland in a quiet part of the Brasov city, just minutes from the city centre and all local amenities.

With spectacular views over the Tampa mountain and only 20 minutes drive to the local ski resort, Kronstadt is located just 2 kilometres north west of the city in an area called Bartolomeu.

The development will comprise of over 800 apartments in 25 low rise blocks in a parkland setting close to all the local amenities with spectacular views of Tampa Mountain and only 15 minutes drive from the local ski resorts.

The completed development will also include a gymnasium, kindergarten, sports facilities and some commercial units for convenience shopping and restaurants. 60% of this development will be sold to the local Romanian market, which comprises both local residents and wealthy Romanians looking for a trendy holiday retreat. We are offering 40% to foreign investors.

The completion date for buildings 4,5,6 is November 2008.

Building Specification

The apartment will be handed over as follows:

Bathrooms and Toilets

Floor- Tiles manufactured in Italy or Spain or similar quality. Walls: tiles manufactured in Italy or Spain. Tiles fitted to 2.2m height.

Ceiling- painted white. Sanitary equipment: produced by Mondial or RomStal, white color. Sink- white porcelain, 50cm wide, 30cm deep, fitted on worktop and MDF cabinet. Toilet- white porcelain with plastic water tank, pneumatic mechanism 3/6 litres and white toilet seat. Water taps (sink and bath tub) and accessories produced in Italy, ceramic filter. Shower cubicle accessories- Italy manufactured shower set or equivalent as instructed by architect, water taps with one shower command, shower hook, universal IBOX. Other Accessories- soap holder (sink and bath tub), towel rack, toilet paper holder and mirror. Bath tub- 70 x 175cm, white steel. Manual ventilator activated when switching the light on or opening the door and deactivated when switching the light off or closing the door.

Kitchen

Tiles- 8,5 mm thickness, Italian or Spanish Products. All plumbing fixtures to a rough-in stage and ready finish.

Living Room

Walls & Ceiling- painted white. Air conditioning preparation. Telephone & Cable TV sockets. Finished Electrical.

Bedrooms

Walls & Ceiling- White. Telephone & cable TV sockets.

Windows

PVC double glazing.

Doors

Interior MDF doors with high end finish (portadoor).

Hallway

Walls & Ceiling- Insulated Plasterboard painted white

Common Spaces

Fully finished, well lighted, Metal Mailboxes. Elevator: Elmas Elevator. The developer has the right to change suppliers.

Floor Plans

About the Location

Brasov

Brasov is located in the central eastern part of Romania in the Transylvania region, 170 km from Bucharest, which is 2.5 hours by car or rail. Due to its elevation (1000 meters) it enjoys more moderate summer temperatures 25 to 35 Centigrade with light breezes compared to the oppressive summer extremes in the capital that can reach 47 centigrade. Because of this Brasov is a favorite holiday destination for the growing middle class Romanians both in the summer and winter sports season when the local Tampa Mountains are covered in snow during the winter months.

Brasov is the third biggest city after the capital Bucharest and Cluje Napoca, and has a population of over 350,000 which increases to over 500,000 during the busy summer holiday and winter sports season.

Brasov is considered the style capital of Romania with lots of trendy restaurants and bars and the beautifully maintained Saxon architecture dating from the 15th century when the Saxons settled the area. A new international airport is under construction just 15 km from the development which will have an annual capacity of 1 million when completed in 2009. Bucharest is where many Romanians have to live but Brasov is where they want to live.

Kronstadt estate setting

• 1Km to Train station
• 6km to Historic City Centre
• 15Km from the new International airport (completion 2009)
• 2.5 hours by car or rail to Bucharest
• Number one summer and winter destination for Romanians.

About the Developer

This is an Irish venture employing Dutch and American project managers and Romanian architects with a proven track record of building to a high quality western standard. The development is calledKronstadt Estate (Kronstadt is the old German name for Brasov) and is located in Brasov, 2 km north west of the city centre in an area called Bartolomeu.

The development will take four years to complete with construction starting in September 2007.

60% of this development will be sold to the local Romanian market, which comprises both local residents and wealthy Romanians looking for a trendy holiday retreat. We are offering only 40% to foreign investors.

The management of the development will be undertaken by the developer Ireland House SRL until the development is fully completed and handed over to the resident’s property management company. A property fit out and letting service is also available through Goodson & Red, who will provide a complete, turn key solution for investors.

		*Images of a typical Furnishing pack by Goodson & Red

2. The Opportunity

This is an opportunity for investors to participate in one of the most exciting property bull markets in the world today. Property prices in Romania have doubled over the past three years and many experts are predicting prices will double again over the next five years.

Unlike other property investment opportunities available to foreign investors, where the exit strategy is questionable, this development is aimed at the local market where there is local affordability and strong demand expected for years to come, ensuring a ready market for investors wishing to take their profit.

Most Romanians are asset rich and own ther own Panalek apartment (communist block) or land without any mortgage debt, many are selling existing property or re-mortgaging them to purchase new apartments.

With the current property boom in Ireland and the UK well and truly over, Romania offers Irish and UK investors a second chance to build wealth from purchasing property using their pension fund, cash savings and/or a Romanian mortgage or equity release from existing property.

The dynamics driving prices in Romania are many:

• A very old housing stock consisting mostly of poorly built Panelak apartment buildings constructed during the 50’s and 60’s.
• A young educated population aspiring to own newer modern accommodation.
• A booming economy helped by the F.D.I of €50 billion since 2004 and a further €30 billion to come from EU development funding over the next five years.
• Full employment and wages inflation of 20% per annum. Though average wages are low there is a growing middle class with some salaries close to that of professionals in western countries.

About Goodson & Red

Goodson & Red is a fast growing international real estate agency dedicated to offering first class residential property services in two of Eastern Europe’s most promising investment locations – Romania and Estonia.

We have been working in the Eastern European property market for over five years. Over that time we have developed an enviable reputation for our in-depth market knowledge and expert, personal service.

Unlike other companies, who offer every location around the world and claim to be experts in them all, we specialise in high growth potential property investments in Eastern Europe – in particular Romania and Estonia. Our philosophy is to study each market thoroughly, and provide a professional link between developers, investors, buyers, sellers and landlords through our comprehensive consultancy and property sourcing services.

With an expanding network and offices actually on the ground in Bucharest, Romania and Tallinn, Estonia – as well as London, UK – our company can help make operating in these fast moving, emerging locations simple, secure and successful.

Our team of directors have over 25 years combined experience in the UK and Eastern European property markets and are available to deal with developers and investors in person.

Our services include a comprehensive property brokerage service for local buyers and sellers, long and short term lettings services and a comprehensive professional management service for landlords. We also offer a foreign buyers consultancy to help investors diversify their portfolio, together with a development consultancy service, providing effective marketing and branding for developers.

Whatever your requirements in Eastern European property Goodson & Red is perfectly positioned to help you achieve your aims.

Please download our company profile by Visiting: www.bucharestproperty.com/files/companyprofile.pdf

Introduction to Investing in Emerging Markets

Residential property continues to attract more small and new investors than ever before, with increasing numbers of people investing for profit – or perhaps a retirement nest egg.

However, with uncertainty in the UK market, shrewd investors must increasingly look further afield for profitable opportunities. Eastern Europe offers an exciting opportunity for investors willing to take a little extra risk. These emerging locations can offer the opportunity to buy in at prices not seen in the UK since the 1980’s – and prospects for capital growth UK investors can only dream of.

Of course, Eastern Europe is a very big place. Understandably, many investors are unsure about where, when and how to buy.

Goodson & Red believes that Romania is the next big property boom in Eastern Europe. Our job is to research the market and present you with the very best investment opportunities.

In this special report we are pleased to tell you a little more about a golden opportunity to invest in one of the most exciting new apartment developments in Romania’s booming 2nd city, Brasov.

Why Invest in Romania?

For many years Romania was very much a closed country, suffering from severe poverty and decline. Today, most outsiders are not aware how much Romania has changed or how rapid the county’s progression towards becoming a modern European economy is.

With a population of around 23 million, Romania is the second largest country in Eastern Europe – and the seventh largest in the EU. Only Germany, France, the UK, Italy, Spain and Poland are larger markets.

Apart from these hard-cash benefits Romania has many other qualities which commend it as your investment location:

• Educated, ambitious people
• A fast improving infrastructure
• Rich culture
• Optimistic ‘going-places’ feel – boding well for the prospects of its property market.

Romania’s economy has been growing fast for six years now. It was granted the much desired ‘functional market economy’ status by the EU in 2004 and now officially qualifies as a ‘Boom Economy’. Romania was the fastest growing economy in the EU in 2006 (other than the relatively small Baltic countries).

Key Facts

• Full, Active EU Member: EU membership invariably brings rising property prices.
• Booming Economy: Economic growth of 5.3% in 2005, 7.7% in 2006, and a forecasted 8.4% for 2007. (IMF forecast.)
• Democratic & Stable: Romania is a parliamentary republic with a bicameral parliament.
• The president of the country, the senators and the members of the lower chamber are elected every four years.
• Favourable Tax Regime: Sixteen percent ‘flat tax’ system benefits middle/high income earners. No capital gains tax after three years of ownership favours property investors.
• Growing GDP: Total US$244 billion (US$11,500 per capita) in 2006 and growing.
• Potentially one of the largest economies in Europe.
• Increasing Employment: Unemployment fell to 5% in September 2006 (approximately half as much in Bucharest) which is 33% lower than the EU average.
• Fast rising wage levels.
• Foreign Direct Investment (FDI): Accelerated fast since 2001 reaching over US$9 billion in 2006.
• FDI is expected to be the highest in Central/ Eastern Europe apart from Russia over the next few years.
• EU Funding: Major recipient of EU funding.
• Will receive an additional €30 billion for the years 2007-2013, the highest allocation of all the new EU member states.
• Developing Mortgage Market: Mortgages are a relatively new arrival in Romania. Greater accessibility to mortgages, and more Romanians able to afford to buy property, is expected to fuel the property market.
• Euro Currency Imminent: Currently the Government has a provisional target for introduction in 2011.
• Improving Infrastructure: Low cost airlines and new motorways make Romania more accessible for business, visitors and tourists.
• Strong Demand for Property: Strong domestic demand, plus interest from foreign buyers and investors – and a largely unexploited tourist/ holiday home property market.

Further Information

For more specific information on Romania and the many good reasons for investing here we recommend you read How To Profit From The NEXT Biggest Property Boom In Eastern Europe, by Darren Goodson. This comprehensive and informative book is available for free at www.bucharestproperty.com.

You can find an extensive selection of online maps of all areas of Bucharest on the About Romania website at www.aboutromania.com.

3. Prospects for Capital Appreciation

While it is, of course, impossible to predict how much the value of your investment might rise we believe the prospects for profiting from your Bucharest property are very favourable.

In the early 1990’s Romania found itself in the unfortunate position of having the worst standard of housing in Eastern Europe. Very few people had the money to buy property, and so much property was virtually valueless. Since the economic boom began, however, a buoyant housing market – centred substantially on Bucharest and now the secondary cities have emerged.

Many analysts and consultants report that prices generally have risen by around 15%-30% per year over the last 2-3 years depending in property type and location. Property consultants CB Richard Ellis say that the lower limit of price rises for Bucharest apartments was 20% in the second half of 2006. (CB Richard Ellis, Market view Bucharest Property, Year-End 2006). Hence the general consensus of opinion amongst property professionals is that price rises could continue for at least five years and are likely to be in the order of 25%-30% annually on average in Brasov and across the country. CB Richard Ellis says that average sale prices of properties could rise 20% in 2007.

Channel 4’s ‘A Place in The Sun’ has forecast that prices could rise by 414% by 2015.

Lettings & Management

Once your property is completed and handed over you may well wish to let it out, to earn a rental income. While it is impossible to predict future rents and yields we can offer some advice, based on recent experiences.

BucharestProperty.com, in association with Goodson & Red, our real estate agency in Bucharest, can take care of the full management of your kronstadt property through our Professional Property Management Department. However, you are perfectly free to choose your own letting agent if you wish.

4. Buying Off Plan: What You Need to Know

Buying off plan has proved to be a shrewd and effective way of investing in the booming Romanian market. We have taken Bucharest as an example.

In 2006, eleven developments were launched in Bucharest’s six sectors. This delivered only 8,800 units for a population of over two million inhabitants – many of whom are living in substandard communist era tower blocks. The desire amongst affluent Romanians to move to new, upmarket developments in the secondary cities – like Kronstadt – is partly responsible for fuelling spectacular capital growth over the last couple of years.

In 2006, 50% of all Bucharest developments were sold off plan, with two completely sold out a full 12 months before completion! The locals have demonstrated a strong appetite for buying in early, and we believe that foreign investors are well advised to consider doing likewise.

Disadvantages of Buying Older Property:

• Questionable build standards
• Poor design and layout – not suited to modern buyers/tenants.
• No/inadequate on-site facilities.

Advantages of Buying Off Plan:

• Professional design and layout
• High quality of construction and finish.
• Desirable on site facilities and modern security add value.

5. More Helpful Information For Investors

The Romanian Mortgage Market: What You Need to Know

Mortgage finance has only become available to most Romanians in the last three years. In the past all purchases were in cash, which limited prices and capital appreciation. Today, access to easy, cheap finance is one of the factors that is really driving the market here.

The mortgage industry in Romania is still quite immature. It represents only 2% of the country’s GDP, compared to around 50% in the UK. So there is considerable room for growth. There are currently now over 20 banks actively promoting mortgages here.

Romanians may currently borrow 75% loan to contract, requiring a 25% deposit. However, as in other emerging markets we consider the mortgage market will quickly become more sophisticated and the range of mortgage products will increase – thus creating even better prospects for today’s investor.

You’re Exit Strategy: Some Suggestions

With any investment it is, of course, sensible to have an exit strategy. In this section we will offer some suggestions for your consideration.

Local demand among the emerging middle class is currently very high and a sale to local buyers could be an attractive exit route. Yet there is also a shortage of good rental accommodation in Brasov so rental opportunities are good.

There are three strategies for you to consider:
1. Flip your investment
2. Complete your investment
3. Complete and release equity

1. Flipping your investment might involve selling your contract to another investor or purchaser before you are called to complete on the project. The demand from locals is so high that they will provide you with an exit strategy at an early stage if you wish to flip.

This is typically done six months before completion and allows you to release any potential profit you may have gained from buying off plan. It is a riskier strategy than ‘2’ or ‘3’ and you should ideally have a mortgage in place in case you decide not to flip.

2. Completing your investment means signing the contract, and taking possession of your investment property on completion. Most people will use the mortgage finance that is available at 80% loan to value (LTV) and will then hand the letting and management of the property over to Goodson & Red, our local estate agents in Bucharest. We will be setting up the rental management facilities in the secondary cities we promote.

3. Completing and releasing equity gives you an opportunity to complete on your investment, hold it for the medium term and also release any potential capital appreciation that has occurred during the construction period.

Releasing Equity

For example, if prices have risen at a modest 20% over two years it could mean an investor would be able to release €24,000 on completion.

Once you have benefited from capital growth in the construction period release equity and investing it in the next up and coming development in Bucharest could be a very sensible exit strategy indeed.

Example

Who Can I resell to?

The Romanian property market is growing rapidly, thanks to increasing local affluence and easier access to mortgage finance. There is a growing middle class who are keen to ascend the property ladder as quickly as possible.

Colliers International have operated in Bucharest for over 10 years now, and are considered experts on the residential market here. They say ‘middle income residential segment (of the Bucharest market) is entering its long expected boom’.

This can also be said for Brasov, where wealthy Romanians are buying second homes and would like to retire.

The main characteristics

• Income of at least €1,000 per month
• Top and middle management positions
• Already own an apartment and will rent it out
• Upgrading to a new apartment and selling the older one to raise the deposit
• Young educated Romanian couples looking to start a family.
• Working for a multinational company
• Eligible for a mortgage
• First time buyers interested in buying an apartment in a lifestyle-oriented complex

Buying Through a Company: What You Need to Know

At the moment, the constitution of Romania restricts ownership of real estate by foreign nationals. However, a Romanian company may own real estate in the country even if foreign owned.

Another benefit of setting up a Romanian limited company is that it will save you 19% VAT. This is a cost that individual purchasers have to fund.

Therefore, we suggest setting up a Romanian limited company through which to purchase your property. We have lawyers able to represent you and assist you in the formation of a company if required.

Therefore, we suggest setting up a Romanian limited company through which to purchase your property. We have lawyers able to represent you and assist you in the formation of a company if required.

Protecting Your Investment

We understand the importance of protecting your investment. Therefore we have a strict checklist that must be satisfied before we proceed with a development:

• Title Check
• Developers Bond
• Access to Development Funding
• Planning Permission
• Title Deeds

These searches give you added security by fully protecting your investment.

Risks & Returns: Some Points to Consider

The Economy

So far, every country that has joined the EU has benefited economically. There is, of course, a risk that Romania’s economy may falter as buyers look even further east to secure cheaper ‘non-EU’ prices for goods and services.

In our opinion, this is a limited risk and will not negatively impact property prices. Indeed the largest real estate consultancy in the world – Jones Lang Lasalle – has forecast that Bucharest is expecting the highest output growth over the midterm ever registered in E-REGI history (European Regional Economic Growth Index).

Price Risk

Are you paying the right price? We believe the price for this development is excellent. Firstly, the specification and design of the building will actually enhance the area, while the location itself is a unique selling point for this development.

To be sure, we have engaged a respected independent Romanian real estate consultancy company to prepare a report for us, assessing the present value and the growth potential for this project over a two year time period.

Inward Investment

Corporations such as General Electric, IKEA & Renault are already in the Romanian commercial property market and are confident that commercial and residential real estate are the places to be for long term growth.

We are convinced that not only are their predictions based on extensive research and analysis, but they are most likely backed by risk averse decision makers – who would be wary of investing if the market was not strong.

Future Growth Risk

There are of course, no guarantees in any market in terms of future growth. But everything about this development points towards there being substantial capital growth potential.

From our experience other Eastern European markets, and looking historically at how price per square metre values appreciate in emerging markets, we anticipate these investments will increase considerably.

Exit Risk

There is a possibility that investors looking to sell their investments may not find a buyer. This is always a risk in any market, emerging or otherwise and cannot be understated.

Given that this is a family-orientated property rather than a mass market development we consider this risk is limited, as the growing Romanian middle classes aspire to this style of development.

The Costs of Buying

The buying procedure in Romania is similar to that in other European countries. Transactions for the purchase of real estate must be finalised in a written contract and confirmed by a notary – a legal official who is duty bound to check every detail and document.

Prior to completion your own lawyers will undertake due diligence for you, much the same as if purchasing anywhere else. We recommend that you obtain English translations of important documents and satisfy yourself that they are in order.

Once the transaction is ready to proceed the final legal transfer of ownership of your property is carried out on a predetermined date in front of the notary. A notary deed will be issued which is equivalent to a title deed and is an important and valuable document.

Finally, in order for the buyer to be regarded as the legal owner of the property they should be registered as the owner with the Real Estate Registry.

Small differences in exchange rates make a big difference to the end amount you pay, and specialist companies’ rates compare extremely favourably to the high street banks.

*Please enquire for our recommended Currency Exchange Company.

Tax Implications

When buying in Romania the tax rules are the same for locals and foreigners. As with all tax systems, the rules are complex and you are strongly advised to seek professional advice from a specialist. However, here is a handy guide:

Property Transfer Tax

The sale and purchase of real estate located in Romania are subject to stamp duty and notary fees. Stamp duty figure is 0.5% plus VAT.

Value Added Tax

The transfer of immovable property in Romania is subject to VAT charged at the standard 19%. However, special VAT simplification measures apply to land and buildings, provided both the seller and the buyer are VAT registered in Romania. In this case, the seller and the buyer account for both input and output VAT without any VAT cash flow.

Capital Gains Tax

Non-resident legal entities are taxable in Romania at the standard profits tax rate of 16% for the capital gains realised from selling ownership rights over a local company. Profits derived from the direct sale of real estate in Romania are also subject to the standard 16% tax. However you can decrease the capital gains tax liability by deducting all costs involved in the purchase, maintenance and sale of the property.

Dividend Tax

Dividends paid abroad by a local company from its profits are subject to a 16% withholding tax in Romania. However, this tax may be reduced (even to zero) under the provisions of some of the double tax treaties signed between Romania and other countries.

Local Taxes

Owners of buildings are required to pay an annual building tax to the local authorities. For companies, building tax is 1-2% of the book value of the building. There is a local tax liability of 1.5% on the cost of your apartment when owned by a company. This liability can be credited back against CGT when you sell.

6. Why Buy Using BucharestProperty.com?

BucharestProperty.com’s fee includes everything you need to make a successful property investment in Romania. We don’t just sell you a property. We offer a full consultancy service, do thorough due diligence on every project, and provide personal service to ensure everything runs smoothly:

Finding the Deal

• Finding the deals through our network of international finders
• Personally visiting all developments for face-toface meetings with key personnel and viewing the sites
• Financially structuring the deal for maximum returns
• Completing extensive research and due diligence on title, planning, legalities, country and town, the development and the developer
• Sourcing reputable local English-speaking lawyers
• Negotiating favourable fee structure with lawyers

Services

• Our team help you through your entire investing process, including:
• Answering any questions you may have during your investment process
• Guiding you through the contract and payment process
• Helping arrange a power of attorney
• Help organise and liaise with mortgage companies where necessary
• Arranging site visits – site visits are welcome
• Help source and organise furniture packs where appropriate
• Letting and management if required – through our own real estate agency in Bucharest, Goodson & Red.
• Update you on the progress of your investment
• Answer any questions or queries regarding your investment

*Our fee for a Kronstadt apartment is just £1,995 plus 18% VAT payable for each individual reservation made.

Our Team

8. What To Do Next

We hope you have found this information interesting and useful and that you will want to participate in this opportunity to invest in Bucharest property.

While we recommend that you consider everything carefully before proceeding please be aware that these apartments are proving very popular and are already selling fast. To ensure that your preferred apartment or apartments are available at the listed prices we recommend that you contact us as soon as possible to make a reservation.

Alternatively, if you have any further questions please do not hesitate to contact us. Contacting us with a question or query does not commit you to buying.

To reserve an apartment or apartments – or make an enquiry – please contact us on 0871-271-5120 or email sales@bucharestproperty.com now.

We look forward to hearing from you.

Yours sincerely,

Summary: Investor’s Checklist

• Emerging market.
• Buoyant economy.
• Growing demand for property.
• Excellent prospects for capital growth.
• Good letting potential.
• Centrally located property, good transport links.
• Good quality development.
• Sensible financial structure.
• Handover of your property within a reasonable period.

For all enquiries or to reserve an apartment, email sales@bucharestproperty.com
or telephone 0871-271-5120

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