Investment Deal
Varenna
Has a Coastline Homes member formally visited the location?
Yes
Result of the ‘Forensic’ report (if applicable)
N/A
Does the development / product meet the criteria for:
1 Location Yes Exceptional
2 Quality Yes
3 Price Yes
4 Instant Equity Yes Below market value
5 Rental Demand Yes Excellent
6 Financial Package Yes
7 Brand Name & Reputation of Developer Yes
Land title
Permissions
Does the developer have title? Yes, confirmed
Building / Planning Permission / Builder’s Guarantee
Copy of zoning categorisation, if obtained N/A
Copy of planning permission, if obtained Viewed.
Copy of building permits, if obtained Viewed
Details
Financing of Development
Does the construction depend on off-plan sales for financing? No.
What are their sales targets? All 74 sold within 18 months
Are their sales forecasts realistic? Yes, we will sell them for the developer earlier
Where is the investor's money held? Escrow until 15/1/07, then developer’s bank.
What happens to the client’s money if the development does not get completed? Bank
Guarantees? Clients funds are protected by guarantee.
Delivery of project
What are their delivery targets?
Block D March 2007
Are their construction timelines realistic?
Yes
Developer CARNAZZOLA GEOM. CAMILLO SPA
Overview on Track record:
1. Document checklist – Checked out.
Copy of certificate of incorporation
List of company directors
Passport copy for at least one director
2. Background information
How long has the company been in operation? Over 20 years
What other projects do they currently have on sale? Other quality developments were viewed
on Lake Como.
How many sales did they achieve last year? N/A
Do they have English-speaking staff? Yes
Is it possible to obtain references?
- Reputation
- Construction quality
- Commercial status
Yes, verified through ‘honest broker’ and local Mayor.
3. Commercial terms
What contract will the developer use? Compromesso already drawn up.
Does this offer enough protection? Yes
What rights do we have if the contract is breached? Full rights under Italian contract law.
Which legal system has jurisdiction? Italian legal system
To where will issues be escalated for arbitration?
Italian legal system
References:
N/A see above.
Purchase Price
€200,032 to €346,488
Market Value
Estimated at least €40,000 higher based on comparables.
Bank Valuation
N/A Comparables have been used.
Reason for discount
The developer’s prices are too low, and we have launched this deal as the first
off-plan deal in the area. They normally build first then sell – hence we have
obtained the whole deal at wholesale prices.
Type
Off-plan Yes
New build
Refurb
Re-sale
Apartment Yes
Villa
Townhouse
Semi-detached
Detached
Condo
Total units available (of each type)
2 studios, 12 one beds, 6 two beds
Specification (type 1) See price list and floor plans
Beds
Bath
Parking
Yes. Garaged parking included in price.
Location
Located on the best part of Lake Como. On a hillside in the village of Varenna,
overlooking the town of Bellagio across from Menaggio. 1 hour from Milan
Malpensa airport, 50 mins from Bergamo airport and 45 mins from the smaller
Lugano airport via Menaggio. The development is less than a 10 min walk from
Varenna railway station, from where trains go to St. Moritz (45 mins) and Milan (1
hour). There is also a breathtaking golf course up on the hills overlooking
Menaggio (accessed by the regular ferries from Varenna harbour).
Varenna is known as the ‘mini Portofino’ after one of the most expensive towns in
Italy.
Appraisal of location /region
The location of these apartments on a hillside with unobstructed views are guaranteed for life as there is no possibility to build in front of them. The development is also very close to the centre of Varenna with access to its restaurants, harbour and regularferries to Bellagio and Menaggio. This makes it an ideal candidate for capital growthand rental demand – but at very affordable prices as a result of us securing the unitsat wholesale value (much lower than comparable new builds in the area).
Savills are building a similar development across the Lake above Menaggio. They are slightly larger but are inferior in appearance and quality. The prices are over £100,000 more starting at £320,000.
Prices for a new build down in the village of Varenna are over €2800 per m2 which has no views of the lake, no pool or parking, are smaller, have no kitchen installed or white goods and are inferior in design to the Varenna.
The prices for our deal are between €2700 and €3000 per m2
The lake front at Varenna commands very high prices, for example, a building
consisting of two retail units and four apartments sold for 13 million euros recently.
Rentals
Appraisal of rental market (include worked example):
Varenna is in an excellent position and a very popular location for both investors and tourists. The town
receives 48,000 to 50,000 requests for accommodation per annum, but there are only 250 beds per night in
Varenna.
These figures have been confirmed by the local Mayor.
This is naturally a very healthy situation for an investor, supported further by the fact that little scope for
further development of property exist.
Expected annual income in excess of €15,000 for a one bed, substantially more for the larger 2 beds.
Further work is continuing to bring a rental company on board for the investors.
Type of rental market:
Ideal for short term rentals. Would suit both couples young and old, as well as small families.
Rental value: 1 beds from €500 pw off-season, and €700 pw high season.
2beds €600 pw
off-season, and €800 pw high season.
Rental guarantee: No
Mgt charges: expect 25% to 30% for full management and sourcing of rentals
Service charges: 100 euros per month including communal lighting, gardens, pool, cleaning.
And building Insurance.
Buildings insurance: See above
Capital Growth
There is built-in instant equity on purchase, with expected real growth of 50%
on the real market value over 5 years.
The numbers on the 3 page summary sheet are therefore conservative and
assume that the growth is on the purchase price.
Reservation Fee
How much: €5000 (in addition to 25% deposit)
Policy: Refundable until Preliminary Contract (Compromesso) signed – similar to exchange
of contracts.
Exchange
Deposit: 25% (on top of the €5000 reservation fee)
When Exchange: Compomesso signed within 30 days or sooner. We expect a
deadline of 30/11/06 to be set.
Completion date: 31 March 2007
Stage payments: No
Finance
Has the developer arranged a financial product for this deal?
Yes. Awaiting details from Italian agents in next two weeks.
We have also linked up with Conti Financial Services and Fidentia to provide mortgage
products as well. Fidentia Group have informed us that buyers can obtain interest-only
mortgages up to 60% LTV as long as they declare it as a purchase and not a pure
investment, i.e. they must intend to use it for personal use an rent out in between.
See separate documentation for these details. Note with Fidentia Group, the client applies
on-line.
Name, name of contact and their details, for a local bank providing mortgages?
See separate documentation for these details.
Available Loan to Value: Up to 80% typically. Note this is typically the purchase price, not the
actual market value.
Note that there are no Buy to Let or self-certifying mortgages in Italy. It is similar to France, in
that no rental income is assessed in the application. The bank looks at only net monthly
income, to see if it is three times the mortgage payment.
Also the purchaser cannot apply for a mortgage without the signed Compromesso. This
means they pay the €5000 then 25% deposit, sign Compromesso, prior to applying for the
mortgage. The Compromesso will naturally be subject to mortgage, so that if they cannot
obtain the loan then the contract is cancelled and deposit monies returned (minus bank
charges).
Fees: Expect from 0.75% to 1% of mortgage value.
Rates: Euro rates. Best so far quoted is 4.2% variable. But will vary according to
circumstances.
Type: Capital & Repayment only, up to 30 years.
Fidentia have both interest only (up to 60% LTV) and Capital & Repayment products (up to
80% LTV) with repayment periods from 15 to 40 years (or age 75). The shorter the period the lower the rate
“This is a rare opportunity to acquire a luxury apartment at an affordable price in one
of the most outstanding and prestigious locations in Europe. Its position overlooking
the Lake in a sought-after village, will ensure that the values of these apartments will
rise substantially. We see them as a hold for at least 5 years after completion.”
Attachments
Site plan, floor plans, price list, commission, pictures taken on location, Sample
Compromesso, artist’s impression, mortgage information.
Note the floor plans are original and in Italian. Cottura means ‘baking room’ so read kitchen.
Camera means ‘room’ so read bedroom. For Soggiorno read living area. Bagno means
‘Bath’ so read Bathroom.
Viewing trip
Italian Property (the agents in this deal) will host viewing trips. Clients can expect a full tour
of the site, be taken to a show apartment 2KM from the site, assistance with opening up a
bank account and applying for a national insurance number as well as preparation for the
notary process.
Client pays for everything except transfers from airport. Flights to either Milapensa Milan or
Bergamo are relatively cheap and one night’s accommodation should be around 100 euros
or less.
Clients should be aware that set dates will be available based on flying to Milan on a certain
flight. Therefore more than one party may be collected and transferred at the same time.
Purchasing Costs
12% to 13.5% of the purchase price should be budgeted.
10% tax
€2500 notary costs for Contract
€2500 notary costs for mortgage documents
€1000 approx. for miscellaneous bank charges and other admin fees
0.75% mortgage fees
Payable on Final Act (completion).
Incentives
Exclusive location.
Below market value.
High Capital Growth expected.
Turn key deal (normally kitchens and white goods, and other aspect are notincluded in the price)
Garaged parking included in price.
Ground floor units have large gardens.
Commanding views of Lake Como.
Extras
Furniture: No
Air Conditioning: No
White Goods: Yes
Parking: Yes
Flooring (included? wood, carpet, marble, laminate):Yes tiled.
Final Appraisal and recommendation
“These luxury apartments are situated in a prime location overlooking a prestigious part of Lake Como
- they offer excellence in quality of build, style and comfort. An outstanding investment with huge
potential for growth in capital values with purchase prices of the apartments some way below market
value. They are ideal for both investment and personal use. We strongly recommend this
development.”
Recommend as a 7Best Invest product. We should retain the option to sell the other 44 units, and look at
the other opportunities in Lake Como already identified.
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