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Review of Market Performance for the development of a unique plot of land in Lesvos Island

Confidential Information Memorandum

Map of Location
Les vos
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Site Location

Site

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Photos of the Site

Po da ra Be ac h
Site

Si t e

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Table of Contents
Important Notice Introduction 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Investing in Greece Investment Incentives in Greece Regional Perspective Lesvos Tourism Overview Climate of Lesvos Site Description Zoning & Planning Regulations Development Potential – Scenarios Scenario I Scenario II Scenario III SWOT 8 12 15 18 29 31 35 38 39 47 52 61 6 page 7 page

Appendix

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Important Notice
Confidential information memorandum This Confidential Information Memorandum contains proprietary and confidential information regarding the owner of the subject and the proposed development which is the subject of this memorandum (“the project”). It has been prepared in order to enable interested parties (buyers) to acquire a complete picture and conduct an initial evaluation of the land. No approaches of any kind may be made by you to the owner without prior the knowledge and the written authority of Z. Floros . Neither this memorandum, nor the information contained herein, may be reproduced or passed on to any person or used for any purpose other than stated above. On request, the recipient will return this memorandum without retaining any copies thereof.

Contents of this memorandum Neither the owner nor its associates makes any expressed or implied representation or warranty and no responsibility or liability is accepted by any of them with respect to the accuracy or completeness of the information set forth in this memorandum. Nothing contained herein is, or shall be relied upon as, a promise or representation regarding historic or current market conditions or any future events or performance of the market and/or the project. The information set forth in this memorandum is intended solely to assist in the preliminary evaluation of the subject plot of land by those to whom it has been delivered by the owner and interested parties must undertake such investigations as they see fit before entering into any contract.

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Introduction
The Owner
The owner has a prime land plot of 218 hectares in the south western part of Lesvos island and specifically in the area of Podara Bay, at the community of Mesotopo in the municipality of Eresso, in the Prefecture of Lesvos (North Aegean Islands). The owner has selected Z. Floros as its exclusive adviser in the identification and selection of a purchaser (the Buyer) for the site. The owner recognizes the potential of the site if it is successfully developed and managed by a well-reputed developer and real estate management company. For this reason, the owner seeks the interest of international developers and companies to purchase the freehold ownership of the subject site. The owner has the freehold interest in the subject plot since early 1900’s. The prime site and potential project, along with the improving infrastructure in the broader area, offer an outstanding opportunity to a potential investor.

The Site The site is located at approximately 0.5 km distance from Tavari town, 1.5 km from Mesotopo town and 75-80 km from the upgraded international airport of Lesvos. The immediate area is rather agricultural and less tourism developed, however there are opportunities and interest to develop the south western side of Lesvos island since it has one of the best seashores on the island and provides for a good infrastructure network. The beach is one of the greatest assets of the subject site, offering fine-grain sand, ideal for leisure, whilst the river bank at the south area of the subject represents a truly unique feature of the site which offers significant ecologically sensitive development opportunities. In addition, due to the unspoiled and undeveloped location of the site, the seclusion and privacy should greatly enhance the project as a destination.

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1. Investing in Greece
1.1 Greece
Greece, at the southern extremity of the Balkan Peninsula, is the only member of the EU without a land frontier with another member. To the North, Greece has land borders with Albania, the former Yugoslav Republic of Macedonia, and Bulgaria and to the east with Turkey. The sun and the sea are Greece’s principal resources and have been so since antiquity. In Greece, a country of fishing boats and freighters, ferries and yachts, one is never more than 100 klm from the sea. Greece is competitive in significant cost intensive areas such as Human resources, Energy, Telecommunications, Construction and Property. It is Europe’s strategic link to the sizeable emerging markets of the Balkan, Black Sea, eastern European and eastern Mediterranean regions. Greece’s advantageous location provides access and opportunity to the neighboring regional markets while Thessalonica, the capital of northern Greece, offers the financial and trading services needed in order to conduct business in the regional markets. Greece has 39 international standard airports, many of which are being upgraded or rebuilt. One of the biggest infrastructure projects in Greece is the new Athens International Airport. Greece has 123 cargo or passenger ships, cruise ships and freights. The new infrastructure project of motorways will entail noticeable reductions in traveling time between important Greek cities and it will lead to marked improvements in road safety. Furthermore, it will contribute to economic development, as it will stimulate commercial exchanges. It improves in particular the accessibility of the remote northern regions of Thrace, Epirus and Macedonia. The population of Greece is around 11 million. The official language is Greek (Hellenic) but English , French, German, and other languages are widely spoken, especially in tourist areas. The religion is Greek Orthodox. There are minorities of Catholics & Muslims. Greece is a member of the EU since January 1981. It is a democracy and enjoys political and economic stability. Greece has a Mediterranean climate. Long, dry and hot summers and mild sunny winters especially in the south, although winters can be colder inland in northern areas mostly. The country has 300 days of sunshine per year. The average temperature in the summer is 25 C (77 F). Annual rainfall varies from 1500mm in the North to less than 500mm in the South and it rarely rains in the summer. Investing in an expanding economy with a major and increasing economic role in the Balkans that is part of the EU and the Euro area is always a paying proposition. Greece has the highest growth rate in Europe and, given its prospects, is anticipated to keep this position in the foreseeable future. It is also a natural destination for holiday homes and tourism. Greece is in the process of establishing a National Land Registry whereby official titles shall be issued for the property secured at the same time by the state. Some areas already have a Land Registry (such as Rhodes and the Cyclades islands in general) while most others are based on a different system, that of the Registry of Mortgages on a Municipal basis.

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1. Investing in Greece
1.2 Investing in Greece
Investing in an expanding economy with a major and increasing economic role in the Balkans that is part of the EU and the Euro area is always a paying proposition. Greece has the highest growth rate in Europe and, given its prospects, is anticipated to keep this position in the foreseeable future. It is also a natural destination for holiday homes and tourism. Greece is in the process of establishing a National Land Registry whereby official titles shall be issued for the property secured at the same time by the state. Some areas already have a Land Registry (such as Rhodes and the Cyclades islands in general) while most others are based on a different system, that of the Registry of Mortgages on a Municipal basis.

Below a checklist for acquiring property in Greece is provided:

Appoint Lawyer

The purchaser must appoint a Lawyer to search the titles at the Registry of Mortgages and represent him/her to the Public Notary where the contract deed will be signed. The lawyer must carry out a search at the Registry of Mortgages and ensure that the vendor holds and absolute title (deed) to the property, that the property is unencumbered, that all acts associated with the property are based on a lawful planning permission and that all property taxes burdenening the vendor have been paid. The purchaser must secure copies of the title (contract deed) held by the vendor.

Receive Copy of Title

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1. Investing in Greece
Appoint Public Notary Raise Funding The purchaser must appoint a Public Notary in the presence of whom the contract deed is to be signed thereby becoming an official transaction whereby the purchaser acquires the title to the property purchased. Different modules of financing are offered by Greek banks or one can receive his funds by a simple transfer from a foreign account to an account in Greece. The purchaser must apply for and secure a Tax Registry Number (AFM or ΑΦΜ) from the Inland Revenue Service.

Apply for Tax Registry No. Transfer Tax

The purchaser must make sure that the transfer tax is paid prior to signing the contract with the aid of his/her lawyer. The tax is paid by the purchaser. The purchaser will have to pay the following obligatory costs as required by Greek Law: • Lawyer 1% of contract amount up to Euro 45,000 plus 0.5% for amounts exceeding Euro 45,000. Legal costs for checking the title are separate. • Public Notary 1.5% of contract amount. • Transfer Tax Fees 11% of contract amount. • Registration Fee 0.5% of contract amount.

Pay Associated Costs

Sign Contract at Public Notary’s Office

For property to be officially bought/sold a contract must be signed before a Public Notary. The Notary is a state official in the presence of whom the contract deed is read and signed by both vendor and purchaser. He/she is there to draft it and verify and register in the public records the transaction, which takes place in his/her presence.

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1. Investing in Greece
Effect Transfer at Registry of Mortgages Submit Proof of Transfer at Land Registry The contract deed must be transferred in the purchaser’s name at the Registry of Mortgages and the relevant official certificates secured. This is usually carried out by the purchaser’s lawyer. If the property has already been registered under the National Land Registry the purchaser must submit a copy of the contract deed together wi the transfer certificate from the Registry of Mortgages so that the said property be properly registered in his/her name.

Once one acquires property in Greece you have the obligation to submit a statement to Tax Authorities each year declaring your property, in order to pay any taxes due for the said property. The total value of all property holdings of a person or legal entity are summed up and tax is determined on that. Tax is calculated on ‘’objective values’’. In many cases purchasers opt to declare as the contract amount, the Government –issued values, for tax purposes, the so-called “Objective Values”. These are calculated on the basis of Governmental Data by the Public Notary and the Inland Revenue Service. The “’ Objective Value” of each property is calculated according to a specified formula and a price per sqm for the location and particular characteristics of a property. The advice of a lawyer is highly recommended on this issue. Property tax is calculated by summing the total value of all property holdings of a person or legal entity and tax is determined on that. Tax is calculated on “Objective Values”. In areas near teh national borders and in some islands, non-European nationals require a special permission by Local Council in order to purchase property. There is no restriction for all other mainland or island areas. This permission tends to be a formality for non-controversial nations. Thus, if you are a EU national you do not have any problem purchasing property anywhere in Greece.

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2. Investment Incentives in Greece
2.1 Tourism Investment Incentives in Greece
In Greece investment activity in the tourism sector is highly supported with the two main sources of public funding coming from tax incentives and subsidies in accordance with Investment Law 2601/98, and from the 3rd Community Support Framework (CSF). The current investment law is under amendment and is expected to be improved to the benefit of investors and is planned to be enacted by the end of 2004. Investment Law q Investment Law 2601/98 sets out two basic investment incentives which are the following: i. Capital and Interest Subsidies on Loans ii. Tax exemption and interest subsidy on loans q Prospective investors that have been in operation for less than 5 years have access to both incentives whereas long established companies can only claim tax exemption and interest subsidy on any loans used to fund appropriate investments. However certain tourism investments have access to both incentives: –Long term investment programs (2-5 years) –Business Plans for survival and reform –Important investments over 73.4 million Euros –Investments for the integrated modernization of hotel units q In addition, the investment law divides tourism companies into two categories and subsidizes them accordingly. These are: –Category 1: Companies that are involved in tourism but excluding those which fall under category 2. –Category 2: Companies associated with special or alternative forms of tourism such as conference facilities, thalassotherapy, golf courses, etc.

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2. Investment Incentives in Greece
2.2 3rd Community Support Framework (CSF)
q The 3rd Community Support Framework enables Greece to tap into substantial European Union funds which it can apply towards projects that readdress inequalities amongst EU member countries between 2000 and 2006. The CSF’s projected capital expenditure for the tourism sector in Greece is approximately 2 billion Euros, composed of EU support, the Greek State and private funds.

q CSF proceeds are distributed in the following order of priority: –Modernization and expansion of tourist facilities including new hotels –Expansion of the Greek tourist market through the provision of new services including public investment in specific sectors such as marinas, cultural events, etc. –Technological upgrading of tourism businesses to support their competitiveness –Promotional campaigns supporting Greece as a tourist destination –Development of thematic tourism –Creation of special tourism infrastructure facilities ( congress centers, golf courses, thalassotherapy centers, hydrotherapy centers, marinas, etc).

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2. Investment Incentives in Greece
2.3 Rehabilitation Centers
According to Law 2601/1998 / Α-81 and Law 2072/1992/A-125 (article 10 and 30) Grants are received for Centres of full recovery and rehabilitation according to the following: q Individual or legal entities, which develop Centres of full recovery and rehabilitation are able to receive grants from the aforementioned Laws. The Centre is required to operate for the benefit of services of health and hospitalisation of ill internal or external patients that require rehabilitation and suffer from diseases such as muscular, nervous, circulatory, respiratory system, as well as from intellectual deprival, using the modern means and the methods of medical rehabilitation. The Minister of Health, Prevention and Social Insurances determines the specifications of operation of such centres for full recovery and rehabilitation, the facilities and the essential equipment, the necessary personnel, as well as the essential space. q According to Law 2601/1998 / Α-81 (Article 4), the specific grants are broken down according to Greek Zones, as follows: The purchase of new mass transportation vehicles for personnel as well as the patients of the subject centre. For the application of provisions of the present law, the Greek Territory it is distributed into four (4) regions as follows: Region D': Includes the Prefectures of Eastern Macedonia and Thrace, Continental Regions and frontier areas at a distance of 20 km from the Greek borders. Also included are: the islands of Greek Territory with a population up to 3.100 residents, according to the census of 2001, the Northern Aegean islands (including Lesvos), the Dodecanese Prefecture, except for the region that is determined from the ministerial decision of the general urban drawing of the city of Rhodes.

q

q

According to Law 2601/1998 / Α-81 (Article 3), the Expenditure Support Grants are provided for the following:
(i) The construction, the expansion, the upgrading, of specialised as well as auxiliary installations, in addition to the expenditures for landscaping.

The grants for zone D are based on the following: ü Percentage grant on the capital expenditures: 40% Percentage grant on the interest expenses of the financial loans of the investment: 40% Percentage grant payments : 40% on the financial leasing

ü
(ii) The purchase and installation of new modern machinery and equipment. The financial lease payments of new modern machinery and equipment, which is acquired for the operation of the subject centre. The purchase and installation of new modern hardware and software. The purchase of new mass transportation vehicles for personnel as well as the patients of the subject centre.

ü

(iii) (iv)

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3. Regional Perspective
3.1 Greek Economy / Positive economic growth
Officially known as the Hellenic Republic, Greece is a country of 10.6m inhabitants located in the eastern Mediterranean. Bordered by Turkey to the east and Bulgaria, the Former Yugoslav Republic of Macedonia (FYROM) and Albania to the north, the peninsula that constitutes mainland Greece is surrounded by some 1,400 islands. Greece joined the European Community in 1982 and is a major beneficiary of E.U aid, equal to about 4% of GDP. Despite the effects of recent global economic uncertainty, Eurozone participation and the Athens 2004 Olympic Games have assisted Greece maintain high investment levels, high GDP growth and lower interest rates, as shown by the key economic indicators detailed in the following table • • Inflation has slowed significantly since the early 1990’s. GDP growth in 2003 is estimated to reach 3,8%, nearly four times as high as GDP growth in the Eurozone (1,0%). GDP growth in 2003 is estimated to reach 3,8%, nearly four times as high as GDP growth in the Eurozone (1,0%).

Key economic indicators (1998 – 2004)
1998 GDP growth (%) Inflation (%) Unemployment Rate Consumer Price Index Debt as % of GDP
(1)

1999 3,4 2,7 12 3,9 105,5

2000 4,3 3,1 11,4 2,7 104,6

2001 4,1 3,8 10,9 3,9 103,9

2002 4,0 3,5 10 3,4 104,9

2003 4,8 3,4 9,1 3,5 101,7

2004

(1)

3,4 4,8 11,1 4,7 108,5

4,2 3,3 8,3 3,6 98,5

Estimates based on the latest official information Source: Greek National Bank / Ministry of Finance 2003

• • • •

Inflation has slowed significantly since the early 1990’s. Low interest rates and implied rapid credit expansion in the private sector have fuelled consumption. Measures for the reduction of corporate tax and increased tax exemption, together with the discontinuance of stamp duty, are expected to free more resources, which in turn should have a positive effect on investment and consumption levels. Unemployment has been falling steadily over the last couple of years. Recent job creations specifically in the services and construction sectors due primarily to the Olympic Games and the Community Support Framework Grants have pushed unemployment below 10% for the first time in 10 years. Assuming stability in the Balkans, however, Greece should benefit from their re-building and the high level of aid and investment expected to flow into the area. 15

3. Regional Perspective
3.2 Overview of Greek Tourism
Tourism is a key industry providing 8% of the total GDP in Year 2002 (latest official data). Moreover, 10% of the direct employment is centered in tourism related activities and comprises 30% of the total national investment. In 2002, Greece was rated the 10th country worldwide in regards of the Tourism receipts (€10,3 million ). The Greek Tourism Industry is characterized by an intense seasonality of visitation with a concentration of tourism demand during the months of May through to October (almost 50% of tourism arrivals take place during that period).

20%
Greece

15% 10% 5% 0%
J F M A M J J A S O N

Spain Turkey Cyprus Portugal Egypt

This is mainly due to the characteristics of the key European source markets. It is also, however, due to limited focus to date on extending the season through conference and incentive visitation, golf and spa tourism. The improvement of the investment environment through the Greek Development law (N.P 17/65), the attraction of foreign investors, the constant upgrading of all tourism infrastructure and the intense Greek tourism promotion to be seen from the organization of the 2004 Olympic Games, consist the main axis of achieving the goals for sustainable qualitative and quantitative tourism growth.

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3. Regional Perspective
The Iraq war and the SARS epidemic have affected the international tourism industry. The Greek tourism market experienced a slowdown in the tourism arrivals during 2003. It is estimated that the Olympic Games of 2004 will boost significantly the foreign arrivals. Future forecasts suggest continued growth with 14.5m tourists estimated by 2005 (compound annual growth rate of 3%). The following table shows a comparison of tourist arrivals amongst Greece and other competitive European tourist destinations for the period 1990-2001 :

Year 1994 1995 1996 1997 1998 1999 2000 2001 CAG(1)

Greece

Change

Spain (000s) 43,232 34,920 36,221 39,553 43,396 46,776 47,900 49,500 2%

Portugal France (000s) 9,169 9,511 9,730 10,172 11,295 11,632 12,096 12,167 4% (000s) 61,312 60,033 62,406 67,310 70,040 73,042 75,600 76,500 3%

Italy 27,480 31,052 32,943 34,692 34,933 36,516 41,200 39,000 5%

Turkey 6,670 7,727 8,614 9,689 9,752 7,487 10,428 11,618 8%

(000s) % 10,642 13% 10,130 -5% 9,233 10,070 10,916 12,164 13,100 14,033 4% -9% 9% 8% 11% 8% 7%

(000s) (000s)

§ Greece in Y2002 was rated the 15th top tourist destination in the world. § According to the GNTO, Europe is the dominant source market, representing up to 94% of total arrivals to Greece, with Germany and the United Kingdom accounting for some 40%.

Compound annual growth (1994 to 2001) – Latest official data available Source: World Tourism Organization

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4. Lesvos Tourism Overview
4.1 History of Lesvos Island There are seven major islands in the northeastern group: Samos, Chios, Ikaria, Lesvos, Limno, Samothraki and Thasos. Large distances separate them, therefore island hoping is not as easy as it is within the Cyclades and Dodecanese. Most of these islands are large and have very distinctive characters. Its long unbroken high standard of civilization is still in evidence, even in our own day many outstanding writers, artists, and thinkers have their roots in Lesvos. Greece’s most famous contemporary poet, Odysseus Elytis, the Nobel laureate was also born here. Lesvos is one of the few places where most of the towns and villages have preserved intact their architectural heritage. The highest mountains are Lepetymnos (968m) and Olympus (967m). Most of the towns and villages were built in the interior for security reasons, in the dips and hollows of its undulating hills.

Lesvos island, Greece’s third largest island after Crete and Evia, was a center of the Aeolian civilization, when around the 10th century B.C. it spread to the shores of Asian Minor. During the reign of the tyrant Pittakos (6t century B.C.), one of the Seven Sages of Antiquity – Sappho and Alcaeus, tow of the greatest poets of the The landscape is varied with enormous olive groves (the 11 ancient world immortalized the island in their poetry. It has million trees produce a vast quantity of justly famous oil), also been the birthplace of the greatest Arion and the pine, chestnut and plane trees, rocky mountains, numerous musician Terpandros. In the 5th century B.C., Lesvos beaches, some sandy, some pebble, some with stream rising joined the Athenian League but, like the other Greek from them indicating the presence of hot springs, some –the States, succumbed to Macedonia in the following century ones facing the open sea – blessed with crystalline waters. in 88 B.C., it was annexed to the Roman province of Asia Minor. In later years, it was ruled successively by the Byzantines (1355), the Genoese (1462) and the Turks (1462-1912), while repeated pirate raids over the centuries caused the islanders to erect countless castles in self defense. 18

4. Lesvos Tourism Overview
4.2 Lesvos at a Glance Lesvos belongs to the islands of the Eastern Aegean Sea. Its area is 1,638 sq.km and together with the islands of Lemnos, Ayios Efstratios and the islets around them, it belongs to the Prefecture of Lesvos. Its coastline forms two bays in the south - Geras and Kallonis - and a plethora of creeks and capes. The main plains are the plains of Kalloni, Ippeos, Perama and Eressos and the highest mountains are Lepetymnos, Olympos and Psilokoudouno. There are streams flowing through the fertile plains, among them Tsiknias, Tsichliotas, Mylopotamos and Sedountas. The eastern and central part of the island is cloaked in olive groves, pine forests, and chestnut, oak, beech and plane trees. The population is approximately 100,000 and Mytilene is the capital city of the island and the administrative center of the Prefecture of Lesvos, the seat of the Ministry of the Aegean Sea, of the District of the North Aegean and of the University of the Aegean. The island is divided in 13 Municipalities. The local economy is based on the agricultural production with an emphasis on olive oil production (of exceptionally high quality), cattle-raising (mainly dairy products) and fishing. Distillery is developed and its main product is the world famous ouzo. Many of the island's inhabitants are professionally engaged in tourism. The soil and the climate of the island have given Lesvos an unusually rich flora to which it owes its beauty, the beauty that Sappho, the famous lyric poetess (6th century BC), sung. The Lesvian philosopher Theophrastus (3rd century BC), one of the forefathers of Botany, was the first to record a large number of plants.

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4. Lesvos Tourism Overview
4. 3 Tourism Overview § § Lesvos island has over 100 organized hotels which compose of 6,784 beds. The majority of the hotel units were built from 1985 – 1995. While in Lesvos 1000 residents correspond to only 64 beds in other Greek islands 1000 residents correspond to 1000 beds. This shows the underdevelopment of the island during the past few decades. Due to the limited supply of hotel units, during the past years, there has been an increased interest to develop large hotel units (over 500 beds) with facilities such as conference centers , thalassotherapy and balneotherapy centers in order to take advantage of the numerous thermal baths in Lesvos island. The majority of the tourists of Lesvos are mid to upper class and growth in arrivals is significantly greater than at other Greek destinations. For example in 1999, average growth in arrivals for Greece was 6.5% whilst Lesvos island experienced a 20% growth rate. Accordingly, visitation from countries of origin is as follows: Greeks (30%), Germans (22.5%), British (18%), Dutch (9.5%) and the remainder come from countries such as Austria, Scadinavia, Belgium, Cyprus, and Israel. In 2003, arrivals by charters where as follows: British (27,223), German (7,670), Holland (15,255), Danish (7,460), Swiss (1,158), Austrian (2,995), Belgian (5.717), Norwegian (5,973), Swedish (3,475), Slovenia (977), whereas the total arrivals where 77,903 compared to 81,045 in 2002 and 83,286 in 2001. In year 1989 and 1999, tourism experienced significant increases of 32% and 36% respectively. Lesvos, undoubtedly, has retained its cultural perspective, social mores and has respected its environment in a unique manner over the years. 70% of arrivals represent domestic tourism Lesvos island is split into various tourist zones: § a) The southeast zone of Mitilini town; b) Molyvos-PetraAnaxou zone, a pure tourism center; c) Sigriou-EressouAntissas zone; d) Kalloni-Polichnitou-Vateron zone; e) Plomariou zone; f) The north east zone in the broader area of Mantamados; g) the internal zones. §The major tourism developments are centered in the east, i.e. 25% of the hotel beds and 21% of the beds of non hotels. § The Molyvos-Petra-Anaxou zone, comprises of 40% of the tourism beds of the island. §The Sigriou-Eressou-Antissas zone comprises of 11% of the hotel beds. §The connection of Sigriou and the port of Rafina will expand the demand for accommodation further east to Tavari and Podara (area of the subject plot). §Accordingly, visitation in Lesvos follows undoubtedly highly seasonal patterns, with a concentration of approximately 95% of nights spent during months May through to October. §The major tour operators on the island are TUI, Sunset, Cosmar, and Olymbia.

§

§

§

§

§ § §

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4. Lesvos Tourism Overview
Lesvos island has over 100 organized hotels which compose of 6,784 beds. The majority of the hotel units were built from 1985 – 1995. Lesvos has numerous alternative forms of tourism, as seen below: § Thermal Springs: The volcanic activity in Lesvos resulted in the formation of several hot springs with therapeutic properties. Bathhouses date back to antiquity. The most famous are Polichnito, Lisvoriou, Thermis, Eftalous, and the Gulf of Gera. Religious Tourism: monasteries and churches are scattered around the island such as Panagia Agiasou, St. Rafael, Taxiarch of Mantamadou and the moastery of Leimonos. Rambler/Stroller Tourism: A number of forests, olive groves and natural beauties cover the island of Lesvos. Agricultural Tourism: The diverse traditional villages scattered on the island and the small agricultural tourist accommodations are ideal for this form of tourism. Birdwatching: The Bay of Kalloni is famous for its water grounds and numerous rare birds. Generally the flora and fauna of the island are extremely rich. In the recent years birdwatching facilities have been constructed while the number of persons visiting Lesvos in order to watch the birds has also increased. Today, 1,400 taxa (species and sub-species) of plants have been recorded on the island making Lesvos a “botanic paradise”: aromatic, pharmaceutical, ornamental and rare plants, bushes and trees.
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§ Based on a relevant research of the local tourism authorities, the percentage of repetitive visitors in Lesvos reaches a percentage of 40%. § The European Union Co Financing Grants such as the LEADER+ (Community Initiative for Links between actions for the development of the rural economy) have helped the island restore the vitality of rural areas and to stimulate the creation and maintenance of rural activities. § Local authorities in Lesvos are very active towards leveraging the seasonality pattern of tourism arrivals. The aim is to develop and promote diversified tourism products of high quality able to expand tourism demand for a longer period during the year. § In addition there seems to be a trend to provide more initiative to the local tourism authorities, which will utterly provide more flexibility and focus to the sector.

§

§ §

§

§

4. Lesvos Tourism Overview
4.4 Hotel supply in Lesvos Island
In order to achieve a more realistic approach of demand and supply factors that apply to the specific area, we provide some information about the tourism in the North Aegean. The conclusions are derived from the analysis of the latest statistical data provided by the Greek national Tourism Organization. In the table below, a summary of the hotel units and room supply in the North Aegean is set out, using the official Greek grading system.

Lesvos Units De Luxe A´ B´ C´ D´ E´ TOTAL
0 0 8 43 55 1 7 114

Chios Rooms
0 360 1,678 1,174 11 108 3,331

Limnos Rooms
0 493 398 215 58 0 1,164

Samos Rooms
478 63 160 182 51 0 934

North Agean Rooms
92 684 1,463 2,768 116 182 157 5,346

Units
0 0 10 16 7 5 0 38

Units
3 2 7 9 3 0 24

Units
1 6 35 125 14 15 196

Units
4 27 106 209 27 30 403

Rooms
570 1,605 3,810 4,579 376 378 11,318

Directory of Tourism- Northern Agean Prefecture

The following is of note: § The Lesvos prefecture offers approximately 28% of the hotel units in the North Aegean and 29% of hotel rooms. § Approximately 7% of the units and 11% of the rooms offered in Lesvos belong to the A category and are mainly located in Molyvos and Mitilini town, whilst there are no De Luxe hotels on the island. 22

4. Lesvos Tourism Overview

Maps of Lesvos

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4. Lesvos Tourism Overview
4.5 Hotel occupancy rates in Lesvos
•Lesvos island experiences lower occupancy rates than other Greek islands. This is predominately due to the fact that the season is limited compared to other islands in the south of Greece.
99/98 3,67 8,73 10,02 6,7 2,34 00/99 -1,92 1,51

Occupancy Rates of North Aegean Islands
TOTAL YEAR Prefecture Lesvos Chios Samos TOTAL GREECE TOTAL 1996 44,45% 45,82% 61,81% 52,54% 1997 45,45% 46,18% 63,68% 54,24% 1998 45,41% 47,10% 64,63% 54,70% 61,12% 1999 49,08% 55,83% 74,65% 61,40% 63,46% 2000 59,48% 64,97% 97/96 1 0,36 1,87 1,7 4,01 NORTHERN AEGEAN -0,05 0,92 0,95 0,45 2,75 VARIATION 98/97

•In addition, Lesvos island just recently has become a tourism destination compared to other islands of the Kyklades and Dodekanese. •Eressos, Mitilini Town, Plomari, Petra, Molyvos and Kalloni gather the largest percentage of foreign arrivals on the island. Eressos and Mitilini Town both have 6000 arrivals in August, whereas for the same period Plomari has 2300, Petra 3800, and Molyvos and Kalloni have 1300 and 1800, respectively.

54,37% 58,37% Source: GNTO (2000)

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4. Lesvos Tourism Overview
4.6 Hotel occupancy rates in Lesvos (major destinations)

Molyvos Petra

Mitilini Kalloni

Eressos
S it e

Vrisa Plomari
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4. Lesvos Tourism Overview
4.7 Air Movements in Lesvos
180.000
INTERNATIONAL MOVEMENTS BY CHARTERED FLIGHTS

Below, a chart with the monthly arrivals by charter are presented.

160.000 140.000 120.000

Arrivals by Charter (Monthly)
20.000 15.000 10.000 5.000 November January May March June July December February April August Sept. October

100.000

Months

2002 2003

80.000 60.000 40.000 20.000 0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Arrivals

Αrrivals

Departures

• International Arrivals to the island of Lesvos typically occur during the months of April through October (7months). •Similar arrival patterns were experienced in year 2002 and 2003 whilst a total of 81,045 and 77,903 arrivals occurred in year 2002 and 2003, respectively. •In year 2000, Domestic Arrivals to Lesvos were 167,611 whereas departures were 169,112. •In year 2000, International Arrivals to Lesvos were 78,965 whereas departures were 80,529. Similar a movements were achieved for years 2001- 2003. The adjacent charts represent 1) the International Movements from 1986 through year 2003, 2) the Domestic Movements from 1986 through year 2000. Source: GNTO (2000)
350.000 300.000 250.000 200.000 150.000 100.000 50.000 0
1986 1987 1988 1989

DOMESTIC MOVEMENTS

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

26

Arrivals

Departures

4. Lesvos Tourism Overview
4.8 Nights spent in Lesvos
Table 1: Nights spent by foreign tourists in hotels by region and prefecture
Total Year Prefecture Lesvos Chios Samos TOTAL GREECE TOTAL 1996 414.277 96.987 745.742 1.257.006 35.497.834 1997 1998 1999 408.787 115.212 902.547 1.426.546 45.803.360 2000 521.556 95.445 749.411 1.336.412 46.636.293 1.441.465 46.573.553 2001

Table 2: Nights spent by Greek nationals in hotels by region and prefecture
Total Year Prefecture Lesvos Chios Samos TOTAL GREECE TOTAL 1996 172.669 80.788 139.814 393.271 12.447.672 1997 218.772 96.064 155.851 470.687 13.372.852 1998 NORTHERN AEGEAN 223.765 100.434 166.992 491.191 13.984.434 276.363 98.036 186.413 560.812 14.453.542 279.919 97.708 188.961 566.588 14.666.610 14.983.243 1999 2000 2001

NORTHERN AEGEAN 369.803 345.689 82.226 822.055 1.274.084 39.991.655 81.656 782.375 1.209.720 42.565.008

§Similar arrival patterns were experienced in year 2002 and 2003 whilst a total of 81,045 and 77,903 arrivals occurring in year 2002 and 2003, respectively. §In year 2000, Domestic Arrivals to Lesvos were 167,611 whereas the average stay was 1.7 days. §In year 2000, International Arrivals in Lesvos were 78,965 whereas the average stay was 6.6 days.

Table 3: Nights spent by foreign tourists and Greek Nationals
Total Year

Prefecture Lesvos Chios Samos TOTAL GREECE TOTAL

1996 586.946 177.775 885.556 1.650.277

1997 588.575 178.290 977.906 1.744.771

1998 NORTHERN AEGEAN 569.454 182.090 949.367 1.700.911 56.549.442

1999 685.150 213.248 1.088.960 1.987.358 60.256.902

2000 801.475 193.153 938.372 1.933.000 61.302.903

2001

2.018.559 61.567.209

Source: GNTO (2000)

47.945.506 27 53.364.507

4. Lesvos Tourism Overview
Museums Recent Monuments
◊ ◊ ◊ ◊ ◊ ◊ ◊ N1 Mytilini First High School N2 Parthenagogeion - Girls' School N3 Mytilini Old City Hall N4 Aghia Paraskevi Oil-Mills N5 Aghia Paraskevi School N6 Multi-cultural Center of Polychnitos N7 Lesbos Prefecture Building

4.9 Nearby Attractions in Lesvos Island
The subject site is located in close proximity to a number of archaeological, historic and natural points of exceptional interest, such as: The Acropolis of Eressos, the Fotress of Sigri, and the Kaloktistos wall, all just a few kilometers from the site.
• • • • • • •

◊ ◊ ◊ ◊

1. Archaeological Museum of Mytilene 2. The house of Vareltzedaina at Petra, Lesbos 3. Teriade MuseumLibrary 4. Museum of Works by Theophilos

Ancient and Byzantine Monuments
A1 Archaeological site of Thermi A2 The Acropolis of Eressos (Mastos) A3 Archaeological site of Klopedi A4 The "Kaloktistos" wall A5 The Theater of Mytilini A6 The Roman Aqueduct at Moria A7 Fortress of Sigri • • • • • • • • B1 The Fortress of Mytilini B2 The Fortress of Methymna B3 Early Christian basilica of Aghios Andreas (St. Andrew of Crete) B4 Fortress of Myrina B5 Early Christian basilica at Chalinados B6 Church of the Virgin (Panagia) Troulloti B7 Church of St Stephen (Agios Stephanos) at Mantamados B8 Church of the Dormition of the Virgin at Petra B9 Church of St Athanasios at Mytilene B10 Church of St Therapon at Mytilene B11 Church of St Therapon at Mytilene • • • • • • • • • • • B12 Church of St John (Agios Ioannis) at Kerami B13 Church of the Transfiguration of Christ at Papiana B14 Church of the Dormition of the Virgin (Koimesis Theotokou) at Agiasos B15 Monastery of the Taxiarches at Mantamados B16 Monastery of Leimon (Moni Leimonos) B17 Monastery of the Dormition of the Virgin (Koimesis Theotokou) at Damandri B18 Monastery of Perivoli B19 Monastery of Ypsilos B20 Yeni Tzami (Mosque) at Mytilene B21 Tsarsi Hamam (Turkish bath) at Mytilene B22 Valide Tzami (Mosque) at Mytilene

SUBJECT SITE

• • •

28

5. Climate of Lesvos
5.1 Sunshine & Temperature of Sea

L es

vo s

§ The climate of Greece is similar to that of other Mediterranean countries. The hottest months are July to August with average temperatures of approximately 25 °C. Winters are mild with average temperatures reaching lows of between 11 °C and 13 °C. §The climate is considered temperate, whereas the average temperature is 17.5 °C. § The average sunshine in Lesvos is over 140 days per year or 2,734 hours annually. § The temperature of the sea above 18 C is estimated to be 5 – 6 months per year.

29

5. Climate of Lesvos
5.2 Rainfall, Winds & Shores
§ The average annual rainfall is considered low at 40- 80 cm, whereas the south of the island experiences even lower rainfall.

vo s

§ The climate of Lesvos is mild and healthy: the winter is warm and the sun shines throughout the year. §North Etesian winds are experienced during the year in the North Aegean. §The North Aegean has 2.5 times more sandy as well as notable beaches than its percentage surface compared to other islands. §Lesvos island has 24 klm of exploitable beaches.

L es

30

6. Site Description
6.1 Location
The plot site is located at approximately a 75 km distance from Mitilini International Airport, 10 km from the well known Eressos town and 32 km from Kalloni town, both major tourism destinations. The site is only 22 km from the Petrified Forest In Sigri, one of the best known tourist attractions in Lesvos and a unique natural monument of great palaeontological, geological and environmental significance. § The site covers an area of over 218,000 sqm, stretched along the slopes of Podara Bay. The site is inclined with views to the sea and the mountains of the area. The site is an exceptional property situated 300 m away from the Aegean seashore, i.e. Podaras beach, one of the best known beaches in Lesvos island. The overall site is located out of the city planning, but is considered build able according to the respective Presidential Decree. The site is in near proximity to the famous Podara beach, which in the summer months gathers a number of tourists due to its sandy beach, privacy, as well as calm and clean waters. The neighboring plots are predominately rocky and barren some used as sheep yards whereas others for agricultural use. Although western Lesvos, with the exception of some small plains is barren, the eastern, southern and central parts are cloaked in olive groves (11 million olive trees) and forests of pine chestnut, oak, beech and plane trees. Moreover, the Forestry Authority has no legal claim against the land, i.e. the land is free and clear of any claim. The bathing water quality at the area of the site is considered excellent.

§

§ §

§ §

SUBJECT PROPERTY

§ §

31

6. Site Description
6.2 Topography
The landscape is topographically varied. The two impressive gorges, the bays, the olive tree forest in the surrounding area of the site, and the views of the Aegean sea compose a picture of great beauty. The partial rocky surfaces and the incitation of the site consist of major attributes which permit eased architectural interference. The way that the site is physically separated from the neighboring area, helps the visitor to feel “isolated” and secure (sentiments highly appreciated by the modern tourist). Estimated flight time to Lesvos airport from Key Destinations Greece Athens Thessaloniki Rhodes International Destinations Frankfurt Vienna London Munich Amsterdam 32

6.3 Access
Air The character of the proposed project makes it essential that both the hotel / rehabilitation guests and the villas’ owners be able to fly directly from their home countries to eastern Lesvos and subsequently have a comfortable travel by coach or car to their final destination. Through the newly enlarged road network of Lesvos and the newly acquired access by road to the subject site which is 1km east of from Tavari town the visitor enjoys both convenience and a sense of arrival like none other. The airport of Mitilini features a runway of 2,400 m. long and 60 m. wide being able to facilitate the aircraft landing even under difficult weather conditions. There are daily routes from Athens to Lesvos and Thessaloniki, Limnos and Chios.

0: 35 0:35 1:35

2:30 2:00 3:35 2:15 3:15

6. Site Description
Sea Access to the site is also possible by sea through Miitilini Port and Molyvos (Mithimna) Port. There are daily ferry boats from the Port of Piraeus, and routes from Thessaloniki and Kavala, as well as from Chios, Samos and Patmos, Leros, Kalimnos, Kos, and Rhodes. The port of Mitilini has been recently upgraded to easily accommodate large ferries. The average travel time between Piraeus and Lesvos island is14 hours with intermediary stops. The Cruise Ship Arrivals have dropped during the past years do to the Shengen regulation constraints. The Mitilini Port cruise arrivals from years 2000 through 2003, were as follows:
Year 2000 2001 2002 2003

Passengers

25.680

12.662

9.330

13.661

Road The road network of Lesvos links Tavari to Mitilini town, from where a regional road of approximately 75 km leads to the site. The Lesvos Road Axis has been upgraded and is considered in very good compared to other islands. In addition, another axis road is currently being developed to the site which leads to Podara beach. The final access to the site from the city of Lesvos is facilitated through a newly carves dirt road connects in near proximity to the subject land. This section of the road has been included into the municipality’s road upgrading program and it is expected to be significantly improved from its current condition. Kilometric distances and driving times from the subject site to other key destinations within Crete are exhibited into the following table

KEY DISTANCES AND DRIVE TIMES Destination Mitilini’s Intern. Airport (Lesvos) Kalloni town Eresos Sigrion Mythimna (Molyvos) Pirgi Thermis Plomari Mandamados Source: Microsoft AutoRoute Distance (km) 75 32 10 22 51 66 78 48 33 Drive time from site 1 hr-20 min 30 min 10 min 20 min 55 min 1 hr-10 min 1 hr-20 min 50 min

6. Site Description
6.4 Utilities
Electricity: All energy requirements for the development will be provided by the Public Power Corporation (PPC) network. Water: The municipality of Eressos will be required to be engaged to supply the development with 400-500 cubic meters of water for all uses which is the estimated quantity required in full operational mode. Moreover, the Municipality will need to approve the boring for water in order for the site to be self-sufficient in water supplies. Telephone: The Greek Telecommunications Organization will need to provide all telephone connections required.

34

7. Zoning & Planning Regulations
The subject plot has the ability to be built under various zoning & planning regulations and according to the following Presidential Decrees (PD’s) and government gazettes:
Laws A) Development Scenario PD 31.5.85, Official Journal of the Hellenic Republic 270 D: Building Terms for plots of land outside town planning and outside of designated settlements prior to 1923 . According to this PD , the following apply: •Minimum land plot of 4,000 sqm and a façade of 25 meters •Maximum building coverage of 10% •Minimum 15 meter distance from the land boarder •Maximum levels: 2 floors (or maximum 7.5 m) •Maximum building coefficient of 0.2 (for the minimum 4,000 sqm), i.e. 200 meters B) Amendments published in PD 3212.2003, Official Journal of the Hellenic Republic A – 308: According to Article 10 of this PD, the following apply: • Case a of paragraph 1 of article 1 from PD (24) 31.5.1985 -270 D is replaced as follows: – a) Minimal area of land 4.000 sqm and a façade on a communal road of twenty five (25) meters. Paragraph 9 of article 1 from PD (24) 31.5.1985 -270 D is replaced as follows: – b) Land which is found within ridges, the maximum altitude of buildings is prohibited to exceed the ridge. The first section of paragraph 10 of article 1 from PD (24) 31.5.1985 -270 D is replaced as follows: – The construction of independent buildings is approved from the pitch of the slope. If the pitch of the slope exceeds 35% where the building is placed, the area of the underground auxiliary spaces which do not factor in the building coefficient, then the area can not exceed 20% of permitted building coefficient. In paragraph 11 of article 1 from PD (24) 31.5.1985 -270 D, the following is added: – The level of the roof of the underground space is not allowed to be higher than 0,80 meters from the shaped surrounding ground.

35

7. Zoning & Planning Regulations

Laws B) continued

Development Scenario

•In paragraph 11 of article 1 from PD (24) 31.5.1985 -270 D, the following is added: –The level of the roof of the underground space is not allowed to be higher than 0,80 meters from the shaped surrounding ground. •At the end of case b of paragraph 1 of article 6 from PD (24) 31.5.1985 -270 D, the following is added: –Land with an area multiple of 4,000 sqm, for which conditions of segmentation apply, the maximum allowable surface of the building is equal to the sum of the area of the buildings that would be allowed to be erected in each plot after the segmentation, decreased by 15% and under the conditions that: –a) a building will be erected and b) the ground will remain united.

36

7. Zoning & Planning Regulations
Laws Development Scenario

C)

Presidential Decree (PD) 2508/1997, Official Journal of the Hellenic Republic A-124: According to this PD, which sets the terms for the Urban Study of Viable development of cities and settlements in Greece, the following apply: • • According to article 18 of this PD, the maximum building coefficient for second residencies cannot exceed 0,4. According to Article 24 which represents Regions of specifically regulated zoning -P.E.R.P.O., the following apply: – The territorial extent, which is found outside of city and designated settlements prior to 1923, and outside of settlements up to 2.000 residents may be determined as regions of specifically regulated zoning (P.E.R.P.O.) – The territorial extent which is determined as PERPO should be united and have a minimal surface of fifty (50) acres (50,000 sqm). It is not considered united if it is interrupted from approved national, provincial, municipal or Community roads. – The urban study is drawn up according to the specifications quoted in paragraph of 12 of the present PD and contain specifically: a) uses of land and posible additional prohibitions or obligations, b) diagrams of networks of infrastructure, c) communal and public areas which should amount to a maximum 40% of the total extent of the total land under the P.E.R.P.O. and d) the general and specific terms and restrictions of zoning, which can be fixed per building block or part of a building block, provided that this it is imposed by the configuration of the land or the need of protection of the natural or cultural environment or other special urban needs. The determined medium building coefficient for the total buildable area of P.E.R.P.O. it is not allowed to exceed 0,6 times and specifically for regions of seasonal residence 0,4 times. In any case, the building coefficient of each buildable areas cannot specifically exceed 0,8 and for regions of second residence 0,6.

37

8. Development Potential- Scenarios
The subject plot has been analyzed and reviewed for its development potential according to three distinctive scenarios. The scenarios are limited and not exhausted. Scenario I & II- Residential The first two scenarios concern the development of the site and include: § § A) The development of a residential complex of 70 villas (as fragmented plots of 4,000 sqm), according to PD 31.5.85, Official Journal of the Hellenic Republic 270 D. B) The development of a residential zoned community residential block consisting of 222 high quality villas, according to Presidential Decree (PD) 2508/1997, Official Journal of the Hellenic Republic A-124.

Scenario III– Rehabilitation Center The second alternative concerns the development of a rehabilitation center and includes: § The development of 350 room rehabilitation center in addition to supporting facilities and amenities.

Scenario IV (not analyzed): The subject could also be considered for the development of a hotel with supporting seasonal residents, state of the art conference centre, Thalassotherapy centre, etc

38

Scenarios 1

RESIDENTIAL COMPLEX (as fragmented plots of 4,000 sqm) Base Case Scenario

39

9. Project Description
9.1 Residential Alternative (as separate land Plots)
§ According to Presidential Decree (PD) 31 /Gov. Gazette D 270/1985, the plot is legally buildable when a plot is equal or over 4,000 sqm. § Assuming the entire plot can be fragmented into smaller plots, which is possible, 70 luxury villas can be built on the land to accommodate the needs of the international and national summer home market. The specifications for the proposed residential development are presented in the table below.
Residential Number sqm

Land of Development Net Land (after infrastructure works) Number of Plots for development Allowed build able sqm according to Law

200.000 170.000 42 8.500

Villas Sea View Villas Village View Double villas

50 12 4

100 100 200

sqm Construction Total Cost (€/sqm) Construction Cost (€/sqm) 5.000 4.500.000 900 1.200 1.080.000 900 800 900 900 900 720.000 1.080.000 450.000 -

Sale value (€/sqm)

Total Sale Value(€/sqm)

2200 1900

11.000.000 2.280.000

Triple Villas Commercial Areas Common Areas

4 -

300

1.200 500 -

2200 2200 4000 0

1.760.000 2.640.000 2.000.000 -

800

TOTAL

70

9.000

7.830.000

19.680.000

§ The absorption of the units is assumed to be 25%, 35%, 40% during year 1, 2 and 3. § Marketing & Agency and other expenses are assumed at 5% of the sales value. 40

§ The discount rate has been estimated at 12%. § A Hypothetical Loan at 75% of total construction costs has been assumed with an interest rate of 6,5%, amortized over the 3 year absorption period of the units.

9. Project Description
9.1 Residential Alternative- Financial Performance (as separate land plots)

Scenario 1: Residential Development (as separate land plots)
Gross Income Income from Sales Expenses Marketing & Agent Fee Expenses Other Miscellaneous Expenses Total Expenses Net Operating Income Asking Land Value Estimated Construction Cost of the Property (2004) Cash Flow before Debt Financing

Construction 2005

Construction 2006 1 2007

SALES 2 2008 3 2009

4.920.000 147.600 98.400 $246.000 4.674.000

6.888.000 206.640 137.760 $344.400 6.543.600

7.872.000 236.160 157.440 $393.600 7.478.400

0,35

0,65

-$5.000.000 -$2.740.500 -7.740.500 € -$5.089.500 -$5.089.500

4.674.000

6.543.600

7.478.400 Unleveraged IRR NPV (project) $ 15% 878.933

Hypothetical Loan Interest Expense (construction period only) Debt Service (Principal & Interest) Total Debt Service Equity Investment Cash Flow after Debt

-2.055.375 € -133.599 € 0 -133.599 € -5.685.125 € -5.818.724 €

-3.817.125 € -381.713 € 0 -381.713 € -1.272.375 € -1.654.088 €

-2.217.313 € -2.217.313 €

-2.217.313 € -2.217.313 €

-2.217.313 € -2.217.313 €

$2.456.687

$4.326.287

$5.261.087 Leveraged IRR NPV (equity) $ 17% 1.053.713

Debt Service Coverage Ratio

1

2,11

2,95

3,37

1) Debt Service Coverage Ratio is defined as the Net Operating Income (NOI) divided by the Total Debt Service

41

9. Project Description
§ All of the villas may be generous in space and may feature furnishings selected from a menu of options prepared by the project’s interior designers to maintain the highest possible standards. Residential ownership should include access to dining, pools, spa, tennis, and golf as well as full concierge service. § The price of the villas ranges from 1,900 to 2,200 €/sqm, which is considered affordable compared to other destinations in the Mediterranean. Also, one should consider that the area of the villa will be much larger (by 50%) if you consider the basement in the total area since the subjects plots inclined land provides for above ground basement. § Assuming in the calculations the cost of the land at 5,000,000 € plus construction costs and expenses the subject project has a positive leveraged NPV of 1,053,713 € and an IRR of 17%.

42

9. Project Description - Seasonal home market in Greece
Demand • Our market research has identified three major buyer groups that are currently active in the residential market in Greece, whilst with Greeks being the vast majority. The typical characteristics of each buyer group are set out in the following table. The Greek second home buyer group prefers predominately apartments, semi-detached houses or small townhouses, with a building surface that ranges between 50 – 100 m2 with minimal amenities. On the other hand, international buyers seek clustered residential developments. Units are usually more than 100m² within organized resorts, offering on-site amenities. Interviews with development companies, local real estate agents, and operators, highlight that most foreign purchasers have previously visited the location of the subject residence. Most of the Greek developers do not market their products internationally through special marketing programs. Although there is no official or published data available on the purchase of second homes in Greece, our interview program revealed a general consensus that the second home market for foreign purchasers is increasing, although current absolute numbers continue to be low due to a lack of supply.
Greek nationals Major residential buyer groups currently active in Greece • • UK • • • German/Swiss • • Great interest in the local market especially for seaside units Budget typically €100,000 to € 250,000 Seeking retirement homes Flats preferred to villas, whereas living space of around 80m2 is required Budget typically €300,000 to €450,000 Seeking holiday and retirement homes with plot sizes of up to 1,000m 2 and living space of 120-150 m 2 Budget typically €320,000 to €450,000

•Interviews with development companies, local real estate agents, and operators, highlight that most foreign purchasers have previously visited the location of the subject residence. Most of the Greek developers do not market their products internationally through special marketing programs. Although there is no official or published data available on the purchase of second homes in Greece, our interview program revealed a general consensus that the second home market for foreign purchasers is increasing, although current absolute numbers continue to be low.

43

9. Project Description - Seasonal home market in Greece
Construction costs • From the research we have conducted, we understand that the construction cost for townhouses designed to attract foreign purchasers, typically range between €880/m² to €1,300/m², reflecting the high-quality of construction and finish that is required. Local developers and local agents consider that specifications for the design of such developments should reflect traditional Greek island architecture which is considered a paramount in the purchase decision. Future Supply • Our market research has included a detailed overview of the Mediterranean and Atlantic master-planned residential developments within resorts– focusing on four destinations that have been profiled. In each destination we have investigated the potential future supply of residential product – notably within master-planned resorts – that would compete for the same market. However, this review cannot be exhaustive.

In the Table below, we have tabulated summary data on the most significant master-planned residential developments that are in operation.
Table Existing supply of master-planned residential developments in Greece Condominium Project Poseidonia Complex Dionysos Village Porto Hydra Village Units 77 Comments Limited leisure facilities; maintenance is optional. Operates since 2000.

Location/site Greece Sounio

Siteia, Crete Ermioni

394 300 Each year a new construction plan is set.

Total

______ 771

The vast majority of the Greek multi-unit developments are comprised of 30-40 units on average with Dionysos Village comprising of 394 units, as an exemption. Most of the residential developments offer the residents modern, comfort, leisure amenities and maintenance for an annual fee.

44

9. Project Description - Seasonal home market in Greece
In this Table, we tabulate summary data on the most significant smaller scale masterplanned residential developments underway in the Mediterranean.
Table Location/site Greece – Residential Spetses Chania Rhodes- Kalathos Chania/Kalatha Chania/M alamai Pirgaki, Naxos Myconos Xylokastro Siteia Pitiousa Resort By J & P Development Helios Resort Cybarco Cybarco Naxos resort Myconos Villas Xylokastro Apartments Domiki Critis 71 35 30 5 25 26 4 200 Future supply of smaller scale residential developments in selected M editerranean locations Condominium Project Units Comments

Unknown date of commencement of construction Expected completion of the project end of 2004 Construction began in May 2003 The project is in the construction phase Expected completion of the development 2004 Construction has begun Estimated to be completed by the end of 2003 Development of condominiums on an area of 12 hectares Unknown date of commencement of construction
2 .

St. John – Evoia Paros Agrari, Myconos Pountazeza, Sounio Iraklion

Navy’s Resort (O.S.M.A.N.) Paros Village EKTER S.A. Babis Vovos Theseus Beach Village (TE.A.K)

26 350

Units vary from 80-120 m . Intended for navy officers

Expected completion of the development on June 2004 Construction of luxurious country residences. The construction license approval is suspended at the moment Construction of condominiums on a total area of 67,540 m (building area of 2 15,750 m ). Unknown date of commencement of construction. 32 residential units are already constructed. Expected completion of the development end of 2007. Hotel construction is expected to commence on 2008.
2

Spain - Costa del Sol Marbella – Puerto Banus Marbella- La Montua Istan Benalmadena El Embrujo Casa Grande Resort Zahara de Istan Atalaya Golf 84 58 120 122 Under construction Under construction Under construction Under construction

45

9. Project Description - Seasonal home market in Greece
In this Table, summary data is tabulated on residential property prices in Greek and selected Mediterranean/ Atlantic master-planned residential developments. Whilst not exhaustive, this overview is intended to give a perspective on typical build areas, price levels and absorption rates.
Table Prices and Absorption Rates of small scale residential development in selected Mediterranean locations

Project
Greece- Residential J&P Development – Pitiousa/Spetses J&P Development – Chania Helios Resort-CybarcoRhodes

Construction Average 2 Price (€/m2 ) Cost (€/m )
2,500 - 3,000 1,2 2,000 - 3,000 -

Absorption Rate
80% sold -

Consumer’s Origination
Mainly Greek

Units Size
71 units, 50 – 200 m land 250-350 m 35 units, 50 – 200 m land 250-30 m
2; 2 2; 2

2,150 - 2,300 1,300 including 50% sold pool, landscaping, a/c

2 2 2 65% British, 25% 30 units on land of 6.5 hectares, 2bdrm-72 m , 3bdrm-108 m , 4bdr- 140m Cyprian, 10% Greek

Cybarco- Chania/Kalatha 2,000 - 2,100 -

Marketing & Construction began in May -

-

5 units, 2 units of 177 m , 3 units of 146 m

2

2

Cybarco- Chania/Malamai CRE Copelouzos/Naxos resort 2,9

-

-

25 units under planning phase § 14 units of 95 m , 10 of 115 m , 2 of 151 m
2 2 2

Paros Village

2,35

1,027
2

(plus 20%

Greek

115 – 200 m

2

293€/m for the surrounding area) Dionysos Village Posidonia Complex Theseus Beach Village (TE.A.K) Spain –Costa del Sol – Residential El Embrujo Zahara de Istan Atalaya Golf 2,263 – 2,669 2,748 – 2,861 2,347 – 2,121 Under construction Under construction Under construction 2,050 – 2,935 735 built) 1,500- 2,800 (densely 77% years 37,5% of the 32 constructed units after 3.5 95% of the units are From 35 to 121 m 2 sold to Greeks 77 villas of 55, 77, 106 and 130 m
2 2 2

350 units, apartments 50-60 m ; villas 300 m

46

Scenarios 2

RESIDENTIAL ZONED COMMUNITY Best Case Scenario

47

10. Project Description
10.1 Residential Zoned Community
§ According to Presidential Decree (PD) 2508/1997, Official Journal of the Hellenic Republic A124, the plot can be zoned receiving a building coefficient which in the case of seasonal residencies can not exceed 0.4 times. Although this process is considered more time consuming than Scenario 1, the economical benefits are much greater. We have assumed a building coefficient of 0,25 times in order to make the development less dense and more appealing to the buyer. Therefore, the buildable area is 30,000 sqm on only 120,000 sqm of the land. The remainder may be developed for example as a hotel unit (Phase II). § Assuming the entire plot can be fragmented into smaller plots, which is possible, 70 luxury villas can be built on the land to accommodate the needs of the international and national summer home market. The specifications for the proposed residential zoned community are presented in the table below.
Residential Number sqm

Land of Development Phase II

199.999 80.000 120.000

Residential (1st Phase) Building Coeficient Buildable Area 0,25 30.000

Villas Sea View Villas Village View Double villas

100 100 17

100 100 200

sqm Construction Total Cost (€/sqm) Construction Cost (€/sqm) 9.000.000 900 10.000 9.000.000 900 10.000 3.400 900 900 900 800 3.060.000 1.350.000 2.700.000 1.600.000

Sale value (€/sqm) 2200 1900

Total Sale Value(€/sqm) 22.000.000 19.000.000

Triple Villas Commercial Areas Common Areas

5 -

300

1.500 3.000 2.000

2200 2200 4000 0

7.480.000 3.300.000 12.000.000 -

TOTAL

222

30.000

26.710.000

63.780.000

§ The absorption of the units is assumed to be 25%, 35%, 40% during year 1, 2 and 3. § Marketing & Agency and other expenses are assumed at 13% and 2% respectively on the sales value, since the project is greater in scale and scope than Scenario 1.

§ The discount rate has been estimated at 12%. § A Hypothetical Loan at 75% of total construction costs has been assumed with an interest rate of 6,5%, amortized over the 3 year absorption period of the units. 48

10. Project Description
10.1 Residential Zoned Community - Financial Performance
Scenario 2: Lesvos Residential Community Construction Construction Development
Gross Income Income from Sales Expenses Marketing & Agent Fee Expenses Other Miscellaneous Expenses Total Expenses Net Operating Income Land Value Estimated Construction Cost of the Property (2004) Cash Flow before Debt Financing -$5.000.000 -$5.342.000 -10.342.000 € -$21.368.000 -$21.368.000

SALES 1 2007 2 2008 3 2009

2005

2006

15.945.000 2.072.850 318.900 $2.391.750 13.553.250

22.323.000 2.901.990 446.460 $3.348.450 18.974.550

25.512.000 3.316.560 510.240 $3.826.800 21.685.200

13.553.250

18.974.550

21.685.200 Unleveraged IRR NPV (project) $ 25% 8.086.597

Hypothetical Loan Interest Expense (construction period only) Debt Service (Principal & Interest) Total Debt Service Equity Investment Cash Flow after Debt

-

4.006.500 260.423 0 -260.423 € -6.335.500 € -6.595.923 €

-

16.026.000 1.041.690 0 -1.041.690 € -5.342.000 € -6.383.690 € $5.989.465 $11.410.765 $14.121.415 Leveraged IRR NPV (equity) $ 39% 10.121.506 -$7.563.785 -$7.563.785 -$7.563.785 -$7.563.785 -$7.563.785 -$7.563.785

Debt Service Coverage Ratio

1

1,79

2,51

2,87

1) Debt Service Coverage Ratio is defined as the Net Operating Income (NOI) divided by the Total Debt Service

49

10. Project Description
§ All of the villas may be generous in space and may feature furnishings selected from a menu of options prepared by the project’s interior designers to maintain the highest possible standards. Residential ownership should include access to dining, pools, spa, tennis, and golf as well as full concierge service. § The price of the villas ranges from 1,900 to 2,200 €/sqm, which is considered affordable compared to other destinations in the Mediterranean. Also, one should consider that the area of the villa will be much larger (by 50%) if you consider the basement in the total area since the subjects plots inclined land provides for above ground basement. § Assuming in the calculations the cost of the land at 5,000,000 € plus construction costs and expenses the subject project has a positive leveraged NPV of 10,121,506 € and an IRR of 39%. Plus there is a remaining 80,000 sqm of land to exploit (Phase II)

50

10. Project Description
§ Note: The design of the villas should remind typical Lesvos architecture. Local and imported construction materials of the
highest quality should be carefully selected based on the requirements of the design. Careful landscaping will ensure that public spaces provide visual softness and serenity providing views of the sea. The villages will be pedestrianised in order to enhance relaxation while parking will be provided in carefully selected areas. Other amenities possibly available to the owners of the residences will include open air theatre, commercial areas, banking facilities while ownership will include access to dining, pools, and tennis. The residential units will be marketed domestically and internationally, through predefined principles. The construction will be gradually materialised, according to the respective market demand. The company, as an additional service to the residences’ owners, should intend to create a management company for the residential component which among other services will also offer the opportunity to the owners to rent if they wish their villas for some periods within the summer season. § The villas will consist of one or two floor buildings, the majority of which will have a surface of 100 s.m. within the building coefficient which along with the semi-open and underground space will total approximately 120 s.m. Some villas will cover 200 and 300 s.m.

§ Note: The concept of master-planned resorts including a residential component is quite new in Greece. Emerging prospects are appearing due to the new law submitted to parliament. The law institutes urban planning incentives for large tourism investments. This is a unique opportunity to combine real estate and tourism, through the creation of permanent secondary residences in both seaside and mountain resorts which may prolong the tourist period. In Greece, potential development of residential complexes and tourist facilities such as golf courses, tennis courts, spa, club houses can be constructed on land of more than 30 ha (300,000 sqm). The tourist facilities shall cover 65% of development whereas the residential component shall cover 35% of the total buildable area, with a new cohesive building coefficient of 0.20%. The new law will presumably attract foreign and national institutional investors.

51

Scenarios 3

REHABILITATION SCENARIO Alternative Case Scenario

52

11. Project Description
11.1 Rehabilitation Center Development
According to Presidential Decree (PD) 2508/1997, Official Journal of the Hellenic Republic A-124, the plot can be privately zoned. It has been assumed that the following specifications will apply to the Rehabilitation Development.
Land for Development Green area (possible future development) Land Required for Rehabilitation (Alternative) 200.000 80.000 120.000
INITIAL SPECIFICATIONS FOR THE REHABILITATION CENTER
Components Guestrooms Standard guestroom Junior suites De lux suites Presidential Suites Total Guestrooms Food & Beverage Outlets Coffee Shop Additional terrace seating Greek & Mediterranean restaurant Additional terrace seating Grill Pool restaurant Piano bar Lounge bar Additional terrace seating Total F&B Outlets Supporting Facilities Retail Rehabilitation Rooms Business Center Library Church Infirmary Total Supporting Facilities Leisure Facilities Swimming pools (outdoor) Swimming pool (indoor) Health Center / Spa Tennis Courts Source: Assumptions Units/Seats Area (m )
2

320 20 9 1 350

17,000

Building Coefficient Build able Area Average Gross Room area (including communal areas) Number of Rooms Number of Beds

0,2 24.000 68 350 700

220 100 140 70 100 60 60 70

440 300 280 120 300 1,440 120 1000 40 60 75 300 1,595

§ The development is assumed to be constructed on 120,000 sqm of land, whilst the remainder will be used for green area or possibly be developed separately (the additional income from the remaining land of 80,000 sqm has not been included in the calculations)

2 1 1,000 2

53

11. Project Description
11.2 Rehabilitation Center - Construction costs
In this chapter, some initial indicative and illustrative estimates of the performance of the rehabilitation center are presented as well as estimates of the construction cost of the development, as seen below.
Description General Infrastructure Works/ Landscaping Retail areas construction cost Construction cost per bed REHABILITATION Furniture, Fixtures and Equipment COMPONENT Swimming Pools (COSTS) Biological Treatment Common Areas Sport Facilities /Spa and Fitness Centre/Rehabilitation Rooms Medical Equipment Total Construction cost of Rehabilitation Component Grants for Rehabilitation Center (40%) Capital Required for Development (after Grants) 0,4 Number/ Size (sqm) Cost€/Unit Cost€

96.000 220 700 700

55 600 22000 4000

1700

600

5.280.000 132.000 15.400.000 2.800.000 500.000 600.000 1.020.000 1.000.000 1.000.000 € 27.732.000,00 € 11.092.800,00 € 16.639.200,00

§ The construction costs have been estimated at 27,732,000€, whereas the cash grants represent 40% of this amount, i.e. 11,092,800€. Therefore, the capital required (in the form of equity and debt) is 16,639,200€.

54

11. Project Description
11.3 Rehabilitation Center - Assumptions
It is noted that those per bed cost estimates do not include provisions for furniture and equipment, such as rooms’ furniture, kitchen installations, carpets, curtains, decoration or other. The expenses for all the above, are added separately depending on the specifications and the quality level of the unit. The predefined per bed cost has been estimated taking into account the following: üAll the common areas that are necessary for the classification of the unit, which includes kitchens, bars and restaurants, kitchens, lobby etc and other areas of the main building ü Air condition ü Connection to all supply networks ü Elevators ü Fire protection system ü Other installations ü All installations essential for the correct and efficient organization and operation of the hotel üThe amount of €22,000 as an initial cost estimate per bed in double rooms, is considered adequate for the quality level of the proposed rehabilitation unit.

55

11. Project Description
INCOME Year of 1st Operation Days of Operation (annually) Rooms Occupancy Double Occupancy Average Room Rate Income from F&B (each person per occupied room) Telephone & Laundry (% of revenue) Rehabilitation Income (each person per occupied room) 2008 224 350 57% 2 144 50 4% 50

§ We have assumed 350 rooms for a maximum capacity of 700 visitors. § 1st Year occupancy is at 57% with an Average Romm Rate of 144 € (or 72 € per person in double occupancy). It has been assumed that the occupancy of the subject Rehabilitation Center will stabilize at 72% in year 5 of operation. The subject is assumed to operate 224 days out of the year. § Rehabilitation income arises to 4.4 million € in year 2008 and the expenses have been assumed at 72% of income, i.e. it is estimated that each visitor per day will provide income of 50€, a very conservative estimate. § A Basic Management (3% of Revenue) and Incentive Fee has been included for the operation of the Center. A provision for Renewals has also been included.

56

a a n r R r c e a y v t P e a8 r2

11. Project Description
11.4 Rehabilitation Alternative Financial Performance (1-5 yrs)
Year R oom occupancy A verage room rate R evP ar Presented in future Euros Values R evenues R oom s Food B everage Telephone Laundry R ehabilitation services R entals & other incom e Total revenue Departm ental costs R oom s Food & beverage Telephones Laundry R ehabilitation services Total departm ental costs Total operated dept incom e U ndistributed costs A dm inistration & general Marketing P roperty operation & m aint E nergy Total undistributed costs N et incom e from operations Fixed charges B asic m anagem ent fees Incentive m anagem ent fee P rovision for renewals P roperty insurance Total fixed charges N et incom e (EB ITD A)
(2 ) (1 )

2008 57% 144 82 A m ount 000s Ratio %

2009 62% 154 95 Am ount 000s R atio %

2010 65% 160 104 A m ount 000s R atio %

2011 70% 170 119 A m ount 000s R atio %

2012 72% 174 125 Am ount 000s Ratio %

6.704 3.439 1.089 259 130 4.443

41,7% 21,4% 6,8% 1,6% 0,8% 27,7%

7.815 3.794 1.210 289 144 4.876

43,1% 20,9% 6,7% 1,6% 0,8% 26,9%

8.539 4.056 1.299 310 155 5.197

43,7% 20,7% 6,6% 1,6% 0,8% 26,6%

9.723 4.440 1.431 343 170 5.666

44,6% 20,4% 6,6% 1,6% 0,8% 26,0%

10.266 4.670 1.508 362 180 5.950

44,7% 20,4% 6,6% 1,6% 0,8% 25,9%

0 0,0% 16.064 100,0%

0 0,0% 18.128 100,0%

0 0,0% 19.556 100,0%

0 0,0% 21.773 100,0%

0 0,0% 22.936 100,0%

1.544 3.499 116 73 3.172 8.404 7.660

23,0% 77,3% 44,8% 56,2% 71,4% 52,3% 47,7%

1.645 3.714 130 78 3.371 8.938 9.190

21,0% 74,2% 45,0% 54,2% 69,1% 49,3% 50,7%

1.724 3.888 140 82 3.529 9.363 10.193

20,2% 72,6% 45,2% 52,9% 67,9% 47,9% 52,1%

1.832 4.118 154 87 3.743 9.934 11.839

18,8% 70,1% 44,9% 51,2% 66,1% 45,6% 54,4%

1.906 4.280 163 90 3.890 10.329 12.607

18,6% 69,3% 45,0% 50,0% 65,4% 45,0% 55,0%

1.667 1.152 698 572 4.089 3.571

10,4% 7,2% 4,3% 3,6% 25,5% 22,2%

1.667 1.128 756 604 4.155 5.035

9,2% 6,2% 4,2% 3,3% 22,9% 27,8%

1.649 1.102 817 630 4.198 5.995

8,5% 5,6% 4,2% 3,2% 21,5% 30,6%

1.726 1.131 838 665 4.360 7.479

7,9% 5,2% 3,8% 3,1% 20,0% 34,4%

1.783 1.160 860 690 4.493 8.114

7,8% 5,1% 3,7% 3,0% 19,6% 35,4%

482 309 321 80 1.192 2.379

3,0% 4,9% 2,0% 0,5% 7,4% 14,8%

544 449 544 91 1.628 3.407

3,0% 5,5% 3,0% 0,5% 9,0% 18,8%

587 541 782 98 2.008 3.987

3,0% 5,8% 4,0% 0,5% 10,3% 20,3%

653 682 871 109 2.315 5.164

3,0% 6,1% 4,0% 0,5% 10,6% 23,8%

688 742 917 115 2.462 5.652

3,0% 6,2% 4,0% 0,5% 10,7% 24,7%

Statistical references Daily room s available A nnual room s available A nnual room s occupied D ouble occupancy A nnual sleepers
(1) (2)

350 81.900 46.683 1,68 78.427

350 81.900 50.778 1,68 85.307

350 81.900 53.235 1,68 89.435

350 81.900 57.330 1,68 96.314

350 81.900 58.968 1,68 99.066

These ratios are calculated on departm ental revenue EB ITD A - E arnings before interest, taxes, depreciation and am ortis ation

57

11. Project Description
11.5 Rehabilitation Alternative Financial Performance (6-10 yrs)
Year Room occupancy A v e r a g e r o o m r a te RevPar P r e s e n te d in fu t u r e E u r o s V a lu e s Revenues Room s Food B e v e ra g e T e le p h o n e L a u n d ry R e h a b ilita tio n s e rv ic e s R e n ta ls & o th e r in c o m e T o ta l re v e n u e D e p a r tm e n ta l c o s ts Room s F o o d & b e v e ra g e T e le p h o n e s L a u n d ry R e h a b ilita tio n s e rv ic e s T o t a l d e p a r tm e n ta l c o s ts T o t a l o p e r a te d d e p t in c o m e U n d is tr ib u t e d c o s ts A d m in is t ra tio n & g e n e ra l M a rk e tin g P ro p e rty o p e ra tio n & m a in t E n e rg y O t h e r n o n -o p . d e p t F r a n c h is e fe e s O th e r o ve rh e a d c o sts T o t a l u n d i s tr ib u te d c o s ts N e t i n c o m e f ro m o p e ra t io n s F ix e d c h a r g e s B a s ic m a n a g e m e n t f e e s In c e n tiv e m a n a g e m e n t fe e P ro v is io n fo r r e n e w a ls P ro p e rty ta x e s Rent P ro p e rty in s u ra n c e R e s e rv a t io n c o s ts T o t a l fix e d c h a r g e s N e t i n c o m e ( E B IT D A )
(2) (1)

2013 72% 188 135 Am ount 000s R a tio %

2014 72% 192 139 Am ount 000s R a tio %

20 1 5 72% 197 142 Am ount 000s R a tio %

2016 72% 203 146 A m ount 000s R a tio %

2017 72% 20 8 15 0 Am ount 000s R a ti o %

1 1 .0 5 7 4 .7 9 2 1 .5 4 7 371 184 6 .1 0 4

4 6 ,0 % 1 9 ,9 % 6 ,4 % 1 ,5 % 0 ,8 % 2 5 ,4 %

1 1 .3 4 5 4 .9 1 7 1 .5 8 7 381 189 6 .2 6 3

4 6 ,0 % 1 9 ,9 % 6 ,4 % 1 ,5 % 0 ,8 % 2 5 ,4 %

1 1 .6 4 0 5 .0 4 5 1 .6 2 9 391 194 6 .4 2 6

4 6 ,0 % 1 9 ,9 % 6 ,4 % 1 ,5 % 0 ,8 % 2 5 ,4 %

1 1 .9 41 5.176 1.671 40 1 19 9 6.593

4 6 ,0 % 1 9 ,9 % 6 ,4 % 1 ,5 % 0 ,8 % 2 5 ,4 %

12 .2 5 4 5.311 1.714 412 204 6.764

4 6 ,0 % 1 9 ,9 % 6 ,4 % 1 ,5 % 0 ,8 % 2 5 ,4 %

0 0 ,0 % 2 4 .0 5 5 1 0 0 ,0 %

0 0 ,0 % 2 4 .6 8 2 1 0 0 ,0 %

0 0 ,0 % 2 5 .3 2 5 1 0 0 ,0 %

0 0 ,0 % 2 5 .9 81 1 0 0 ,0%

0 0 ,0 % 26 .6 5 9 1 0 0,0 %

1 .9 5 6 4 .3 9 2 167 93 3 .9 9 1 1 0 .5 9 9 1 3 .4 5 6

1 7 ,7 % 6 9 ,3 % 4 5 ,0 % 5 0 ,5 % 6 5 ,4 % 4 4 ,1 % 5 5 ,9 %

2 .0 0 8 4 .5 0 5 172 95 4 .0 9 5 1 0 .8 7 5 1 3 .8 0 7

1 7 ,7 % 6 9 ,3 % 4 5 ,1 % 5 0 ,3 % 6 5 ,4 % 4 4 ,1 % 5 5 ,9 %

2 .0 6 0 4 .6 2 3 176 97 4 .2 0 1 1 1 .1 5 7 1 4 .1 6 8

1 7 ,7 % 6 9 ,3 % 4 5 ,0 % 5 0 ,0 % 6 5 ,4 % 4 4 ,1 % 5 5 ,9 %

2.113 4.743 18 1 10 0 4.311 1 1 .4 48 1 4 .5 33

1 7 ,7 % 6 9 ,3 % 4 5 ,1 % 5 0 ,3 % 6 5 ,4 % 44,1% 55,9%

2.168 4.865 185 103 4.422 11 .7 4 3 14 .9 1 6

1 7 ,7 % 6 9 ,3 % 4 4 ,9 % 5 0 ,5 % 6 5 ,4 % 44 ,0 % 56 ,0 %

1 .8 3 8 1 .1 9 1 882 708 0 0 0 4 .6 1 9 8 .8 3 7

7 ,6 % 5 ,0 % 3 ,7 % 2 ,9 % 0 ,0 % 0 ,0 % 0 ,0 % 1 9 ,2 % 3 6 ,7 %

1 .8 8 6 1 .2 2 2 905 726 0 0 0 4 .7 3 9 9 .0 6 8

7 ,6 % 5 ,0 % 3 ,7 % 2 ,9 % 0 ,0 % 0 ,0 % 0 ,0 % 1 9 ,2 % 3 6 ,7 %

1 .9 3 5 1 .2 5 3 928 745 0 0 0 4 .8 6 1 9 .3 0 7

7 ,7 % 4 ,9 % 3 ,7 % 2 ,9 % 0 ,0 % 0 ,0 % 0 ,0 % 1 9 ,2 % 3 6 ,7 %

1.985 1.286 95 3 76 4 0 0 0 4.988 9.545

7 ,7 % 4 ,9 % 3 ,7 % 2 ,9 % 0 ,0 % 0 ,0 % 0 ,0 % 19,2% 36,7%

2.037 1.319 977 784 0 0 0 5.117 9.799

7 ,7 % 4 ,9 % 3 ,7 % 2 ,9 % 0 ,0 % 0 ,0 % 0 ,0 % 19 ,2 % 36 ,8 %

722 812 962 0 0 120 0 2 .6 1 6 6 .2 2 1

3 ,0 % 6 ,4 % 4 ,0 % 0 ,0 % 0 ,0 % 0 ,5 % 0 ,0 % 1 0 ,9 % 2 5 ,8 %

740 833 987 0 0 123 0 2 .6 8 3 6 .3 8 5

3 ,0 % 6 ,4 % 4 ,0 % 0 ,0 % 0 ,0 % 0 ,5 % 0 ,0 % 1 0 ,9 % 2 5 ,8 %

760 855 1 .0 1 3 0 0 127 0 2 .7 5 5 6 .5 5 2

3 ,0 % 6 ,4 % 4 ,0 % 0 ,0 % 0 ,0 % 0 ,5 % 0 ,0 % 1 0 ,9 % 2 5 ,8 %

77 9 87 7 1.039 0 0 13 0 0 2.825 6.720

3 ,0 % 6 ,4 % 4 ,0 % 0 ,0 % 0 ,0 % 0 ,5 % 0 ,0 % 10,9% 25,8%

800 900 1.066 0 0 133 0 2.899 6.900

3 ,0 % 6 ,4 % 4 ,0 % 0 ,0 % 0 ,0 % 0 ,5 % 0 ,0 % 10 ,9 % 25 ,9 %

S ta ti s tic a l r e fe r e n c e s D a ily ro o m s a v a ila b le A n n u a l r o o m s a v a ila b le A n n u a l r o o m s o c c u p ie d D o u b le o c c u p a n c y A n n u a l s le e p e rs
(1 ) (2 )

350 8 1 .9 0 0 5 8 .9 6 8 1 ,6 8 9 9 .0 6 6

35 0 8 1 .9 0 0 5 8 .9 6 8 1 ,6 8 9 9 .0 6 6

350 8 1 .9 0 0 5 8 .9 6 8 1 ,6 8 9 9 .0 6 6

350 8 1 .9 0 0 5 8 .9 6 8 1 ,6 8 9 9 .0 6 6

350 8 1 .9 00 5 8 .9 68 1,68 9 9 .0 66

T h e s e ra tio s a re c a lc u la te d o n d e p a r tm e n ta l r e v e n u e E B IT D A - E a rn in g s b e fo re in te re s t, ta x e s , d e p re c ia tio n a n d a m o rt is a tio n

58

11. Project Description
11.6 Rehabilitation Alternative - Assumptions of WACC
Terminal (Expected Growth Rate) 0% 35% 70% 30% 6,50%

Capital Required for Development (after Grants): 16.639.200 € Loan (debt): 11.647.440 €

Marginal Tax rate Debt Equity Long Term Balloon Payment (interest) Unlevered beta *[1+(1-tax rate) [debt/equity]] Unlevered beta Leveraged Beta

Total Construction cost of Rehabilitation Component: 27.732.000 €

0,62 1,56

Cost of equity = Risk free rate + Beta * Risk Premium = 5.4% + 1.56 (4%) = Risk Free Rate Risk Premium Cost of capital = 11.60% (.30) + 6.5% (1-.35) (.70) = Annual Depreciation

11,6% 5,4% 4% 6,45% € 2.218.560

59

11. Project Description
11.7 Rehabilitation Center Financial Performance Estimates (to the Firm)
Scenario 3: Rehabilitation Development Land Construction Expenses Operating income before depreciation (EBITDA) Depreciation Operating income Taxes Operating income after taxes (+) Depreciation Cash flow to firm Cash flow to firm Terminal Value Land & Construction Costs Discounted at @ 6.45 Present Value of Cash Flows to Firm IRR to Firm NPV to Firm 0€ 0 0 0 0 0 0 0€ 0 0 0 0 0 0 0€ 0 0 0 0 0 0 2.379.000 € -2.218.560 € 160.440 € -56.154 € 104.286 € 2.218.560 € 2.322.846 € 2.322.846 € 3.407.000 € -2.218.560 € 1.188.440 € -415.954 € 772.486 € 2.218.560 € 2.991.046 € 2.991.046 € 3.987.000 € -2.218.560 € 1.768.440 € -618.954 € 1.149.486 € 2.218.560 € 3.368.046 € 3.368.046 € 5.164.000 € -2.218.560 € 2.945.440 € -1.030.904 € 1.914.536 € 2.218.560 € 4.133.096 € 4.133.096 € 5.652.000 € -2.218.560 € 3.433.440 € -1.201.704 € 2.231.736 € 2.218.560 € 4.450.296 € 4.450.296 € 6.221.000 € -2.218.560 € 4.002.440 € -1.400.854 € 2.601.586 € 2.218.560 € 4.820.146 € 4.820.146 € 6.385.000 € -2.218.560 € 4.166.440 € -1.458.254 € 2.708.186 € 2.218.560 € 4.926.746 € 4.926.746 € 6.552.000 € -2.218.560 € 4.333.440 € -1.516.704 € 2.816.736 € 2.218.560 € 5.035.296 € 5.035.296 € 6.720.000 € -2.218.560 € 4.501.440 € -1.575.504 € 2.925.936 € 2.218.560 € 5.144.496 € 5.144.496 € 6.900.000 € -2.218.560 € 4.681.440 € -1.638.504 € 3.042.936 € 2.218.560 € 5.261.496 € 5.261.496 € 81.574.846 0,50 2.586.694 € 0,47 41.016.484 € Construction 2004 -5.000.000 € 2005 -5.823.720 € 2006 -10.815.480 € 1 2007 2 2008 3 2009 4 2010 OPERATION 5 2011 6 2012 7 2013 8 2014 9 2015 10 2016

-5.000.000 €

-5.823.720 € 0,94

-10.815.480 € 0,88 -9.544.546 €

0,83 1.925.682 €

0,78 2.329.389 €

0,73 2.464.063 €

0,69 2.840.560 €

0,65 2.873.241 €

0,61 2.923.467 €

0,57 2.807.067 €

0,54 2.695.085 €

-

-5.000.000 € 22% 41.753.000 €

-5.470.855 €

§ The land cost of 5,000,000 € as well as the construction costs have been incorporated in the estimations. § The subject rehabilitation development has a positive leveraged NPV of 41,753,000 € and an IRR of 22%. 60

12. SWOT Analysis
In order to place our findings in context, we set out the strengths, weaknesses, opportunities and threats (SWOT) relating to the site and the local market.
SWOT analysis
Strengths • According to studies of the tourism development of the island, the next development potential areas of Lesvos are the south west seashores (Tavari and Podara beaches-adjacent to subject site) Natural beauty, privacy, location and access High quality of facilities Real estate component Sizeable plot of land Unspoilt and up and coming destination Proximity to other Lesvos destinations (Singriou, Eressos) and nearby antiquities Climate (better than in other competitive destinations) Cultural and natural beauties of the island Large capacity for demand satisfaction In near proximity to Turkish boarders, i.e. Smyrni – 5 million population, Asia Minor10 million population which is expected to increase to 30 million in 10 years. Summer home market is expected to grow significantly for Greece Subject land has clean titles and no issues with Archaeology or Forestry Opportunities • • • • Improving image of Greece (Economic, Infrastructure, Safe Destination) Proximity to source markets New infrastructure works in the area Expected critical mass from the development of resort projects in the broader area which is expected to improve the recognition of the area as an international tourism destination The planned route from the port of Rafina to Sigrio will assist in the development of western Lesvos Possibilities for alternative tourism Penetration of source markets (west and east Europe, North America, developed countries of Asia, and huge market of Turkey • • • • • • • • • • • • • • • • • • • Weaknesses Airport distance and scheduled flights The tourism season is short The occupancy rates are somewhat limited The average daily rate is considered inexpensive The unit size of the hotels is limited which does not provide for economies of scale The dispersal of units is large making the Tour operators business more difficult Limited alternative tourism facilities (golf, theme parks, etc) Limited number of units over 400 beds (A category and up), making its entrance in the Tour Operator catalogues very difficult The cultural, folk and archaeological richness of the island requires proper marketing and promotion Limited transportation routes and alternatives (by air and sea) Seasonality Low quality of existing accommodation facilities in the broader area Limited existence of other large hotels in the area (critical mass)

• • • • • • • • • •

• •

Threats Possible delays in the planned infrastructure works Economic recession Increased competition of planned resorts in the broader area Pricing Policy (Value for Money) Tour Operator exploitation

• • •

61

Appendix - Permits
Project’s Permits
The typical permits required for a development of this size are seen below .

Typical List of Permits required for development
Type of Permit , Licence or Approval Shore Line Designation (for properties 50m from the seashore) Jurisdiction of Ministry of Finance/ Ministry of Public works & Environment, Ministry of Defence Forestry Authority Ministry of Culture a) Department of Prehistorical and Classical Monuments N/A Status

Declassification from forest land Archaeological Permits

Issued Issued

Water Supply Certification Sewage Treatment Certification Wastes Treatment Certification Access Road Width Certification Certification of Building restrictions of Plot GNTO Suitability of Plot Permit (if Tourism related)

Municipality or Eressos Municipality or Eressos Municipality or Eressos Municipality or Eressos Town Planning Office of Lesvos Greek National Tourism Organisation

TBD TBD TBD TBD TBD TBD

Environmental Impact Study Approval GNTO Design Approval (if Tourism related) Zoning Approval Infrastructure Works Permit Building (construction) permit

Ministry of Public Works & Environment Greek National Tourism Organisation Ministry of Public Works & Environment Department of Technical Services of Lesvos Town Planning Office of Lesvos

TBD TBD TBD TBD TBD

62

Appendix – Air Photo of Site

63

Appendix – MAP

64