Performance characteristic of the Project

The assessment of the efficiency of the Project is based on the calculation of the fundamental forecast models defining development:

1. Statement of profit and loss, which shows operational activities for the period of the Project consideration;

2. Cash flow statement, which indicates sources and terms of repayment of credits and loans of shareholders;

3. The balance, which reflects planned asset profile and liability structure of the Company.

Basing on these report forms, the assessment of the efficiency of investments and of a solvency of the Project was conducted.

The assessment of the efficiency of investments is based on the comparison of net profit expected from the realization of the Project with the invested capital. The basis for the method is the estimation of net cash flow defined as the difference between a net profit of the Project and the general sum of the investments and payments for credits (loans), connected with the of capital costs outlay.

On the basis of net cash flow the major indicators of the assessment of the efficiency of investments are calculated: net present value, discounted payback period, internal profitability rate, etc. (see Table 5).

The discount rate, which is used for matching expenses and revenues for each accounting period of the Project by the initial period, is applied to estimate these indicators.

Table 5. Assessment of the efficiency of investments and of Project solvency.

Indicator	Unit of measure	Meaning
Period of recoupment (repayment of a credit)	months	84
Period of recoupment (repayment of loans to shareholders)	months	92
NPV	Euro	3 220 986
IRR	%	4,2
Profitability of sales (tenancy)	%	38

The figures above show that the period of recoupment of the Project (repayment of the credit) is 84 months from the beginning of realization of the Project and 57 months from the moment of input of the building into operation. Net Present Value for 96 months of operation of the retail and office complex will amount to 3,2 million Euro.

The break-even point on the total area of rent out premises starts from 10 thousand sq.m. at the first stage (the Project provides tenancy of 13 thousand in sq.m.) and comes to 4 thousand sq.m. on the fifth year of operation of the complex (the Project provides 15 thousand sq.m.).

Therefore, the minimum average rental price of a square meter in a year should be 297 Euros at the first stage (according to the Project – 396) and 130 Euros (according to the Project – 408) after loan repayment. It attests to certain degree of safety of the Project.

Project implementation period is supposed to be 8 years. Various business scenarios were considered and the key indicators of investments efficiency and of a financial status of the Project were calculated on the basis of these terms.

Calculation of the key indicators of the Project allows making a conclusion on a sufficient overall performance of the retail and office complex, and consolidated forecast forms of reports (see Appendixes) show an ability to fulfill obligations to the Bank and shareholders.