Canidelo Apartments

Canidelo Apartments is a beachfront ground-up development. The location is zoned as commercial and services, suitable for mixed commercial and hotel development. The goal is to develop serviced apartment for sale and lease back.

Address:

Lote 19, Avenida Beira Mar, V.N de Gaia
Total construction area:

11,232 sqm
Estimated Investment Timeline:

03.2023 – 12.2026
(45 months)
Report issue:

#3
Date of Issue:

30-09-2023
Next Issue:

31-12-2023

1. Project Updates

Geotechnical Surveys were conducted and results shared with design team for further studies.
Two official information requests were submitted (PIP), one for a single building and another for two buildings. Information is still pending confirmation from City Hall.
Adriano Pimenta Arquitectos, Lda which will conduct the concept phase and licensing, is currently studying solution on the Main Concept, A sketch is shared in the photos area. For this first stage was agreed a total fee €35,000. The same proposal allows us to proceed with Adriano Pimenta for the execution phase where was agreed a total fee of €255,000 (not awarded).
Multiprojectus from Garcia Garcia was hired as the engineering team for the project. Multiprojectus will be responsible for the execution of projects, and construction supervision and also be involved in the concept and licensing phases. The total fee agreed upon was €220,000.
Support from tourism/operation expertise was received and pointed to include further semi-independent room units into the design.
Typology tests are being carried out along with image conception studies.
The next step is to submit licensing of one of the proposals and refine the construction cost estimation.

2. Financial Updates

For the 3rd quarter of 2023 some updates were performed to the business plan, namely:
- Update of all the estimations for hard and soft costs (after completion of project’s design concept). The main updates are related with the costs estimation for architecture and technical projects services;
- Revision of sales forecast where the current estimated net revenue for the project is €21.4M;
- Revision of capital structure (Scenario A and B)
  - Estimated total required equity for the project is now €4.0M for scenario A and €7.0M for scenario B (see detailed information in the tables below);
  - The construction loan for this project should be around €11.3M. The conditions of this loan were reviewed. We are estimating a total interest rate of 6.145%, according to the current market conditions.

I Capital Structure & Profit Forecast

On March 2023, the fund acquired the asset holding company (Sparkling Joy, Lda) via a combination of share purchase and shareholder’s loan (as of September, 2023 the total equity injected is €2.25M:

Capital: 525,000 euros

Shareholder’s loan: 1,725,000 euros

After reassessment of the project's business plan we are presenting the following scenarios for equity requirements and respective profits:

Scenario A:
- Total common equity required of €4.0M which will be used to support land acquisition costs and 100% of project's soft costs;
- In this scenario would be required an additional capital injection of €2.8M. This additional cash could be provided through common equity injections or other alternative instruments such as preferred equity or debt.
- At this stage, we do not have full visibility over the alternatives that could be applied to this project which means that the estimated profit for this scenario will need to be reviewed according to the financing costs.
- According to the assumptions and limitations above identified we are pointing for a return of equity of 51.5%

Scenario B:
- In this situation common equity will be used to support land acquisition costs, soft costs, 15% of hard costs and furniture expenses. In this scenario we have assumed an assumption where the bank loan for construction will not exceed 85% of the total amount.
- Besides the construction loan, we are not expecting any other instruments of debt. Common equity required to this would be higher (€7.0M), however this will significantly change the return of equity to 30.8%.

Capital Structure & Financing

Total Estimated Project Cost

19,305,927.00€
Total Capital Invested

2,250,000.00 €
Debt Financing

11,233,340.00 €
Construction Loan

11.233.340,00 €
Equity Financing

2.250.000,00 €
Common Equity

6.910.680,00 €

Project Profit Forecast-Allocated to Equity Investor

Common Equity Investor (Scenario A: Land + Soft Costs)

4,134,976.00€
Additional Capital Required (Scenario A)

2.775.704,00 €
Profit Forecast (Scenario A) - Allocated to Common Equity Investor

2.128.210,00 €
Total Projected Return (Scenario A)

51.5%
Common Equity Investor (Scenario B: Land + Soft Costs + Hard Costs)

6,910,680.00€
Profit Forecast (Scenario B) - Allocated to Common Equity Investor

2.128.210,00 €
Total Projected Return (Scenario B)

30.8%

III Project Cost Estimation

During last quarter we have decided to put in place a different strategy for project management and architect services which not only ensures a more efficient project management process but also allows us to closely monitor construction costs through direct collaboration with the construction company's design team. This implies a project development fee update, however, taking this strategy, we will be able to obtain some cost reduction on architect, project management and also on construction costs for this project.

The key aspects of our revised approach are as follows:

Enhanced Project Management by Qualiv: Qualiv has taken on the responsibility of project management, which promises to streamline operations and project execution optimisation;
Direct Engagement with Construction Company: We have chosen a more direct route by having Qualiv contract directly with a specialised construction firm for design services. The initial architectural work, encompassing the concept and licensing, will be overseen by an architectural services entity.