Quote:
Originally Posted by anthonyday
Yes I have no reason to believe that it will not be finished. In any rate I am not overly concerned about this as it is an investment, and given the penalty payments for late completion, it makes no financial difference to me.
Again, I don't really see why this would be of concern. I'm not worried about when they start, only when they finish. At this stage of construction it will only be ground preparation anyway. I have bought other properties over a year ago and construction has only just started on these, so this is certainly not unusual.
If you look at when payments are released from escrow as per stages of the build, only small percentages of the funds are being released each stage so with 60% sold, which is very quick I might add, I would suspect that there would easily be sufficient funds for construction.
One more point regarding the financial position of IPI. In the DD report it states that they have €1.2 million or so in reserve which is a significant amount of money considering they have already paid several million for the plot. Zafarana shouldn't create a financial strain as the resort has long been sold out and therefore all funds are in escrow for construction. This is a cash funded development meaning that there are no loans for construction finance on the development. This is quite rare as developers will often borrow huge sums of money against the resort. This helped me at least with both projects, as I know that without the constraints of interest repayments, banks being involved etc my investment is safer.
Tony Day
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Hi Tony
Thanks for the explanation - it makes sense of course, but there remains an element of trust required and it is that which people may decide to go with or not. 1.2m Euros sounds a lot but if the executives have a mortgage each, during these recent difficult times, 1.2m Euros can easily be swallowed up by that - look at UK repossessions; and the DD makes it clear that Seddons did not look into their personal finances for surety for buyers which would have provided greater clarity for buyers.
60% may be a lot - I'm not sure on that - but if 60% sales is then provided drip drip to the builder thro' escrow, for example spread around the Part 1 evenly, how is it used to maintain the build evenly? Say a block B has only sold 35% and block A 75%, will the better sold take precedence for building? The only way I can see the part sold project working is if the profit margin is sufficient to cover builds where sales are non existent, and that's possible of course, or where there is extra monies to use for building which can be recouped on sale. I also think that once the build gets underway, and progresses, there is more chance that people will buy the remainder as they grow in confidence about the project.
If a builder had monies, from loans say, covering the whole build there would be no problem as in usual housing projects where there is good demand - the builder builds the project and people either buy in advance or when the houses are finished; then the builder is paid and can repay the loan - in this case the only funds available, if no loan is sought, are those prepaid into escrow. That's why I said if IPI had evidence of completed builds it would assist the prospective buyer. I've checked the Net and cannot find any - do you know of any?
The penalty payments sound reasonable but again with say 60% sales, if the build, perhaps inevitably as the Egyptian court case cannot be resolved for several months according to the DD, is delayed to extreme how can those penalties be paid if funds are tight for construction? One then has to assume either IPI or the builder - whoever is responsible at that stage (and the DD suggests that IPI may become liable as 100% share owner, or its building contractor, or its Egyptian partner which is contracting the work - not as clear as might be) - will have to pay those penalties? Who is paying for the apparent long delays at Zafarana?
Regards
Jacky