Our investment history in Croatia I and my partners are Croatia enthusiasts since the 90s. As usually it started as a holiday destination. We saw the end of the war, the huge devastation and the recovery process. The first investment trials on our side were made already in 2000, when our partner acquired some objects is Dalmatia (restaurant, discotheque). These objects could have been good investments, as they were purchased before the real estate boom on a reasonable price. Unfortunately the legal framework was poor at that time, therefore it happened that some legal procedures are still not settled and after 13 Years the land registry papers are still not clean. This was the reason to postpone further investments.

Our investment history in Croatia In the Year 2005 we notified changes in the legal system, the security for investments raised significantly. And of course it was at the time of the European real estate boom. So we decided to make a second try. For over one Year we observed and analyzed the market. Based on these researches in 2006 we choose the Kvarner and Istria Region as the possible investment location. The reasons for this were: Good infrastructure Near to important neighbor countries Good financial situation of the region (important for prospective infrastructural developments) Good legislative framework (land registry system was the best developed in the country at that time) 2 Airports (Pula, Rijeka)

Our investment history in Croatia Finally we built two apartment complexes on the island of Krk. The original idea was to sell the apartments to private people, as holiday homes. Unfortunately the preparing phase lasted until the Year 2008 (licenses, plans, tendering of the constructor, financing, etc…). The building works were finished already during the crisis. Selling was not an option anymore, due to the lack of market. So we needed a new plan. We had to move towards tourism and utilize the properties as tourist objects. This was how we came from real estate development to the tourism industry. After getting familiar with the statistics and numbers of the Croatian tourism, it was obvious that it is a dynamic industry with outstanding growth rates and further potential. Apart from the usual accommodation and catering services, nautical tourism and camps were promising by their figures.

Our investment history in Croatia Here are some pros and cons we have encountered on the Croatian real estate development market: Pros: Simple tax system, easy to understand Very good public databases on land registry, cadastre maps, company court. Accessible over the internet without fees. Average corporate tax rate (20%) Relatively low stamp duties for permissions and licenses Before 2009: good market, lower VAT Cons: Slow permissions connected with bureaucracy High additional charges on real estate development: high communal fees to local municipalities Slow court procedures Expensive banking system, with slow procedures and high interest rates

Nautical Tourism - Marinas Already back in the Year 2009 we started to analyze the nautical tourism sector. This was catalyzed by the sailing activities of our partners. The idea of obtaining a concession on a marina came very quickly. The main reasons for this are: The realization costs of a berth are cheaper to that of an apartment. The rental income is higher, due to a longer season. Additional services (restaurant, boat repair, coffee shop, etc..) can bring significant extra income in addition to the berth rental. Nautical tourists are wealthy and top spenders. A nautical tourist spends daily more than double of that a normal tourist. Market demand is high, concurrency is not easy. Lower overhead costs (compared to hotel)

Nautical Tourism - Marinas Just to mention some of the cons: High initial investment (compared to land real estate) Concession rights (no ownership, limited timeframe) High labor ratio

Nautical Tourism - Marinas The Opportunity Finally last Year the opportunity became reality and our group could obtain the concession for Marina Martinscica on the Island of Cres. This is a concession right on 29 Years for a 200 berth marina. The realization of the marina is based on the reconstruction and extension of a local communal port. The concession includes the offshore elements of the marina. The onshore facilities like boat repair, parking, reception, coffee shop, etc… must be developed as separate project elements, by acquiring all licenses, buying land and so on.

Nautical Tourism - Marinas This Year (2013) a second concession was offered on a tender, also on the Island of Cres, but directly in City of Cres. The two locations Martinscica and Cres are near, but they have different advantages. The proximity of the two marinas makes it possible to operate them under a shared management, reducing the overhead costs. So we went for it and won the concession for City Marina Cres too. This concession is on 29 Years as well, with the extension and reconstruction of the local communal port. This concession includes the building of a supply house onshore as well. Currently we are in the realization phase of both marinas. The opening of Marina Martinscica is expected for the next season (2014).

New Era in State Relationship A new era has started: In connection with our marina developments we encountered a huge change in the behavior of the authorities compared to our earlier experience. These changes are based on two pillars. One is the overall support of the State on foreign investment and the other one is the full support from the local authorities. State support Legislative changes (tax free period on investments, protection of foreign investment, building regulations easier, etc…) Founding of supporting state companies like the Agency for Investment and Competitiveness Special treatment of big investments Reversed VAT on constructions

New Era in State Relationship Support of the local authorities Great collaboration of all authorities: County office (Primorsko Goranska Županija, Cres municipality and Port Authority Cres). No back draft because of miscommunication between authorities. Very short response time of the authorities. Direct contact to the necessary authorities, real time support. Positive official statements on our projects

Future expectations as Investor Future expectations as Investor: Lower bureaucratic paper works Shorter court response times Reforms in the banking sector Use of European funds on infrastructure development Long term: positive impact of the EU membership on the real estate market

Future expectations as Investor Expectations for the touristic sector: State financed investments in high level infrastructure like museums, event halls, wellness centers, amusement parks etc.. This would be necessary for the prolongation of the touristic season. At the moment a big disadvantage for investors of this sector is the short season, which has a bad impact on the return of investment. By expanding the touristic infrastructure the season can be longer, which could have a positive impact on the whole market.

Future expectations as Investor Closing words: All together Primorsko Goranska Region has a very good climate for investments at the moment. I can only outline once again the support from the authorities. It is a very modern thinking region, with local leaders, able to think with the investors head.