1/3/2020

TOWN ASSOCIATION 2020

ANNUAL BUSINESS PLAN

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Contents

I. Introduction ……………………………………….……………………….…….. 2

II. 2020 Business Plan . . . . . . . . . . . . . . . . . . ………………………………..…….. 3

III. List of Attachments ……………….………………………………………….….. 4

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I. INTRODUCTION

Current Development Status and Planned Development in 2020

In addition to already established Town Area with all the infrastructure support, comprised of residential and retail areas, marina and the first ever hotel, The Chedi, Lustica Bay continues to further develop in 2020. We got the first buildings in Centrale at the beginning of the year, and two more will be finished before the end of the year. We’ll be working on completion of remaining buildings B5 and E5, to complete construction in the Promenade area.

As the Town Area increases throughout the year to include these new residential clusters, Lustica Development will, under the Town Management SLA, be adjusting its operations to better serve the Town. That primarily related to in-house staffing in the technical department, but also finding advance solutions for balance between technical and physical protection.

Town and Condominium Organizations

Lustica Bay Town Association is a non-governmental organization established to protect and advance interests of its members, as freehold and usage right holders in the Town.

Condominium Associations are organizations that are comprised of owners of apartments in each building and its formation is requirement per the Montenegrin Law.

Purpose of both of these Associations is to promote safety, health and welfare of all residents and guests of the Town; protecting, preserving and architecturally controlling the property located in the Town; and managing, maintaining and organizing the Utilities and Facilities of the Town Area. All Condominium Associations are an integral part and are represented by the Town Association.

In order to fulfill its purpose, Town Association utilizes a contract with a Town Management Company to provide Town Management and Operation services. Mission and responsibility of company chosen to be the Town Management Company under the contract is to provide Lustica Bay Town community with inviting, safe and sustainable environment, which supports and enhances lifestyle in accordance with slogan “Life as it should be”. That entails provision of a cost-effective and responsive service for maintenance and operation of facilities, grounds, security, utility services, and other related supporting functions.

Definitions

TOWN AREA is the entire area that surrounds the building and it includes, but is not limited to: walkways, roads, paved areas, stairs, squares, open spaces, street lights, landscaping, ramps, rainwater installation, waste water treatment plants (WWTP), generators, etc. Town Area is defined in Service Level Agreement Scope of Services, which is attached to this Annual Business Plan (ATTACHMENT 2).

COMMON AREA is the area which serves the buildings as a whole and it includes all parts within the building envelope and those attached to it, which are used or are in service of all occupants. It includes: foundations, building structure, common terraces, hallways and stairs, building façade, roof and gutters, ventilation shafts, hydrants, fire protection systems and fire extinguishers located in common areas, fire access, elevators (in buildings that have elevator) electrical, plumbing and sewer installation in common areas, emergency lights, building interior and exterior lights, central HVAC system, telecommunication installation to central rack, lighting protection, other building parts

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requiring maintenance and used as common space. TOWN ASSETS are all movable or immovable property within the Town Area, as defined herein and showed in ATTACHMENT 2, which is made available to the Town Association by Lustica Development, with the transferred Right to Use. Town Assets include, but are not limited to: street lights, landscape lights, fire-fighting infrastructure, road and walkway surfaces, retaining walls, landscaping (excluding pools), benches, trash cans, signage, utilities infrastructure, Waste Water Treatment Plant, and all other land or buildings controlled by the Grantor, whether by freehold ownership, usage right or leasehold right etc.

II. 2020 BUSINESS PLAN

A. Overview of Services

Contract for Town management and operation services with Lustica Development AD continues throughout 2020. Detailed description of all services is provided in the Scope of Services, which is provided in the Attachment 3 of this Annual Business Plan.

As per the attached Scope of Services, selected Town Management Company, as an overview, will provide following services:

1. Management & Operations of the Town – basic services, which are comprised of: General Maintenance, Town Security, Insurance of Town Area and Town Assets and Management and administration services.

2. Utility Services to the Town – to include provision for utility services (electricity and water supply, wastewater (sewer) and waste management), as well as coordination with suppliers.

As explained in the Introduction, it is expected that the Town Area increases as the construction of new clusters and infrastructure finishes. Attachment 2 shows three maps of the Town Area in 2020, which follows development of the Town.

B. 2020 Work Plan and Fee Projections

Plan for 2020 for Marina Village Zone is to maintain the same level of services as those provided in 2019, described above and presented in the Scope of Services attached. While the type of services provided will remain the same, the scope will increase due to the increase in the Town Area. Warranty management will be provided for all Town Areas and Town Assets subject to warranty during 2020.

The overall intent of the Town Association and Town Management Company will be to continue to strive to optimize the costs of maintenance, and where possible reduce the costs, by optimizing maintenance costs and running effective predictive maintenance programs. For this reason, we have decided to choose the option of an in-house technical team. This will ensure stability of the operations and better reliability and quality of services provided.

Centrale area, which is handed over in January 2020, is a new Zone in the Town and will make a part of the overall Town Area. Maintenance of the Centrale Zone is planned to start as of April 2020.

In regard to the services to the Town Area, as it is shown in Attachment 2, following activities will be performed:

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• Security: As planned, part of the CCTV system, as well as some additional ramps, were put in place in 2019, which allowed us to keep the same level of physical security, while maintaining and slightly increasing security level in the Town. CCTV Master plan development and implementation will continue in 2020, to include additional CCTV, access systems, etc. Following continuous development of the Town, further consideration will be given to implementation of technical solutions and cutting down physical presence, if possible. In the Centrale Zone, security will be provided only as a daily roving patrol.

• Insurance: No changes to the insurance policy terms will be pursued, except for addition of the coverage for the assets that are to be added to the Town Area.

• Maintenance: As planned, during 2019, a consideration was given to analysis of effectiveness of moving operations more towards engagement of in-house facility management staff vs. outsourced services, which was the case all along. Determination was made that more in-house staff, mostly technicians, should be engaged, which will allow us to increase quality of the services and ensure more efficient response to clients’ requests. Given that determination, Lustica Development is undergoing a hiring process to implement this new strategy. As the Town Area increases, scope will be increased accordingly, to include areas around buildings, additional infrastructure, landscape areas etc.

• Pest management: More emphasis has been put on pest management, and its safety component in particular. Per that, a certified pest management company has been contracted to perform all activities regarding pest management. We will continue with earlier start for spraying against mosquitos also in 2020, and with regular be-weekly repetition during the summer season. Deration against rodents and spiders is regularly planned for the whole year with special emphasis during the season. Also throughout the season we have snake repellents being placed around the town area.

Taking under consideration the Annual Business Plan as outlined above and planned dates for the expansion of the Town Area, calculation was performed to come to the Town Association Fee projection.

Per all the above, the estimated Town Fee for 2020 is as follows:

Marina Village - 28,25 €/m2 (for full year) Centrale - 12,75 €/m2 (for 9 months).

Attachment 1 provides breakdown of the 2020 Town Fee calculation and expense projections.

III. List of Attachments

Attachment 1 – 2020 Town Fee and Expense Projection Attachment 2 – 2020 Town Area Map Attachment 3 – Scope of Services – SLA between Lustica Bay Town Association & Town Management Company

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ATTACHMENT 1 – 2020 Town Fee and Expense Projection

a) ATTACHMENT 2 – 2020 Town Area Map a) Town Area – Period: January 1 – May 15, 2020

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b) Town Area – Period: May 15 – September 15, 2020

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c) Town Area – Period: September 15 – December 31, 2020

ATTACHMENT 3 – Scope of Services – SLA between Lustica Bay Town Association & Town Management Company

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SERVICE LEVEL AGREEMENT Town Management Scope of Services

---------------------------- LUSTICA BAY

TOWN ASSOCIATION

LUSTICA BAY TOWN ASSOCIATION, RADOVICI, TIVAT

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Contents

I. Summary …………………………...………………….……………….……….. 2 a. Introduction …………………………………………………………………. 2 b. Current Development Status ……………………………………………...… 2 c. Definitions ………………………………………………………………...… 2

II. Scope of Services …………………….………….……………..……...……….... 3 a. Management and Operations of the Town….……………………………...… 3 b. Utility Services Supply ………………………………………………………..5

III. General Contract Requirements ……………………….…………...…….…... 6

a. Reporting Requirements .…………………………………………………….. 6 b. Invoicing .…………………………………………………………………….. 7 c. Record Keeping ……………………………………………………………... 7

IV. Attachments …………………….…………...…………………………....… 14

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I. Summary

a. Introduction

Lustica Bay Town Association (Client) is a non-governmental organization established to protect and advance interests of its members, as freehold and usage right holders in the Town. The Association has in particular the following purpose:

a) Promoting the safety, health and welfare of the Members, residents and guests of the Town;

b) Protecting, preserving and architecturally controlling the property located in the Town;

c) Managing, maintaining and organizing the Utilities and Facilities of the Town Area.1

In order to fulfill its role and purpose, Town Association is seeking a company to provide Town Management Services. Selected company will ensure that a cost-effective and responsive approach in terms of management and services of maintenance and operation of facilities, grounds, security and safety services, utility services, and other related supporting functions is exercised.

Condominium Associations are organizations that are comprised of owners of apartments in each building and its formation is requirement per the Montenegrin Law. All Condominium Association members are, by default, members of the Town Association.

Full Scope of services (hereafter “Scope”) to be subject of a Service Level Agreement are provided in Section II.

b. Current Development Status

Lustica Development A.D. has completed and handed over apartments in its first ten residential buildings, which are part of the Lustica Bay development project. Additional 8 buildings (F buildings) will be completed and handed over in April 2017 and additional 8 buildings (G Buildings) in late June 2017.

There is currently a total of 70 units. As of April 2017, there will be 113 residential units and once G buildings are completed, total of 158 units in sixteen buildings. There will be additional 4 pools in F buildings and 3 in G buildings, on top of the existing two pools.

Complete infrastructure was built by Lustica Development A.D. to provide good quality and reliable utility services to the Town.

c. Definitions

TOWN AREA is the entire area that surrounds the building and it includes: walkways, roads, paved areas, stairs, squares, open spaces, street lights, landscaping, ramps, rainwater installation, waste water treatment plants (WWTP), generators, etc., as shown in the Attachment 1 of this Scope.

COMMON AREA is the area which serves the buildings as a whole and it includes all parts within the building envelope and those attached to it, which are used or are in service of all occupants. It includes: foundations, building structure, common terraces, hallways and stairs, building façade, roof and gutters, ventilation shafts, hydrants, fire protection systems and fire extinguishers located in common areas, fire access, elevators (in buildings that have elevator) electrical, plumbing and sewer installation in common areas, emergency lights, building interior and exterior lights, central HVAC

1 Statute of Lustica Bay Town Association, Article 5

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system, telecommunication installation to central rack, lighting protection, other building parts requiring maintenance and used as common space. TOWN ASSETS are all movable or immovable property within the Town Area, as defined herein and showed in Attachment 1 of this Scope, which is made available to the Town Association by Lustica Development. Town Assets include, but are not limited to: street lights, landscape lights, fire-fighting infrastructure, road and walkway surfaces, retaining walls, landscaping (excluding pools), benches, trash cans, signage, utilities infrastructure, Waste Water Treatment Plant, Sub-station, and all other land or buildings controlled by the Lustica Development AD, whether by freehold ownership, usage right or leasehold right etc.

II. Scope of Services

Services required by this Scope of Services (hereafter “Scope”) are:

• Management and Operations of the Town • Utility Services to the Town

Detailed explanation of these services is provided below.

1. Management and Operations of the Town Services provided as a part of Management and Operations of the Town include:

1. General Maintenance of the Town 2. Town Security 3. Insurance 4. Management and administration

A delineation should be made in terms of services which are the responsibility of the Town Association versus those that are responsibility of the Condominium Association. Town Association has responsibility over Town Area and Condominium Association over Condominium Area. This is primarily dependent on the area where services are performed: • Town Association associated work includes all the services that are provided in the management

and maintenance of Town Area, the infrastructure and assets that are part of the function of a Town as a whole and can't be directly associated with a particular condominium/building or group of buildings. Examples of these services, related to Town infrastructure and assets are: sidewalks and walkways, retaining walls, road surfaces, manholes, road and landscape lights (if landscape is for the entire Town), street lights, storage and warehouse space in the Town Area or in use for the Town Area, but located elsewhere, etc.

• Town services do not include services that can be particularly attributed to one or more condominiums/buildings and which are the responsibility of the Condominium Association in terms of the Common Area, as defined above. Examples of Condominium areas, i.e. assets to be maintained are: exterior of the buildings, common areas inside the buildings: landings, staircases, technical rooms, heat pumps (if shared between occupants), exterior landscaping – plants and lights (if directly associated to a particular condominium or a specific group of condominiums), pools, signage, fire-protection equipment, warehouse/storage facilities (if just serving the condominium(s)), etc.

Detailed breakdown of services is provided as part of this Scope, sections 1.1 to 1.4 below.

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1.1 General Maintenance – Town

Regular General Maintenance services entail various types of activities required for the overall maintenance and upkeep of the Town Area and Town assets, such as:

- general technical maintenance and repair: electrical, plumbing, sewer, masonry, flooring, metal-mechanic, locksmith, etc.

- specific technical maintenance and repair: fire extinguishers and fire protection switchboard, solar panels, , etc.

- cleaning: façade, streets walkways, staircases, hallways, etc. - pest management: mosquito, rodents, etc. - safety and health activities - fire protection activities: procedures, instructions, trainings and drills - signage and wayfinding management - asset management activities: storage, inventorying, transportation.

Maintenance of the Town Area as defined above includes the following services:

- maintenance and repair of all sidewalks and walkways in the town area - maintenance and repair of the retaining walls - maintenance and repair of the road surface - operation, maintenance and repair of the road - operation, maintenance and repair of the landscape lights - cleaning of the entire area of the town - town landscape maintenance and repair - General town maintenance: electrical, plumbing, sewer, masonry, flooring, metal-

mechanic, locksmith, etc. - pest management of the town area.

Additional services, outside of this Scope of Services, will be charged separately.

1.2 Town Security The aim is to provide homeowners with a professional and welcoming approach to safety and security, while respecting privacy. Town Area needs to be provided with 24/7 physical security at entry points to the Town area, which has been handed over and is in use by the homeowners. This is to restrict the mixing of the construction and utilized areas and to limit the access for privacy purposes. In addition, function of security is to protect and preserve all property belonging to the Town.

Currently, there is no CCTV system installed, but consideration is given to providing coverage at some focal points throughout the Town area. Should CCTV system be installed, services of management: maintenance and control of the system, are considered to be part of this Scope. Actual design and implementation of the system will be an Additional Service, as defined in this Scope.

1.3 Insurance Town Association requires that all the Town Area Assets are insured. Type of insurance to be obtained: - coverage against fire, thunder, explosion, fall of aircrafts, storm, hail, fight, vehicle impact,

demonstrations, events, glass breakage, burglary, robbery and earthquake

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- 3rd party liability. Solicitation, negotiations, coordination of claim processing, etc. is part of this Scope of Services and is reflected in the Management and Administration services. 1.4 Management and administration: Management of the Town requires skillful human resources and sufficient means for proper operation. Services provided must be at the highest, professional level. A team of experienced individuals must be engaged to provide all the services. Key among the functions included in the Town management aspect are: - Contractor management (personnel, tools, equipment, parts and materials) - Coordination with contractors and site visits - Asset management - Financial Management - Quality Control Management, to include inspections - Reporting Requirements to Town Assembly – Annual Financial Statements - Management Policies, Standard Operating Procedures (SOPs), Guidelines, etc. - Customer Services. b. Utility Services

According to the Lustica Bay Town Association Statute, Town Association must ensure that reliable utility management services are provided in the Town. Part of this Scope is the requirement for a Utility Management Company, which will provide utility supplies. Utility Management function includes, but is not limited to negotiating, contracting, inspection and control of the utility supply to the Town. It is responsibility of the Town Management company to ensure review of the existing supply mechanisms and propose improvements in supply. This includes entering contracts for uninterrupted power or water supply, waste management, as appropriate and required. Utility Services to be provided are:

• Electricity • Water • Sewer • Waste management.

Town Management Company, under this Scope, will make reasonable effort to ensure that telecommunication services (internet, TV, land line and mobile services) can be obtained by the homeowners, should they choose to do so. Coordination, negotiations and contracting with telecommunication providers is part of this Scope of Services and is reflected in the Management and Administration services part. Key among the services, to be provided as a part of this Scope include:

• Utility Management and Administration • Electricity Supply and Maintenance • Water and Sewer Supply & Maintenance • Waste Management • Telecommunication Services coordination

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• Management of maintenance and repair of the infrastructure • Billing and Consumption Management and Control.

III. General Requirements

Reporting Requirements Reporting on behalf of Town Association is required on an Annual basis in a form of an Annual Report. Annual Report will include: 1) description of all the activities and services performed in the past year 2) expenditures in the reporting year and 3) calculation of the actual Town Fee for the reporting year 4) calculation of the estimated Town Fee for the following year. Annual Report to the Town Association for each financial year (January-December), is due February 15th of the following year. Invoicing Invoicing will be done annually, in advance, per the adopted Decision for the estimated Town Association Fee for that year, no later than March 1st of the current year. Reconciliation of the final Town Association Fee will coincide with the Annual Report for that year, which will be done by March 1 of the following year.

Record Keeping

All the records, financial and other documentation must be kept in an organized manner and available for the review by the Client.