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20 March 2006

Developers Queue To Buy Land In Bulgaria.

About 30 developers and property hunters line up on an empty white sand beach, straining to hear the English translation of a speech from Krasimir Todorov. Todorov, the mayor of Avren, is trying to sell 300,000 sq metres of municipally owned land south of the Black Sea port of Varna. It includes a thick strip of forest and hot mineral springs suitable for spa treatments, and it borders the Kamchia River that is part of a protected environmental area.

“This is one of the prime properties along this coast,” he says, gesturing towards the sea. “We offer an excellent return for investors but also a great place for a holiday home.”

His sales pitch seems to be working. The Moscow government has already invested in this area of Bulgaria’s coast, with plans to build two five-star hotels on a promontory enclosing the south side of the beach. And more buyers – institutions and individuals from Russia, the UK, Ireland, Spain and France – are circling, eager to get in on Europe’s latest emerging market property boom.

Not surprisingly, the latest trend is a move toward more upscale development – high-end villas and bigger apartments that will serve as long-term second homes rather than rental properties. It helps that the country’s government has backed new legislation aimed at protecting the Black Sea coast; high-rise buildings will be banned and new zoning regulations required a certain amount of green space to be preserved amid new construction. As Bulgaria comes closer to European Union accession, financing a property purchase has become easier, and airlines are ramping up flights to Sofia and Varna.

“We believe the market is moving from a mainly investor-driven one to a more balanced investor/lifestyle profile,” says Mark Schubert of Lemon Tree Villas, a company that twice a month brings 30 to 50 potential homebuyers to the country.

Sunny Beach is perhaps the best example of the Black Sea coast’s past. Built in the Communist-era 1960s to attract sun-and-sand tourists, the resort benefited from a wave of new investment in the first part of this decade, with an estimated €500m funnelled into refurbishment and construction, including a few new five-star hotels. Still, it has remained a mass-market family destination, full of Soviet-style housing blocks made only slightly prettier by their new paint.

Elsewhere, however, the quality of new development is rising. Bulgarian Developments is currently marketing Oasis Kamchia, a low-rise holiday retreat in a forest in the Avren region close to the beach that features a gymnasium, tennis courts, swimming pools and café/bars. John Cain, from Chadderton, near Manchester, recently bought a large two-bedroom apartment there. “I was originally looking to buy in Spain, but the quality of the complex and plans for the resort convinced me to buy in Bulgaria,” he says.

Bay View Villas, a resort under construction on a hillside five minutes’ drive from Sunny Beach, is another example. Brick with a cladding of local stone is used instead of breeze blocks, along with high quality kitchen and bathroom fixtures. Communal facilities include 1,000 sq metre pool complex; a spa and fitness centre; a terrace restaurant; and two supermarkets. Golf carts provide transport around the complex, and three motor-yachts will be available for charter by residents. A family-sized, four-bedroom villa costs up to €236,000. Peter Jennings of selling agent Lemon Tree Villas predicts: “This kind of development is what will put Bulgaria on the second-home map.”

He is equally proud of the less expensive Windows to Paradise, a group of high-end apartments to be built on a cliffside site 10km from the historic town of Balchik on the way to the Romanian border. It will adjoin one of three three 18-hole golf courses designed by Ian Woosnam and Gary Player being built in the region, and a marina will be built in a cove below the site. A two-bedroom apartment in the first phase of construction, due for completion in 2007, costs €80,000, and most have been sold off-plan.

Bargains in Bulgaria


Not so long ago, the very idea of taking a holiday in Bulgaria would have seemed far-fetched. Buying a home there would have certainly meant you received strange looks in the street.

Yet the former Eastern Bloc country has gained popularity to such an extent that tourist numbers have soared and it is now seen as not only a good place to invest in property, but somewhere to live. Property is cheap, the climate is good and the beaches and mountains offer a spectacular backdrop.

Visitors are often shocked to discover that Bulgaria, once a favoured holiday haven of people from the Soviet Union, has 137 miles of Black Sea beaches and more than 130 peaks over 2,000m (6,560 ft) high. The country is an excellent destination for those who enjoy skiing and hillwalking.

If there is a time to invest, it is now. Bulgaria is due to join the European Union in 2007 and the slow pace of economic development will undoubtedly begin to quicken. Currently, it is one of Europe’s poorest states - Gross Domestic Product per head of population is less than a third of the EU’s average - but the Bulgarian economy is growing faster than just about anywhere else.

Slow development has meant low prices for those savvy to the charms of Bulgaria. A three-course meal for two with wine can cost as little as £6 or £7 and a pint of beer can be drunk for around 50p.

Mark Schubert, co-founder of one of Bulgaria’s top real estate brokers, LemonTreeVillas.com, says: "What’s happening here is what happened in Spain around 20 years ago.

"You can still buy beach front property for 20 (roughly £14) a square metre on the Black Sea, but prices now also range up into the millions."

Schubert, whose firm sells around 100 houses to Britons a month, says small houses about an hour from the sea can be had for under £15,000 - although another £3,000 plus is often necessary to install indoor plumbing and a kitchen. Alternatively there are new developments springing up where a brand new fully fitted apartment in the upmarket Bansko ski resort can be had for as little as £23,000.

Although the prices may seem modest, they are a boon for many Bulgarians who - stranded in rural areas after a collapse of industry during the last decade - are eager to move into cities to find work or live closer to their families.

The Bulgarian embassy in London says it is flooded with dozens of calls a day from Britons searching for information on how to buy property, and the number of long-term visas it has issued has jumped 100 per cent over the last year.

John and Lita Bailey, recently-retired teachers from Kent, came on holiday to Bulgaria a year ago and bought two houses for a total of less than £10,000.

They were drawn by the sunny weather and the rugged charm of their village, where indoor plumbing is rare and neighbours keep animals and grow most of their own food. Like most newcomers, they have been astounded at how friendly people are. "We’ve had dinner in a different house every night this week," laughs John. "But, of course, a neighbour translates for the time being."

So, What does the future hold for Bulgaria’s real estate market?

The Bulgarian commercial property market has experienced dynamic development in all sectors, with trends varying greatly in terms of growth cycle, performance, investor interest, and geographic location. Modern quality supply has registered robust growth, with most of the activity concentrated in the office and retail sectors of the market. However, modern-standing investment stock is still limited in supply, with the retail and industrial sectors of the market offering the greatest investment potential.

Office market is most likely going to reach its stage of maturity in 2006, as about 200 000 sq m of office space is in the pipeline, and another 100 000 sq m is at the project design phase. Yet, there are unexploited niches with enormous market potential, where demand for the right product in the right location is huge. Thus investment timing and location will continue to be of major importance. With Bulgaria’s ranking at 15th position among the top outsourcing destinations in A. T. Kearney’s index, the country is expected to attract substantial level of investments in the services sector, which will increase demand for quality office premises.

2005 and 2006 have appeared to be the long awaited turning point in the retail property sector of the market. The first three malls that will provide a combined modern retail space in excess of 100 000 sq m are awaiting completion, and will put under pressure some of the prime high-street locations. These are: Mall of Sofia that will offer 54 000 sq m of retail space; Sofia City Centre Mall with about 31 000 sq m of retail space, and Sky City Mall with 16 000 sq m of retail space.

As 34 per cent of monetary household expenditure goes on foods and drinks, the food retail sector is expected to continue to be the major sector, driving retail growth. With hypermarkets/supermarkets facing constantly increasing competition, the first discounters are to enter the Bulgarian market, probably by the end of 2006. Some of the largest retail chains, operating in Bulgaria, are: Metro Cash & Carry, REWE Holding (Billa - 18 stores till the end of 2005 & Penny Market expected in 2006), Ramstore, VP Market, Praktiker, Mr. Bricolage, Praktis, Technopolis, Technomarket, HIT and many others. Some retailers that have shown interest in entering the Bulgarian market in 2006 are: Lidl, Kaufland (already acquiring land in the largest cities) and Mercator.

Indisputably, the logistics/warehousing sector is the sector, anticipating its dynamic growth and development phase. The current level of modern stock is obviously insufficient. Due to the lack of such products, prime rents remained at their high last year level of five euro a sq m, with almost no vacancy. Older stock however will continue to retain vacancy rates of about 30-50 per cent. Approaching its EU accession, Bulgaria will have to absorb a constantly increasing level of FDI, which factor will set high requirements for the industrial property sector of the market. In the past few years, demand has concentrated in several industrial zones in key parts of the country like: Sofia, Plovdiv, Rousse, Stara Zagora and others. However, unexploited opportunities for development still exist along the Pan-European Transport corridors (mainly along corridor No 7 - The Danube River), and near the major Black Sea port towns of Varna and Bourgas.

One of the largest development schemes under way is Sofia Airport Centre. The proposed business park, with offices and a logistics centre, has a projected built-up area in excess of 115 000 sq m, and will be constructed over the next two years. It is located about 300 m away from the airport’s new terminal, designed to accommodate up to 2.6 million passengers a year. On the investment side of the market, yields have followed their logical trend of compressing, reaching nine to 11 per cent in 2005, and expected to compress further, in line with Bulgaria moving closer to EU accession. However, they still offer significant premium to the yields in the other European countries.

Suitable investment grade stock is limited in supply, with alternative investment schemes (sale-leaseback scheme for example) gaining momentum. However, large international developers and investment funds, both public and private, have entered Bulgarian market, a major factor, expected to stir market activity and development.

Development of the real estate market is of great importance to Bulgaria. The construction industry in the country employs a significant number of people, adds value to economy and thus contributes to the steady GDP increase. On the other hand, the banking industry is more than ever involved in the real estate sector by facilitating mortgage credits to individuals and companies by offering more flexible conditions, lower interest rates and longer terms. Last but not least, rapid real estate market development attracted huge foreign investments in the country, both speculative and Greenfield, that accelerated growth of the economy.

What are the main reasons for this?
1. The economic environment in the country improved significantly in past five years - we have one of the lowest corporate rates in Europe, inflation is lower, incomes are rising constantly, predictability has improved, economic freedom increased and overall people’s expectations are positive.

2. Legislation has been passed that facilitated secondary mortgage market and real-estate related investments - the law on mortgage bonds in 2000 (banks can find additional money for their credit activities), the law on special purpose vehicles in 2003 (companies that can invest in real estate and thus provide opportunity for small investors to put their money in big investment projects), the improvement of the central credit registry within the national bank and start of operation of the first private credit bureau that would allow for greater transparency.

3. EU accession is anticipated as a reliable measure of an economy that is heading to a more stable and secure business environment for investors.

The state’s role should be to guarantee private property rights and contract enforcement. Unfortunately, we are witnessing some negative draft laws and intentions in this field that could have contradictory results. Such examples are the draft law on registering construction companies, the draft act on the sea coast, the idea to tax all agricultural land in the country, among others. If theses are to be implemented we can expect adverse effects on the real estate market.

Transparency and security are very important for this market. The government has received financing from the World Bank to create a property register and cadastre. These are in the process of being set up, and delays are causing problems and leading to a less liquid market. An obstacle to a more transparent market is the practice of misreporting the transfer price in real estate deals. There are two incentives to hide the true figures - due transfer tax (two per cent) and the informal economy (all deals above 30 000 leva should be reported to the Financial Intelligence Agency to check the origin of the money and this may be a difficulty if you have misreported your income to avoid high social security contributions, for example).

Housing market
- after the most successful year (2004), 2005 was characterised by steady housing construction, higher prices, friendly banks and willing customers. Although, price inflation was less aggressive, we witnessed increased prices in several secondary markets in the country (Stara Zagora, Pleven, Blagoevgrad, etc.) as a result of catching up with business development. 2006 will be less profitable for construction entrepreneurs (more time to sell finished apartments, need for more flexible payment schemes in order to be competitive, higher quality demanded by customers). Lower profit is a consequence of increases in the price of materials, lack of qualified and experienced labour (it costs more in salaries to keep it) and higher supply.

Vacation (apartment) buildings - the boom in construction of such buildings was dominant in 2004 - 2005 with major destinations summer resorts (Sunny Beach, Golden Sands), as well as winter destinations (Bansko, Pamporovo). Bad infrastructure, lack of commitment and control from local municipalities is on the path to turn these places into overbuilt cities where no decent return from investment can be achieved. That is why, one should be careful when considering investing money in this area. Anyway, other destinations inside the country are gathering momentum and are likely to be very profitable and attractive.

Land - one of the major characteristics of land market in Bulgaria is the current ban on foreigners acquiring land in the country. However, this is not considered as an obstacle but a factor that increases the transaction cost, the time to conclude a deal, and involves intermediaries. In any case, this gives the opportunity to many poorer families to sell their land at a higher price. It can hardly be said that there is a dynamic land market in Bulgaria apart from in the big cities and resorts where major construction activity is concentrated. Agricultural land is still less attractive. Despite this, several specialised land investment funds were created so we believe that this market is just starting its real development. Still, land investment will require long-term commitment and is less liquid.

Office market - starting to be very dynamic in the capital and expected to be of greater attention for investors. “Specialised” in such investments are special purpose investment companies that accumulate funds from smaller investors, invest them in big projects and manage the property for number of years. Since demand for specialised, high-quality office buildings with additional services is accelerating we can expect that many entrepreneurs will be attracted in this segment. Since more and more companies are willing to build own offices and then sell and lease back we can expect future development.

Industrial market - concentrated in several areas in the country (Sofia, Plovdiv, Sevlievo, Bourgas) but more cities are making efforts to attract big companies. Acceleration of the decentralisation process in Bulgaria will give powers to local municipalities to offer competitive business environments and stimulate new investments. The process, however, is slower than desired. Land prices, the urbanisation process and local authorities’ willingness to assist business are seen as incentives for big foreign companies to invest.

Trade market - every time an economy grows, trade properties are on the edge of investors’ interest. With rising incomes, consumer confidence and purchasing power increase, and this inevitably boosts spending. In 2005, construction of several big trade centres started, with completion expected in 2006. These malls are attracting huge investor interest and all units are fully pre-sold. The cities of Sofia, Varna, and Stara Zagora attracted such projects.

Property as an investment - price inflation of all types of property (except for land) turned real estate investment to be very profitable. Bulgaria was among the few countries in Europe that secured property investment return of above 10 per cent in 2005. The picture is changing slowly in a downward direction but is still attractive for investors. Lower levels of European interest rates and good practice (no major problems with foreign investors in the country so far) attract less speculative investors as ordinary foreign citizens and companies. The trend however is for steady flattening of Bulgaria’s property returns with European levels in the next three to four years.

Sofia - capital property market should be analysed separately from other locations since it differs in many ways. First, housing demand is more dynamic and constant that is due to in-country migration, higher incomes, headquarters’ location of almost all international companies, good investment prospects, etc. That is why housing prices rose permanently with changing of preferred districts in time. Central locations are still of interest but high-quality residential complexes with restricted access in the outskirts of the city are attracting customers. They offer European quality of construction, additional services, property management, security and comfort to its buyers. At the moment, wealthy people are among the major customers but we witness change in customers profile since middle-class buyers are supported by banks in such transactions. Office buildings in Sofia are to become soon the most attractive type of construction. EU accession and positive expectations of business facilitate investment in real estate for their activities. Although rents lagged behind in 2004 and 2005, we see increasing of their levels that should continue in 2006 if no major political downturns happen. Construction of two malls and lack of free trade space are no surprise.

As a summary we expect that real estate market will further develop with less intensity in its housing and vacation apartments sectors, and future focus in office and land segments.




Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15599 Price: £34,483 - €50,000 Details: Beds: 0 | Baths: 0 | Built M2 500 | Plot: M2 600 | Pool: No | Garage: Yes

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15597 Price: £30,966 - €44,900 Details: Beds: 3 | Baths: 2 | Built M2 180 | Plot: M2 1000 | Pool: No | Garage: Yes

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15603 Price: £26,897 - €39,000 Details: Beds: 6 | Baths: 2 | Built M2 240 | Plot: M2 560 | Pool: No | Garage: Yes

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15602 Price: £25,862 - €37,500 Details: Beds:6 | Baths: 3 | Built M2 200 | Plot: M2 - | Pool: No | Garage: Yes

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15601 Price: £21,379 - €31,000 Details: Beds:2 | Baths: 1 | Built M2 100 | Plot: M2 - | Pool: No | Garage: No

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15595 Price: £17,931 - €26,000 Details: Beds:3 | Baths: 1 | Built M2 200 | Plot: M2 4000 | Pool: No | Garage: Yes

Property for sale in Pamporovo Bulgaria
Property for sale in Bulgaria - House Location: Pamporovo Ref: 15595 Price: £17,931 - €26,000 Details: Beds:3 | Baths: 1 | Built M2 200 | Plot: M2 4000 | Pool: No | Garage: Yes

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - Ski resort apartment Location: Borovets Ref: 16896 Prices from: £48,490 - €71,280 Details: Beds: 1 | Baths: 1 | Built M2 72 | Plot: M2 - | Pool: No | Garage: No

Property for sale in Borovets bulgaria
Property for sale in Bulgaria - Ski resort apartment Location: Borovets Ref: 16897 Prices from: £48,490 - €71,280 Details: Beds: 1 | Baths: 1 | Built M2 72 | Plot: M2 - | Pool: No | Garage: No

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort apartment Location: Bansko Ref: 16542 Prices from: £58,231 - €85,599 Details: Beds: 1 | Baths: 1 | Built M2 80.94 | Plot: M2 - | Pool: No | Garage: Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort apartment Location: Bansko Ref: 16895 Prices from: £56,667 - €83,300 Details: Beds: 1 | Baths: 1 | Built M2 70 | Plot: M2 - | Pool: No | Garage: No

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - House Location: Bansko Ref: 15445 Price: £19,728 - €29,000 Details: Beds:4 | Baths: 1 | Built M2 150 | Plot: M2 500 | Pool: No | Garage: No

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 14275 Price: £88,435 - €130,000 Details: Beds:4 | Baths: 2 | Built M2 150 | Plot: M2 1200 | Pool: No | Garage: Parking

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 16613 Price: £64,626 - €95,000 Details: Beds:3 | Baths: 2 | Built M2 300 | Plot: M2 1000 | Pool: No | Garage: Yes

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 14283 Price: £47,619 - €70,000 Details: Beds:2 | Baths: 1 | Built M2 120 | Plot: M2 1200 | Pool: No | Garage: Yes

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 15036 Price: £37,415 - €55,000 Details: Beds:2 | Baths: 1 | Built M2 150 | Plot: M2 2000 | Pool: No | Garage: No

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 15364 Price: £19,048 - €28,000 Details: Beds:3 | Baths: 2 | Built M2 100 | Plot: M2 1500 | Pool: No | Garage: Yes

Property for sale in Varna Bulgaria
Property for sale in Bulgaria - House Location: Varna Ref: 15037 Price: £17,687 - €26,000 Details: Beds:3 | Baths: 1 | Built M2 120 | Plot: M2 700 | Pool: No | Garage: Yes

property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15590 Price: £56,463 - €83,000 Details: Beds:2 | Baths: 1 | Built: M2 90 | Plot: M2 800 | Pool: No | Garage: Yes

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15591 Price: £55,034 - €80,900 Details: Beds:5 | Baths: 3 | Built: M2 1000 | Plot: M2 4000 | Pool: Yes | Garage: No

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15585 Price: £44,218 - €65,000 Details: Beds:4 | Baths: 2 | Built: M2 190 | Plot: M2 32 | Pool: No | Garage: Yes

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15588 Price: £44,218 - €65,000 Details: Beds:5 | Baths: 2 | Built: M2 250 | Plot: M2 800 | Pool: No | Garage: Yes

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property villa Location: Bansko Ref: 15444 Price: £29,932 - €44,000 Details: Beds: 1 | Baths: 1 | Built M2 150 | Plot: M2 1500 | Pool: No | Garage: No

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15584 Price: £24,490 - €36,000 Details: Beds:3 | Baths: 2 | Built: M2 180 | Plot: M2 600 | Pool: No | Garage: Yes

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15586 Price: £17,007 - €25,000 Details: Beds:1 | Baths: 1 | Built: M2 90 | Plot: M2 1000 | Pool: No | Garage: Yes

Property for sale in Borovets Bulgaria
Property for sale in Bulgaria - House Location: Borovets Ref: 15589 Price: £15,646 - €23,000 Details: Beds:2 | Baths: 1 | Built M2 80 | Plot: M2 - | Pool: No | Garage: Yes

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property apartment Location: Bansko Ref: 15630 Price: £44,322 - €65,153 Completion: November 2005 Details: Beds: 1 | Baths: 1 | Built M2 59 | Plot: M2 -- | Pool: No | Garage: Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property off plan apartment Location: Bansko Ref: 16546 Price: £39,185 - €57,602 Completion: August 2006 Details: Beds: 1 | Baths: 1 | Built M2 -- | Plot: M2 -- | Pool: No | Garage: --

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property apartment Location: Bansko Ref: 15630 Price: £44,322 - €65,153 Completion: November 2005 Details: Beds: 1 | Baths: 1 | Built M2 59 | Plot: M2 -- | Pool: No | Garage: Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property apartment Location: Bansko Ref: 15960 Price: £38,027 - €55,900 Details: Beds: 1 | Baths: 1 | Built M2 43 | Plot: M2 -- | Pool: No | Garage: Secure Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property Villa Location: Bansko Ref: 16549 Price: £29,932 - €44,000 Details: Beds: 1 | Baths: 1 | Built M2 150 | Plot: M2 1500 | Pool: No | Garage: No

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property apartment Location: Bansko Ref: 16766 Price: £27,211 - €40,000 Details: Beds:-- | Baths:-- | Built M2 -| Plot: M2 - | Pool: Heated | Garage: Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property villa Location: Bansko Ref: 16610 Price: £26,993 - €39,680 Details: Beds:1 | Baths:1 | Built M2 -| Plot: M2 - | Pool: No | Garage: Parking

Property for sale in Bansko Bulgaria
Property for sale in Bulgaria - Ski resort property villa Location: Bansko Ref: 15444 Price: £29,932 - €44,000 Details: Beds: 1 | Baths: 1 | Built M2 150 | Plot: M2 1500 | Pool: No | Garage: No

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