2013 year end ir presentation
DESCRIPTION
ÂTRANSCRIPT
March 2013
Year End 2013 Investors Presentation
FINANCIAL & BUSINESS RESULTS
This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of AFI Development Plc (the "Company") or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the document.
This communication is only being distributed to and is only directed at (1) qualified institutional buyers (within the meaning of Rule 144A of the United States Securities Act of 1933, as amended (the "Securities Act") or (2) accredited investors (as defined in Rule 501(a) of Regulation D adopted pursuant to the Securities Act). Any person who is not a "qualified institutional buyer" or "accredited investor" should not act or rely on this document or any of its contents.
This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions.
Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
Neither the Company, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document.
The information contained in this document is provided as at the date of this document and is subject to change without notice.
Disclaimer
2
SECTION 1
Company Overview
Company at Glance
4
•Full cycle real estate developer
•Focus on unique large scale commercial and residential projects
•Primary market: Moscow, Russia
BUSINESS
•13 years on the market
•Admitted to LSE in 2007
•Premium listing from 2010
•Free float – 35,12%
HISTORY
•Strong global brand
•Affiliate of Africa Israel Group (64,88% owner) , a major conglomerate with global focus on real estate, construction and infrastructure
BRAND
•Strong liquidity position: US$ 203,3 mn as at December 31, 2013
•Secured financing for on-going projects
• 29% Debt to Total Assets**
FINANCIAL STABILITY
•14 completed projects with total c. 0,6 mln sqm of space
•Impeccable credit history
•Market reputation for high quality and professional property management
TRACK RECORD
•Substantial income
generating portfolio.
Major project AFIMALL
•2 Projects are in active stage of development
•5 Pipeline projects & land bank
PORTFOLIO
Market Cap, as of March 14, 2014 US$ 0.81 bn
Price per share, as of March 14, 2014 US$ 0.77
NAV (Equity), as of December 31, 2013 US$ 1.73 bn
NAV per share, as of December 31, 2013 US$ 1.65
Portfolio Value* US$ 2.5 bn
47% AFIMALL
Yielding and Hotels 22%
Under Construction
9%
Development Projects 21%
Land Bank 1%
Portfolio Value*
* Gross Asset Value of Portfolio based on C&W Valuation as
for 31 December 2013 and BV of Land Bank projects,
Trading Properties and Hotels( inc. JV)
** Bank loans only
Note: the NOI projections are “forward looking statements” based on C&W valuation assumptions and Company estimations and they can be realized or not realized due to factors beyond the Company's control including, among others, the impact of competitive
pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the
impact of general business and global economic conditions
Key Projects in Moscow
Yielding Assets (retail, offices and hotels)
Ownership:50%
Other
** Odinburg presented with cost value
* Outside of Moscow
Value** ( C&W, Dec, 31 2013):
US$ 1.7 bn
GLA(excl. hotels),sqm: 195K sqm
NOI stab. ( excl. hotels):
US$ 204 mn
Value (BV): US$ 19 mn
5
Projects Under Development
Value** (afid share, C&W):
US$ 749 mn
GLA,sqm: 217,6K sqm
GSA,sqm: 588,4K sqm
Land Bank
Active phase of construction
Yielding Assets
Projects under
Development
Completed Assets
Tverskaya IB Riversede Station AFIMALL
PLAZA SPA Kisl* PLAZA SPA ZHEL* Aquamarine III
Aquamarine Hotel Paveletskaya,1 H2O
* * Hotels presented with cost value
Odinburg** Paveletskaya II
Plaza IC Pochtovaya
Plaza iia
Expolon
Plaza IV
Achievements 2012 (1/2) STATUS COMMENT
Company Achievements during the year 2013
In Q1 2013 the transaction relating to the disposal of 50% share in Four Winds Limited was
finalized. The consideration is US$103.5 mn for AFID share
In Q2 2013 The Company has finalized a disposal of 643 parking lots to VTB which resulted
with net cash flow for the Company at the amount of US$ 54.5 mn. Net profit is c.US$ 20 mn
In December 2013 the Company completed a transaction on disposal of one of the four buildings in
Ozerkovskaya III project. The consideration amounted to an equivalent of US$91.5 million
and applicable Russian VAT.
In Q3 2013 the Company decreased the US$ loan interest in AFIMALL US$ part of loan facility
from 6,5%+3mLibor to 5,02+3mLibor% (annual saving c. US$5,2 mn)
In Q1 2013 the company obtained a new loan facility in the amount of US$ 220 for
Ozerkovskaya III Project with interest rate 3m Libor+5,7%
In Q1 2013 the Company has launch the first stage of the residential project “Odinburg”, which has
approximately 2,652 apartments, with a total area of over 33 hectares located 11 km west of Moscow
in the town Odintsovo. In December 2013 the Company began initial sales.
In November 2013, the Company signed a 6-year land lease agreement in Paveletskaya II for further
development and construction of the residential and commercial space. This resulted in a US$81.0 million gross valuation gain (US$64.8 million net of taxation) in in Q3 2013.
6
Achievements 2012 (1/2) STATUS COMMENT
Company Share Performance 2010 - 2013
7
-80.00%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
AFI Development PLC Price AFI Development PLC Sponsored GDR RegS Price
MirLand Development Corporation Plc Price LSR Group OJSC Sponsored GDR RegS Price
PIK Group OJSC Sponsored GDR RegS Price Etalon Group Ltd. Sponsored GDR RegS Price
R.G.I. International Limited Price
SECTION 1
Project Update
Yielding Projects
(as of December 2013)
Total GBA, sqm 283,2K
Total GLA(shops, offices, storage), sqm 107.2K
Occupancy end of Dec, (as of shops only) 87%
Occupancy end of Dec, (as % of GLA total) 79%
Parking lots, numbers 2,075
Stabilized NOI (C&W est.) US$149.2 mn
MV (C&W est.) US$ 1.160 bn
Loan balance as for December, 2013 US$ 600mn
AFIMALL CITY
During 2013, AFIMALL City reported a strong increase (45% year-on-year) in
footfall. This was reached despite the ongoing construction works in the Mall's
surrounding area
The actual rented area reached 84,5K sqm as the end of 2013, which is 14% up
compared to 74,3K sqm as the end of 2012.
AFIMALL introduced and become a new home for the several well-known and new
brand over the year such as TSUM Discont, Forever 21, Marc O’Polo, Lee Cooper,
New Balance
In Q3 2013 the Company decreased the loan interest in US$ part of loan facility for
AFIMALL from 6,5%+3mLibor to 5,02 % +3mLibor (annual saving c. US$5,2 mn)
AFIMALL City Update
9
+43%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013 2012
Revenue 23.2 24.9 26.5 29.5 104.1 81.4
Operating expenses (8.6) (8.1) (9.5) (8.8) (35.1) (33.2)
NOI 14.6 16.7 17.0 20.7 69.0 48.2
AFIMALL and Moscow-City Development
AFIMALL
MOSCOW CITY DEVELOPMENT
Existing Office Complex 0 – Tower 2000
4 – Imperia Tower
8 – CityPoint
9 – Capital City
10 – Naberezhnaya Tower
13a – Federation Tower (West)
19 – Northern Tower
6, 7 – Central Core (AFIMALL City)
Under Construction 2, 3 – Evolution Tower
11 – IQ-quarter
12 – Eurasia Tower
13b – Federation Tower (East)
14 – Mercury City Tower
16a – OKO
16b – Parking
Planned 15 – Moscow City Government
Building
20 – Exposition and Business Center
Moscow City existing office space is approximately 570K sqm, within 1,2 mn
sqm of office space expected to be constructed.
By 2015 total office stock expected to reach 1.1m sq m
About 120,000 workforce are expected to work in the Moscow City area
by the time all planned office has been constructed
The Moscow City vacancy rate increased to c. 25% due to the recent
launching of the new buildings
Apartments area around 0.5 mln sqm (155,000 sq m (800 apartments)
commissioned)
Hotel area around 153,000 sqm (Novotel (25,000 sqm) opened in February
2013)
At the beginning of 2014 the new metro station Delovoy Center, which has
a direct access to the mall, has started its operations
This new station (Delovoy Tcents) provides direct access to AFIMALL City
and will over the next two years become the main connecting point for a new
line, which will link the densely populated residential districts Ramenky,
Horoshevskiy, Savyolovsky and Maryina Roscha 10
AFIMALL and Moscow-City Development
AFIMALL
Based on C&W report 11
Building AFIMALL Ozerkovskaya III Berezkovskaya Tverskaya Plaza IIPaveletskaya, bld.
1H2O Tvesrkaya Plaza Ib
Aquamarine
Hotel*
Plaza SPA
Kislovodsk
Plaza SPA
ZheleznovodskTOTAL
Moscow Moscow Moscow Moscow Moscow Moscow Moscow Moscow
Moscow City CBD CBD CBD CBD
Class Retail Office A & Street
Retail Office B
Office & Street
Retail Office B Office B
Office & Street
Retail Hotel Hotel Hotel
GBA, sqm 283,128 61,772 11,612 6,008 16,246 10,698 2,104 8,931 25,000 11,701 437K
GLA, sqm 107,208 46,247 10,250 6,008 14,085 8,990 1,909 159 keys 275 keys 134 keys 195K
Parking lots (total), # 2,075 466 150 - 126 81 - 15 - 15
Ocupancy rate, % 79% - 91% 95% 96% 76% 95% 71% 56% 59%
750- Office
500 - retail
NOI stab (C&W est.),
US mn149.2 38.4 5.2 2.5 4.5 2.7 1.3 - - - 204
NOI Year 2014 (C&W
est.), US mn 89.0 12.2 4.6 2.8 2.9 1.6 0.9 - - - 114
MV(AFID share),US$
mn**1,160 324 39 32 30 17 9 31 25 22 1,688
Location Kavkaz region Kavkaz region
1,231 Average rent as of
31.12.2013, $/sq m357 579 365 689 594 ADR 231 ADR 371 ADR 223
Yielding Properties
12
• Current Net rent for AFIMALL presented as for the end of December, 2013
• ** Occupancy is a % of GLA total (107,2sqm)
*** MV based on C&W valuation as for 31.12.2013. Hotels presented by cost value and 100% of the project
**** Information after disposal of 1 Bld Project is not leased yet
12
*
****
* *
(as of December 2013)
Total GBA, sqm 61,6K
Total GLA, sqm 46,2K
Parking lots, numbers 466
Stabilized NOI (C&West.) US$38.4 mn
MV (C&W est.) US$ 323,7 bn
Loan balance as for December, 2013 US$ 205 mn
OZERKOVSKAYA III*
The sale of Building 1 in Aquamarine III to Russian diamond miner and
producer Alrosa JSC was the result of successful marketing efforts and in line
with overall management strategy. In addition to being a successful transaction,
the disposal is a strong benchmark for the entire Aquamarine complex and
should assist it in attracting other high quality tenants similar to Alrosa.
The transaction consisted of a gross office area of 10,985.8 sq.m., a terrace of
418.9 sq.m. and a 15.8% share title to common areas of the Complex, which
totaled 3,728.6 sq.m. The total transacted area corresponded to approximately
11,994 sq.m. The consideration was paid in cash and amounted to an equivalent
of US$91.5 million and applicable Russian VAT.
Following the transaction, the Company retains title to the remaining three
buildings of the Complex, which have a combined area of 62,800 sq.m. (GLA
46,247 sq.m.).
Ozerkovskaya III Update
* information after bld 1 disposal
13
SECTION 2 Project Update
Development Projects
ODINBURG (as of December 2013)
Type Residential
Ownership, % 100%
GBA,sqm 739,1K
GSA, sqm/GSA commercial total:
Phase I, sqm:
Phase II, sqm:
469,3K
149,4K
319,8K
Apartments, total : 8,899
Phase 1: 2,652
Stage 1 650
Parking units: 2,656
In October 2013, AFI Development began construction at “Odinburg”, the
Company’s largest residential projects with a total area of over 33 hectares
located 11 km west of Moscow in the town Odintsovo.
Initial construction works, allocated to the first stage of Phase I were
launched in October 2013. In December 2013 the Company began initial
sales of the Crown residential building.
For the convenience of customers, the Company has constructed a sales
office with an area of about 600 sq.m. Within this office, potential buyers
can receive comprehensive consultation on the project as well as apply for a
mortgage loan.
As for March, 12, 2014 107 signed contracts are in place.
Barks approved to provide the morgage for individuals
Odinburg Residential
15
During 2013 the Company progressed with the development of the most
asvanced office project in the Tverskaya Zastava area - complex Plaza Ic,
which is a Class A office complex located in the cultural and business quarter
of the Tverskoy sub-district.
The building is located within a 4-minute walk of the circle line of the
Belorusskaya metro station, which serves as the main transport hub linking the
city centre with one of Moscow’s main airports – Sheremetievo International
Airport.
The project has a GBA of 51,200 sq.m. (including underground parking of
approximately 519 parking spaces) and an estimated GLA of 32,454 sq.m.
Following the registration of a 10-year land lease agreement, the Company
successfully finalised the development concept and is in the final stages of pre-
construction works. Start of construction is scheduled for H1 2014 and the
Company is currently in the process of selection and appointment of the
general contractor.
On March 7, 2014 the Company has received the Construction Permit for
further development.
PlAZA IC
(as of December 2013)
Total GBA, sqm 51,2K
Ownership 100%
Total GLA, sqm 32,4K
Parking lots, numbers 280
MV (C&W est.) US$ 110,6mn
16
Plaza IC ( 2 Brestskaya, 50/2)
PARAMETERS:
Type: Mix
GBA, sqm: 111,7K
GLA, sqm: 90,3K
MV(C&W),mn: S$ 103,5
(as of December 2013)
Type Office A, retail
Ownership 95%
GBA,sqm 108,0K
GLA/GSA, sqm 58,6K/2,7K
Parking units: 1,210
Status:
• During 2013 the Company progressed with securing the land lease agreement with Moscow authorities, having finalized the borders of the land plot.
(as of December 2013)
Type Residential, retail
Ownership 100%
GBA,sqm 151,4K
GLA/GSA, sqm 21,0K/53,2K
Parking units: 1,760
Status:
• The Company finalised negotiations with the Moscow City
authorities to change the permitted usage of the land plot.
• In November 2013, the Company signed a 6-year land lease agreement for further development and construction of the residential and commercial space.
• This resulted in a US$81.0 million gross valuation gain (US$64.8 million net of taxation).
(as of December 2013)
Type Residential, retail
Ownership 100%
GBA,sqm 170,3K
GLA/GSA, sqm 28,K/63,1K
Parking units: 1,771
Status:
• Currently, the Company is working on securing the land lease agreement to allow construction in accordance with the new development plan as well as on the planning and design of the project.
PLAZA IV
PAVELETSKAYA II
POCHTOVAYA
17
Plaza IV (Gruzinskiy Val, 11)
Main Pipeline Projects
SECTION 3 Financial Update
Q1 2013 2012
Actual Actual Actual Actual Actual Actual
(1) Construction consulting/management services 0.0 0.0 0.0 0.1 0.2 3.6
(2) Rental income 33.1 35.4 36.6 39.5 144.6 117.1
(3) Sale of residential and trading property 0.2 55.0 1.8 0.5 57.5 4.8
(4) TOTAL REVENUE 33.4 90.5 38.4 40.0 202.3 125.5
(5) Other income 3.2 0.4 0.8 2.0 6.4 0.8
(6) Operating expenses (21.4) (17.8) (18.3) (19.0) (76.5) (65.2)
(7) Administrative expenses (4.0) (7.0) (2.1) (3.9) (16.9) (20.2)
(8) Cost of sales of residential and trading property (0.2) (31.8) (1.3) 0.6 (32.6) (3.8)
(9) Other expenses (1.8) (0.8) (1.5) (1.4) (5.5) (1.5)
(10) TOTAL EXPENSES (24.2) (56.9) (22.3) (21.7) (125.1) (90.0)
(11) Share of profit of equity-accounted investees (0.6) (0.1) 0.3 (0.3) (0.8) 23.9
(12) GROSS PROFIT 8.6 33.5 16.3 18.0 76.3 59.4
(13) Valuation gains on investment property 16.5 41.0 47.4 0.3 106.2 (265.9)
(14) Impairement loss for trading property and hotels - (1.2) (2.2) (65.4)
(15) RESULTS FROM OPERATING ACTIVITIES 25.1 74.5 63.7 17.1 180.4 (272.0)
(16) Profit on sale/disposal of properties/investment 32.1 - - 0.2 32.3 2.4
(17) Profit on sale of Investment property 27.8 27.8 -
(18) Finance income 15.7 1.5 1.2 2.5 21.0 18.5
(19) Finance expense (16.8) (17.7) (16.8) (15.7) (66.9) (57.3)
(20) FX Gain/( Loss) (9.2) (19.6) 5.1 (5.2) (28.9) 16.6
(21) Translation reserve reclassification due to disposal of subsidiary (30.3) - - - (30.3) -
(22) Net finance income/(costs) (40.5) (35.8) (10.5) (18.4) (105.2) (22.2)
(23) PROFIT BEFORE INCOME TAX 16.7 38.8 53.2 26.6 135.3 (291.8)
(24) Current income tax (0.4) (0.4) (0.5) (7.6) (8.9) (2.0)
(25) Deferred income tax (0.7) (10.7) (11.9) 0.9 (22.5) 18.2
(26) PROFIT FOR THE PERIOD 15.6 27.7 40.8 19.9 103.9 (275.5)
# ITEM ('000)Q2 2013 Q3 2013 Q4 2013 2013
Consolidated P&L
19
(2) Rental income achieved USD 144,6
mn for 12m 2013, which is 23% higher
than in 2012
AFIMALL contribution in rental income
is US$ 104,1 mn
(12) Gross profit went up to 29%
compared 2012
(17) Sale of Ozerkovskaya III
(26) Profit for the period amounted to US$
103,9 mn compared to loss in US$ 275,5
mn in 2012
19
20
Statement of Financial Position
Comments: (1) Acquisition of 50% of shares in Ozerkovskaya III, sale of Bld. 1
(2) Revaluation of Paveletskaya II
(3)(5)(17) Sale completion of Four Winds
(10) Disposal of 643 parking lots to VTB and construction of Odinburg
20
31.12.2013 31.12.2012
US$ mn US$ mn US$ mn %
(1) Investment property 1,609.8 1,292.3 317.5 25%
(2) Investment property under development 635.3 567.7 67.5 12%
(3) Investment in Joint Ventures 5.6 82.4
(4) Property, plant and equipment 69.7 76.6 (6.8)
(5) Long-term loans receivable 21.7 113.5
(6) VAT recoverable 0.4 0.5 (0.1)
(7) Goodwill 0.0 0.2 (0.2)
(8) Non-current assets 2,342.5 2,133.1 209.4 10%
(9) Trading property 6.4 3.6 2.8 78%
(10) Trading properties under construction 127.2 141.8 (14.6)
(11) Inventory 0.6 0.6 (0.0)
(12) Short-term loans receivable 0.8 0.1 0.7
(13) Trade and other receivables 106.4 78.3 28.1 36%
(14) Current tax assets (4.1) 2.3 (6.4)
(15) Cash and cash equivalents 193.3 174.8 18.5 11%
(16) Other investments 10.0 0.0 10.0
(16) Current assets 440.6 401.6 39.1 10%
(17) Assets held for sale 0.0 71.3 (71.3)
(18) TOTAL ASSETS 2,783.1 2,606.0 177.1 7%
(19) Equity
(20) Share capital 1.0 1.0 (0.0)
(21) Share premium 1763.4 1763.4 0.0 0%
(22) Translation reserve (150.5) (144.6) (5.8) 4%
(23) Retained earnings 117.7 9.7 108.0
(24) TOTAL EQUITY 1,731.7 1,629.5 102.1 6%
(25) Minority interest (2.2) (3.0) 0.8
(26) Trade and other payables 0.0 38.3 (38.3)
(27) Long-term loans and borrowings 778.9 554.6 224.4 40%
(28) Deferred tax liabilities 125.3 81.9 43.3 53%
(29) Deferred income 22.0 20.2 1.9 9%
(30) Non-current liabilities 926.2 695.0 231.2 33%
(31) Short-term loans and borrowings 27.0 17.3 9.7 56%
(32) Trade and other payables 100.4 267.1 (166.8)
(33) Current liabilities 127.4 284.5 (157.1)
(34) TOTAL LIABILITIES 1051.4 976.5 74.9 8%
(35) TOTAL EQUITY AND LIABILITIES 2,783.1 2,606.0 177.1 7%
# NARRATIVE Changing
Strong cash position with US203,3 million in cash ,cash equivalents and
marketable securities as at 31 December 2013, compared to US$174,8 million
as at 31 December 2012
Increase in total equity was driven by US$ 103,9 mn of net profit for the
period
Debt to equity ratio ( 47%)
Investment property is significant part of total asset portfolio
Loans and cash position as of December 31, 2013
Gross balance of the bank loan portfolio (as of December 31, 2013) – US$ 805 mn
Total cash balance and deposits (as of December 31, 2013) – US$ 203,3 mn (marketable securities included)
The Company is in line with all financial covenants
*
Project Bank
Balance as of
December 31,
2013
Available
(US$ mn)Nominal Interest rate Currency Maturity
RCB $291 - 9.5% RUB
RCB $309 - 3-m Libor+5,02% USD
TOTAL AFIMALL $600 $41 7.32%
Ozerkovskaya III (100%) VTB $205 $0 3-m Libor+5,7% RUB 26.01.2015
TOTAL/AVERAGE RATE $805 6.97%
AFIMALL 01.04.2018
21
22
Net Asset Value
LTV= 33%
LTE = 47%
22
PROJECT Book Value Bank Loan Net Company's Share
31-Dec-13 31-Dec-13 31-Dec-13
AFI Mall 1,160 (600) 560
Berezkovskaya (100%) 39 39
Paveletskaya I 30 30
Plaza H20 17 17
Ozerkovskaya III 324 (205) 118
Plaza Ib 9 9
Plaza II 32 32
TOTAL INVESTMENT PROPERTY: 1,610 (805) 805
Plaza Ic 111 111
Plaza II a 12.40 12
Plaza IV (100%) 168 168
Kosinskaya 107 107
Bolyshaya Pochtovaya 139 139
Paveletskaya II 93 93
Ruza 4 4
St. Petrsburg 1 1
TOTAL INVESTMENT PROPERTY UNDER DEVELOPMENT: 635 0 635
Ozerkovskaya Phase II (26) 5 5
4Winds residential 1 1
TOTAL TRADING PROPERTY: 6 0 9
Aquamarine Hotel 31 31
Plaza SPA Zheleznovodsk 22 22
Pyatigorskaya (Park Plaza Kislovodsk) 7 7
Plaza Spa Kislovodsk (Tirel) (50%) 25 25
Versailles (Kislovodsk) 7 7
TOTAL PROPERTY PLANT AND EQUIPMENT: 93 0 93
Odinburg 127 127
TOTAL TRADING PROPERTY UNDER DEVELOPMENT: 127 0 127
TOTAL PORTFOLIO: 2,471 (805) 1,668
CASH AND CASH EQUIVALENT 203.3
DEFFERED TAX LIABILITY (126)
TOTAL OTHER ASSETS AND LIABILITIES (13)
TOTAL EQUITY: 1,732
*
* Including marketable securities
Annex
Market Update
Market Overview and Capital Markets
RUSSIAN MACROECONIMIC OVERVIEW RUSSIAN REAL ESTATE INVESTMENT MARKET • Russian economic growth fell to 1.3% in 2013, down from
3.4% in 2012. Stagnation was caused by a slowing-down of
Eurozone economies, the drop of industrial production
growth to about zero as well as reduction of fixed
investments from 6.6% in 2012 to 0.2% in 2013.
• Despite a slowdown in Russia's overall economic growth
during 2013 retail trade and the consumer market recorded
above average growth in real terms at 4.5% year-on-year.
• At the same time, inflation remained under control and
largely unchanged year-on-year at 6.5%, whilst the country
enjoyed close to full employment.
• Oil prices continued to drive Russian budget revenues with the
share of oil and gas revenues at 46.1% in 2013, against 50.2%
in 2012 and stood at the level of US$ 105 in the end of 2013.
• Unemployment rate remained the lowest 2013 and stood at
the level of 5,5%
• In 2013, Russia had the third-highest foreign direct investment
inflows in the world. High investment flows into Russia are
expected to continue over the coming years.
• Total investments into commercial real estate in 2013 made
up $7.45 billion which is similar to the volume of
investments in 2012. Many transaction were in the process of
finalization at the end of 2013 and they are expected to be
closed in the first quarter of 2014.
• The current yields for Prime commercial real estate projects in
Moscow in 2013 were 8.5% for offices, 9.0% for retail. In
2014 we expect that capitalization rates for the best properties
will not be corrected significantly.
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
GDP growth by country, %
Czech Republic Germany
Poland Russian Federation
United Kingdom United States
Europe Euro area
March, 3, 2014
US$ 110,8
0
20
40
60
80
100
120
140
160 Oil Price, US$ per Barrel
0.0
10.0
20.0
30.0
40.0
50.0 Unemployment rate, %
France Greece
Italy Russian Federation
Spain United Kingdom
United States Euro area
8.50
9.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Investments, US$ mn and Yield (%)
Office Retail Warehouse Other Office Retail24
Office and Retail Markets overview
OFFICE MARKET OVERVIEW RETAIL MARKET OVERVIEW
Key indicators Units
Prime rate, US$ sqmpa
(US$/sqm/year)
950-1,150
Base rent Class A
US$ sqmpa
580-850
Yields (prime) 8,75%
Overall vacancy,% 13,7%
Vacancy rate,%
(Class A CBD )
18,0% 600
710
930
1,090
710 640
740 790
850
800
1,000
1,500
2,000
800 850
1,200 1,150
1,150
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
US$
/psq
m/p
a
average Class A class A CBD Prime
3,000
3,500
4,500 4,800
3,700
4,000 4,000 4,000
4,500 4,500
1,300 1,500
1,700 2,000
1,200 1,350
1,350
1,350
1,150
1,800
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
USD
psq
m p
a
Prime rents Base rents
Key indicators Units
Prime rate, US$
psqma (prime shopping center retail
gallery)
3,000- 4,500
Base rent, US$
psqma
500-1,800
Yields (prime) 8,5%
Vacancy rate,% 2,5%
Vacancy rate,% (prime shopping centers)
1,1%
• Whilst the overall volume of project completions in 2013
increased by 57% year-on-year to 888,270 sq.m., only 25% of new
office schemes met Class A requirements, with the majority classified
as Class B
• The average vacancy rate increased slightly to 13.7%, whilst
rental rates continued to grow by 7-12% year-on-year, subject to
building class and location
• The average asking rental rate for Class A buildings amounted to
US$ 870 while for Class B, the average asking rental rate was
stable at US$530. Average annual rental rates for prime office space
were at the level of US$1,200 per sq.m. (excluding VAT and
operational expenses)
• Looking to 2014, 70% of the announced pipeline is located outside of
central Moscow, with overall completion volumes estimated at
slightly below 2013 levels. Rental rates are expected to remain
largely stable
• During 2013, the Russian market received 1.65 million sq.m. of
new quality retail space, slightly below the completion volumes seen
in 2012 (1.7 million). 9 quality shopping centres totalling 231,850
sq.m. opening in Moscow
• Throughout 2013, the average vacancy rate and rental levels
remained stable across all sub-sectors. The level of vacant space in
quality retail shopping malls reached record lows at 1,5% -
2,5%, driven by the low level of new construction in Moscow
• Moscow retail gallery rental rates are in the range of US$ 500-4,000
• According to developer’s plans 3,2 bn sqm of new quality retail
space might be delivered the next year in Russia, most likely around
60-70% will be opened.
25
Residential Market Moscow and Moscow region
Source: Blackwood Report, 2013, Rosstat
• According to Rosstat, 69.4 million sq.m. of housing was
commissioned in Russia during 2013, which is 5.5% more
than during 2012. The Moscow region continued to witness the
highest levels of construction with 6.9 million sq.m.
introduced across the Moscow suburbs.
• The volume of new supply in the business segment in Moscow
is estimated at 82,000 sq.m. At end 2013, the average market
price for business class apartments stood at US$ 6,851 per
sq.m.
• At end-2013, the average market price for apartments in the
Moscow region stood at RUR74,830 or US$2,276 per sq.m.,
up 6% year-on-year.
• According to Rosserest the amount of mortgage transactions in
2013 reached 24.6% of total, compared to 20.5% in 2012.
• In economy segment the amount of mortgage is about
50%-70%
• One of the reasons for the mortgage market growth in 2013
was the slow down of mortgage rates at the level of 12,5%
26