2014 year end investor presentation
DESCRIPTION
ÂTRANSCRIPT
March 2015
Total Year 2014 IR 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 thesolicitation of an offer to buy or acquire securities of AFI Development Plc (the "Company") or any of its subsidiariesin any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of itsdistribution, should form the basis of, or be relied on in connection with, any contract or commitment or investmentdecision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no relianceshould be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions containedherein. 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 otherwisearising in connection with the document.
This communication is only being distributed to and is only directed at (1) qualified institutional buyers (within themeaning 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 personwho is not a "qualified institutional buyer" or "accredited investor" should not act or rely on this document or any ofits contents.
This document contains "forward-looking statements", which include all statements other than statements of historicalfacts, 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 thenegative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and otherimportant factors beyond the Company's control that could cause the actual results, performance or achievements ofthe Company to be materially different from future results, performance or achievements expressed or implied bysuch forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, costand synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatoryapprovals 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 ofgeneral business and global economic conditions.
Such forward-looking statements are based on numerous assumptions regarding the Company's present and futurebusiness 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 thatmay or may not occur in the future. These forward-looking statements speak only as at the date as of which they aremade, and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions toany forward-looking statements contained herein to reflect any change in the Company's expectations with regardthereto 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 tosupplement, 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 changewithout 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
•14 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$ 93,3 mn as at December 31, 2014
•Secured financing for on-going projects
• 32% Debt to Total Assets**
FINANCIAL STABILITY
•14 completed projects with total c. 0,6 mlnsqm of space
•Impeccable credit history
•Market reputation for high quality and professional property management
TRACK RECORD
•Substantial income
generating portfolio.
Major project AFIMALL
•8 Development Projects & land bank
PORTFOLIO
* Gross Asset Value of Portfolio based on C&W Valuation as
for 31 December 2014 and BV of Land Bank projects, Trading
Properties and Hotels( inc. JV)
** Bank loans only
AFIMALL
50%
Yielding Projects and Hotels
21%
Development Projects
29%
PORTFOLIO VALUE*
Market Cap, as of March 17, 2015 US$ 270 mn
Price per share, as of March 17, 2015 US$ 0,26
Average price per share in 2014 US$ 0,69
NAV (Equity), as of December 31, 2014 US$ 1.29 bn
NAV per share, as of December 31, 2014 US$ 1,23
Portfolio Value* US$ 2.0 bn
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 and Botanic Garden presented
with cost value
* Outside of Moscow
Value**( C&W, Dec, 31 2014):
US$ 1.4 bn
GLA(excl. hotels),sqm: 195K sqm
NOI stab.( excl. hotels):
US$ 182 mn
Value (BV): US$ 8 mn
5
Projects Under Development
Value**( C&W, Dec 31 2014):
US$ 581 mn
GLA,sqm: 235,0K sqm
GSA,sqm: 708,6K sqm
NOI stab. (C&W, Dec
31 2014):
US$ 106,3 mn
Land Bank
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 IVBotanic Garden
Achievements 2012 (1/2)STATUS COMMENT
Company Achievements during the year 2014
AFIMALL occupancy increased by 9% and reached 85% in 2014 compared to 76% in December 2013.
AFIMALL NOI increased by 20% and reached US$ 83,0 mn in 2014 compared to US$ 69 mn in 2013
In the beginning of 2014 the Company started active sales of apartments at Odinburg, which had
positive impact on the cash flows
In January 2015, the Company subsidiary, Krown Investments LLC (“Krown”) signed an addendum to
the loan facility agreement with VTB Bank OJSC (“the Bank), extending the term of the loan to 26
January 2018. Krown, which owns the Aquamarine III (Ozerkovskaya III) office complex, had an
existing loan from the Bank maturing on 26 January 2015, of which US$ 205 million was outstanding.
In addition to extending the term of the loan, the new addendum amended the payment schedule and
interest rate conditions of the loan agreement and introduced new covenants. The payment schedule
anticipates repayments of the principal starting from Q4 2015, while the new covenants include a Debt
Service Coverage Ratio of 1.2 applicable from Q4 2015 and a Loan to Value ratio of 65% from January
2015. In line with the addendum, on 26th January 2015 Krown paid US$10 million to the Bank as
partial repayment of the outstanding loan amount, thus reducing the total to US$195 million. About
90% of the principal is to be paid at maturity.
In December 2014, AFI Development restored the Botanic Garden project on its balance sheet,
following liquidation of former primary investor, Novoe Koltso Moskvy OJSC (“NKM”), as risks
related to the bankruptcy of NKM were removed. The Company has completed the planning of the
residential complex and received Moscow construction authorities’ approval for the project. In
addition, the necessary construction permit was obtained in December 2014. It adds 113 sqm of
residential and commercial areas to company portfolio value.
6
SECTION 2
Project Update
Yielding Projects
(as of December 2014)
Total GBA, sqm 283,2K
Total GLA(shops, offices, storage), sqm 107.2K
Occupancy (as part of GLA total) 85%
Parking lots, numbers 2,075
Terminal NOI (C&W est.) US$ 133.7 mn
MV (C&W est.) US$ 1.000 bn
Loan balance as for December, 2014 US$ 481 mn
AFIMALL CITY
In 2014 the overall occupancy level increased and reached 85% compared to 76% in
December 2013. During 3 years of full operation AFIMALL became the noticeable and
popular shopping center located in the center of Moscow with quality tenant mix and
comfortable shopping zone.
AFIMALL became the leader within existing shopping malls, which introduced the new and
unique Russian and international brands on the market. Laura Eshley, Mirko Botticelli, Forever
21, H&M Home, SFIZIO, Crate&Barrel are entered in 2014. In Q4 2014 the management of
AFIMALL has signed the agreement with MFC (the center which serves people for
government and municipal needs) for lettable area c. 1,200 sqm.
Despite of ongoing construction, AFIMALL is easy to reach from different directions: from
office towers “Federation”, “Naberezhnaya Tower” and “Capital City”, also from Novotel,
“Evolution” tower and ExpoCentre.
In 2014, the management of AFIMALL launched the unique navigation system, which helps
visitors quickly and simply find the right direction to the parking or shops location.
AFIMALL City Update
8
Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014 2013
Revenue, mn USD 28,0 28,7 26,0 24,3 107,0 104,1
Operating Expenses, mn USD (11,1) (6,2) (1,0) (5,7) (24,0) (26,2)
NOI 16,8 22,5 25,0 18,6 83,0 69,0
+20%
AFIMALL and Moscow-City Development
AFIMALL
MOSCOW CITY DEVELOPMENT
Existing Office Complex0 – 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 Construction2, 3 – Evolution Tower
11 – IQ-quarter
12 – Eurasia Tower
13b – Federation Tower (East)
14 – Mercury City Tower
16a – OKO
16b – Parking
Planned15 – Moscow City Government
Building
20 – Exposition and Business Center
Moscow City existing office space is approximately 770K 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. 40% due to the recent
launching of the new buildings
Apartments area around 0.7 mln sqm (190,000 sq m commissioned)
Hotel area around 153,000 sqm (Novotel (25,000 sqm, which is 360 keys)
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 Tcenter) 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
9
Yielding Properties
* GBA and GLA presented after disposal of Bld. 1.
** MV based on C&W valuation as for 31.12.2014. Hotels presented by cost value
10
Building AFIMALL Ozerkovskaya III* Berezkovskaya Tverskaya Plaza II Tvesrkaya Plaza Ib Paveletskaya, bld.
1
H2O Aquamarine Hotel Plaza SPA
Kislovodsk
Plaza SPA
Zheleznovodsk TOTAL
Moscow Moscow Moscow Moscow Moscow Moscow Moscow Moscow
Moscow City CBD Moscow CBD CBD CBD
Class RetailOffice A & Street
RetailOffice B
Office & Street
Retail
Office & Street
Retail Office B Office B Hotel Hotel Hotel
GBA, sqm 283 182 61 772 11 612 5 913 2 338 16 246 10 698 8 931 25 000 11 701 438K
GLA, sqm 107 208 46 247 10 250 5 856 2 054 14 085 8 991 159 keys 275 keys 134 keys 194K
Parking lots (total), # 2 075 466 140 - - 126 81 15 - 15
Ocupancy rate
(31.12.2014), %85% 1,0% 88% 83% 83% 93% 86% 73% 71% 69%
NOI (12m forward)
(C&W est.), US mn 99,7 12,4 2,6 1,6 0,7 1,1 1,4 - - - 120
NOI stab.
(C&West.), US mn133,7 35,0 3,5 2,6 0,9 3,8 2,2 - - - 182
MV,US$ mn** 1 000 300 21,3 15,2 5,4 19,5 12,1 17,3 14,4 12,2 1 418
Location Caucasus region Caucasus region
1 147 Average rent as of
31.12.2014, $/sq m205 347 213 - - -792 404 395
SECTION 3Project Update
Development Projects
Odinburg Residential
12
GBA, sqm 767,1K
GSA residential, sqm 453,0K
STATUS: Construction Bld#1, Bld.#2 are
ongoing
Odinburg Residential
13
OVERVIEW
The ODINBURG residential district is located in the town of
Odintsovo, a modern area considered to be one of the best and
most environmentally clean towns in the Moscow region. (11 km
from MKAD).
New highway to Moscow is right next to the complex.
The entire residential district takes up an area of 33 hectares, which
will host eight 8-to-25 story buildings. The residential element will
offer 9,139 apartments and a total sellable area of 453K sq.m.
(Inclding City share).
CONSTRUCTION STATUS and SALES
As of today - 594 apartments have been signed
The construction of bld. 1 is finalized. Facade works are ongoing.
Construction of Bld.#2 has been started
ODINBURG
(as of December 2014)
Type Residential
GBA,sqm 767,1K
GSA, sqm/GSA commercial total:
GSA resi(Phase I), sqm:
GSA resi(Phase II), sqm:
GLA, sqm:
453,0/19,6K
145,1K
307,9K
16,8K
Apartments, total : 9,139
Phase 1: 1,512*
Stage 1 723
Stage 2 789
Parking units: 3,399
* Including City share
PlAZA IC
(as of December 2014 )
Total GBA, sqm 61,8K
Total GLA, sqm 37,0K
Parking lots, numbers 467
MV (C&W est.) US$ 87,7mn
14
Plaza IC ( 2 Brestskaya, 50/2)
OVERVIEW
The Plaza 1C project is located in Moscow business district in close proximity
to the Garden Ring and Belorussky railway station and implies A class office
complex construction with retail zones on the ground floor.
CONSTRUCTION STATUS
Following the registration of a 10-year land lease agreement, the Company
successfully finalised the development concept, received the necessary
construction permit and completed all pre-construction works. AFI
Developments plans to start construction of this project as soon as it has
secured debt financing on favourable terms and the market situation improves.
Projects under Development
Other
15
1. POCHTOVAYA (RESIDENTIAL COMPLEX)
Location: Moscow, CAD
GBA, sqm 170,3K
GSA/GLA, sqm 56,9K/34,2K
Status: Stage P finalized
MV, US$ (C&W) 108,3 mn
• The Company has several projects in pipeline with total GBA c. 1,6 bn sqm.
2. PAVELETSKAYA (RESIDENTIAL COMPLEX)
Location: Moscow, CAD
GBA, sqm 151,4K
GSA/GLA, sqm 48,2K/26,1K
Status: Stage P ongoing
MV, US$ (C&W) 67,4 mn
3. PLAZA IV (OFFICE COMPLEX)
Location: Moscow, CAD
GBA, sqm 108,0K
GLA, sqm 61,3K
Status: Securing approval
MV, US$ (C&W) 107,1 mn
Pochtovaya
Paveletskaya
Plaza IV
4. BOTANIC GARDEN (RESIDENTIAL COMLEX)
Location: Moscow
GBA, sqm 255,0K
GSA/GLA, sqm 107,5/5,1K
Status: Concept
MV, US$ (C&W) 20,1 mn
Kosinskaya
Botanic Garden
SECTION 4
Financial Update
Consolidated P&L
17
Comments:
Despite of severe rouble
depreciation versus the dollar,
rental income and income from
hotel operations decreased only
by 2% year-on-year to
US$141.4 million (compared to
US$144.6 million for 2013)
AFIMALL City contribution
amounted to US$107.0 million
(compared to US$103.9 million
for 2013), 3% increase year-on-
year despite difficult
macroeconomic environment
Gross profit for 2014 was
US$49.9 million, compared to
US$76.3 million in 2013 (the
2013 results were largely
affected by the completion of
disposal transaction of parking
space at AFIMALL City to
VTB Bank JSC in the mount of
US$ 24,7 mn)
In 2014 AFI Development
incurred net loss of US$287.3
million, compared to net profit
of US$103.9 in 2013, mainly
due to valuation loss of
US$220.7 million in Q4 2014
and rubble depretiation
Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014 2013
Actual Actual Actual Actual Actual Actual
(1) Construction consulting/management services - - 0,1 0,1 0,2 0,2
(2) Rental income 36,7 38,2 35,0 31,6 141,4 144,6
(3) Sale of residential and trading property - 1,4 0,2 0,8 2,4 57,5
(4) TOTAL REVENUE 36,7 39,6 35,3 32,6 144,1 202,3
(5) Other income 1,7 1,3 0,1 0,4 3,5 6,4
(6) Operating expenses (21,8) (15,5) (11,5) (13,7) (62,5) (76,5)
(7) Administrative expenses (7,4) (3,6) (7,1) (4,1) (22,3) (16,9)
(8) Cost of sales of residential and trading property - (1,0) 0,0 (0,6) (1,6) (32,6)
(9) Other expenses (2,3) (0,7) (3,1) (0,7) (6,8) (5,5)
(10) TOTAL EXPENSES (29,7) (19,6) (21,6) (18,8) (89,7) (125,1)
(11) Share of profit of equity-accounted investees (0,6) 1,2 (1,3) (3,7) (4,5) (0,8)
(12) GROSS PROFIT 6,3 21,2 12,3 10,1 49,9 76,3
(13) Valuation gains on investment property 73,3 (46,8) 108,4 (220,7) (85,9) 106,2
(14) Profit (loss) for trading property (0,4) (8,3) (8,8) 8,6 (8,9) (2,2)
(15) RESULTS FROM OPERATING ACTIVITIES 79,2 (34,0) 111,9 (202,0) (44,8) 180,4
(16) Profit on sale/disposal of properties/investment 0,1 - - 0,1 0,1 32,3
(17) Profit on sale of Investment property - - 27,8
(18) Finance income 2,7 2,0 0,3 1,8 7,0 21,0
(19) Finance expense (14,8) (14,1) (14,2) (17,3) (60,8) (66,9)
(20) FX Gain/( Loss) (37,9) 22,8 (63,8) (146,0) (224,8) (28,9)
(21) Translation reserve reclassification due to disposal of subsidiary - - - - - (30,3)
(22) Net finance income/(costs) (50,1) 10,7 (77,7) (161,5) (278,6) (105,2)
(23) PROFIT BEFORE INCOME TAX 29,2 (23,3) 34,2 (363,5) (323,3) 135,3
(24) Current income tax (0,2) (0,3) (0,3) 0,2 (0,6) (8,9)
(25) Deferred income tax (4,8) 3,1 (9,7) 48,1 36,7 (22,5)
(26) PROFIT FOR THE PERIOD 24,3 (20,5) 24,2 (315,2) (287,3) 103,9
(27) LOSS ATTRIBUTABLE TO:
(28) Non-controlling interests 0,3 (1,0) 0,7 (6,2) (6,3) 0,9
(29) Owners of the Company 24,0 (19,5) 23,5 (309,0) (281,0) 103,1
# ITEM ('000)
Statement of Financial Position
Comments:
18
Cash position remains strong at US$93.3 million in cash, cash
equivalents and marketable securities as at 31 December 2014
Gross Asset Value reduced to US$2.0 billion as at 31 December 2014
(compared to US$2.4 billion as at 31 December 2013), due to sharp
valuation decreases across the portfolio owing to deteriorating
macroeconomic conditions
Debt to Equity Ration is 53%
(1)(2) Revaluation of IP and IPUD
(3) FX loss
(4) Due to the FX change
(7) Botanic Garden
(10) Odinburg
(26) Decrease due to negative valuation and IP and IPUD
31.12.2014 30.09.2014 31.12.2013
US$ mn US$ mn US$ mn US$ mn %
(1) Investment property 1 375,4 1 602,3 1 609,8 (226,9) -14%
(2) Investment property under development 431,5 686,6 635,3 (255,1) -37%
(3) Investment in Joint Ventures 0,0 3,9 5,6 (3,9) -100%
(4) Property, plant and equipment 35,1 54,7 69,7 (19,6) -36%
(5) Long-term loans receivable 18,1 21,4 21,7 (3,3) -16%
(6) VAT recoverable 0,0 0,1 0,4 (0,0) -28%
(7) Inventory of real estate 20,1 0,0 0,0 20,1
(8) Total non-current assets 1 880,2 2 368,9 2 342,4 (488,7) -21%
(9) Trading property 3,0 4,8 6,4 (1,8) (38%)
(10) Trading properties under construction 133,0 143,4 127,2 (10,4) (7%)
(11) Inventory 0,6 0,4 0,6 0,2 40%
(12) Short-term loans receivable 0,0 0,8 0,8 (0,8) (100%)
(13) Trade and other receivables 39,0 67,3 106,4 (28,3) (42%)
(14) Current tax assets 1,3 (0,1) 0,0 1,4 (2229%)
(15) Cash, cash equivalents and tradable securities 93,3 97,3 203,3 (4,0) (4%)
(16) Total current assets 270,2 313,9 444,7 (43,7) -14%
(17) TOTAL ASSETS 2 150,4 2 682,8 2 787,1 (532,4) -20%
(18) Equity
(19) Share capital 1,0 1,0 1,0 (0,0) (0%)
(20) Share premium 1763,4 1763,4 1763,4 0,0 -
(21) Translation reserve (314,9) (229,2) (150,5) (85,7) 37%
(22) Retaining earnings (159,0) 149,1 117,7 (308,1) (207%)
(23) TOTAL EQUITY 1 290,6 1 684,4 1 731,7 (393,8) -23%
(24) Minority interest (8,8) (2,4) (2,2) (6,4) 268%
(25) Long-term loans and borrowings 455,1 540,7 778,9 (85,6) (16%)
(26) Deferred tax liabilities 102,6 140,1 125,3 (37,5) (27%)
(27) Deferred income 13,0 18,3 22,0 (5,3) (29%)
(28) Total non-current liabilities 570,7 699,1 926,2 (128,4) -18%
(29) Short-term loans and borrowings 231,7 231,8 27,0 (0,1) (0%)
(30) Trade and other payables 28,2 35,4 100,2 (7,2) (20%)
(31) Advances from customers 38,0 34,5 0,1 3,5 10%
(32) Income tax payable 4,1
(33) Total current liabilities 297,9 301,7 131,4 (3,8) -1%
(34) TOTAL LIABILITIES 859,8 998,4 1055,5 (138,7) (14%)
(35) TOTAL EQUITY AND LIABILITIES 2 150,4 2 682,8 2 787,1 (532,4) (20%)
# NARRATIVE Changing
Loans and cash position as of December 31, 2014
Gross balance of the bank loan portfolio (as of December 31,2014) – US$ 686 mn
Total cash balance and deposits (as of December 31, 2014) – US$ 93,3 mn (including marketable securities)
The Company is in line with all financial covenants
19
Project Bank
Balance as of
Debt, 2014
(US$ mn)
Available
(US$ mn)Nominal Interest rate Currency Maturity
VTB $185 - 9,5% RUB
VTB $296 - 3-m Libor+5.02% USD
TOTAL AFIMALL $481 $0 6,88%
Ozerkovskaya III (100%) VTB $205 $0 3-m Libor+5.7% USD 26.01.2015
TOTAL/AVERAGE RATE $686 6,60%
AFIMALL 01.04.2018
• In January 2015, the Company subsidiary, Krown Investments LLC (“Krown”) signed an addendum to the loan facility agreement with VTB Bank OJSC (“the Bank), extending the term of
the loan to 26 January 2018. Krown, which owns the Aquamarine III (Ozerkovskaya III) office complex, had an existing loan from the Bank maturing on 26 January 2015, of which US$
205 million was outstanding. In addition to extending the term of the loan, the new addendum amended the payment schedule and interest rate conditions of the loan agreement and
introduced new covenants. The payment schedule anticipates repayments of the principal starting from Q4 2015, while the new covenants include a Debt Service Coverage Ratio of 1.2
applicable from Q4 2015 and a Loan to Value ratio of 65% from January 2015. In line with the addendum, on 26th January 2015 Krown paid US$10 million to the Bank as partial
repayment of the outstanding loan amount, thus reducing the total to US$195 million. About 90% of the principal is to be paid at maturity.
Gross Asset Value
LTV= 51%
LTE = 53%
20
PROJECT Book Value Bank Loan Net Company's
Share
Net Company's
Share
31.12.2014 31.12.2014 31.12.2014 30.09.2014
AFI Mall 1 000 (481) 519 593
Berezkovskaya (100%) 21 21 38
Paveletskaya I 20 20 30
Plaza H20 12 12 17
Ozerkovskaya III 300 (205) 95 118
Plaza Ib 5 5 8
Plaza II 15 15 24
Sadovaya -Samotechnaya 2 2 2
TOTAL INVESTMENT PROPERTY: 1 375 (686) 689 830
Plaza Ic 88 88 136
Plaza II a 4 4 12
Plaza IV (100%) 107 107 164
Kosinskaya 54 54 107
Bolyshaya Pochtovaya 108 108 159
Paveletskaya II 67 67 104
Ruza 4 4 4
TOTAL INVESTMENT PROPERTY UNDER DEVELOPMENT: 431 0 431 687
Ozerkovskaya Phase II (26) 2 2 4
4Winds residential 1 1 1
TOTAL TRADING PROPERTY: 3 0 3 5
Aquamarine/Ozerkovskaya 26 17 17 25
Plaza SPA Zheleznovodsk 12 12 18
Pyatigorskaya (Park Plaza Kislovodsk) 4 4 6
Plaza Spa Kislovodsk (Tirel) (50%) 14 14 21
Versailles (Kislovodsk) 0 0 4
TOTAL PROPERTY PLANT AND EQUIPMENT: 48 0 48 74
Odinburg 133 133 143
Botanic Garden 20 20
TOTAL TRADING PROPERTY UNDER DEVELOPMENT: 153 0 153 143
TOTAL PORTFOLIO: 2 011 (686) 1 325 1 739
CASH AND CASH EQUIVALENT 93 97
DEFFERED TAX LIABILITY (104) (140)
TOTAL OTHER ASSETS AND LIABILITIES (24) (11)
TOTAL EQUITY: 1 291 1 684
Market Update
Market Overview and Capital Markets
22
Source: MED, C&W, JLL, Economist
JLL CBRE C&W
3.0 2,5 2,5
RUSSIAN MACROECONIMIC OVERVIEW
• Russian economic growth falls short even a 1% and based
on IMF amounted at the level of 0,5% in 2014. Falling oil
price, Ukraine conflict, depreciation of Rubble put pressure on
Russian Economic which has already faced circle recession.
• The oil price remains the biggest unknown in 2015. Oil
prices went 50% down in December 2014 vs December 2013.
• Prices for imported goods will significantly increase.
Inflationary pressures have largely been driven by the food
sector, where prices were up by 15.4% year on year in
December. In December’2014 the inflation velel reached
11,4% vs 6,5% in December 2013.
• The rouble remains the key factor to watch. At the end of
December 2014 the rouble was down by 43% against the US
dollar compared to September 2014 and down by 72%
compared to December 2013, owing to international sanctions,
perceptions of high political risk and falling oil prices.
• Retail sales will continue to come under pressure, following
significant pressure in 2014. The weaker rouble combined
with rising inflation and falling wages decreased retail
spending power.
• n 2014, the total volume invested in commercial real estate
in Russia was US$ 4.1 bn. The number is significantly lower
than the volumes invested in 2011— 2013 (US$ 7.5—8.1 bn)
and comparable to the volume during the 2010 recovery (US$
4.0 bn)
• n Q4 2014, the CBR increased the key rate up to 17% (in
January’2015 - 15%, in March’2015 – 14%) pointing to the
oil price downturn, toughed sanctions and the need to limit
inflation / devaluation risks. Following the CBR and overall
market trends, the capitalization rates have been increased for
offices, prime retail and warehouse objects, respectively,
setting them at 11.00%, 11.00% and 13.00%.
RUSSIAN REAL ESTATE INVESTMENT MARKET
0.5%
-20
-10
0
10
20 Russia GDP Growth, % Y-O-Y
0
20
40
60
80
100
No
v-0
3
May
-04
No
v-0
4
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
Jun
-08
Dec
-08
Jun
-09
Dec
-09
Jun
-10
Dec
-10
Jun
-11
Dec
-11
Jun
-12
Dec
-12
Jun
-13
Dec
-13
Jun
-14
EUR/RUB USD/RUB
60,1220
40
60
80
100
120
140 Oil price (Brent, US$ per barrel)
Exchange Rates
Forecast of Investment Volume in 2015 (USD mn)
0,5
1,7
4,6
5,35,8
2,3
4,0
6,5 7,47,1
4,1
11,00
0
2
4
6
8
10
12
14
16
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F
Investment Volume, USD mn
Office Retail Warehouse Other Office Retail
Office and Retail Markets overview
OFFICE MARKET OVERVIEW
Key indicators Units
Base Rent Class A
(Prime) ,US$ sqmpa
750-900
Base rent Class A, US$
sqmpa
450-650
Overall vacancy,% 17,2%
Vacancy rate, Class A, % 28,4% - 32%
Key indicators Units
Prime rate, US$
psqma (prime shopping
center retail gallery)
2,500 – 4,500
Base rent, US$
psqma
400-1,450
Vacancy rate,% 1,5% - 6,0%23
• 2014 marked the highest level of new construction since
2009: 1.4 mln sq m of offices were delivered in 54 office
buildings. The biggest one are the President Plaza Business
Center (114,695 sq m), the first phase of the business park
Comcity (107,546 sq m) on the New Moscow territory and two
more developments at the Moscow International Business
Center Moscow City – OKO Tower (110,000 sq m) and Steel
Summit (93,878 sq m).
• During 2014, asking rental rates decreased. The average
asking base rent for vacant class A premises now is $620. A
discount of 10-15% is possible during the negotiation process.
External factors coupled with the high level of new supply has
resulted in increasing pressure on rents in 2014 – the rental cost
decreased on average by 22% YoY. Prime rents stood in the
range of USD750–900 per sq m per year. Class A rents ranged
between USD450 and USD650 and Class B+ between
USD275–450 per sq m per year.
• A decline in demand, especially in class A resulted in the
average vacancy rate increasing, from 12% at the beginning
of the year to 17.2% at year-end. Office premises are
available in all submarkets; however, there are areas, where the
vacancy rate is much higher than average. The vacancy rate in
Moscow-City has already reached 40%.
RETAIL MARKET OVERVIEW
• Quality retail construction in 2014 was at a record level in
Moscow and in Russia. In 2014 a record volume of new retail
spaces was delivered in Moscow. The biggest mall in Europe,
AviaPark, was opened in Moscow in November. Moscow is
still undersupplied with quality retail space compared to the
biggest European cities. The provision of quality shopping
centre retail space in Moscow is 345 sq m per 1,000 inhabitants
by the end of Q4 2014.
• The average rents are at USD400-1,450 per sq m per year,
while the prime rents are ranging between USD2,400 and
USD4,500 per sq m per year. Retailers are asking for a short
term rental discount, fixing foreign currency exchange rate, or
paying rent as % of turnover. Developers are ready to consider
alternative commercial terms.
• The vacancy rate in Q4 2014 remained at the level of 1,5% -
6%. The growing va- cancy rate in existing shopping centers
leads to high com- petition for tenants between landlords of
existing and new retail spaces.
935
1 088
731
645734 796 870
770
646
807
509 414 444 466530
480300
500
700
900
1 100
1 300
2007 2008 2009 2010 2011 2012 2013 2014
US$
/psq
m/p
a
Base Rent, US$ psqmpa
average Class A average Class B
sourceC&W
3 500
1 500
2 000
2 500
3 000
3 500
4 000
4 500
2007 2008 2009 2010 2011 2012 2013 2014
Prime Rents, US$ psqmpa
Residential Market Overview
24
RESIDENTIAL MARKET MOSCOW AND MOSCOW REGION
• MOSCOW: In 2014 in Moscow it was delivered c. 3,3 mn
sqm of residential construction compared to 3,1 mn sqm in
2013.
• Monthly analysis of residential areas commissioning in
Moscow in 2014 revealed the maximum rate in Q4 2014 -
986,900 sq m.
• 14 new business class residential buildings were supplied in
the market in 2014. (intermarksavills)
• For the twelve months 2014 it was closed 3785 transactions
in the primary business class residential. The average
amount of deals in the months was 315 transactions, it is
50% more than in 2013. The most active months were
November and December of 2014.
• During the year the average asking price per sqm in
business class residential decreased till the level of 5 100
USD. (the min amount was in 2009 with the level of 7 750
USD). Ruble prices showed predictable growth, more than
15 %. In the end of 2014 the ruble price reached 290 000
sqm per sqm.
• MOSCOW REGION: By the end of 2014 in the Moscow
region there were 982 new buildings.
• The average price per sqm in Moscow region amounted at
the level of 81 550 rub ( 1,462 USD). By the year end
comfort class apartmaents reached 83 750 rub psqm,
business – 189 450 rub psqm. (Blackwood).
• The average price per sqm in Odintsovo region is c.
96,800 rub.
Price (all market) apartments residential
Q1 Q2 Q3 Q4
Odinburg
Asking average price by
regions, rub per sqm
more
less