Property Finance by EBRDProperty Finance by EBRD

Oxana Selska, Senior BankerOxana Selska, Senior Banker

25 September 200925 September 2009

EkaterinburgEkaterinburg

EBRD is:EBRD is:

0

5

10

15

20

25

30

35

40

45

'98 '00 '02 '04 '06 '07 '08 '09

Established in 1991

Operates in 30 countries from central Europe to central Asia

2,750 signed projects

€44.39 bln commitments

Total project value €140.47 bln

Cumulative commitments €44.39 billion

As of 30 June 2009

EBRD Involvement in the Property SectorEBRD Involvement in the Property Sector

Total commitments as of 30 June 2009:

• €1.82 billion to 107 projects (including equity participation in funds)

• €6.5 billion total project value

Development of new annual commitments

0.040.080.0120.0160.0200.0240.0280.0320.0360.0400.0440.0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU

RO

(m

illi

on

s)

EBRD: general project featuresEBRD: general project features

Project makes economic sense - no “soft loans”

Substantial equity contributions by the project sponsor, incl. cash

For commercial projects, need for private investment

Usual need for a B lender

Limited re-financing

EBRD Financing InstrumentsEBRD Financing Instruments

Senior, subordinated debt, convertible

Syndication

Denominated in major currencies

Tailor-made security package

Common stock or preferred shares

Minority positions only

Flexible exit strategies

Mezzanine loans

Debt Equity / Mezzanine

EBRD Portfolio – Geographic DistributionEBRD Portfolio – Geographic Distribution

7%

16%1%

61%

15%Central Europe

South-East Europe

Russia&Ukraine

Central Asia

Regional

As of 30 June 2009

Current Portfolio by type of financingCurrent Portfolio by type of financing

55%

45%

Equity Debt

As of 30 June 2009

Property Commitments by sectorProperty Commitments by sector

45%

8%

6%

4%

15%

6%9% 7%

Investment Funds

Property DevelopmentCompanies Offices

Residential

Retail/mixed use

Warehousing

Tourism

Hotels

As of 30 June 2009

EBRD Real EstateEBRD Real Estate

TYPE:TYPE:

• Office Buildings

• Retail / Shopping centres

• Warehouses

• Mixed-use facilities

• Hotels and resorts

• Property Funds, Joint-Ventures

• Residential

PARTNERS:PARTNERS:

• Real Estate Developers

• Real Estate Funds

• Operators

FINANCIAL INSTRUMENTS:FINANCIAL INSTRUMENTS:

• Senior Debt

• Mezzanine / Quasi-Equity

• Equity

What is on the Market with EBRDWhat is on the Market with EBRD

Equity FundsEquity Funds

•Marbleton Fund•Europolis I, II, III•Heitman I, II, IV•Accession Fund•Global•Polonia•BPH•Bluehouse II•Arka Property Fund•Russia Developer Fund

Commercial Real EstateCommercial Real Estate

•IKEA Mega Mall (Russia)•BD Logistics (Russia)•Raven Russia Novosibirsk (Russia)•Saratov Shopping Centre (Russia)•GTC Regional Retail(Romania)•19 Avenue Office (Serbia)•Kashirka Mall (Russia)•Chisinau Shopping Mall (Moldova•East Gate – Tirana Shopping Mall (Albania)•Europolis Sema Park (Romania)

Investments in Investments in DevelopersDevelopers •GRDC•GTC•Trigranit•BSR

Tourism & HospitalityTourism & Hospitality

•Jadranka Hotels•(Croatia)

Typical EBRD financing to real estateTypical EBRD financing to real estate

Financing tailored to the needs and risk nature of each Financing tailored to the needs and risk nature of each projectproject

– Long-term (7-10 years)

– Local / foreign currency

– Target gearing varies

– Competitive pricing– Clear and fair distribution of risks and returns between

different financing partners– Alignment of each financing feature (timing of

disbursement / repayment, level of return, etc.) with the underlying risk nature

– Financing predominantly for new developments; acquisition financing limited to date

Structuring solutionsStructuring solutions

Project Finance can work for large developmentsProject Finance can work for large developments– Ring-fenced projects, often with developers/property

managers– Equity component can reduce loan pricing– Project completion mitigation (turnkey contracts, sponsor

support agreed)

Separation of property assetsSeparation of property assets– Arm’s length leases, separate companies– Financial investors alongside developers/property managers

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Financing structuresFinancing structures

Note: details are simplified for case study

Minority equity partner(s)

Project Company

EBRD

Co-financing Banks

•A-loan (maximum 35% of total project costs)•Limited recourse to sponsor•Security on real estate

•Majority ownership + property management control

EquityDebt /Equity

•Possible EBRD equity (a small % of debt amount)

•B-lender or parallel lender

Debt Project FinanceDebt Project Finance

•May be divided into operating and real estate entities

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Sponsor

Financing structuresFinancing structures

Note: details are simplified for case study

Equity FinanceEquity Finance

Project CompanyOrdinary

Equity

Ordinary Equity /Portage Equity /Mezzanine

Sponsor

Minority partner

EBRD

•EBRD exit through a put to Sponsor with pricing in a range depending on performance of the Company.

•Alternative is full risk equity or secured debt after certain “Project Completion” financial targets are met by Project Company or mezzanine financing.

•EBRD risk can be limited to specified (such as political risk) events with guarantee from Sponsor to apply in other cases.

Majority ownership and management control

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How to best attract EBRD financing?How to best attract EBRD financing?

General principles, applicable to all sectorsGeneral principles, applicable to all sectors Sound integrity Energy efficient projects Transparency / early dialogue Proven track record and market knowledge Equity cash exposure Clear business plan Robust creditworthiness

– Equity investors – key driver: ROE

– Lenders - key driver: Project cash flows / DSCR

How EBRD can helpHow EBRD can help

Direct supportDirect support– Advice in structuring the project

– As an active or impartial shareholder, in equity investments

– As an involved lender, in loans

Help to secure additional financingHelp to secure additional financing

– Preferred creditor status to attract commercial lenders

– Investors

Political comfortPolitical comfort

Due diligence “stamp”Due diligence “stamp”

Property and Tourism team contactProperty and Tourism team contact

Sergei Gutnik, Senior Banker, Property&TourismEBRD MoscowTel: + 7 495 787 1111E-mail: gutniks@ebrd.com