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AFI DEVELOPMENT PLC
INVESTORS PRESENTATION
AFI DEVELOPMENT PLC INVESTORS PRESENTATION
AFI DEVELOPMENT PLC INVESTORS PRESENTATION
January 2011
2
Outline
Disclaimer
Overview
Strategy and key competencies
Holding structure update
Market update
Operational update
Financial update
Outlook
Disclaimer
Overview
Strategy and key competencies
Holding structure update
Market update
Operational update
Financial update
Outlook
3
Disclaimer
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.
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.
4
Overview
AFI Development PLC (AFID) is one of the leading real estate developers of unique large-scale commercial and residential projects with focus on Moscow, Russia
Active on the market since 2001, operating as AFI Development since 2006 and admitted to the London Stock Exchange (LSE) in 2007
Strong reputation, track record of value creation and an established position on Moscow’s unsaturated real estate market with high entry barriers
Affiliate company of Africa Israel Group – a major Israeli conglomerate with global focus on real estate, construction and infrastructure
Successful track record of 8 completed projects with total of 193,000 sqm of commercial and residential space
Project pipeline: 5 ongoing projects to be completed within the next 1-3 years, 3 projects in active preparatory stage and 19 additional land plots in the portfolio for future development (land bank)
Strong liquidity position with over US$ 110 mln in cash (September 30, 2010) and secured credit facilities to complete ongoing projects
Total space to be delivered within the next 5-7 years – over 3 mln sqm
AFI Development PLC (AFID) is one of the leading real estate developers of unique large-scale commercial and residential projects with focus on Moscow, Russia
Active on the market since 2001, operating as AFI Development since 2006 and admitted to the London Stock Exchange (LSE) in 2007
Strong reputation, track record of value creation and an established position on Moscow’s unsaturated real estate market with high entry barriers
Affiliate company of Africa Israel Group – a major Israeli conglomerate with global focus on real estate, construction and infrastructure
Successful track record of 8 completed projects with total of 193,000 sqm of commercial and residential space
Project pipeline: 5 ongoing projects to be completed within the next 1-3 years, 3 projects in active preparatory stage and 19 additional land plots in the portfolio for future development (land bank)
Strong liquidity position with over US$ 110 mln in cash (September 30, 2010) and secured credit facilities to complete ongoing projects
Total space to be delivered within the next 5-7 years – over 3 mln sqm
Market Cap:US$ 1.26 bln (as of Jan 17, 2010), premium LSE listing
NAV US$ 1.65 bln (as of September 30, 2010)
Projects delivered
8 with total area of c. 193,000 sqm
On-going projects
5 with total area of c. 400,000 sqm
Land bank:
19 projects with total area of over 3 mln sqm of future construction including 3 projects to be started within the next 18 months
5
Strategy and key competencies
Strategy points:
Commitment to value maximization for shareholders through creation of best-in-class, well-balanced property portfolio
Development of new projects only with confirmed demand levels
Retaining only the highest quality / best located properties with certain residential, non-prime commercial projects and selected land bank sold off
Suspension of new acquisitions and staged development of acquired land bank: presently 5 major high-quality projects under development
Professional development company with strong local experience
Key competencies:
Proven ability to deliver top quality multi-use multiphase real estate
Strong market reputation
Access to debt funding through impeccable credit history
Concentration on the most sustainable segment of Russian real estate – Moscow Central high quality
Strategy points:
Commitment to value maximization for shareholders through creation of best-in-class, well-balanced property portfolio
Development of new projects only with confirmed demand levels
Retaining only the highest quality / best located properties with certain residential, non-prime commercial projects and selected land bank sold off
Suspension of new acquisitions and staged development of acquired land bank: presently 5 major high-quality projects under development
Professional development company with strong local experience
Key competencies:
Proven ability to deliver top quality multi-use multiphase real estate
Strong market reputation
Access to debt funding through impeccable credit history
Concentration on the most sustainable segment of Russian real estate – Moscow Central high quality
6
Holding structure update
Issued shares public during IPO in 2007 on LSE
Achieved a Premium Listing on LSE in Summer 2010
Issued shares public during IPO in 2007 on LSE
Achieved a Premium Listing on LSE in Summer 2010
Free float 36%
Nirro Group 10%
AFI In-vestments
54%
7
MARKET UPDATE
8
Moscow real estate SWOT
Strengths Largest city in Europe with c. 13 mln inhabitants
Highest per capita incomes in Eastern Europe
Financial center of Russia with vast presence international business
Undersupply of quality real estate in all segments
Historically provided one of the most attractive returns on the global real estate market
Developing real estate market institutionalism
Low competition level in real estate development
Weaknesses
High entry barriers caused by bureaucracy and restrictions for new development
High costs of borrowing and uneasy process of securing project level debt financing
Lack of professionalism among the developers
Cumbersome process of obtaining permitting documentation
Opportunities As one of the top priorities of the new Mayor Mr. Sobyanin
involves solving traffic problems – real estate projects will be more thought out and better planned with higher proportion of supporting infrastructure
High entry barriers provide opportunities for developers with successful track record on the market and create landscape of limited competition
Real estate yields are significantly higher in Moscow then in the rest of Europe – yield compression is forecast
Threats Real estate in Russia has high correlation to oil price,
significant drop in oil has proven to depress the market
Municipal authorities may significantly adjust the Moscow General Plan and many projects in concept and design stage be cancelled
High bureaucracy may continue even under the new Mayor which will prevent healthy levels of real estate development
9
Market during economic crisis
Real estate sector affected by the global financial crisis Russia’s real estate sector was significantly affected by the crisis which caused a decline in commercial
real estate values of over 50% and in residential by 30-40% Numerous bankruptcies and change of ownership of development companies Almost no transactions on the market and highly limited distressed sales Banks are holding on to pledged assets transferred to their ownership due to insolvencies Deteriorating demand from tenants and increased vacancies driving uncertainty regarding future take-up
levels and feasibly of new construction (up to 20% for Moscow office space according to Jones Lange LaSalle (JLL))
Impact of the crisis on real estate Slow recovery with gradual improvement in demand levels and vacancies Low number of quality assets and projects under construction on the market (excess supply of mid and low
quality properties) Virtually no investor interest in acquisition of new land plots / development sites leading to a dramatic drop
in prices compared to pre-crisis levels Financing remains limited and costs of financing remain high (12-20% in ruble terms) Decline in competition levels with many projects in construction phases suspended and no new projects
being started Companies with substantial own production capacities and large land banks remain at risk of default
Real estate sector affected by the global financial crisis Russia’s real estate sector was significantly affected by the crisis which caused a decline in commercial
real estate values of over 50% and in residential by 30-40% Numerous bankruptcies and change of ownership of development companies Almost no transactions on the market and highly limited distressed sales Banks are holding on to pledged assets transferred to their ownership due to insolvencies Deteriorating demand from tenants and increased vacancies driving uncertainty regarding future take-up
levels and feasibly of new construction (up to 20% for Moscow office space according to Jones Lange LaSalle (JLL))
Impact of the crisis on real estate Slow recovery with gradual improvement in demand levels and vacancies Low number of quality assets and projects under construction on the market (excess supply of mid and low
quality properties) Virtually no investor interest in acquisition of new land plots / development sites leading to a dramatic drop
in prices compared to pre-crisis levels Financing remains limited and costs of financing remain high (12-20% in ruble terms) Decline in competition levels with many projects in construction phases suspended and no new projects
being started Companies with substantial own production capacities and large land banks remain at risk of default
10
Market landscape after economic crisis
Who is at risk? We believe developers with…
B class offices in the pipeline: the most significant fall in occupancy (up to 30%) and rent level (down by c. 40-50%)
limited credit history and access to cheap debt financing
own production capacities that make operation less flexible to demand levels
significant level of land bank and speculative projects in the portfolio
Who are the survivors? We believe, companies with…
established market reputation
high operational expertise and successful track record
diversified portfolio of projects in high-quality class category and A class income generating properties for which demand remains high
absence of own production capacities that can promptly react to changing market conditions
secured debt financing and established credit history with banks
sufficient liquidity levels
Who is at risk? We believe developers with…
B class offices in the pipeline: the most significant fall in occupancy (up to 30%) and rent level (down by c. 40-50%)
limited credit history and access to cheap debt financing
own production capacities that make operation less flexible to demand levels
significant level of land bank and speculative projects in the portfolio
Who are the survivors? We believe, companies with…
established market reputation
high operational expertise and successful track record
diversified portfolio of projects in high-quality class category and A class income generating properties for which demand remains high
absence of own production capacities that can promptly react to changing market conditions
secured debt financing and established credit history with banks
sufficient liquidity levels
11
Moscow office market
Current market drivers Central Class A rents: US$ 800 – US$ 950
per sqm per annum
Class A office yields: 9.5% – 10.5%
Class A CBD vacancy: 3% - 5%
Investment volume CBD prime: minimum
Current market drivers Central Class A rents: US$ 800 – US$ 950
per sqm per annum
Class A office yields: 9.5% – 10.5%
Class A CBD vacancy: 3% - 5%
Investment volume CBD prime: minimum
2005 2006 2007 2008 2009 20100
250,000500,000750,000
1,000,0001,250,0001,500,0001,750,0002,000,0002,250,000
0.0%
3.0%
6.0%
9.0%
12.0%
15.0%
18.0%
21.0%
650,000850,000
1,100,0001,300,000
1,800,000
2,100,000
Office Supply and Vacancy
total supply vacancy CBD vacancy
sqm
2005 2006 2007 2008 2009 20100
400
800
1,200
1,600
2,000
600750
10001400
620
650800
1,000
1,500
2,000
800 850
Class A rental rates in Moscow
rental rate rental rate CBD prime
US
D/p
sqm
/pa
Source: AFID, JLL, C&W Source: AFID, JLL, C&W
2005 2006 2007 2008 2009 20100
5001,0001,5002,0002,5003,0003,500
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
555
1,252
1,730
2,719
2,027
927
Transaction volumes and yields
Investment deal volume yields
US
D v
olu
me
Source: AFID, JLL, C&W
12
Moscow retail market
Current market drivers Quality retail rents: US$ 2,200 –
US$ 2,400 per sqm per annum
Yields: 10% – 11%
Vacancy: 2% - 4%
Current market drivers Quality retail rents: US$ 2,200 –
US$ 2,400 per sqm per annum
Yields: 10% – 11%
Vacancy: 2% - 4%
Source: AFID, JLL, C&W Source: AFID, JLL, C&W
Source: AFID, JLL, C&W
2005 2006 2007 2008 2009 20100
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%
1,000,0001,200,000
1,500,0001,800,000
2,200,000
3,130,000Moscow retail supply and vacancy
total area vacancy
sqm
1 2 3 4 5 60
200400600800
1,0001,2001,4001,6001,8002,000
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
780
1,6891,554 1,527
30177
Moscow retail transaction volumes and yields
Investment deals volume yields
US
D v
olu
me
2005 2006 2007 2008 2009 20101,500
1,700
1,900
2,100
2,300
2,500
2,700
2,900
2,200
2,500
2,700
2,400
2,200
2,400
Quality retail rents in Moscow
rental rate
US
D p
sqm
pa
Source: AFID, JLL, C&W
13
Operational update
Opening of the Mall of Russia scheduled for January 2011. Contracts signed for 72% of shops. New name for the Mall is selected and registered: AFIMALL CITY.
Construction of Ozerkovskaya III is on schedule to be completed Q3 2011. Negotiations with large tenant for Ozerkovskaya III at advanced stage
Construction of Paveletskaya project is completed and opening is
planned for January 2011
Kalinina project re-geared, planned delivery end 2011
Development to be started on another 3 projects (Brestskaya, Kunzevo, Pochtovaya)
High focus by management on corporate governance and business transparency
Focus on improvements in Investor Relations: During September – November participation in 5 investment bank conferences in New York, London and Moscow; additional investor meetings in Frankfurt, Stockholm, Helsinki and Tel Aviv. Conference call with Q3 results took place on Nov 22, 2010
Opening of the Mall of Russia scheduled for January 2011. Contracts signed for 72% of shops. New name for the Mall is selected and registered: AFIMALL CITY.
Construction of Ozerkovskaya III is on schedule to be completed Q3 2011. Negotiations with large tenant for Ozerkovskaya III at advanced stage
Construction of Paveletskaya project is completed and opening is
planned for January 2011
Kalinina project re-geared, planned delivery end 2011
Development to be started on another 3 projects (Brestskaya, Kunzevo, Pochtovaya)
High focus by management on corporate governance and business transparency
Focus on improvements in Investor Relations: During September – November participation in 5 investment bank conferences in New York, London and Moscow; additional investor meetings in Frankfurt, Stockholm, Helsinki and Tel Aviv. Conference call with Q3 results took place on Nov 22, 2010
14
Portfolio overview
retail office resi hotel
Delivered and in the port-folio
16545000 311585000 56092840 71000000
Under devel-opment
657300000 94000000 0 9487000
Next for devel-opment
0 142300000 282460000 0
100,000,000
300,000,000
500,000,000
700,000,000
AFID Active Pipeline (USD)
Curr
ent
MV
in U
SD
retail office resi hotel
Delivered and in the portfolio 5008 129100.5 17491.5 21430.6
Under development 121962.45 39729 0 12665
Next for development 0 101500.8 580000 0
50,000150,000250,000350,000450,000550,000650,000
AFID Active Pipeline (GLA SQM)
GLA
SQM
157,500,000\ 6%
142,993,824 6%
47,415,000
2%399,130,0
00 17%
571,700,000 24%
189,087,000 8%
885,609,845
37%
commercial space sold
resi space sold
resi space unsold
Delivered commercial
AFIMALL CITY
Under devel-opment
Land bank
AFID Property Portfolio (Current MV in USD)
Current MV of portfolio – US$ 2.1 bln
Total space of portfolio – 3 mln sqm
Current MV of active projects – US$ 1.6 bln
Total space of active projects – over 1 mln sqm
Active pipeline by current MV: Retail – 41% Office – 34% Residential – 20% Hotel – 5%
Current MV of portfolio – US$ 2.1 bln
Total space of portfolio – 3 mln sqm
Current MV of active projects – US$ 1.6 bln
Total space of active projects – over 1 mln sqm
Active pipeline by current MV: Retail – 41% Office – 34% Residential – 20% Hotel – 5%
*Numbers based on valuation done by JLL, AFID share of projects shown, disposed projects not included , active projects include projects “next for development”
15
Completed Projects (1)
Four Winds residential
Four Winds office
Aquamarine I,II office
Aquamarine II residential
Status 6 apartments
unsold
Completed H2 2008
GSA, sqm 18,272
GLA retail, sqm
5,008
Average price psqm achieved
$10,000
Status 50% owned
Completed H2 2008
GBA, sqm 28,309
GLA office, sqm
17,556
GLA retail, sqm 3,416
NOI, mln pa $30mln
Average net rent, psqm pa
$1,340
Status Sold
Completed
2005/2008
GBA, sqm 14,000/12,800
Sold 2005/2008
Sale price, mln
$54mln/$207mln
Price psqm of GBA
$3,860/$16,190
Status 16 apartments
unsold
Completed Q4 2008
GBA, sqm 37,296
GSA, sqm 16,711
Average price psqm
$13,000
16
Completed Projects (2)
Aquamarine IIhotel
Status 100% owned
Completed Q4 2009
Put into operation
Nov 2009
Business class 4 stars
GBA, sqm 16,372
# of keys 159
RevPar $132
Status 50% owned
Completed 2006
Put into operation
2006
Resort hotel 4 stars
GBA, sqm 25,000
# of keys 275
RevPar $237
Plaza SPA hotel in Kislovodsk
H2Ooffice
Berezhkovskayaoffice
Status 100% owned
H2O 2009
Office B
GBA, sqm 10,698
GLA, sqm 8,998
NOI $2.9mln
Average net rent, psqm pa
$290
Status 75% owned
Completed 2006
Office B+
GBA, sqm 11,612
GLA, sqm 10,136
NOI $3.8mln
Average net rent, psqm pa
$400
17
Development: Mall of Russia AFIMALL CITY
Project details
Located in the heart of Moscow City, the Russian capital’s newest business district, currently one of the largest and most ambitious real estate projects in Europe (15 multi-use complexes with nearly 4 mln sqm of total space)
Moscow’s largest shopping mall with nearly 400 stores and outstanding leisure facilities including abundance of dining, a movie theater, a concert hall, and a skating ring
Current status
Opening of the Mall scheduled for January 2011
72% pre-let at an average rate of US$ 1,200 per sqm per year for the first year, another 10% are under negotiation
Construction loan refinanced resulting in extension of maturity by 2 years to Aug 2013 and a decrease in interest rates from 16% to 13.25% in ruble terms
Project details
Located in the heart of Moscow City, the Russian capital’s newest business district, currently one of the largest and most ambitious real estate projects in Europe (15 multi-use complexes with nearly 4 mln sqm of total space)
Moscow’s largest shopping mall with nearly 400 stores and outstanding leisure facilities including abundance of dining, a movie theater, a concert hall, and a skating ring
Current status
Opening of the Mall scheduled for January 2011
72% pre-let at an average rate of US$ 1,200 per sqm per year for the first year, another 10% are under negotiation
Construction loan refinanced resulting in extension of maturity by 2 years to Aug 2013 and a decrease in interest rates from 16% to 13.25% in ruble terms
GBA 179,423 sqm
GLA c.110,000 sqm
Delivery December 2010
Project ownership 75% (100% of cost)
Forecast NOI US$ 132 mln. (annualized)
MV upon completion US$ 941.5 (for 100% equity)*
*Valuation done by JLL , Dec 31, 2009
18
Moscow City
19
Development: Tverskaya Mall
GBA 106,137 sqm
GLA 36,303 sqm
Delivery Q4 2013
Project ownership 100%
Construction completion In progress
Forecast NOI $US 55.9 mln*
MV upon completion $US 421.3 mln*
Project details
Located under ground in the centre of Moscow in one of high-end neighborhoods near the Belorusskaya subway station
The Mall is part of AFID’s complex redevelopment of Tverskaya Zastava Square (over 500,000 of total commercial and residential space, part of AFID’s present land bank)
Easy access from subway, rail terminal and specifically built underground pedestrian passes
Nearly 200 stores, 700-800 underground parking slots and various entertainment facilities
Current status
External wall construction and utility lines relocation is ongoing
The City of Moscow agreed to and started financing a part of the engineering infrastructure
Project details
Located under ground in the centre of Moscow in one of high-end neighborhoods near the Belorusskaya subway station
The Mall is part of AFID’s complex redevelopment of Tverskaya Zastava Square (over 500,000 of total commercial and residential space, part of AFID’s present land bank)
Easy access from subway, rail terminal and specifically built underground pedestrian passes
Nearly 200 stores, 700-800 underground parking slots and various entertainment facilities
Current status
External wall construction and utility lines relocation is ongoing
The City of Moscow agreed to and started financing a part of the engineering infrastructure
Valuation done by JLL, Dec 31, 2009
20
Development: Ozerkovskaya III
GBA 78,647 sqm
GLA 51,388 sqm
Delivery Q3 2011
Project ownership 50%
Forecast NOI (100%) US$ c.31.0 mln*
MV upon completion (100%) US$ 261.2 mln*
Project details
Ozerkovskaya Phase III is part of the Ozerkovskaya Embankment development site comprising four individual development projects referred to as Phases I, II, III and IV
Located in Zamoskvorechye, Moscow’s prestigious business and residential area within the Garden Ring
First two phases of office development were completed, rented out and successfully sold in 2005 and 2008
Current status
Works on facades, internal engineering systems and fit-out are on-going
Leasing negotiations are on-going
New credit facility for US$ 74 mln at 13.25% was signed with Sberbank. The loan is sufficient to cover all construction costs
Project details
Ozerkovskaya Phase III is part of the Ozerkovskaya Embankment development site comprising four individual development projects referred to as Phases I, II, III and IV
Located in Zamoskvorechye, Moscow’s prestigious business and residential area within the Garden Ring
First two phases of office development were completed, rented out and successfully sold in 2005 and 2008
Current status
Works on facades, internal engineering systems and fit-out are on-going
Leasing negotiations are on-going
New credit facility for US$ 74 mln at 13.25% was signed with Sberbank. The loan is sufficient to cover all construction costs
Valuation done by JLL, Dec 31, 2009
21
Development: Pavelezkaya I
GBA 16,512 sqm
GLA 14,035 sqm
Parking spaces 283
Delivery Q4 2010
Project ownership 100%
Forecast NOI US$ 5.1 mln*
MV upon completion US$ 34.9 mln*
Project details
The overall Paveletskaya Embankment development comprises 10 commercial buildings which will be redeveloped into a Class B+ business park located in a dynamically developing business area on the border of Moscow's Central and Southern Administrative Districts
Paveletskaya I is the first phase of the Paveletskaya development and envisages a reconstruction of an ex-printing house facility into an office center
Current status
Reconstruction is 100% completed
Construction was completed at the end of Q4 2010, commissioning is expected by the end of January 2011
Negotiations with potential tenants are in progress
Possibility to let the building to a single anchor tenant
Project details
The overall Paveletskaya Embankment development comprises 10 commercial buildings which will be redeveloped into a Class B+ business park located in a dynamically developing business area on the border of Moscow's Central and Southern Administrative Districts
Paveletskaya I is the first phase of the Paveletskaya development and envisages a reconstruction of an ex-printing house facility into an office center
Current status
Reconstruction is 100% completed
Construction was completed at the end of Q4 2010, commissioning is expected by the end of January 2011
Negotiations with potential tenants are in progress
Possibility to let the building to a single anchor tenantValuation done by JLL, Dec 31, 2009
22
Development: Kalinina Hotel
GBA 12,665 sqm
GLA 175 keys
Delivery Q3 2011
Project ownership 100%
Stabilized ADR US$ 300
Forecast NOI US$ 4.1 mln*
MV upon completion US$ 26 mln*
Project details
The Kalinina project is located in Russia’s south
region in the city of Zheleznovodsk, popular resort
destination
The project envisions a renovation of an existing
building to a 3-star hotel with sanatorium facilities
The hotel is planned to be operated by AFI Hotels
Opening date is expected December 2011
Current status
Tender for general contractor completed with full
development budget approved (c. US$20 mln)
Subsidized loan from municipality at 6.25% in RUR
secured for the full development budget
Project details
The Kalinina project is located in Russia’s south
region in the city of Zheleznovodsk, popular resort
destination
The project envisions a renovation of an existing
building to a 3-star hotel with sanatorium facilities
The hotel is planned to be operated by AFI Hotels
Opening date is expected December 2011
Current status
Tender for general contractor completed with full
development budget approved (c. US$20 mln)
Subsidized loan from municipality at 6.25% in RUR
secured for the full development budget
Valuation done by JLL, Dec 31, 2009
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Next for development Brestskaya Kunzevo Bolshaya Pochtovaya
GBA 51,263 sqm
GSA (resi) 25,538 sqm
GLA (retail) 1,274 sqm
Delivery 2013
Project ownership 100%
Forecast sale price psqm $10,000
Forecast NOI (retail) $1.5 mln
Current status: Design works started, construction is planned for Q3 2011
GBA Over 1 mln sqm
Delivery First phase c. 300K sqm
Land plot size 40 Ha
Project ownership 100%
Forecast sale price psqm $4,000
Current status: General concept approval with the city authorities. Looking for co-investor
GBA 143,000 sqm
GSA (resi) 80,000 sqm
Project ownership 100%
Forecast sale price psqm $7,000
Current status: Redesign to residential
All financials are AFID’s preliminary estimates
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Map of active projects in Moscow
Ozerkovskaya
Tverskaya Mall
Paveletskaya
Mall of Russia
KuntsevoBrestskaya
Pochtovaya
25
Land bank
Project Type Land (Ha)
GBA upon completion
(sqm)
B/S value June 30, 2010 (AFID
share)
MV upon completion ($)
Kosinskaya (existing building) office 10.3 111,770 144,740,438 240,380,533Brestskaya 50/2 (Plaza Ic, Ia, Ib)
mixed use1.0
134,712133,627,424 602,480,000
Plaza II office 0.6 55,030 60,238,053 253,865,450
Plaza IIa office 0.2 10,500 6,016,609 34,195,025
Plaza IV hotel and office 1.3
132,500100,522,320 624,083,926
Ozerkovsky per., 3 (future phaze IV)
office0.0
1,8641,966,882 2,380,000
Serebryakova residential 3.2 246,700 67,596,618 443,833,042
Odintsovo residential 30.0 729,420 106,576,537 1,230,087,950
Park Plaza Kislovodsk hotel resort 5.3 47,683 8,224,844 92,400,000
Versailles project in Kislovodsk hotel resort 0.6 11,762 9,591,744 29,000,000
Old lake - Kislovodsk hotel resort 20.8 51,625 9,225,502 129,074,000
Kuntsevo residential 50.7 1,000,000 77,461,937 1,505,037,509
Ruza residential 387.0 n/a 4,138,360 273,693,000
St. Petersburg retail 3.7 n/a 1,823,161 1,810,000
Volgograd retail 7.7 n/a 2,957,041 2,925,000
Bolshaya Pochtovaya residential 4.5 143,000 206,149,456 1,113,157,019
Boryspol (Ukraine) residential 130.7 n/a 11,723,304 11,730,000
Zaporozhie (Ukraine) retail 4.6 n/a 5,166,975 5,170,000TOTAL 662.2 2,958,381 957,854,385 6,595,302,454
Extensive land bank Over 650 Ha of land Total future area – c. 3 mln
sqm (commercial/residential % 60/40)
MV when completed – over US$ 6.6 bln*
Land bank strategy Development upon securing
necessary financing and gaining full confidence in levels of demand from tenants/buyers
Planned for development next
Brestskaya 50/2 Kuntzevo Bolshaya Pochtovaya
Extensive land bank Over 650 Ha of land Total future area – c. 3 mln
sqm (commercial/residential % 60/40)
MV when completed – over US$ 6.6 bln*
Land bank strategy Development upon securing
necessary financing and gaining full confidence in levels of demand from tenants/buyers
Planned for development next
Brestskaya 50/2 Kuntzevo Bolshaya Pochtovaya
*valuation done by JLL, Dec 31, 2010, includes only project ownership of AFID
26
FINANCIAL UPDATE
27
Debt & liquidity
With over 110 mln in cash and cash equivalents as of September 30, 2010 the liquidity position remains strong
Sufficient debt financing secured to complete current pipeline
With over 110 mln in cash and cash equivalents as of September 30, 2010 the liquidity position remains strong
Sufficient debt financing secured to complete current pipeline
Lending bank Project Total facility
Drawn/Balance Outstanding as of
September 30, 2010
Available for investment as of
September 30, 2010
VTB Mall of Russia 277.9 228.7 49.2
Sberbank Tverskaya Mall 280.0 78.3 201.7
Sberbank Ozerkovskaya III 74.0 7.8 66.1
Sberbank Kalinina hotel 20.0 0 20.0
MDM Bank Four Winds 75.0 74.1 0.0
Deutsche Bank Corporate 60.0 10.0 0.0
Morgan Stanley Corporate 20.1 7.8 0.0
Total 807.0 406.7 337.0
In $USD
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Balance sheet
Non-current assets remained stable throughout Q3 2010. The increased value of assets is due to progressed development on several projects. The Company did not conduct a full revaluation of its development and core-income assets portfolio having adjusted its value for costs incurred only
Current liabilities continue gradual reduction as the Company decreases its short-term loans and borrowings
In Q3 2010 long term liabilities increased by US$26 mln following drawdowns made to complete Mall of Russia and Aquamarine III projects
Retained earnings remain low as no significant profit was booked in Q3 2010
Non-current assets remained stable throughout Q3 2010. The increased value of assets is due to progressed development on several projects. The Company did not conduct a full revaluation of its development and core-income assets portfolio having adjusted its value for costs incurred only
Current liabilities continue gradual reduction as the Company decreases its short-term loans and borrowings
In Q3 2010 long term liabilities increased by US$26 mln following drawdowns made to complete Mall of Russia and Aquamarine III projects
Retained earnings remain low as no significant profit was booked in Q3 2010
Balance sheet as at 30.09.2010 US$ '000
USD'th Balance as at Balance as at Balance as at Balance as at
Narrative 30/09/2010 30/06/2010 31/03/2009 31/12/2009 abs %%
Total non-current assets 1,798,709 1,739,351 1,812,779 1,753,428 45,282 3%Total current assets 462,243 474,740 525,117 594,214 (131,971) (22%)Total assets 2,260,952 2,214,092 2,337,896 2,347,641 (86,689) (4%)
Retained earnings 26,933 17,953 72,594 80,949 (54,017) (67%)
Total equity 1,649,786 1,617,922 1,720,084 1,702,661 (52,874) (3%)Minority interest 3,031 2,810 2,719 2,867 164 6%
Total non-current liabilities 423,018 396,727 397,475 366,688 56,330 15%Total current liabilities 185,118 196,632 217,619 275,425 (90,307) (0)Total liabilities 611,167 596,169 617,812 644,980 (33,813) (5%)
Total equity and liabilities 2,260,952 2,214,092 2,337,896 2,347,641 (86,688) (4%)
Change 9m 2010
31/03/2010
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Income statement
The Company recorded US$ 54 mln loss in for 9m 2010 compared to US$ 217 mln profit for 9m 2009 . The loss in 2010 is due to the Company’s conservative approach to valuation in Q2 2010 which resulted in impairment of assets
Revenues for nine months to 30 September 2010 including net proceeds from the sale of trading properties increased by 15% year-on-year to US$53.9 million driven by higher rental income and residential sales.
Loss before tax driven by reevaluation for the period was US$49.8 million compared to profit of US$285 million for nine months to 30 September 2009.
Net loss for nine months to 30 September 2010 was US$53.9 million compared to profit of US$217.1 million for nine months to 30 September 2009. Of this, US$9.1 million was achieved in the third quarter which was not affected by fluctuations in the valuation of our investment properties and investment properties under development, against US$1.9 million in the third quarter of 2009.
The Company recorded US$ 54 mln loss in for 9m 2010 compared to US$ 217 mln profit for 9m 2009 . The loss in 2010 is due to the Company’s conservative approach to valuation in Q2 2010 which resulted in impairment of assets
Revenues for nine months to 30 September 2010 including net proceeds from the sale of trading properties increased by 15% year-on-year to US$53.9 million driven by higher rental income and residential sales.
Loss before tax driven by reevaluation for the period was US$49.8 million compared to profit of US$285 million for nine months to 30 September 2009.
Net loss for nine months to 30 September 2010 was US$53.9 million compared to profit of US$217.1 million for nine months to 30 September 2009. Of this, US$9.1 million was achieved in the third quarter which was not affected by fluctuations in the valuation of our investment properties and investment properties under development, against US$1.9 million in the third quarter of 2009.
P&L as at 30 September 2010 US$ '000
USD'th
Narrative abs %%
Gross operating profit 16,768 4,989 20,308 5,637 (3,540) (17%)
Net valuation (loss)/gain (47,874) (0) 262,316 0 (310,190) (118%)
Impairement loss for trading property (14,133) - (16,048) - 1,915 (12%)
Results from operating activities (45,239) 4,989 266,531 5,569 (311,770) (117%)
Net finance income/(costs) (4,571) 3,290 18,495 2,186 (23,066) (125%)
Profit before income tax (49,810) 8,279 285,026 7,756 (334,835) (117%)
Income tax expense (4,094) 845 (67,930) (5,810) 63,836 (94%)
Profit for the period (53,904) 9,124 217,095 1,946 (270,999) (125%)
9m 2009 3q 2009 Change 9m 2010 /
9m 2009Q3 20109m 2010
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Cash flow
Cash inflow from operating activities for 9m 2010 reached US$ 34 mln compared to US$ 6 mln outflow in 9m 2009
Following active development of several projects cash outflow from investment activities reached US$ 101 mln for 9m 2010 compared to cash outflow of US$ 45 mln in 9m 2009
Cash flow from financing activities was negative for the period and constituted US$ 33 mln outflow
Cash balance as of 9m 2010 remains high at the level of US$ 110 mln
Cash inflow from operating activities for 9m 2010 reached US$ 34 mln compared to US$ 6 mln outflow in 9m 2009
Following active development of several projects cash outflow from investment activities reached US$ 101 mln for 9m 2010 compared to cash outflow of US$ 45 mln in 9m 2009
Cash flow from financing activities was negative for the period and constituted US$ 33 mln outflow
Cash balance as of 9m 2010 remains high at the level of US$ 110 mln
Condensed Statement of Cash Flows as at 30 September 2010 US$ '000
1/1/10 - 30/9/10 1/1/09 - 30/9/09
Net cash used in operating activities 33,824 -6,420
Net cash used in investing activities -100,657 -45,177
Net cash used in financing activities -33,205 30,337
Effect of exchange rate fluctuations -520 -17,392
Net decrease in cash and cash equivalents -100,558 -38,652
Cash and cash equivalents at 30 Sept. 2010 110,272 164,226
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Outlook
Focus on continued improvements in corporate governance
standards and transparency levels
Geographical focus on Moscow as it provides the strongest
real estate fundamentals; concentration on high quality
centrally located commercial and residential properties
Currently 5 projects under construction and several others at
concept design stage with plan to start construction within 18
months
Significant focus on liquidity
Provided levels of available financing, liquidity and market
demand are sufficient continue capitalization of extensive
land bank
Work-in-progress to dispose several non-strategic assets
Effective measures of cost control and operational efficiency
in place
Focus on continued improvements in corporate governance
standards and transparency levels
Geographical focus on Moscow as it provides the strongest
real estate fundamentals; concentration on high quality
centrally located commercial and residential properties
Currently 5 projects under construction and several others at
concept design stage with plan to start construction within 18
months
Significant focus on liquidity
Provided levels of available financing, liquidity and market
demand are sufficient continue capitalization of extensive
land bank
Work-in-progress to dispose several non-strategic assets
Effective measures of cost control and operational efficiency
in place
