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
•Full cycle real estate developer
•Focus on unique large scale commercial and residential projects
•Primary market: Moscow, Russia
BUSINESS
•12 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$ 140,3 mn as at September 30, 2013
•Secured financing for on-going projects
• 30% Debt to Total Assets**
FINANCIAL STABILITY
•16 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
** Bank loans only
AFI Development at Glance
Portfolio Value*
* Gross Asset Value of Portfolio based on C&W Valuation as for
30 June 2013 and BV of Land Bank projects, Trading Properties
and Hotels
Market Cap, as of Nov 18, 2013 US$ 0.85 bn
Price per share as of Nov 18, 2013 US$ 0.81
NAV (Equity), as of September 30, 2013 US$ 1.71 bn
NAV per share, as of September 30, 2013 US$ 1.64
Portfolio Value* US$ 2.5 bn
3
Current Portfolio
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)
Development Projects
Ownership:50%
Aquamarine Complex
Four Winds
H2O Office
Four Winds***
Berejkovskaya
Paveletskaya, 1
Tverskaya Plazas
Otradnoe Kosinskaya
Pochtovaya, Phase I
Botanic Garden
Paveletskaya,
Phase # II
Other
AFIMALL City
Land Bank
*** Odinburg presented with cost value
* Outside of Moscow
Value** (afid share, C&W):
US$ 1.7 bn
GLA(excl. hotels),sqm: 204K sqm
NOI stab. ( excl. hotels):
US$ 217 mn
Value*** (C&W): US$ 747 mn
GLA,sqm: 252K
GSA, sqm: 574,3K
NOI stab: US$ 142,3 mn
Value (BV): US$ 20 mn
AFIMALL City Berezkovskaya
Paveletskaya, 1
Tverskaya Ib, II
Ozerkovskaya III Aquamarine Hotel
Plaza SPA Zhel* Plaza SPA Kisl * H2O
Pochtovaya Tverskaya Plazas Odinburg*
Kosinskaya Paveletskaya II
** Hotels presented with cost value
4
AFIMALL City Update (1/3)
PROJECT HIGHLIGHTS
(as of September 2013)
Total GLA(shops, offices, storage), sqm 107.2K
Total GLA shops only, sqm 96,8K
% of GLA shops only 85%
Stabilized NOI (C&W est.) US$151.2 mn
MV (C&W est.) US$ 1.160 bn
Loan balance as for September, 2013 US$ 603 mn
CURRENT STATUS:
NOI for the 9m 2013 reached US$ 48,4 mn compared to US$ 38,9 mn due to
increase in AFIMALL operating activity
Growth in occupancy with total leased area reaching circa 82,046 sq.m. as at 30
September 2013 (from 80,020 sq.m. as at 30 June 2013 and 74,353 sq.m. at year-
end 2012)
One of the most renowned department stores in Moscow TSUM has sighed a long-
term lease for 1,688 sqm at the 1st floor and became the new main tenant
during Q3.
The AFIMALL sustainable increases its popularity and awareness by the
management quality work in improvement of tenant mix
AFIMALL became one of the top stages holding Annual Russian Fashion Week
Show
The Company reduced the interest rate for US portion of the loan from
Libor+6,6% to Libor +5.02%
6
Up to 24%
Q1 2013 Q2 2013 Q3 2013 9M 2013 9M 2012
Revenue 23.2 24.9 26.5 74.6 62.1
Operating expenses (8.6) (8.1) (9.5) (26.2) (23.3)
NOI 14.6 16.7 17.0 48.4 38.9
AFIMALL and Moscow-City Development (2/3)
AFIMALL
MOSCOW CITY DEVELOPMENT
Moscow City existing office space is approximately 500K sq
m, with another 600K sq m of office space expected to be
constructed by 2015.
The Moscow City vacancy rate is c. 25% (existing buildings)
Hotel Novotel, launched last quarter, will add additional visitors
to the Mall. Existing supply (number of rooms) – 360,
pipeline (number of rooms) - 319
The following buildings are expected to be completed:
Federation Tower (East), Eurasia Tower(107,5K) and
OKO(gla:87K sqm) — by the end of 2014, IQ-quarter
(gla:107K and Evolution Tower — by the end of 2015 (about
600,000 sq m of office area in total)
2 additional metro lines: Prolongation of Tretyakovskaya till
Ramenki, construction of Hordovaya with 4 different lines
connections (Vystovochnaya, Polezhaevskaya, Hodinskoye
Pole, Dinamo, Savelovskaya) by 2014 (see next slide)
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
7
AFIMALL and Moscow-City Transport Infrastructure(3/3)
Today: (0) –
“Vistavochnaya” – metro
station at the lowest level of
AFIMALL City
Till the end of 2013 (start of
2014): Point (1) – “Delovoy
Center” will be connected
with Point (2) - “Park
Pobedy”.
“Delovoy Center” is
going to be an additional
station at the lowest level of
AFIMALL City
2015: Point (1) – “Delovoy
Center” will be connected
with Point (3) –
“Khoroshevskaya”
Point (2) - “Park
Pobedy” will be connected
with Point (4) -“Ramenki”
0
1
2
3
4
(2014
8
Ozerkovskaya (Aquamarine III)
PROJECT HIGHLIGHTS*
(as of September 2013)
GBA, sqm: 73,4K
GLA, sqm 55,4K
MV (C&W est.) US$ 389 mn
Loan balance as for September, 2013 US$ 220 mn
CURRENT STATUS:
AFID reached a binding agreement to dispose Bld#1 in Aquamarine
Complex to a Russian State controlled corporation.
Total transacted area of Bld #1 is approximately 11,994 sq.m and includes
terraces & 71 parking spaces.
The consideration amounts to US$91.5 mn excluding VAT, AFID expects
to receive net profit on the transaction in the amount of approximately
US$14.6 million (expected to be recognized in Q4 2013).
Bld # 1
* The data presented for all project ( Four Buildings) before disposal of Bld # 1.
9
Yielding Properties
10
* Current Net rent for AFIMALL presented as for the end of September, 2013 and does not include discounts
** MV based on C&W valuation as for 30.06.2013. Hotels presented by cost value
***Project is not leased yet
*
***
Building AFIMALL BerezkovskayaPaveletskaya, bld.
1H2O
Tvesrkaya Plaza
Ib
Tverskaya Plaza
II
Ozerkovskaya
III***
Aquamarine
Hotel
Plaza Spa
Kislovodsk
Plaza SPA
Zheleznovodsk
Ownership 100% 74% 99.1% 100% 100% 100% 100% 100% 50% 100%
Moscow Moscow Moscow Moscow Moscow Moscow Moscow Moscow
Moscow City CBD CBD CBD CBD
GBA, sqm 304,205 11,612 16,246 10,698 2,104 6,008 73,346 11,701 25,000 8,931
GLA, sqm 107,208 10,250 14,085 8,990 1,909 6,008 55,422 159 keys 275 keys 134 keys
Parking lots (total), # 2,075 150 126 81 - - 551 15 - 15
Ocupancy rate (shops only), % 85% 86% 96% 73% 87% 87% - 79% 52% 62%
Current Net Rent as of
30.06.2013, $/sq m1,251* 443 244 206 527 455 750 ADR 242 ADR 379 ADR 229
Class Retail Office B Office B Office B Street retail &
Office
Street retail &
Office
Office A & Street
Retail Hotel Hotel Hotel
NOI stab (C&W est.), US mn 151.6 5.8 4.6 2.9 1.3 4.5 46.0 - - -
MV(AFID share),US$ mn** 1,160 31.3 30.1 18.3 9.0 31.5 389.1 31.0 25.0 23.0
CAP Rate 10% 12% 13.5% 14% 12% 11.5% 10% 9.5% 13% 13%
Location Kavkaz region Kavkaz region
10
Pipeline Projects Development Status
CURRENT STATUS:
• The first construction works on the land plot, allocated for the 1st stage in Phase # 1 have been launched
(54,5K sqm from 200,8K sqm of GBA)
• The mortgage accreditation was passed with one bank
CURRENT STATUS:
• The end of construction works was shifted from Q4 2013 to H1 2014
• The project was submitted to top Russian banks
CURRENT STATUS:
• Approval documentation GPZU and GZK are in place
• Design works are in process. Project design stage – stage P finalized
• The company finalized the top list to choose General Contractor
• Start of construction : H1 2014
CURRENT STATUS:
• Design works are in process
• Securing approval documentation
CURRENT STATUS (Plaza IV):
• Land plot’s borders clarification has been finalized
• Securing approval documentation
PARAMETERS:
Type:
Residential
GBA(Phase I), sqm: 200,8K
GSA(Phase I total), sqm: 149,4K
# of Apartments: 2,620
PARAMETERS:
Type: Mix
GBA, sqm: 111,7K
GLA, sqm: 90,3K
MV(C&W),mn: S$ 103,5
PARAMETERS:
Type: Office
GBA, sqm: 51,2K
GLA, sqm: 32,5K
MV(C&W): US$ 105,8 mn
PARAMETERS:
Type: Office, Retail
GBA/GLA, sqm: 108K/61,4K
MV(C&W): US$ 168,6 mn
PARAMETERS:
Type: Residential
GBA, sqm: 170,4K
GSA/GLA, sqm: 63,2K/28,0K
MV(C&W),: US$ 142,3mn
ODINBURG
KOSINSKAYA
TVERSKAYA IC
BOLSHAYA POCHTOVAYA
PARAMETERS:
Type: Office
GBA, sqm: 10,5K
GLA, sqm: 7,6K
MV(C&W),mn: US$ 12,4
CURRENT STATUS:
• According to the article dated 29.10.2013 and published on the official web-site of the Moscow Government, the Construction Department of Moscow Government has made decision to start an active phase of redevelopment at Tverskaya Zastava Square already in 2014 (and the first stage of redevelopment will focus on construction of an additional overhead road across the railway lines), whereas the date of completion of these works remains unclear, which will incur significant delay and, thus, pose high uncertainty with the timeline of the subject Plaza IIa project TVERSKAYA
PlAZA IIA
PLAZA IV
12
Paveletskaya II: change in Value
PROJECT HIGHLIGHTS
(as of September 2013)
Type Business class
Residential
GBA, sqm: 151,4K
GSA/GLA, sqm: 53,2K/21,0K
BV(cadastral value), mn: 11,6
MV(C&W), mn: 92,6
CURRENT STATUS:
The Company finalized negotiations with Moscow City Government to
change the permitted usage of land plot
In November AFID has received a signed land lease agreement for 6 years
for further development
Thus, assumptions in valuation report made by Cushman & Wakefield
have to be adopted for company valuation
Land lease agreement for construction of residential and commercial space
signed at Paveletskaya II in November 2013 resulting US$81.0 million
gross valuation gain (US$64.8 million net of taxation), which is included
in Company Q3 2013 result
13
Extensive land bank
Land bank – projects of the Company is currently put on hold
Land bank strategy
Activate projects upon securing required financing and evaluation of demand level from prospective tenants/buyer
Full flexibility regarding future development in various cycles of the economy – the major competitive advantage for the
Company
Land Bank Projects
Project Type Land (ha) GBA upon completion (sqm) BV as of 30.06.2013, US$ mn
Park Plaza Kislovodsk Hotel resort 5.3 40,000 7,2
Versailles, Kislovodsk Hotel resort 0.6 12,350 7,2
Ruza Mixed use 387 n/a 3,6
St. Petersburg Mixed use 3.07 n/a 1,8
TOTAL 19,8
Note: MV upon completion and GBA upon completion are “forward looking statements” based on JLL valuation assumptions 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
14
Income Statement and Statement of Financial Position
16
Q1 2013 9M 2012
Actual Actual Actual Actual Actual
(1) Construction consulting/management services 0.0 0.0 0.0 0.1 2.2
(2) Rental income 33.1 35.4 36.6 105.1 84.9
(3) Sale of residential and trading property 0.2 55.0 1.8 57.1 4.6
(4) TOTAL REVENUE 33.4 90.5 38.4 162.3 91.8
(5) Other income 3.2 0.4 0.8 4.4 0.2
(6) Operating expenses (21.4) (17.8) (18.3) (57.5) (44.2)
(7) Administrative expenses (4.0) (7.0) (2.1) (13.0) (15.7)
(8) Cost of sales of residential and trading property (0.2) (31.8) (1.3) (33.2) (3.8)
(9) Other expenses (1.8) (0.8) (1.5) (4.1) (1.0)
(10) TOTAL EXPENSES (24.2) (56.9) (22.3) (103.4) (64.5)
(11) Share of profit of equity-accounted investees (0.6) (0.1) 0.3 (0.5) 6.3
(12) GROSS PROFIT 8.6 33.5 16.3 58.4 33.5
(13) Valuation gains on investment property 16.5 41.0 47.4 104.9 (243.4)
(14) Impairement loss for trading property and hotels - - (65.4)
(15) RESULTS FROM OPERATING ACTIVITIES 25.1 74.5 63.7 163.3 (275.3)
(16) Profit on sale/disposal of properties/investment 32.1 - - 32.1 2.3
(17) Finance income 15.7 1.5 1.2 18.5 13.0
(18) Finance expense (16.8) (17.7) (16.8) (51.2) (45.4)
(19) FX Gain/( Loss) (9.2) (19.6) 5.1 (23.7) 16.7
(20) Translation reserve reclassification due to disposal of subsidiary (30.3) - - (30.3) -
(21) Net finance income/(costs) (40.5) (35.8) (10.5) (86.7) (15.7)
(22) PROFIT BEFORE INCOME TAX 16.7 38.8 53.2 108.7 (288.7)
(23) Current income tax (0.4) (0.4) (0.5) (1.3) (3.0)
(24) Deferred income tax (0.7) (10.7) (11.9) (23.3) 15.1
(25) PROFIT FROM CONTINUING OPERATION 15.6 27.7 40.8 84.1 (276.6)
9M 2013# ITEM ('000)
Q2 2013 Q3 2013 (4) Revenue reached US$ 162,3 mn since the
beginning of the year, which is 77% higher
that same quarter last year
(2) Rental income achieved USD 105,1 mn
for 9m2013, which is 24% higher than same
period 2012
AFIMALL contribution in rental income is
US$ 74,5 mn
(12) Gross profit went up to 74% compared
September 2012 and come up to USD 58,4
mn as for |September 2013
(13) Valuation gain US$ 47,4 mn is mostly
related to change in value of Paveletskaya II
and Plaza IIa
(25)Profit from continuing operation
amounted to US$ 84,1 mn compared to loss in
US$ 276,6 mn for the comparative period in
2012
16
30.09.2013 31.12.2012
US$ mn US$ mn US$ mn %
(1) Investment property 1,679.9 1,292.3 387.6 30%
(2) Investment property under development 631.7 567.7 64.0 11%
(3) Investment in Joint Ventures 5.9 82.4 (76.5)
(4) Property, plant and equipment 69.8 76.6 (6.7)
(5) Long-term loans receivable 21.7 113.5 (91.8)
(6) VAT recoverable 0.2 0.5 (0.2)
(7) Goodwill 0.0 0.2 (0.2)
(8) Non-current assets 2,409.3 2,133.1 276.1 13%
(9) Trading properties 6.6 3.6 3.0 83%
(10) Trading properties under construction 120.7 141.8 (21.1)
(11) Inventory 0.6 0.6 (0.0)
(12) Short-term loans receivable 0.1 0.1 (0.0)
(13) Trade and other receivables 90.4 78.3 12.1 16%
(14) Current tax assets 3.0 2.3 0.7 29%
(15) Cash and cash equivalents 140.3 174.8 (34.6)
(16) Current assets 361.7 401.6 (39.9)
(18) TOTAL ASSETS 2,770.9 2,606.0 164.9 6%
(19) Equity
(20) Share capital 1.0 1.0 (0.0)
(21) Share premium 1763.4 1763.4 0.0 0%
(22) Translation reserve (145.4) (144.6) (0.7) 1%
(23) Retained earnings 95.2 9.7 85.6 886%
(24) TOTAL EQUITY 1,714.3 1,629.5 84.8 5%
(25) Minority interest (0.9) (3.0) 2.1
(26) Long-term loans and borrowings 803.9 554.6 249.3 45%
(27) Deferred tax liabilities 126.1 81.9 44.2 54%
(28) Deferred income 21.4 20.2 1.3 6%
(29) Non-current liabilities 951.4 695.0 256.4 37%
(30) Short-term loans and borrowings 20.6 17.3 3.3 19%
(31) Trade and other payables 85.4 267.1 (181.7) (68%)
(32) Current liabilities 106.1 284.5 (178.4) -63%
(33) TOTAL LIABILITIES 1,057.5 976.5 81.0 8%
(34) TOTAL EQUITY AND LIABILITIES 2,770.9 2,606.0 164.9 6%
# NARRATIVE Changing
17
Statement of Financial Position
(2) Related to change in valuation of Paveletskaya II and Tverskaya
Plaza IIa projects.
(23) Retained earnings for the beginning of the period were US$9,7
mn
17
Loans and cash position as of September 30, 2013
Gross balance of the bank loan portfolio (as of September 30, 2013) – US$ 823 mn
Total cash balance and deposits (as of September 30, 2013) – US$ 140,3 mn
The Company decreased the interest rate on the AFIMALL City loan in US dollars from 3 months LIBOR+6.7% to 3 months
LIBOR+5.02%. The average rate for AFIMALL loan decreased from 8,2% to 7,3%
Financial covenants
AFIMALL
Liquidation Value of the property should be higher than sum of the outstanding principal and six months interest
Q3 Revenue: not less than US$ 19,8 mn (including VAT)
As of September 30, 2013 the Company is in line with the covenants
*
Project Bank
Balance as of
September 30,
2013
Available
(US$ mn)Nominal Interest rate Currency Maturity
RCB $294 - 9.5% RUB 01.04.2018
RCB $309 - 3-m Libor+5,02% USD
TOTAL AFIMALL RATE $603 $41 7.30%
Ozerkovskaya III (100%) VTB $220 $0 3-m Libor+5,7% RUB 26.01.2015
TOTAL/BLENDED RATE $823
AFIMALL (Refinance)
18
Portfolio NAV as of September 30, 2013
*
PROJECT Book Value Bank Loan
30.09.2013 30.09.2013
AFI Mall 1,160 (603) 557
Berezkovskaya (100%) 42 42
Paveletskaya I (1) 30 30
Plaza H20 18 18
Ozerkovskaya III 388 (220) 168
Plaza Ib 9 9
Plaza II 32 32
TOTAL INVESTMENT PROPERTY: 1,680 823 856
Plaza Ic 106 106
Plaza II a 12 12
Plaza IV (100%) 169 169
Kosinskaya 104 104
Bolyshaya Pochtovaya 142 142
Paveletskaya II 93 93
Ruza 4 4
St. Petrsburg 2 2
Ozerkovskaya III (underground utilities) 1 1
TOTAL INVESTMENT PROPERTY UNDER DEVELOPMENT: 632 0 631
Ozerkovskaya Phase II (26) 6 6
TOTAL TRADING PROPERTY: 6 0 6
Aquamarine/Ozerkovskaya 26 31 31
Plaza SPA Zheleznovodsk 23 23
Pyatigorskaya (Park Plaza Kislovodsk) 7 7
Plaza Spa Kislovodsk (Tirel) (50%) 25 25
Versailles (Kislovodsk) 7 9
TOTAL PROPERTY PLANT AND EQUIPMENT: 94 0 95
Odinburg 121 121
TOTAL TRADING PROPERTY UNDER DEVELOPMENT: 121 0 121
TOTAL PORTFOLIO: 2,532 823 1,710
CASH AND CASH EQUIVALENT 140
DEFFERED TAX LIABILITY (126)
TOTAL OTHER ASSETS AND LIABILITIES (10)
TOTAL EQUITY: 1,714
NAV
LTV= 33%
LTE = 48%
19
Market Overview (1/2)
Source: Commercial Real Estate Report, JLL; Cushman and Wakefield Report; EIU Russia,
Rosstat
MACROECONOMIC UPDATE
MOSCOW OFFICE MARKET OVERVIEW
MACROECONOMIC UPDATE
• GDP: In Q3 Russian economy entered stagnation phase and GDP growth
reached 1,3% compared to 1,2% in Q2 2013 and 1,0% compared to Q3
2012. So far Russia is still ahead of Eurozone with its 0.3% growth rate but
way below other BRIC partners and even USA with their 2.5%.
• Oil price (Brent): In September oil price slowed down compared to Q2
2013 on 0,7% and increased on 1,4% compared to September 2012. The
World oil prices in the medium term will be reduced, their current level looks
a bit overstated as a result of the existing political risks.
• Consumer sector: Economy is supported primarily by consumer market,
which is fuelled by increase of pensions and salaries in public sector. Retail
trade turnover is growing at about 4% - much faster than economy in general.
• Inflation: Consumer prices in Q32013 increased by 1.1%, with YTD
inflation totaling 4.7%. Probability to meet inflation yearly target of 6%
remains very high.
MOSCOW OFFICE MARKET OVERVIEW
Key indicators Units
Prime rate
(trophy assets)*
(US$/sqm/year)
1,150
Base rent Class A
(US$/sqm/year)
850
Yields (prime) 8,5%
Overall
Vacancy rate
13,1%
Vacancy rate, Class
A
18,9%
*Prime base rents refer to rents in high quality
buildings in the Central Business District (CBD).
`
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
United States Europe
Germany United Kingdom
Czech Republic Poland
Russia
109.2
20
40
60
80
100
120
140 Oil price (Brent, US$ per barrel)
1,000
1,400
620 650
850 850 850 870 850
1,500
2,000
800 850
1,200 1,150 1,150 1,150 1,150
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2007 2008 2009 2010 2011 2012 Q12013
Q22013
Q32013
US$
/psq
m/p
a
average Class A class A CBD Prime
source: AFID, JLL, C&W
• Supply: Over Q3 2013 6 new office buildings were brought on the market
with rentable area of c. 240K sq m. More than 50% of completed office space
in this quarter is Class A developments, the most significant of which are
Mercury City Tower (87,574 sq m). More than 80% of supply – areas
outside of TTR.
• Vacancy: Despite the strong new supply in Q3, the overall vacancy rate
remained stable at the level of 13.1% Nevertheless, vacancy rates for
Class A are particularly high at 18.9% as several new high-quality
developments added available spaces to the market.
• Rental rates: The rental market remained flat over this quarter with prime
rents at USD1,000 to USD1,150/sq m per year, Class A rents stand
between USD600 and USD850, for Class B+ USD350–600/sq m per year
and for Class B- falling in the range USD250–400.
• Yield(prime): The capitalization rates in Moscow remained almost the same
in Q2 2013 ( 8,5%) 21
Market Overview (2/2)
Source: Q3 Marketbit C&W report; Blackwood report, intermarksavills
MOSCOW RESIDENTIAL MARKET MOSCOW RESIDENCTIAL MARKET
MOSCOW RETAIL MARKET OVERVIEW
• Supply: One shopping center opened in Moscow this quarter - Raikin Plaza
(GLA of 35,000 sq m). Other two big openings were in St-Peterburg (GLA of
48K sqm) and Syktyvkar (GLA of 30K sqm.)
• Vacancy: Vacancy rate has been stable in Q3. The share of vacant spaces in
quality premises is 2.5%. It is significantly lower compared to most
European capitals.
• Rental rates: No significant changes were witnessed in rental rates over the
quarter. The prime rent for 100 sqm. space in quality premises remains at the
level of USD3,000–4,500 sq m/year. Average rental rate in shopping centres
is USD 500–1,800 sq m/year.
• Yield(prime): The capitalization rates in Moscow remained the same as in Q1
2013 and amounted at 9% for retail sector
MOSCOW RETAIL MARKET OVERVIEW
Key indicators Units
CBD prime rates
(US$/sqm/year)
3,000 – 4,500
Average base rent
(US$/sqm/year)
500 – 1,800
Prime Yields 9%
Vacancy rate
(market average)
2,5%
• Supply: As the end of Q3 213 the supply of new residential remained
stable and amounted to 1,5 mln sqm (incl. apartments and elite class).
Business class and comfort class took the significant part of supply.
• Prices Moscow: The average price in Q3 2013 for primary business-class
residential premises(incl. apartments) amounted to US$ 7,500 psqm
compared to US$ 7,390 in Q2 2013.
• At the moment the price for business-class residential unit in CBD of
Moscow in the primary market reached a level of US$ 11,000 – 13,000 US$
psqm.
• Prices in the Moscow region was unchanged and stood at the average rate
c. US$ 3,000 psqm
Key indicators
(Moscow)
Units
CBD prime
(US$/sqm)
13,000
Average price
(US$/sqm)
7,500
Key indicators
(Moscow Region)
Units
Average Price
(US$/sqm)
3,000
4,500
4,800
3,700
4,000 4,000 4,000
4,500 4,500 4,500
4,500
1,700 2,000
1,200 1,350
1,350 1,350
1,150 1,150
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
7,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
2010 2011 2012 2013
22
Contact Information
Registered office AFI DEVELOPMENT PLC Spryou Araouzou 165, Lordos Waterfront Building 5th Floor, Flat/Office 505, 3035 Limassol, Cyprus Tel. +357 25 310975 Principal office of operating subsidiary AFI RUS 16 A Berezhkovskaya Embankment, building 5, Moscow, 121059, Russian Federation. Tel: +7 495 796 99 88 http://investors.afi-development.ru
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