INVESTOR PRESENTATION September 2011
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.
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Macroeconomic update Real GDP growth 3.7% in Q2 2011, TY 2011 estimation – 4% Sovereign debt to GDP ratio is the lowest among its peers Oil price (Brent) is volatile but still over U$100 per barrel Unemployment is 6.4% in May. Labor market is steadily improving Inflation is estimated at 7.5-8.5% for TY 2011 Ruble exchange rate is fluctuating around 30 RUB for 1 US$ 200%
150
110% 104.0%
140
105%
130 100%
120 110
95%
100
90%
90 85%
80 70
80% 2003 2004 2005 2006 2007 2008 2009 2010 Real GDP (Year 2003 = 100) - left axis YoY growth, % - right axis
114%
Sovereign Debt (% of GDP)
150%
112%
100%
110%
108.8%
50% 108%
US
UK
Germany
Italy
Spain
Greece
Ireland
Portugal
Russia
0%
106% 2003 2004 2005 2006 2007 2008 2009 2010 Russian CPI, %
Source: EIU, Federal statistics service, JLL
3
Market update Retail Prime rates* Base rents
Units 4,000 psqm pa
Million sqm
Key indicators
Retail supply and vacancy
1,350 psqm pa
Prime yield
9.0% – 9.5%
Vacancy
<1% (prime) 7% (Moscow aver.)
Retail rental rates, US$ psqm pa
4
6% 4,500
5% 3 4% 2
3,700
3,500
1
4,000 4,000 4,000
3,000
3% 2%
4,800
1,500 1,700
1,300
2,000 1,200 1,350 1,350 1,350
1% 0
0% 2005 2006 2007 2008 2009 2010
total area
vacancy
H1 2011
2005
2006
2007
2008
Prime rents
source: JLL, C&W
2009
2010
Base rents
Q1 2011
Q2 2011
source: JLL, C&W
*Prime rates: 100 sqm shops on 1st floors in quality shopping centers
Office
Class A office supply and vacancy
Units
CBD prime rates
US$1,100 US$1,200 psqm pa
3
20%
2
Class A
US$700 - US$800 psqm pa
1
Yields
9%
0
Vacancy prime
2% - 4%
2,000
25%
Million sqm
Key indicators
Class A rental rates, US$ psqm pa
1,500 1,150
15% 10% 5%
1,000
1,400
800
800
850
620
650
2009
2010 H1 2011
1,000 750 600
750
0% 2005 2006 2007 2008 2009 2010 total supply vacancy Class A CBD
H1 2011 vacancy Class A source: JLL, C&W
2005
2006
2007
2008
Average Class A Class A CBD Prime
Source: JLL, C&W
source: JLL, C&W
4
AFI Development at glance •
Full cycle real estate developer
•
Focus on unique large scale commercial and residential projects
•
Primary market: Moscow, Russia
•
Portfolio market value – US$ 2.4 bn (JLL valuation as of June 30, 2011) Land bank 27%
Market Cap - Sep 09, 2011
US$ 0.65 bn
NAV - Jun 30, 2011
US$ 1.8 bn
Average share price - Sep 09, 2011
US$ 0.63
NAV per share - Jun 30, 2011
US$ 1.74
Total equity – Jun 30, 2011
US$ 1.83 bn
Cash & Cash equiv. – Jun 30, 2011
US$ 96 mn
Project level bank loans – Jun 30, 2011
US$ 489 mn
AFIMall City 35% Moscow 94% Kislovodsk 3%
Pipeline 14% Projects under development 10%
Completed and unsold projects 14%
Portfolio market value by project type
Other 3%
Portfolio MV by geography 5
Key projects 1
AFIMALL City Shopping mall
2
Four Winds “A”-class office
3
CITY OF MOSCOW
13
Aquamarine hotel 4* hotel
8
Ozerkovskaya III Mixed-use
9
Kosinskaya “B”-class office
10
Paveletskaya II Residential
11
Otradnoye Residentail
12
Pochtovaya Mixed-use
13
Serebryakova Residential
14
Tverskaya Zastava Mixed-use
12
14 2 4
Ozerkovskaya II Residentaial
1 8 5
4 3 6 7 10
5
Berezhkovskaya 11 “B”-class office
6
H2O “B”-class office
7
Paveletskaya I “B”-class office
Existing projects Projects under development Pipeline projects
9
6
Key Yielding Assets
AFIMALL City Key advantages Central location
•
Largest mall in the city center
•
High quality construction and fit-out
Highlights GLA/# of shops Occupancy 2013 NOI (100%) Revenue 2011 JLL appraisal value*
107K /c.400 81% US$120-130 mn (JLL) US$60 mn US$1,093 mn
*(100% project as at Jun 30, 2011)
Additional matters •
The 25% city share acquisition in Sep 2011
•
The Company aims to have the finance in place by the end of Sep 2011
• •
The Company continues its negotiations with the City in respect of the parking Favorable finance terms have been reached in respect of the existing loan
25 thousand visitors per day
•
20 15 10 5 0 March
April
May
June
July
August
Average daily footfall 8
Four Winds office Key advantages •
Prime location in CBD
•
AAA long-term tenants
•
Well-known brand in Moscow
Highlights Ownership
50%
GBA/GLA
28K /22K
Occupancy
100%
NOI
US$29 mn
Rental rate
US$1,350 psqm pa
JLL appraisal value*
US$271 mn
*(100% project as at Jun 30, 2011)
9
Aquamarine Hotel Key advantages •
Central location
•
Part of the residential / office complex with a total area of 160K sqm
•
Professional development concept
Highlights GBA/# of keys
11K /159 keys
Occupancy (H1 2011)
60%
2011 NOP
US$2.1 mn (JLL)
Stabilized NOP
US$4 mn (JLL)
ADR
US$195
JLL appraisal value*
US$47 mn
*(100% project as at Jun 30, 2011)
10
Plaza Spa Key advantages •
Recognized recreational area
•
Solid reputation for the top quality service in Kislovodsk town
•
Established client base
Highlights Ownership
50%
GBA/# of keys
25K /275 keys
Occupancy (H1 2011)
73%
2011 NOP (100%)
US$8.1mn (JLL)
JLL appraisal value*
US$62mn
*(100% project as at Dec 31, 2010)
11
Active Development
Ozerkovskaya III Key advantages •
Prime location in CBD
•
3rd phase of the residential / office complex with a total area of 160K sqm
•
High quality construction and fit-out
Highlights Ownership
50%
GBA/GLA
79K /46K
Completion
Q4 2011
Stabilized future NOI
US$38 million (JLL)
Average rate
US$800 (JLL)
Management targets •
Development completion in Q4 2011
•
The Company is exploring several disposal possibilities of completed office buildings, in whole or in part
13
Kalinina Spa Key advantages •
Recognized recreational area
•
Second Spa project in the region after Plaza Spa success
•
Attractive price-quality
Highlights GBA/# of keys
13K /175 keys
Operation start
Q1 2012
Stabilized future NOI
US$3 million (JLL)
Management targets •
Start operation in Q1 2012
•
Occupancy stabilization by 2012 end
14
Pipeline next for development
Tverskaya Zastava Key advantages •
Prime business location
•
Close proximity to public transport
•
Moscow top rental rates /prices in the neighborhood
Highlights (based on JLL) GBA
Over 300K
Delivery
2016-2017
Current status •
The Company is still in negotiations with the Moscow authorities on the matter of Tverskaya Zastava
16
Otradnoye (Odintsovo) Key advantages •
Green zone in 7 km from Moscow
•
Prestigious direction & top prices in Moscow Region
•
All amenities for comfort living in place
Highlights GBA/# of apartments
665K /c.7.5K
Revenue
US$1,370 mn*
Development costs
US$860 mn*
Management targets •
Renewal of construction permit and construction start and/or cooperation with co-investor (clarity in 2012)
* The information is based on valuation report conducted by JLL as at Jun 30, 2011 for the purpose of the Company financial statements for the 6 months 2011
17
Paveletskaya Phase II Key advantages •
Central location – 5 km from the Kremlin
•
Embankment of the Moscow River
•
Undersupply of quality residential space in Moscow
Highlights GBA
106K
Revenue
US$390 mn*
Development costs
US$174 mn*
Management targets •
Design and approval works proceeding to secure construction permit (clarity in 2012)
* The information is based on valuation report conducted by JLL as at Jun 30, 2011 for the purpose of the Company financial statements for the 6 months 2011
18
Pochtovaya Key advantages •
Central administrative district of Moscow
•
Embankment of the Yauza River
•
Undersupply of quality residential space in Moscow
Highlights GBA
424K
Revenue
US$1,497 mn*
Development costs
US$616 mn*
Management targets •
Design and approval works proceeding to secure construction permit (clarity in 2012)
* The information is based on valuation report conducted by JLL as at Jun 30, 2011 for the purpose of the Company financial statements for the 6 months 2011
19
Financial position
Financial position • Stable cash position of US$ 96 mn
• Total assets (TA) – US$ 2.57 bn • Total equity (TE) – 1.83 bn, TE/TA – 0.71 • Net debt (ND) – US$ 393 mn, ND/TA – 0.15 Real estate properties Total assets
Current & other assets
2,331
235
=
US$2,566 mn
28
= Sources of finance
1,825 Equity
Long-term loans
462 Short-term loans
252 Other
Balance sheet structure (June 30, 2011), US$ mn 21