CONFIDENTIAL
Q1 2015 IR Presentation FINANCIAL & BUSINESS RESULTS May 2015
SECTION 1
Company Overview
Company at Glance Market Cap, as of May 22, 2015 Price per share, as of May 22, 2015 NAV (Equity), as of March 31, 2015 NAV per share, as of March 31, 2015 Portfolio Value*
US$ 0.3 bn US$ 0,29 US$ 1.29 bn US$ 1,23 US$ 2.0 bn
•Full cycle real estate developer
BUSINESS
PORTFOLIO VALUE* AFIMALL 50%
Development Projects 29%
•Focus on unique large scale commercial and residential projects
•Strong liquidity position: US$ 74,7 mn as at March 31, 2015 FINANCIAL STABILITY
• 31% Debt to Total Assets**
•Primary market: Moscow, Russia
•14 completed projects with total c. 0,6 mln sqm of space
•14 years on the market
HISTORY Yielding Projects and Hotels 21%
•Admitted to LSE in 2007 •Premium listing from 2010
TRACK RECORD
•Impeccable credit history •Market reputation for high quality and professional property management
•Free float – 35,12%
* 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)
•Strong global brand
% Change since January 2015 60% 50%
BRAND
40%
11%
30%
•Secured financing for ongoing projects
20% 10%
•Affiliate of Africa Israel Group (64,88% owner) , a major conglomerate with global focus on real estate, construction and infrastructure
PORTFOLIO
•Substantial income generating portfolio. Major project AFIMALL •8 Development Projects & land bank
0% -10% January-15
** Bank loans only
AFID February-15
March-15
April-15
May-15
3
Key Projects in Moscow ***
*** Information presented as for 31 Dec, 2014
Yielding Assets (retail, offices and hotels) US$ 1.4 bn
Value** ( C&W, Dec, 31 2014):
Tverskaya IB
Riversede Station AFIMALL
195K sqm
GLA(excl. hotels),sqm: NOI stab. PLAZA SPA Kisl*
PLAZA SPA ZHEL* Aquamarine III
US$ 182 mn
( excl. hotels):
Ownership:50% * * Hotels presented with cost value
Aquamarine Hotel Paveletskaya,1
* Outside of Moscow
H2O
Projects Under Development Value**
US$ 581 mn
( C&W, Dec 31 2014):
Odinburg**
Paveletskaya II
KOSSINSKAYA Kossinskaya
Plaza iia
Plaza IC
Pochtovaya
Botanic Garden
Plaza IV
GLA,sqm:
235,0K sqm
GSA,sqm:
708,6K sqm
NOI stab. (C&W, Dec
US$ 106,3 mn
31 2014):
** Odinburg and Botanic Garden presented with cost value
Land Bank Yielding Assets Projects under Development
Value (BV):
US$ 8 mn
Completed Assets
Other 4 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
SECTION 2 Project Update Yielding Projects
AFIMALL City Update
AFIMALL CITY (as of March 2015) Total GBA, sqm
283,2K
Total GLA(shops, offices, storage), sqm
107.2K
Occupancy (as part of GLA total) Parking lots, numbers
83% 2,075
Terminal NOI (C&W est.)
US$ 133.7 mn
MV (C&W est.)
US$ 1.000 bn
Loan balance as for March, 2015
US$ 468 mn
The occupancy level dropped down till 83% at the end of Q1 2015, which is 2% lower compared to Q4 2014 and equal with the same quarter last year Based on significant pressure of external environment instability some tenants such as Gloria Jeans , Mascotte, Fabi couldn’t stay afloat and had to terminate agreements. Despite of the average decrease of footfall in shopping centers, footfall in AFIMALL is constantly increasing quarter by quarter
Revenue, mn USD Operating Expenses, mn USD NOI, mn USD
Q1 2015 19,1 (5,4) 13,7
Q1 2014 28,0 (11,1) 16,8 6
AFIMALL and Moscow-City Development
AFIMALL
MOSCOW CITY DEVELOPMENT Existing Office Complex: 4 – Imperia Tower; 8 – CityPoint; 9 – Capital City; 10 – Naberezhnaya Tower; 13a – Federation Tower (West); 14 – Mercury City Tower; 19 – Northern Tower; 12 – Steel Pick Tower; 6, 7 – Central Core (AFIMALL City) Under Construction: 2, 3 – Evolution Tower; 11 – IQ-quarter; 13b – Federation Tower (East); 16a – OKO; 15, 17-18 - projects for further development
•
Upon fully delivery the Moscow City will cover 60 ha and house 12 high-rise complexes (Total GBA – 3,5 mn sqm). Today Moscow-City consists of 9 complete building complexes accounting for c. 0.77 million sqm of rentable area among 1,2 mn sqm upon delivery.
•
In 2015-2017, the average annual new delivery volume will amount to 150,000 sqm of office space.
•
By 2017, transport infrastructure in the business district is expected to significantly improve, which will result in better accessibility and higher attractiveness of the business district amongst corporate and workers. Now three metro stations are opened (Vistovochnaya, Mezhdunarodnaya, Devlovoy Tcentr)
•
By 2017, the Third Interchange Loop (TIL) will be partially open and MoscowCity will have a metro connection with it
•
New metro stations will make it possible to approach Moscow-City from three different lines: the dark-blue and yellow lines as well as the TIL
•
Currently motorists can access Moscow-City from the TRR, 3d Magistralnaya street (connection with Zvenigorodskoe highway) or Presnenskaya embankment.
•
An additional access road, alongside the Kutuzovsky highway, is planned for 2018, which will increase direct access to the district.
•
7 In October 2014 Russian oil company completed the deal on buy–out of office building Evolution in Moscow City. ( c. 1 bln USD)
Yielding Properties
Building
AFIMALL
Ozerkovskaya III*
Berezkovskaya
Tverskaya Plaza II Tvesrkaya Plaza Ib Paveletskaya, bld. 1 Moscow
H2O
Aquamarine Hotel
Moscow
Moscow
Moscow
Moscow
Moscow
Moscow City
CBD
Moscow
CBD
CBD
Moscow
Retail
Office A & Street Retail
Office B
Office & Street Retail
Office & Street Retail
Office B
Office B
GBA, sqm
283 182
61 772
11 612
5 913
2 338
16 246
GLA, sqm
107 208
46 247
10 250
5 856
2 054
2 075
466
140
-
83%
1,0%
86%
133,7
35,0
1 000
300
Parking lots (total), # Ocupancy rate (31.03.2015), % NOI stab. (C&West.), US mn MV,US$ mn**
Plaza SPA Zheleznovodsk
TOTAL
Moscow
Location Class
Plaza SPA Kislovodsk
Caucasus region
Caucasus region
Hotel
Hotel
Hotel
10 698
8 931
25 000
11 701
438K
14 085
8 991
159 keys
275 keys
134 keys
194K
-
126
81
15
-
15
85%
85%
92%
78%
69%
75%
76%
3,5
2,6
0,9
3,8
2,2
-
-
-
182
21,3
15,2
5,4
19,5
12,1
17,3
14,4
12,2
1 418
CBD
* 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
8
SECTION 3 Project Update Development Projects
Odinburg Residential GBA, sqm 767,1K
GSA residential, sqm 453,0K STATUS: Construction Bld#1 is on final stage, Bld.#2 has been started SALE STATUS: Bld#1, Bld#2 are on sale
10
Odinburg Residential 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. (Including City share). CONSTRUCTION STATUS and SALES
As of reporting day 627 (32,6K sqm) apartments have been signed (average price is 2,289 US$, where USD/RUB - 40,05), parking lots sold – 15 units with a price – 33 652 US$
(as of March 2015) Type GBA,sqm GSA, sqm/GSA commercial total: GSA resi(Phase I), sqm: GSA resi(Phase II), sqm: GLA, sqm:
Apartments, total :
Residential 767,1K 453,0/19,6K 145,1K 307,9K 16,8K
9,139
Phase 1: Stage 1 Stage 2
2,652* 723 789
Parking units:
3,399
* Including City share
11
Plaza IC ( 2 Brestskaya, 50/2)
PlAZA IC (as of March 2015 )
OVERVIEW Total GBA, sqm
61,8K
Total GLA, sqm
37,0K
Parking lots, numbers
 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.
467
CONSTRUCTION STATUS MV (C&W est.)
US$ 87,7mn
 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.
12
Projects under Development •
The Company has several projects in pipeline with total GBA c. 1,6 bn sqm. 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
Botanic Garden
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
Pochtovaya
Plaza IV Kosinskaya Paveletskaya
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
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
Other 13
SECTION 4 Financial Update
Consolidated P&L #
Q1 2015 Q1 2014 Actual Actual USD=62 USD=35
ITEM ('000)
(1)
Construction consulting/management services
0,0
-
(2)
Rental income
24,4
36,7
(3)
Sale of residential and trading property
-
-
24,4
36,7
1,1
1,7
(4) TOTAL REVENUE (5)
Other income
(6)
Operating expenses
(11,4)
(21,8)
(7)
Administrative expenses
(2,7)
(7,4)
(8)
Cost of sales of residential and trading property
(9)
Other expenses
(10) TOTAL EXPENSES (11)
Share of profit of equity-accounted investees
(12) GROSS PROFIT (13)
Valuation gains on investment property
(14)
Profit (loss) for trading property
(15) RESULTS FROM OPERATING ACTIVITIES (16)
Profit on sale/disposal of properties/investment
(17)
Finance income
(18) (19)
-
(2,3)
(13,4)
(29,7) (0,6)
11,2
6,3
21,4
73,3
(0,7)
(0,4)
32,0
79,2
-
0,1
1,5
2,7
Finance expenses
(11,3)
(14,8)
FX Gain/(Loss)
(16,2)
(37,9)
(26,0) 6,0
(50,1) 29,2
(20) Net finance income/(costs) (21) PROFIT BEFORE INCOME TAX (22)
Current income tax
(0,2)
(0,2)
(23)
Deferred income tax
0,3
(4,8)
(24) PROFIT FOR THE PERIOD
6,0
(7) Decrease in BD provision
-
(0,4) 0,1
Comments:
24,3
15
Statement of Financial Position Changing US$ mn
31.03.2015 US$ mn
31.12.2014 US$ mn
1 375,4 431,5 0,0 33,5 17,6 0,0 20,2
1 375,4 431,5 0,0 35,1 18,1 0,0 20,1
0,0 (0,0) 0,0 (1,6) (0,4) (0,0) 0,1
1 878,2
1 880,2
(2,0)
0%
2,9 134,9 0,5 0,1 39,4 1,4 74,7
3,0 133,0 0,6 0,0 39,0 1,3 93,3
(0,1) 1,8 (0,1) 0,1 0,4 0,1 (18,5)
(3%) 1% (12%)
253,9 2 132,1
270,2 2 150,4
(16,3) (18,3)
-6% -1%
1,0 1763,4 (320,7) (152,4)
1,0 1763,4 (314,9) (159,0)
(0,0) 0,0 (5,8) 6,6
(0%) 2% (4%)
1 291,4
1 290,6
0,8
0%
(8,7) 632,7 103,6 12,2
(8,8) 455,1 102,6 13,0
0,1 177,6 1,0 (0,7)
-2% 39% 1% (6%)
748,5
570,7
177,9
31%
30,6 24,5 45,7 0,0
231,7 28,2 38,0 0,0
(201,1) (3,7) 7,6 0,0
(87%) (13%) 20%
Total current liabilities
100,8
297,9
(197,1)
-66%
(34) TOTAL LIABILITIES
840,7
859,8
(19,1)
(2%)
2 132,0
2 150,4
(18,3)
(1%)
# (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32) (33)
NARRATIVE Investment property Investment property under development Investment in Joint Ventures Property, plant and equipment Long-term loans receivable VAT recoverable Inventory of real estate
Total non-current assets Trading property Trading properties under construction Inventory Short-term loans receivable Trade and other receivables Current tax assets Cash, cash equivalents and tradable securities
Total current assets TOTAL ASSETS Equity Share capital Share premium Translation reserve Retaining earnings TOTAL EQUITY Minority interest Long-term loans and borrowings Deferred tax liabilities Deferred income
Total non-current liabilities Short-term loans and borrowings Trade and other payables Advances from customers Income tax payable
%
Comments:
0% 0% -5% -2% -11% 0%
1% 5% (20%)
(25) (29) Prolongation of Ozerkovskaya loan
16
(35) TOTAL EQUITY AND LIABILITIES
Loans and cash position as of March 31, 2015 Gross balance of the bank loan portfolio (as of March 31,2015) – US$ 663 mn Total cash balance and deposits (as of March 31, 2015) – US$ 74,7 mn (including marketable securities)
Project
Bank
Balance as of March 31, 2015 (US$ mn)
Available (US$ mn)
Nominal Interest rate
Currency
VTB
$171
-
9,5%
RUB
VTB
$296
-
3-m Libor+5.02%
USD
$468
$0
6,84%
$0
5,7% + 3-m Libor to 23.01.15 8% + 3-m Libor from 24.01.15 to 20.03.15 7% + 3-m Libor from 21.03.15 to 26.01.18
01.04.2018
AFIMALL TOTAL AFIMALL
Ozerkovskaya III (100%)
Maturity
VTB
TOTAL/AVERAGE RATE
$195
$663
USD
26.01.2018
6,96%
The Company is in line with all financial covenants •
In January 2015, the Company subsidiary, Krown Investments LLC (“Krown”) signed an addendum to the loan facility agreement with VTB Bank OJSC (“the Bank), extending the term of the loan to 26 January 2018. Krown, which owns the Aquamarine III (Ozerkovskaya III) office complex, had an existing loan from the Bank maturing on 26 January 2015, of which US$ 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$195 million. About 90% of the principal is to be paid at maturity.
17
Gross Asset Value PROJECT
Bank Loan
Net Company's Share
Net Company's Share
31.03.2015
31.03.2015
31.03.2015
31.12.2014
AFI Mall Berezkovskaya (100%) Paveletskaya I Plaza H20 Ozerkovskaya III Plaza Ib Plaza II Sadovaya -Samotechnaya
1 000 21 20 12 300 5 15 2
(468)
532 21 20 12 105 5 15 2
519 21 20 12 95 5 15 2
TOTAL INVESTMENT PROPERTY:
1 375
(663)
712
689
Plaza Ic Plaza II a Plaza IV (100%) Kosinskaya Bolyshaya Pochtovaya Paveletskaya II Ruza
88 4 107 54 108 67 4
88 4 107 54 108 67 4
88 4 107 54 108 67 4
431
431
2 1
2 1
TOTAL INVESTMENT PROPERTY UNDER DEVELOPMENT:
431
Ozerkovskaya Phase II (26) 4Winds residential
2 1
Aquamarine/Ozerkovskaya 26 Plaza SPA Zheleznovodsk Pyatigorskaya (Park Plaza Kislovodsk) Plaza Spa Kislovodsk (Tirel) (50%)
17 12 4 14
TOTAL TRADING PROPERTY:
3
TOTAL PROPERTY PLANT AND EQUIPMENT:
46 Odinburg Botanic Garden
TOTAL TRADING PROPERTY UNDER DEVELOPMENT:
TOTAL PORTFOLIO: CASH AND CASH EQUIVALENT DEFFERED TAX LIABILITY TOTAL OTHER ASSETS AND LIABILITIES
TOTAL EQUITY:
Book Value
(195)
0
0
0
135 20
3
3
17 12 4 14
17 12 4 14
46
48
135 20
133 20
155
0
155
153
2 011
(663)
1 348
1 325
75 (104) (28)
93 (104) (24)
1 291
1 291
LTV= 33% LTE = 51%
18
SECTION 1
Market Update
Market Overview and Capital Markets RUSSIAN MACROECONIMIC OVERVIEW
RUSSIAN REAL ESTATE INVESTMENT MARKET
• Russian economic growth felt down till 2,2% negative in Q1 2015 compared to 0,4% negative in Q4 2014. International sanctions and lower oil prices will weigh heavily on the economy, which is forecast by minus 3,8% in 2015 by EUI where the MED expects no more deeper than 2,5%.
• In Q1 2015, the total volume invested in commercial real estate in Russia was US$ 0.7 bn. • In the first three months of 2015, investments into offices dominated the market, accounting for 59% of total volumes, compared to 35% in the corresponding quarter of previous year.
• The rouble began to recover in March-May 2015, and by mid-May is back up to USD/RUB = 50 compared to 56 in the end of December (c. 12%), supported by a recovery in oil prices, seasonal factors and a lighter debt repayment schedule. However, the outlook for the oil price is uncertain.
• Regardless volatile global and domestic economic environment the forecast kept unchanged expecting US$ 2.5 bn of investments by the end of year.
• Inflation has risen rapidly over the past six months, owing to the embargo on EU and US food products, as well as the rapid devaluation of the rouble in November and December, which pushed up import prices. the impact of these factors now appears to be tailing off, leading to a slowdown in the pace of price growth.
6,5
8 000
Volume, USD
RUB/USD exchange rate and oil price
GDP Growth, %
Investment Volume, USD mn
10 000
6 000
4,6
5,3
16 7,1
14
7,4
11,00
12
5,8
10 4,0
8
4,1
4 000
6 2,3
6
2 000
1
-3,833
-4 -9
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Russia Advanced economies Euro area Emerging market and developing economies
Cap.rates, %
• Oil prices went up by 22% and in the April achieved 66 USD per barrel, when in December the price was not more than 53 USD per barrel
• At the same time the capitalization rates at the same levels — 11.00% for offices, 11.00% for prime retail and 13.00% for warehouse objects
4
1,7 0,5
2
0
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Office
Retail
Warehouse
Other
Office
Q1 2015
Retail
Forecast of Investment Volume in 2015 (USD mn)
JLL
CBRE
C&W
3.0
2,5
2,5 20
Source: MED, C&W, JLL, Economist
Office and Retail Markets overview OFFICE MARKET OVERVIEW
RETAIL MARKET OVERVIEW
• Three office buildings were competed in Q1 adding 90,707 sq m of new office space to the market, which was almost two times lower the result seen over the same period last year. The largest one is Evolution Tower in the Moscow International Business Center Moscow City (79,000 sq m). • Around 0.9m sq m of new office supply is expected to enter the market over the entire 2015, which will be 33% less than the result seen in 2014. • By the end of March, the overall vacancy rate increased slightly to 17% from 16.6% level seen in the previous quarter.
• The main effect of rouble devaluation has already been priced into the current level of rents offered for new tenants. The rental cost for Prime offices decreased over the past three months by USD60 and stood in the range of USD750–840 per sq m per year.
1 300
Base Rent, US$ psqmpa
Key indicators
• 3 new shopping centers were opened in Moscow in Q1 2015. Occupancy rate in new Moscow malls (at the level of 70%) is higher than in regional cities. During the first three months of 2015 such shopping centres as Columbus (136,000 sq m), Kuntsevo Plaza (66,000 sq), Outlet Village Belaya Dacha, Phase II (12,700 sq m) and Centralny Detsky Magazin on Lubyanka (34,000 sq m) were opened. • Occupancy rate in new Moscow malls (at the level of 70%) is higher than in regional cities. • The Moscow average vacancy rate (which is about 7-8%) will continue growing at least until summer 2015. • Rental rates in Moscow shopping centres are still under pressure due to the economic situation, which influences even the most successful schemes. Prime rents in the top shopping centers has been decreased by 15% and today are ranging at USD2,0003,800 per sq m per year. At the same time average rent remains at the level of previous quarter, USD400-1,450 per sq m per year
Units
4 500
750-840
4 000
US$/psqm/pa
1 100
700 500
Rent Class A (Prime) ,US$ sqmpa
1 088
900 646
807
731
414
444
783
4…
477
530
Base rent Class A, US$ sqmpa
450-650
3 800
3 000
2 500 2 000
Overall vacancy,%
2007 2008 2009 2010 2011 2012 2013 2014
average Class A
3 500
611
870
796
645
935 509
300
734
Prime Rents, US$ psqmpa
Q1 2015
average Class B
Vacancy rate, Class A, %
17,0% 27,5% - 32%
1 500 2007 2008 2009 2010 2011 2012 2013 2014
Q1 2015
Key indicators
Units
Prime rate, US$ psqma (prime shopping
2,000 – 3,800
center retail gallery)
Base rent, US$ psqma
400-1,450
Vacancy rate,%
7%
sourceC&W
21
Residential Market Overview RESIDENTIAL MARKET MOSCOW AND MOSCOW REGION
MOSCOW:
• According to Rosstat, the volume of completed construction works in Moscow for the 1st quarter of 2015 amounted 109,6 billion. rubles, which is 5.4% less than in the same period last year. • The volume of commissioning in Moscow since the beginning of the year amounted to 869,9 thousand sq m, which is 5.7% more than in the 1st quarter 2014.
• In 2015 it is planned to put into operation 3.2 mn sqm. As the end of Q1 2015, the plan is delivered by 27%. • During the Q1 2015 the average asking price per sqm in prime residential amounted at the level of 206,2 th.rub (without elit and apartments), wich is lower on 5,4% than the Q4 2014. US Dollar price is at the level of 3 570 US$ per sqm ( -7,7% decrease). Business class amounted at the level of 278,5 th rub psqm ( 4 830 US$ psm) MOSCOW REGION: In Q1 2015 the demand in residential sector went down by 36,3% compared to Q4 2014. • The average price per sqm in Moscow region amounted at the level of 83 400 rub ( 1,437 USD) compared to Q4 2014 where the price was 81 148 Rub.
• The average price per sqm in Odintsovo region is c. 91 100 rub.
Average asking price in prime residential market of Moscow, by districts. (th.rubpsqm and udspsqm)