2014 Year End Investor Presentation by AFI Development

Total Year 2014 IR Presentation FINANCIAL & BUSINESS RESULTS March 2015

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, forwardlooking 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.

SECTION 1

Company Overview

Company at Glance Market Cap, as of March 17, 2015 US$ 270 mn Price per share, as of March 17, 2015 US$ 0,26 Average price per share in 2014 US$ 0,69 NAV (Equity), as of December 31, 2014 US$ 1.29 bn NAV per share, as of December 31, 2014 US$ 1,23 Portfolio Value* US$ 2.0 bn

•Full cycle real estate developer

BUSINESS

FINANCIAL STABILITY

AFIMALL 50%

•14 completed projects with total c. 0,6 mln sqm of space

•14 years on the market

HISTORY

•Admitted to LSE in 2007 •Premium listing from 2010

TRACK RECORD

•Strong global brand

BRAND * 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)

•Impeccable credit history •Market reputation for high quality and professional property management

•Free float – 35,12% Yielding Projects and Hotels 21%

•Secured financing for ongoing projects • 32% Debt to Total Assets**

•Primary market: Moscow, Russia

PORTFOLIO VALUE* Development Projects 29%

•Focus on unique large scale commercial and residential projects

•Strong liquidity position: US$ 93,3 mn as at December 31, 2014

•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

** Bank loans only 4

Key Projects in Moscow 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**

Expolon

Paveletskaya II

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 5 Note: the NOI projections are â&#x20AC;&#x153;forward looking statementsâ&#x20AC;? 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

Company Achievements during the year 2014

Achievements 2012 (1/2) STATUS

COMMENT



AFIMALL occupancy increased by 9% and reached 85% in 2014 compared to 76% in December 2013.



AFIMALL NOI increased by 20% and reached US$ 83,0 mn in 2014 compared to US$ 69 mn in 2013



In the beginning of 2014 the Company started active sales of apartments at Odinburg, which had positive impact on the cash flows



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. In December 2014, AFI Development restored the Botanic Garden project on its balance sheet, following liquidation of former primary investor, Novoe Koltso Moskvy OJSC (“NKM”), as risks related to the bankruptcy of NKM were removed. The Company has completed the planning of the residential complex and received Moscow construction authorities’ approval for the project. In addition, the necessary construction permit was obtained in December 2014. It adds 113 sqm of residential and commercial areas to company portfolio value. 6

SECTION 2 Project Update Yielding Projects

AFIMALL City Update

AFIMALL CITY (as of December 2014) Total GBA, sqm

283,2K

Total GLA(shops, offices, storage), sqm

107.2K

Occupancy (as part of GLA total)

Parking lots, numbers

85%

2,075

Terminal NOI (C&W est.)

US$ 133.7 mn

MV (C&W est.)

US$ 1.000 bn

Loan balance as for December, 2014

US$ 481 mn

 In 2014 the overall occupancy level increased and reached 85% compared to 76% in December 2013. During 3 years of full operation AFIMALL became the noticeable and popular shopping center located in the center of Moscow with quality tenant mix and comfortable shopping zone.  AFIMALL became the leader within existing shopping malls, which introduced the new and unique Russian and international brands on the market. Laura Eshley, Mirko Botticelli, Forever 21, H&M Home, SFIZIO, Crate&Barrel are entered in 2014. In Q4 2014 the management of AFIMALL has signed the agreement with MFC (the center which serves people for government and municipal needs) for lettable area c. 1,200 sqm.  Despite of ongoing construction, AFIMALL is easy to reach from different directions: from office towers “Federation”, “Naberezhnaya Tower” and “Capital City”, also from Novotel, “Evolution” tower and ExpoCentre.  In 2014, the management of AFIMALL launched the unique navigation system, which helps visitors quickly and simply find the right direction to the parking or shops location.

Revenue, mn USD Operating Expenses, mn USD NOI

Q1 2014 Q2 2014 Q3 2014 Q4 2014 28,0 28,7 26,0 24,3 (11,1) (6,2) (1,0) (5,7) 16,8 22,5 25,0 18,6

2014 107,0 (24,0) 83,0

2013 104,1 (26,2) 69,0 8

+20%

AFIMALL and Moscow-City Development

AFIMALL

 Moscow City existing office space is approximately 770K sqm, within 1,2 mn sqm of office space expected to be constructed.  By 2015 total office stock expected to reach 1.1m sq m

 About 120,000 workforce are expected to work in the Moscow City area by the time all planned office has been constructed

MOSCOW CITY DEVELOPMENT Existing Office Complex

Under Construction

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)

2, 3 – Evolution Tower 11 – IQ-quarter 12 – Eurasia Tower 13b – Federation Tower (East) 14 – Mercury City Tower 16a – OKO 16b – Parking

Planned

 The Moscow City vacancy rate increased to c. 40% due to the launching of the new buildings

recent

 Apartments area around 0.7 mln sqm (190,000 sq m commissioned)  Hotel area around 153,000 sqm (Novotel (25,000 sqm, which is 360 keys) opened in February 2013)  At the beginning of 2014 the new metro station Delovoy Center, which has a direct access to the mall, has started its operations  This new station (Delovoy Tcenter) provides direct access to AFIMALL City and will over the next two years become the main connecting point for a new line, which will link the densely populated residential districts Ramenky, Horoshevskiy, Savyolovsky and Maryina Roscha

15 – Moscow City Government Building 20 – Exposition and Business Center

Yielding Properties

Building

AFIMALL

Ozerkovskaya III*

Berezkovskaya

Tverskaya Plaza II Tvesrkaya Plaza Ib Paveletskaya, bld. 1 Moscow

H2O

Aquamarine Hotel

Moscow

Moscow City

CBD

Moscow

CBD

Moscow

Retail

Office A & Street Retail

Office B

Office & Street Retail

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

85%

1,0%

88%

1 147

792

99,7

Parking lots (total), # Ocupancy rate (31.12.2014), % Average rent as of 31.12.2014, $/sq m NOI (12m forward) (C&W est.), US mn NOI stab. (C&West.), US mn MV,US$ mn**

Plaza SPA Zheleznovodsk

TOTAL

Moscow

Location Class

Plaza SPA Kislovodsk

Caucasus region

Hotel

10 698

8 931

25 000

11 701

438K

14 085

8 991

159 keys

275 keys

134 keys

194K

126

83%

93%

86%

73%

71%

69%

347

404

395

213

205

12,4

2,6

1,6

0,7

1,1

1,4

120

133,7

35,0

3,5

2,6

0,9

3,8

2,2

182

1 000

300

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

SECTION 3 Project Update Development Projects

Odinburg Residential GBA, sqm 767,1K GSA residential, sqm 453,0K STATUS: Construction Bld#1, Bld.#2 are ongoing

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. (Inclding City share). CONSTRUCTION STATUS and SALES  As of today - 594 apartments have been signed

ODINBURG

 The construction of bld. 1 is finalized. Facade works are ongoing.  Construction of Bld.#2 has been started

(as of December 2014) Type GBA,sqm GSA, sqm/GSA commercial total: GSA resi(Phase I), sqm: GSA resi(Phase II), sqm: GLA, sqm:

Apartments, total :  Phase 1:  Stage 1  Stage 2 Parking units: * Including City share

Residential 767,1K 453,0/19,6K 145,1K 307,9K 16,8K 9,139 1,512* 723 789 3,399 13

Plaza IC ( 2 Brestskaya, 50/2)

PlAZA IC (as of December 2014 )

OVERVIEW Total GBA, sqm

61,8K

Total GLA, sqm

37,0K

Parking lots, numbers

ď&#x201A;§ 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

ď&#x201A;§ 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.

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 15

SECTION 4

Financial Update

Consolidated P&L #

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Actual Actual Actual Actual

ITEM ('000)

(1)

Construction consulting/management services

(2)

Rental income

(3)

Sale of residential and trading property

(4) TOTAL REVENUE

2014 Actual

2013 Actual

0,1

0,2

36,7

38,2

35,0

31,6

141,4

144,6

1,4

0,2

0,8

2,4

57,5

36,7

39,6

35,3

32,6

144,1

202,3

1,7

1,3

0,1

0,4

3,5

6,4

(5)

Other income

(6)

Operating expenses

(21,8)

(15,5)

(11,5)

(13,7)

(62,5)

(76,5)

(7)

Administrative expenses

(7,4)

(3,6)

(7,1)

(4,1)

(22,3)

(16,9)

(8)

Cost of sales of residential and trading property

(1,0)

0,0

(0,6)

(1,6)

(32,6)

(9)

Other expenses

(2,3)

(0,7)

(3,1)

(0,7)

(6,8)

(5,5)

(29,7)

(19,6)

(21,6)

(18,8)

(89,7)

(125,1)

(1,3)

(3,7)

(4,5)

(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)

Profit on sale of Investment property

(0,6)

1,2

(0,8)

6,3

21,2

12,3

10,1

49,9

76,3

73,3

(46,8)

108,4

(220,7)

(85,9)

106,2

(0,4)

(8,3)

79,2 0,1

(8,8)

(34,0)

111,9

8,6

(202,0)

(8,9)

(44,8)

(2,2)

180,4

0,1

32,3

27,8

(18)

Finance income

2,7

2,0

0,3

1,8

7,0

21,0

(19)

Finance expense

(14,8)

(14,1)

(14,2)

(17,3)

(60,8)

(66,9)

(20)

FX Gain/( Loss)

(37,9)

22,8

(63,8)

(146,0)

(224,8)

(28,9)

(21)

Translation reserve reclassification due to disposal of subsidiary

(30,3)

(50,1) 29,2

10,7 (23,3)

(77,7) 34,2

(161,5) (363,5)

(278,6) (323,3)

(22) Net finance income/(costs) (23) PROFIT BEFORE INCOME TAX

(105,2) 135,3

(24)

Current income tax

(0,2)

(0,3)

0,2

(0,6)

(8,9)

(25)

Deferred income tax

(4,8)

3,1

(9,7)

48,1

36,7

(22,5)

(26) PROFIT FOR THE PERIOD

24,3

(20,5)

24,2

(315,2)

(287,3)

103,9

Comments: Despite of severe rouble depreciation versus the dollar, rental income and income from hotel operations decreased only by 2% year-on-year to US$141.4 million (compared to US$144.6 million for 2013) AFIMALL City contribution amounted to US$107.0 million (compared to US$103.9 million for 2013), 3% increase year-onyear despite difficult macroeconomic environment Gross profit for 2014 was US$49.9 million, compared to US$76.3 million in 2013 (the 2013 results were largely affected by the completion of disposal transaction of parking space at AFIMALL City to VTB Bank JSC in the mount of US$ 24,7 mn) In 2014 AFI Development incurred net loss of US$287.3 million, compared to net profit of US$103.9 in 2013, mainly due to valuation loss of US$220.7 million in Q4 2014 and rubble depretiation

(27) LOSS ATTRIBUTABLE TO: (28)

Non-controlling interests

0,3

(1,0)

0,7

(6,2)

(6,3)

0,9

(29)

Owners of the Company

24,0

(19,5)

23,5

(309,0)

(281,0)

103,1

Statement of Financial Position Changing US$ mn

31.12.2014 US$ mn

30.09.2014 US$ mn

31.12.2013 US$ mn

1 375,4 431,5 0,0 35,1 18,1 0,0 20,1

1 602,3 686,6 3,9 54,7 21,4 0,1 0,0

1 609,8 635,3 5,6 69,7 21,7 0,4 0,0

(226,9) (255,1) (3,9) (19,6) (3,3) (0,0) 20,1

-14% -37% -100% -36% -16% -28%

1 880,2

2 368,9

2 342,4

(488,7)

-21%

3,0 133,0 0,6 0,0 39,0 1,3 93,3

4,8 143,4 0,4 0,8 67,3 (0,1) 97,3

6,4 127,2 0,6 0,8 106,4 0,0 203,3

270,2 2 150,4

313,9 2 682,8

444,7 2 787,1

1,0 1763,4 (314,9) (159,0)

1,0 1763,4 (229,2) 149,1

1,0 1763,4 (150,5) 117,7

1 290,6

1 684,4

1 731,7

(393,8)

-23%

(8,8) 455,1 102,6 13,0

(2,4) 540,7 140,1 18,3

(2,2) 778,9 125,3 22,0

(6,4) (85,6) (37,5) (5,3)

268% (16%) (27%) (29%)

570,7

699,1

926,2

(128,4)

-18%

231,7 28,2 38,0

231,8 35,4 34,5

27,0 100,2 0,1 4,1

(0,1) (7,2) 3,5

(0%) (20%) 10%

Total current liabilities

297,9

301,7

131,4

(3,8)

-1%

(34) TOTAL LIABILITIES

859,8

998,4

1055,5

(138,7) (14%)

2 150,4

2 682,8

2 787,1

(532,4) (20%)

# (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

(35) TOTAL EQUITY AND LIABILITIES

(1,8) (38%) (10,4) (7%) 0,2 40% (0,8) (100%) (28,3) (42%) 1,4 (2229%) (4,0) (4%)

(43,7) (532,4)

-14% -20%

Comments:  Cash position remains strong at US$93.3 million in cash, cash equivalents and marketable securities as at 31 December 2014

 Gross Asset Value reduced to US$2.0 billion as at 31 December 2014 (compared to US$2.4 billion as at 31 December 2013), due to sharp valuation decreases across the portfolio owing to deteriorating macroeconomic conditions  Debt to Equity Ration is 53% (1)(2) Revaluation of IP and IPUD (3) FX loss (4) Due to the FX change (7) Botanic Garden (10) Odinburg (26) Decrease due to negative valuation and IP and IPUD

(0,0) (0%) 0,0 (85,7) 37% (308,1) (207%)

Loans and cash position as of December 31, 2014  Gross balance of the bank loan portfolio (as of December 31,2014) – US$ 686 mn  Total cash balance and deposits (as of December 31, 2014) – US$ 93,3 mn (including marketable securities)

Project

Bank

Balance as of Debt, 2014 (US$ mn)

Available (US$ mn)

Nominal Interest rate

Currency

VTB

$185

9,5%

RUB 01.04.2018

AFIMALL VTB TOTAL AFIMALL

Ozerkovskaya III (100%)

Maturity

VTB

TOTAL/AVERAGE RATE

$296

3-m Libor+5.02%

$481

6,88%

$205

3-m Libor+5.7%

$686

USD

26.01.2015

6,60%

The Company is in line with all financial covenants •

Gross Asset Value PROJECT

Bank Loan

Net Company's Share

31.12.2014

30.09.2014

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

(481)

519 21 20 12 95 5 15 2

593 38 30 17 118 8 24 2

TOTAL INVESTMENT PROPERTY:

1 375

(686)

Plaza Ic Plaza II a Plaza IV (100%) Kosinskaya Bolyshaya Pochtovaya Paveletskaya II Ruza

88 4 107 54 108 67 4

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%) Versailles (Kislovodsk)

17 12 4 14 0

TOTAL TRADING PROPERTY:

TOTAL PROPERTY PLANT AND EQUIPMENT:

48 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

(205)

133 20

689

830

88 4 107 54 108 67 4

136 12 164 107 159 104 4

431

687

2 1

4 1

17 12 4 14 0

25 18 6 21 4

133 20

143

153

143

2 011

(686)

1 325

1 739

93 (104) (24)

97 (140) (11)

1 291

1 684

LTV= 51% LTE = 53%

Market Update

Market Overview and Capital Markets RUSSIAN MACROECONIMIC OVERVIEW • Russian economic growth falls short even a 1% and based on IMF amounted at the level of 0,5% in 2014. Falling oil price, Ukraine conflict, depreciation of Rubble put pressure on Russian Economic which has already faced circle recession. • The oil price remains the biggest unknown in 2015. Oil prices went 50% down in December 2014 vs December 2013. •

Prices for imported goods will significantly increase. Inflationary pressures have largely been driven by the food sector, where prices were up by 15.4% year on year in December. In December’2014 the inflation velel reached 11,4% vs 6,5% in December 2013.

• The rouble remains the key factor to watch. At the end of December 2014 the rouble was down by 43% against the US dollar compared to September 2014 and down by 72% compared to December 2013, owing to international sanctions, perceptions of high political risk and falling oil prices. • Retail sales will continue to come under pressure, following significant pressure in 2014. The weaker rouble combined with rising inflation and falling wages decreased retail spending power. Exchange Rates Russia GDP Growth, % Y-O-Y

20 10

0.5%

100

EUR/RUB

USD/RUB

• n Q4 2014, the CBR increased the key rate up to 17% (in January’2015 - 15%, in March’2015 – 14%) pointing to the oil price downturn, toughed sanctions and the need to limit inflation / devaluation risks. Following the CBR and overall market trends, the capitalization rates have been increased for offices, prime retail and warehouse objects, respectively, setting them at 11.00%, 11.00% and 13.00%. Investment Volume, USD mn

6,5

8 000 7 000 6 000

5,3

5 000

7,1

5,8

11,00

3 000

4,1

4,0

4 000

10 8 6

2,3 1,7

2 000 1 000

7,4

4,6

0,5

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F Office

Retail

Warehouse

Other

Office

Retail

Forecast of Investment Volume in 2015 (USD mn)

-10

RUSSIAN REAL ESTATE INVESTMENT MARKET • n 2014, the total volume invested in commercial real estate in Russia was US$ 4.1 bn. The number is significantly lower than the volumes invested in 2011— 2013 (US$ 7.5—8.1 bn) and comparable to the volume during the 2010 recovery (US$ 4.0 bn)

-20 140

Oil price (Brent, US$ per barrel)

120 100

Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14

JLL

CBRE

C&W

3.0

2,5

80 60 40 20

60,12 22

Source: MED, C&W, JLL, Economist

Office and Retail Markets overview OFFICE MARKET OVERVIEW

RETAIL MARKET OVERVIEW

• 2014 marked the highest level of new construction since 2009: 1.4 mln sq m of offices were delivered in 54 office buildings. The biggest one are the President Plaza Business Center (114,695 sq m), the first phase of the business park Comcity (107,546 sq m) on the New Moscow territory and two more developments at the Moscow International Business Center Moscow City – OKO Tower (110,000 sq m) and Steel Summit (93,878 sq m).

• Quality retail construction in 2014 was at a record level in Moscow and in Russia. In 2014 a record volume of new retail spaces was delivered in Moscow. The biggest mall in Europe, AviaPark, was opened in Moscow in November. Moscow is still undersupplied with quality retail space compared to the biggest European cities. The provision of quality shopping centre retail space in Moscow is 345 sq m per 1,000 inhabitants by the end of Q4 2014.

• During 2014, asking rental rates decreased. The average asking base rent for vacant class A premises now is $620. A discount of 10-15% is possible during the negotiation process. External factors coupled with the high level of new supply has resulted in increasing pressure on rents in 2014 – the rental cost decreased on average by 22% YoY. Prime rents stood in the range of USD750–900 per sq m per year. Class A rents ranged between USD450 and USD650 and Class B+ between USD275–450 per sq m per year.

• The average rents are at USD400-1,450 per sq m per year, while the prime rents are ranging between USD2,400 and USD4,500 per sq m per year. Retailers are asking for a short term rental discount, fixing foreign currency exchange rate, or paying rent as % of turnover. Developers are ready to consider alternative commercial terms.

• A decline in demand, especially in class A resulted in the average vacancy rate increasing, from 12% at the beginning of the year to 17.2% at year-end. Office premises are available in all submarkets; however, there are areas, where the vacancy rate is much higher than average. The vacancy rate in Moscow-City has already reached 40%. 1 300

US$/psqm/pa

1 100

1 088

900 646 700 500

Key indicators

Base Rent, US$ psqmpa

807

731

509 300 2007

796

734

2008

2009

414 2010

average Class A

444 2011

466 2012

Base Rent Class A (Prime) ,US$ sqmpa

750-900

Base rent Class A, US$ sqmpa

450-650

4 500 4 000

Prime Rents, US$ psqmpa

3 500 3 500

870 770

645

935

Units

• The vacancy rate in Q4 2014 remained at the level of 1,5% 6%. The growing vacancy rate in existing shopping centers leads to high com- petition for tenants between landlords of existing and new retail spaces.

530 2013

2014

average Class B sourceC&W

Overall vacancy,% Vacancy rate, Class A, %

17,2% 28,4% - 32%

Units

Prime rate, US$ psqma (prime shopping

2,500 – 4,500

center retail gallery)

3 000 2 500

480

Key indicators

Base rent, US$ psqma

400-1,450

Vacancy rate,%

1,5% - 6,0%

2 000 1 500

23 2007

2008

2009

2010

2011

2012

2013

2014

Residential Market Overview RESIDENTIAL MARKET MOSCOW AND MOSCOW REGION

apartments

Price (all market)

residential

• MOSCOW: In 2014 in Moscow it was delivered c. 3,3 mn sqm of residential construction compared to 3,1 mn sqm in 2013. • Monthly analysis of residential areas commissioning in Moscow in 2014 revealed the maximum rate in Q4 2014 986,900 sq m. • 14 new business class residential buildings were supplied in the market in 2014. (intermarksavills) • For the twelve months 2014 it was closed 3785 transactions in the primary business class residential. The average amount of deals in the months was 315 transactions, it is 50% more than in 2013. The most active months were November and December of 2014.

• During the year the average asking price per sqm in business class residential decreased till the level of 5 100 USD. (the min amount was in 2009 with the level of 7 750 USD). Ruble prices showed predictable growth, more than 15 %. In the end of 2014 the ruble price reached 290 000 sqm per sqm. • MOSCOW REGION: By the end of 2014 in the Moscow region there were 982 new buildings.

Odinburg

• The average price per sqm in Moscow region amounted at the level of 81 550 rub ( 1,462 USD). By the year end comfort class apartmaents reached 83 750 rub psqm, business – 189 450 rub psqm. (Blackwood). • The average price per sqm in Odintsovo region is c. 96,800 rub.

Asking average price by regions, rub per sqm