AFI DEVELOPMENT PLC INVESTORS PRESENTATION

Transcription

1 AFI DEVELOPMENT PLC INVESTORS PRESENTATION AFI DEVELOPMENT PL INVESTORS PRESENTA AFI DEVELOPMENT PLC INVESTORS PRESENTATION 1

2 Outline Disclaimer Overview Strategy and key competencies Holding structure update Market update Operational update Financial update Outlook 2

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 forwardlooking, 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 statementsare 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. 3

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 (June 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 4 Market Cap: NAV Projects delivered On-going projects Land bank: US$ 1.1 bln (as of Dec. 1, 2010), premium LSE listing US$ 1.65 bln (as of September 30, 2010) 8 with total area of c. 193,000 sqm 5 with total area of c. 400,000 sqm 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 bestin-class, well-balanced property portfolio Commitment to the highest standards of corporate governance, disclosure and operational predictability 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 5

6 Holding structure update AFI Investments 54% Free float 36% Issued shares public during IPO in 2007 on LSE Nirro Group 10% Achieved a Premium Listing on LSE in Summer

7 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 Weaknesses High entry barriers caused by bureaucracy (during the permitting process) and restrictions for new development High costs of borrowing and uneasy process of securing project level debt financing Lack of professionalism among the developers Developing real estate market institutionalism Low competition level in real estate development 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 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 8

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 estatevalues 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 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 (15-20% 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 9

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 %) 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 10

11 Moscow office market sqm Office Supply and Vacancy ,0% 19,5% 18,0% 16,5% 15,0% 13,5% 12,0% 10,5% 9,0% 7,5% 6,0% 4,5% 3,0% 1,5% 0,0% USD/psqm/pa Class A rental rates in Moscow total supply vacancy CBD vacancy rental rate rental rate CBD prime Source: AFID, JLL, C&W Source: AFID, JLL, C&W USD volume Transaction volumes and yields ,5% 13,0% 12,5% 12,0% 11,5% 11,0% 10,5% 10,0% 9,5% 9,0% 8,5% 8,0% 7,5% 7,0% Current market drivers Central Class A rents: US$ 850 US$ 1,000 per sqm per annum Class A office yields: 9.5% 10.5% Class A CBD vacancy: 3% - 5% Investment volume CBD prime: minimum Investment deal volume yields Source: AFID, JLL, C&W 11

12 Moscow retail market sqm USD volume Moscow retail supply and vacancy total area vacancy 5,5% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% Source: AFID, JLL, C&W Moscow retail transaction volumes and yields ,00% 13,00% 12,00% 11,00% 10,00% 9,00% 8,00% USD psqm pa Quality retail rents in Moscow Source: 2008 AFID, 2009 JLL, C&W 2010 rental rate 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 Investment deals volume yields Source: AFID, JLL, C&W

13 Operational update Opening of Mall of Russia scheduled for December Investment contract with the City was extended to March Contracts signed for 70% of shops. New name for the Mall is selected and registered: AFIMALL CITY. Construction of Ozerkovskaya III is on schedule to be completed Q Negotiations with large tenant for Ozerkovskaya III at advanced stage Paveletskaya project is on schedule to be completed Q 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,

14 Portfolio overview Current MV in USD AFID Active Pipeline (USD) retail office resi hotel Next for development Under development Delivered and in the portfolio GLA SQM AFID Active Pipeline (GLA SQM) retail office resi hotel Next for development Under development Delivered and in the portfolio ,087,000 8% AFID Property Portfolio (Current MV in USD) 885,609,845 37% 157,500,000\ 6% 142,993,824 6% 47,415,000 2% 571,700,000 24% 399,130,000 17% Current MV of portfolio US$ 2.1 bln Total space of portfolio 3 mln sqm commercial space sold resi space sold resi space unsold Delivered commercial AFIMALL CITY Under development Land bank 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 14

15 Completed Projects (1) Four Winds residential Four Winds office Aquamarine I,II office Aquamarine II residential Status 1000 sqm unsold Completed H GSA, sqm 18,272 GLA retail, sqm 5,008 Average price psqm $10,000 Status 50% owned Completed H GBA, sqm 28,309 GLA office, sqm 17,556 GLA retail, sqm 3,416 NOI, mln pa Average net rent, psqm pa $30mln $1,340 Status Sold Completed 2005/2007 GBA, sqm 14,000/12,800 Sold 2005/2008 Sale price, mln Price psqm of GBA $54mln/$207 mln $3860/$16,190 Status 2200 sqm unsold Completed Q GBA, sqm 37,296 GSA, sqm 16,711 Average price psqm $13,000 15

16 Completed Projects (2) Aquamarine II hotel Plaza SPA hotel in Kislovodsk H2O office Berezhkovskaya office Status 100% owned Status 50% owned Status 100% owned Status 75% owned Completed Q Completed 2006 H2O 2009 Completed 2006 Put into operation Business class Nov stars GBA, sqm 16,372 # of keys 159 RevPar $132 Put into operation Resort hotel stars GBA, sqm 25,000 # of keys 2 RevPar $237 Office B GBA, sqm 10,698 GLA, sqm 8,996 NOI Average net rent, psqm pa $2.9mln $290 Office B+ GBA, sqm 11,612 GLA, sqm 10,136 NOI Average net rent, psqm pa $3.8mln $400 16

17 Development: Mall of Russia AFIMALL CITY GBA 179,423 sqm GLA c.114,000 sqm Delivery December 2010 Project ownership 75% (100% of cost) Forecast NOI US$ 120 mln (annualized) MV upon completion US$ (for 100% equity)* 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 over 350 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 December % 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 *Valuation done by JLL, Dec 31,

18 18 Moscow City

19 Development: Tverskaya Mall 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 GBA 106,137 sqm GLA 36,303 sqm Delivery Q Project ownership 100% Construction completion In progress Forecast NOI $US 55.9 mln* MV upon completion $US mln* Valuation done by JLL, Dec 31, 2009 Nearly 200 stores, 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 Negotiations with a new general contractor are ongoing (to be finalized before year end) 19

20 Development: Ozerkovskaya III 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 GBA GLA 78,647 sqm 51,388 sqm Delivery Q Project ownership 50% Forecast NOI (100%) MV upon completion (100%) Valuation done by JLL, Dec 31, 2009 US$ 27.6 mln* US$ mln* 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 20

21 Development: Pavelezkaya I 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 GBA GLA 16,512 sqm 14,035 sqm 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 Delivery Q Project ownership 100% Forecast NOI US$ 5.1 mln* MV upon completion US$ 34.9 mln* Valuation done by JLL, Dec 31, 2009 Reconstruction is 95% completed Commissioning is scheduled end of December 2010 Negotiations with potential tenants are in progress Possibility to let the building to a single anchor tenant 21

22 Development: Kalinina Hotel 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 GBA 12,665 sqm GLA 175 keys Delivery Q Project ownership 100% Stabilized ADR US$ 300 Forecast NOI US$ 4.1 mln* Current status Tender for general contractor completed with full development budget approved (c. US$20 mln) Subsidized loan from municipality at 6.25% in RUR secured for the full development budget MV upon completion US$ 26 mln* Valuation done by JLL, Dec 31,

23 Next for development Brestskaya Kunzevo Bolshaya Pochtovaya GBA GSA (resi) GLA (retail) Delivery ,263 sqm 25,538 sqm 1,274 sqm Project ownership 100% Forecast sale price psqm Forecast NOI (retail) $10,000 $1.5 mln Current status: Design works started, construction is planned for Q GBA Delivery Land plot size Over 1 mln sqm First phase c. 300K sqm 40 Ha Project ownership 100% Forecast sale price psqm $4,000 Current status: General concept approval with the city authorities. Looking for coinvestor GBA GSA (resi) 143,000 sqm 80,000 sqm Delivery Q Project ownership 100% Forecast sale price psqm $7,000 Current status: Redesign to residential 23 All financials are AFID s preliminary estimates

24 Map of active projects in Moscow Mall of Russia Tverskaya Mall Kuntsevo Brestskaya Paveletskaya Pochtovaya Ozerkovskaya 24

25 Land bank Project Type Land (Ha) GBA upon completion (sqm) B/S value June 30, 2010 (AFID share) MV upon completion ($) Kosinskaya (existing building) office , ,740, ,380,533 Brestskaya 50/2 (Plaza Ic, Ia, Ib) mixed use , ,627, ,480,000 Plaza II office ,030 60,238, ,865,450 Plaza IIa office ,500 6,016,609 34,195,025 Plaza IV Ozerkovsky per., 3 (future phaze IV) hotel and office 1.3 office ,500 1, ,522, ,083,926 1,966,882 2,380,000 Serebryakova residential ,700 67,596, ,833,042 Odintsovo residential , ,576,537 1,230,087,950 Park Plaza Kislovodsk hotel resort ,683 8,224,844 92,400,000 Versailles project in Kislovodsk hotel resort ,762 9,591,744 29,000,000 Old lake - Kislovodsk hotel resort ,625 9,225, ,074,000 Kuntsevo hotel resort ,000,000 77,461,937 1,505,037,509 Ruza mixed use n/a 4,138, ,693,000 St. Petersburg hotel resort 3.7 n/a 1,823,161 1,810,000 Volgograd retail 7.7 n/a 2,957,041 2,925,000 Bolshaya Pochtovaya residential , ,149,456 1,113,157,019 Boryspol (Ukraine) residential n/a 11,723,304 11,730,000 Zaporozhie (Ukraine) office 4.6 n/a 5,166,975 5,170,000 TOTAL ,958, ,854,385 6,595,302,454 Extensive land bank Over 650 Ha of land Total future area c. 3 mln sqm (commercial/residential % 60/40) MV when completed over US$ 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 *valuation done by JLL, Dec 31, 2010, includes only project ownership of AFID 25

26 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 In $USD Lending bank Project Total facility Drawn/Balance Outstanding as of June 30, 2010 Available for investment as of June 30, 2010 VTB Mall of Russia Sberbank Tverskaya Mall Sberbank Ozerkovskaya III Sberbank Kalinina hotel MDM Bank Four Winds Deutsche Bank Corporate Morgan Stanley Corporate Total

28 Balance sheet Balance sheet as at US$ '000 USD'th Balance as at Balance as at Balance as at Balance as at Change 9m 2010 Narrative 30/09/ /06/ /03/ /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, , , ,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, % Total non-current liabilities 423, , , ,688 56,330 15% Total current liabilities 185, , , ,425 (90,307) (0) Total liabilities 611, , , ,980 (33,813) (5%) Non-current assets remained stable throughout Q 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 Q 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 Q Total equity and liabilities 2,260,952 2,214,092 2,337,896 2,347,641 (86,688) (4%)

29 Income statement The Company recorded US$ 54 mln loss in for 9m 2010 compared to US$ 217 mln profit for 9m The loss in 2010 is due to the Company s conservative approach to valuation in Q 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 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 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$1.9 million in the third quarter of P&L as at 30 September 2010 US$ '000 Change 9m 2010 / USD'th 9m 2010 Q m q m 2009 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, ,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, ,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, ,095 1,946 (270,999) (125%)

30 Cash flow 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 ,392 Net decrease in cash and cash equivalents -100,558-38,652 Cash and cash equivalents at 30 Sept , ,226 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 30

31 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 31