RESEARCH INVESTMENT MARKET

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1 RESEARCH INVESTMENT 215

2 INVESTMENT 215 INVESTMENT AVERAGE TRANSACTION VOLUME The average transaction has bottomed to the minimum for the last 6 years reaching $81 million. Such low level is due to a decrease in the price of assets as well as the unavailability of debt financing for investors, necessary for large acquisitions. Thus, more transactions less than $1 million were closed in 215. $ mln $ $2.7 bln INVESTMENT TRASACTION VOLUME IN 215 The 215 volume of commercial real estate sale transactions has reached the lowest since 26, decreased by 27% compared to 214. The total volume of transactions amounted to $2.7 billion from January to December % % % 34% 22% 83% 17% % % 14% 53% 86% % 39% 2% % 2.67 TRANSACTION VOLUME DYNAMICS IN TERMS OF THE CAPITAL INVESTED Foreign investors Russian Investors The decline in oil prices and the subsequent Russian ruble weakening had a significant impact on investor sentiment in 215. On the one hand, the price of the assets significantly reduced and became affordable for investors, however on the other hand, the conversion of the commercial real estate market to ruble terms made the rental income less attractive. Though the most quality assets retain foreign exchange pricing today. Capital raising markets still remain closed for Russian companies combined with the introduction of sanctions restrictions in 214, also reflecting the low activity of investors. Throughout the year, in addition to the familiar US and European investors, the representatives of the Middle East and Asia started to heighten interest to Russian assets, but not a single transaction was closed with their participation in 215. Asian investors are interested not only in high-quality stabilized commercial properties, but also the market of residential real estate segment as well as infrastructure projects. The volume of transactions with the participation of foreign capital amounted to $54 million following the results of 215, the lowest level since 29. KEY INVESTMENT TRANSACTION IN 215 RUR 75 Modniy Sezon retail gallery $ mln 45 7 PNK-Chekhov SC Vodoley Gallery BC Metropolis (bldg. 1 and 3) BC Mercedes-Benz Plaza BC Zarechye BC Bakhrushin House SC Solnechniy Ray Four Seasons Sheraton Palace Hotel Riga Mall Logopark Nikolskoe January February March April May June July August September October November December 3 15 Source: Knight Frank Research, 216 RUR/USD Transaction volume

3 INVESTMENT 215 Despite the clearly marked buyer's market, investors face a deficit of high-quality assets. The instability of rental income due to declining rental rates and the desire of tenants to renegotiate the lease terms, is a barrier to potential investors who explore the market in terms of stabilized assets. Contrary to expectations, in 215 there were only a few transactions with the transfer of ownership to the banks provided credit due to the failure of landlords to fulfill their obligations to pay the loan debt. However, due to the further decline of the market such cases may become more common in 216. INVESTMENT TRANSACTION VOLUME DYNAMICS IN TERMS OF THE SEGMENT EUROPEAN COUNTRIES INVESTMENT VOLUME COMPARISON UK Germany France Sweden Netherlands Spain Italy Norway Iceland Denmark Austria Poland Belgium Switzerland Russia Offices Warehouses Hotel Retail Other % +56% -3% -1% +35% -22% -27% -11% +35% +7% +66% +114% Nat capital outflow +16% +3% +3% Change compared to % EUROPEAN CITIES INVESTMENT VOLUME COMPARISON $2.13 bln -27% Investment volume Change compared to 214 STOCKHOLM $5.82 bln -12% LONDON $54.77 bln +42% AMSTERDAM $8.48 bln +59% BERLIN $12.4 bln +62% MOSCOW $2.13 bln -27% MADRID $6.41 bln +38% PARIS $24.53 bln +16% FRANKFURT $9.46 bln +27% VEIN $3.61 bln +1% Source: Knight Frank Research, 216

4 INVESTMENT 215 OFFICE SALE PRICE Class A 3, 5, $/sq m 15, 3, rub./sq m Class B 1,5 3,2 $/sq m 1, 2, rub./sq m PRIME YIELD Class A % Class B % PRIME OFFICE YIELDS COMPARISON London (West End) Paris London (City) Shanghai Warsaw Beijing Bucharest 3.5% 3.5% 4.% 5.9% 6.% 6.3% 7.5% % OFFICE SEGMENT INVESTMENT VOLUMES AND GDP GROWTH DYNAMICS mln $ AVERAGE TRANSACTION VOLUME DYNAMICS Office market investment volume, GDP growth, % in office segment % RENTAL RATES IN THE MAIN BUSINESS DISTRICTS OF MOSCOW Kremlin district Central business district (Garden Ring) Paveletsky business district Belorusskiy business district $ ,5 26,55 45, 59 $ 9 2, 4, Leningradskoe direction -City South-Western direction 6 $ 83 23, 3, 8 $ 1,2 21, 28, 56 $ 7 2, 32, Rental rates 56 $ 7 2, 32, $/sq m/year (triple net) rub./sq m/year (triple net) Source: Knight Frank Research, 216

5 INVESTMENT 215 PRIME YIELD % 11.% THE DYNAMICS OF INVESTMENT IN RETAIL OF RUSSIA AND CONSUMER CONFIDENCE INDEX* % PRIME YIELDS FOR SHOPPING CENTRES IN THE WORLD RETAIL 4.5 % % 2.3% 4.% 5.7% Retail investment volume Consumer Confidence Index (CCI*) * CCI is an indicator designed to measure consumer confidence, which is defined as the degree of optimism about the state of the economy that people express through their consumption and savings. Determined on the basis of quarterly surveys by Rosstat in all regions of Russia, CCI is the relative value of the number of positive and negative responses from the total number. Hong Kong Paris London Warsaw Singapore Milan Beijing Sydney Shanghai Mumbai % 5.8% 5.75% 6.2% 6.% -15 AVERAGE TRANSACTION VOLUME DYNAMICS mln $ 3 25 in retail segment RENTAL RATES IN SHOPPING CENTERS OF MOSCOW Goods for children (1, 2, sq m) 2 4 $/sq m/year; 6, 12, rub./sq m/year; 8 15% White & Brown (1,5 4, sq m) Entertaiment (1, 4, sq m) 1 2 $/sq m/year; 6, rub./sq m/year; 7 12% $/sq m/year; 4, 9, rub./sq m/year; 2.5 4% Sporting goods (1, 6, sq m) 15 3 $/sq m/year; 1, rub./sq m/year; 8 1% Footwear (5 3 sq m) 9 2, 5 $/sq m/year; 35, rub./sq m/year; 1 13% Hypermarket (>7, sq m) 1 25 $/sq m/year; 1, rub./sq m/year; 1.5 4% Apparels (4 1 sq m) 6 2,2 $/sq m/year; 3, rub./sq m/year; 4 12% DIY (>5, sq m) 15 3 $/sq m/year; 4 6, rub./sq m/year; 4 9% Source: Knight Frank Research, 216 * Commercial terms discussed during negotiation process

6 INVESTMENT 215 WAREHOUSE SALE PRICE 4, 45, rub./sq m PRIME YIELD % PRIME INDUSTRIAL YIELDS AND RENTAL RATES COMPARISON $/sq m/year London 4.25% 6.% Geneva 5.75% Hamburg 5.% 14 Oslo 5.5% Amsterdam Rental rate Prime yield WEST 7.% Helsinki 7.% Warsaw NORTH- WEST 7.25% 9.% % Lisbon Bucharest NORTH SOUTH-WEST INDUSTRIAL SEGMENT INVESTMENT VOLUME DYNAMICS 1.4 RENTAL RATES AND VACANT SPACE IN TERMS OF DIRECTION 4, 5, 4,5 5, 4,5 5, AVERAGE TRANSACTION VOLUME DYNAMICS mln $ MKAD SOUTH NORTH-EAST 4, 5, 4,4 5, 4, 4,5 3, 3,5 3,5 4,4 EAST SOUTH-EAST in industrial segment Vacancy rate 4, 5, 5% 5 1% 1 15% over 15% Asking rental rates, rub./sq m/year Source: Knight Frank Research, 216

7 ALL REAL ESTATE HIGHLIGHTS OFFICES RESIDENTIAL CITY COUNTRY INTERNATIONAL RETAIL SHOPPING CENTRES STREET RETAIL LOGISTIC, WAREHOUSES & LAND Professional services Selecting a development site Research Strategic consulting Leasing & Sales Tenant & Buyer representation Marketing Promotion Property Management Valuation Investment & Sales Knight Frank LLP 216 This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, view and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank. BC Lighthouse 26 Valovaya Str , +7 (495) 981 KnightFrank.ru