H1 2010 investor presentation

AFI DEVELOPMENT PL INVESTORS PRESENTA AFI DEVELOPMENT PLC INVESTORS PRESENTATION

AFI DEVELOPMENT PLC INVESTORS PRESENTATION 1

Outline 

Disclaimer



Overview



Strategy and key competencies



Holding structure update



Market update



Operational update



Financial update



Outlook

2

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 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.

3

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



4

Total space to be delivered within the next 5-7 years – over 3 mln sqm

Market Cap:

US$ 1.1 bln (as of Dec. 1, 2010), premium LSE listing

NAV

US$ 1.65 bln (as of September 30, 2010)

Projects delivered

8 with total area of c. 193,000 sqm

On-going projects

5 with total area of c. 400,000 sqm

Land bank:

19 projects with total area of over 3 mln sqm of future construction including 3 projects to be started within the next 18 months

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

Holding structure update AFI Investments 54%

Free float 36%

Nirro Group 10% 

Issued shares public during IPO in 2007 on LSE



Achieved a Premium Listing on LSE in Summer 2010

6

MARKET UPDATE

7

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



Developing real estate market institutionalism



Low competition level in real estate development

Opportunities 



8

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

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

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

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 estate values 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)

 



9

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

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. 40-50%)



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

2 2 1 1 1 1

250 000 750 500 250 000 750 500 250

000 000 000 000 000 000 000 000 000 0

2 100 000

Office Supply and Vacancy 1 800 000 1 300 000 1 100 000 850 000 650 000

2005

2006

total supply

2007

2008

vacancy

2009

21,0% 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

sqm

Moscow office market

USD volume

500 250 000 750 500 250 000 750 500 250 000 750 500 250 0

2 719 2 027

1 730 1 252

927 555

2005

2006

2007

2008

Investment deal volume

2009

13,5% 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%

2010

yields Source: AFID, JLL, C&W

11

Class A rental rates in Moscow 2 000 1 500 1 000 800

1 000

1 400 800

750

600

850 650

620

2006

rental rate

CBD vacancy

Transaction volumes and yields

200 000 800 600 400 200 000 800 600 400 200 0

2005

2010

Source: AFID, JLL, C&W 3 3 3 2 2 2 2 1 1 1 1

2 2 1 1 1 1 1

2007

2008

2009

2010

rental rate CBD prime Source: AFID, JLL, C&W

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

Moscow retail market Moscow retail supply and vacancy

3 130 000

3 000 000 sqm

2 500 000

2 200 000

2 000 000 1 500 000 1 000 000

1 000 000

1 200 000

1 500 000

1 800 000

500 000 0 2005

2006

2007

2008

2009

5,5% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0%

2010

Quality retail rents in Moscow

USD psqm pa

3 500 000

2 2 2 2 2 1 1 1

900 700 500 300 100 900 700 500

USD volume

2 1 1 1 1 1

000 800 600 400 200 000 800

vacancy

1 689 1 527

177 30

1

2

3

4

Investment deals volume 12

5

2 200

2007 2008 2010 Source: AFID,2009 JLL, C&W Source: AFID, JLL, C&W

13,00%

Current market drivers

12,00%



Quality retail rents: US$ 2,200 – US$ 2,400 per sqm per annum



Yields: 10% – 11%



Vacancy: 2% - 4%

10,00%

600 400 200 0

2006

2 400

14,00%

11,00%

780

2 400

2 200

rental rate

Moscow retail transaction volumes and yields 1 554

2 500

2005

Source: AFID, JLL, C&W total area

2 700

9,00% 8,00%

6

yields Source: AFID, JLL, C&W

Operational update 

Opening of Mall of Russia scheduled for December 2010. Investment contract with the City was extended to March 2012. 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 Q3 2011 Negotiations with large tenant for Ozerkovskaya III at advanced stage



Paveletskaya project is on schedule to be completed Q4 2010



Kalinina project re-geared, planned delivery end 2011



Development to be started (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, 2010

13

on

another

3

projects

Portfolio overview Current MV in USD

800 000 000

AFID Active Pipeline (USD)

AFID Property Portfolio (Current MV in USD)

600 000 000

157,500,000\ 6% 885,609,845 37%

400 000 000 200 000 000 0

399,130,000 17%

retail

office

resi

hotel

0

142 300 000

282 460 000

0

Under development

657 300 000

94 000 000

0

9 487 000

Delivered and in the portfolio

16 545 000

311 585 000

56 092 840

71 000 000

Next for development

GLA SQM

commercial space sold resi space sold resi space unsold Delivered commercial AFIMALL CITY Under development Land bank

189,087,000 8%

571,700,000 24%



Current MV of portfolio – US$ 2.1 bln

600 000



Total space of portfolio – 3 mln sqm

500 000



Current MV of active projects – US$ 1.6 bln

400 000



Total space of active projects – over 1 mln sqm

700 000

AFID Active Pipeline (GLA SQM)

300 000 100 000 0

Next for development Under development Delivered and in the portfolio

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” 

200 000

14

142,993,824 6% 47,415,000 2%

retail

office

resi

hotel

0

101 501

580 000

0

121 962

39 729

0

12 665

5 008

129 101

17 492

21 431

Completed Projects (1) Four Winds

Four Winds

Aquamarine I,II

Aquamarine II

residential

office

office

residential

Status

1000 sqm unsold

Status

Completed Completed GSA, sqm GLA retail, sqm

GBA, sqm

28,309

GLA office, sqm

17,556

18,272

Sold

Completed

2005/2007

GBA, sqm

14,000/12,800

Sold

5,008

Status

2200 sqm unsold

3,416

Sale price, mln

Completed

Q4 2008

GBA, sqm

37,296

GSA, sqm

16,711

2005/2008 $54mln/$207 mln

$10,000 NOI, mln pa Average net rent, psqm pa

15

Status

H2 2008

H2 2008

GLA retail, sqm Average price psqm

50% owned

$30mln $1,340

Price psqm of GBA

$3860/$16,190

Average price psqm

$13,000

Completed Projects (2) Aquamarine II

Plaza SPA

H2O

Berezhkovskaya

hotel

hotel in Kislovodsk

office

office

Status

Completed Put into operation Business class GBA, sqm

100% owned Q4 2009 Nov 2009

4 stars 16,372

Status

50% owned

Status

Completed

2006

H2O

Put into operation

2006

Office

Resort hotel GBA, sqm

RevPar 16

159 $132

# of keys RevPar

2009 B

Status

Completed Office

75% owned 2006 B+

GBA, sqm

10,698

GBA, sqm

11,612

GLA, sqm

8,996

GLA, sqm

10,136

3 stars 25,000 NOI

# of keys

100% owned

$2.9mln

NOI

$3.8mln

2 $237

Average net rent, psqm pa

$290

Average net rent, psqm pa

$400

Development: Mall of Russia

AFIMALL CITY

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 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$ 941.5 (for 100% equity)*

*Valuation done by JLL , Dec 31, 2009

17

 Opening of the Mall scheduled for December 2010  70% 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

Moscow City

18

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  Nearly 200 stores, 700-800 underground parking slots and various entertainment facilities GBA

106,137 sqm

GLA

36,303 sqm

Delivery Project ownership Construction completion Forecast NOI MV upon completion Valuation done by JLL, Dec 31, 2009

19

Q4 2013 100% In progress $US 55.9 mln* $US 421.3 mln*

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)

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  First two phases of office development were completed, rented out and successfully sold in 2005 and 2008 GBA

78,647 sqm

GLA

51,388 sqm

Delivery

Q3 2011

Project ownership

50%

Forecast NOI (100%)

US$ 27.6 mln*

MV upon completion (100%)

US$ 261.2 mln*

Valuation done by JLL, Dec 31, 2009

20

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

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  Paveletskaya I is the first phase of the Paveletskaya development and envisages a reconstruction of an ex-printing house facility into an office center GBA

16,512 sqm

GLA

14,035 sqm

Current status

Delivery

Q4 2010

 Reconstruction is 95% completed

Project ownership

100%

Forecast NOI

US$ 5.1 mln*

MV upon completion

US$ 34.9 mln*

Valuation done by JLL, Dec 31, 2009

21

 Commissioning is scheduled end of December 2010  Negotiations with potential tenants are in progress  Possibility to let the building to a single anchor tenant

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

Current status

GLA

175 keys

Delivery

Q3 2011

 Tender for general contractor completed with full development budget approved (c. US$20 mln)

Project ownership

100%

Stabilized ADR

US$ 300

Forecast NOI

US$ 4.1 mln*

MV upon completion

US$ 26 mln*

Valuation done by JLL, Dec 31, 2009

22

 Subsidized loan from municipality at 6.25% in RUR secured for the full development budget

Next for development Brestskaya

GBA

51,263 sqm

GSA (resi)

25,538 sqm

GLA (retail)

1,274 sqm

Delivery

2013

Project ownership

100%

Forecast sale price psqm

$10,000

Forecast NOI (retail)

$1.5 mln

Current status: Design works started, construction is planned for Q3 2011 23

Kunzevo

Bolshaya Pochtovaya

GBA

Over 1 mln sqm

GBA

143,000 sqm

Delivery

First phase c. 300K sqm

GSA (resi)

80,000 sqm

Land plot size

40 Ha

Delivery

Q3 2011

Project ownership

100%

Project ownership

100%

Forecast sale price psqm

$4,000

Forecast sale price psqm

$7,000

Current status: General concept approval with the city authorities. Looking for coinvestor All financials are AFID’s preliminary estimates

Current status: Redesign to residential

Map of active projects in Moscow Tverskaya Mall

Mall of Russia

Brestskaya Kuntsevo

Pochtovaya Paveletskaya Ozerkovskaya

24

Land bank Project

Kosinskaya (existing building)

Type

Land (Ha)

office

10.3

GBA upon completion (sqm)

B/S value June 30, 2010 (AFID share)

MV upon completion ($)

mixed use

1.0

111,770 134,712

Plaza II

office

0.6

55,030

60,238,053

253,865,450

Plaza IIa

office

0.2

10,500

6,016,609

34,195,025

Plaza IV

hotel and office

1.3

100,522,320

624,083,926

1,966,882

2,380,000

Brestskaya 50/2 (Plaza Ic, Ia, Ib)

Ozerkovsky per., 3 (future phaze IV)

office

0.0

132,500 1,864

144,740,438

240,380,533

133,627,424

602,480,000

Serebryakova

residential

3.2

246,700

67,596,618

443,833,042

Odintsovo

residential

30.0

729,420

106,576,537

1,230,087,950

8,224,844

92,400,000

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

Park Plaza Kislovodsk

hotel resort

5.3

47,683

Versailles project in Kislovodsk

hotel resort

0.6

11,762

9,591,744

29,000,000

Old lake - Kislovodsk

hotel resort

20.8

51,625

9,225,502

129,074,000

Kuntsevo

hotel resort

50.7

1,000,000

77,461,937

1,505,037,509

mixed use

387.0

n/a

4,138,360

273,693,000

hotel resort

3.7

n/a

1,823,161

1,810,000

 Brestskaya 50/2

retail

7.7

n/a

2,957,041

2,925,000

 Kuntzevo

Bolshaya Pochtovaya

residential

4.5

1,113,157,019

Boryspol (Ukraine)

130.7

143,000 n/a

206,149,456

residential

11,723,304

11,730,000

4.6

n/a

5,166,975

5,170,000

662.2

2,958,381

Ruza St. Petersburg Volgograd

Zaporozhie (Ukraine) TOTAL

25

office

957,854,385

6,595,302,454

Planned next

for

development

 Bolshaya Pochtovaya *valuation done by JLL, Dec 31, 2010, includes only project ownership of AFID

FINANCIAL UPDATE

26

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 Project

Total facility

Drawn/Balance Outstanding as of June 30, 2010

Available for investment as of June 30, 2010

Mall of Russia

277.9

228.7

49.2

Sberbank

Tverskaya Mall

280.0

78.3

201.7

Sberbank

Ozerkovskaya III

74.0

7.8

66.1

Sberbank

Kalinina hotel

20.0

0

20.0

Four Winds

75.0

74.1

0.0

Deutsche Bank

Corporate

60.0

10.0

0.0

Morgan Stanley

Corporate

20.1

7.8

0.0

807.0

406.7

337.0

Lending bank VTB

MDM Bank

Total

27

Balance sheet Balance sheet as at 30.09.2010 USD'th Narrative Total non-current assets Total current assets Total assets Retained earnings Total equity Minority interest Total non-current liabilities Total current liabilities Total liabilities Total equity and liabilities

US$ '000 Balance as at

Balance as at

Balance as at

Balance as at

30/09/2010

30/06/2010

31/03/2009

31/12/2009

Change 9m 2010 abs

1,753,428 45,282 594,214 (131,971) 2,347,641 (86,689)

%%

1,798,709 462,243 2,260,952

1,739,351 474,740 2,214,092

1,812,779 525,117 2,337,896

3% (22%) (4% )

26,933

17,953

72,594

80,949

(54,017)

(67% )

1,649,786 3,031

1,617,922 2,810

1,720,084 2,719

1,702,661 2,867

(52,874) 164

(3% ) 6%

423,018 185,118 611,167

396,727 196,632 596,169

397,475 217,619 617,812

366,688 275,425 644,980

56,330 (90,307) (33,813)

15% (0) (5% )

2,260,952

2,214,092

2,337,896

2,347,641

(86,688)

(4% )



Non-current assets remained stable throughout Q3 2010. 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 Q3 2010 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 Q3 2010

28

Income statement P&L as at 30 September 2010 USD'th

US$ '000 9m 2010

Q3 2010

9m 2009

3q 2009

Narrative Gross operating profit

16,768

4,989

20,308

Net valuation (loss)/gain

(47,874)

(0)

Impairement loss for trading property

(14,133)

Results from operating activities

(3,540)

(17% )

262,316

0 (310,190)

(118%)

-

(16,048)

-

(45,239)

4,989

266,531

Net finance income/(costs)

(4,571)

3,290

18,495

Profit before income tax

(49,810)

8,279

285,026

(4,094)

845

(67,930)

(53,904)

9,124

217,095

Income tax expense Profit for the period

5,637

Change 9m 2010 / 9m 2009 abs %%

1,915

(12%)

5,569 (311,770)

(117%)

2,186

(23,066)

(125%)

7,756 (334,835)

(117% )

(5,810)

63,836

(94%)

1,946 (270,999)

(125% )



The Company recorded US$ 54 mln loss in for 9m 2010 compared to US$ 217 mln profit for 9m 2009 . The loss in 2010 is due to the Company’s conservative approach to valuation in Q2 2010 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 2009.



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 2009. 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 2009.

29

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

-520

-17,392

Net decrease in cash and cash equivalents

-100,558

-38,652

Cash and cash equivalents at 30 Sept. 2010

110,272

164,226

Effect of exchange rate fluctuations



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

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