strictly confidential for addressee only valuation … · 2014. 3. 30. · a proposal for valuation...

MARCH 17, 2014

STRICTLY CONFIDENTIAL FOR ADDRESSEE ONLY

VALUATION REPORT #12-MOSC-900001/1

AFI MALL, LOCATED AT:

2 PRESNENSKAYA EMB., MOSCOW

PREPARED FOR AFI DEVELOPMENT PLC

DATE OF VALUATION DECEMBER 31, 2013

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VALUATION REPORT #12-MOSC-900001/1 PREPARED FOR AFI DEVELOPMENT PLC

AFI MALL, LOCATED AT: 2 PRESNENSKAYA EMBANKMENT, MOSCOW, AS AT DECEMBER 31, 2013

VALUATION & ADVISORY CUSHMAN & WAKEFIELD 2

TABLE OF CONTENTS

EXECUTIVE SUMMARY 41 INSTRUCTIONS 6

2 BACKGROUND TO THE VALUATION 6

3 BASES OF VALUATION 7

4 ASSUMPTIONS, SPECIAL ASSUMPTIONS, DEPARTURES AND RESERVATIONS 7

5 INSPECTION 7

6 CONFLICTS OF INTEREST 8

7 SOURCES OF INFORMATION 8

8 GENERAL COMMENT 8

9 VALUATION 8

10 CONFIDENTIALITY 9

11 DISCLOSURE AND PUBLICATION 9

B PROPERTY REPORT 101 LOCATION/SITUATION 10

2 DESCRIPTION 14

3 ACCOMMODATION 15

4 STRUCTURAL CONDITION AND REPAIR 16

5 SITE 16

6 ENVIRONMENTAL CONSIDERATIONS 16

7 ZONING AND PERMITTED USES 16

8 TITLE 16

9 TAXES 17

10 TENANCIES 17

11 NON-RECOVERABLE AND OPERATING EXPENSES 19

12 MARKET OVERVIEW 21

MACROECONOMIC OVERVIEW 21

CAPITAL MARKETS 23

RETAIL MARKET 24

OFFICE MARKET 32

MOSCOW MAIN MARKET INDICATORS 36

13 HIGHEST AND BEST USE ANALYSIS 38

14 VALUATION METHODOLOGY 38

15 VALUATION COMMENTARY AND ASSUMPTIONS 40

16 CONCLUSIONS AND RECONCILIATION 51

17 MARKETABILITY 52

APPENDICES 53APPENDIX I VALUATION CALCULATIONS 53

APPENDIX II PRINCIPAL TERMS AND CONDITIONS OF APPOINTMENT AS VALUERS 55

APPENDIX III GENERAL VALUATION PRINCIPLES 61

APPENDIX IV LICENSES AND INSURANCE 66

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APPENDIX V INFORMATION RECEIVED FROM THE CLIENT 70

APPENDIX VI TYPICAL FLOOR LAYOUT 71

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EXECUTIVE SUMMARY

AFI MALL, 2 PRESNENSKAYA EMB., MOSCOWValuation agreement: #12-MOSC-900001 dated November 26, 2012

Date of the valuation December 31, 2013

Date of the report March 17, 2014

Period of valuation process January – February 2014

The name and the address of the Client

AFI DEVELOPMENT PLC represented by FUAMARI SECRETARIAL LIMITED

Legal address: Spiru Arause, 165, LORDOS WATERFRONT BUILDING, 5 floor, office 505, 3035, Limassol, Cyprus Postal address: Spiru Arause, 165, LORDOS WATERFRONT BUILDING, 5 floor, office 505, 3035, Limassol, Cyprus OGRN – HE 118198 INN – 12396 KPP – 774487001 Bank Details: BIK – 0445 25 225 C/A / K/A – 3010181040000000025 OKPO Code - 78472154

The name and the address of the legal entity the Valuer has labor contract with

Cushman and Wakefield LLC

Legal address: Gasheka St., 6, Moscow, Russia, 125047Postal address: Gasheka St., 6, Moscow, Russia, 125047OGRN 1047797054227 as of 06.10.2009.

Location/Situation The Property is located in Presnensky Subdistrict (the Central Administrative District of Moscow), within and close to the Third Transport Ring (200 m east of the inner side), at the Central Core of the Moscow International Business Centre “Moscow City”, and can be accessed from the Third Transport Ring, Presnenskaya Embankment and Krasnogvardeysky 1st Proezd, as well as by metro – from Vystavochnaya and Mezhdunarodnaya metro stations (located within a 5-minute walk from the site, with the connection hub located in the underground part of the Property).

Property Description The Property represents a 9-level super regional shopping and entertainment complex (including 3 levels of underground parking and 6 retail levels above) with a gross building area (GBA) of 283,182.1 sq.m and a gross leasable area (GLA) of 107,207.6 sq.m. As of the date of valuation the complex (including the underground parking1) is fully operational.

GBA 283,182.1 sq.m

GLA 107,207.6 sq.m

Site Area 43,742 sq.m (4.3742 hectares)

Tenure Building held freehold:

Ownership Certificate 77 AP 121714 dated 24.12.2013 in respect of the non-residential premises totaling 166,072 sq.m (the shopping centre part of the complex);

Ownership Certificate 77 AO 609117 dated 17.05.2013 in respect of the non-residential premises totaling 116,989.8 sq.m (underground parking);

Ownership Certificate 77 AO 609114 dated 17.05.2013 in respect of the non-residential premises totaling 10.5 sq.m (underground parking);

1 According to instruction from the Client we have valued 2,075 parking spaces in the underground parking

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Ownership Certificate 77 AO 609105 dated 17.05.2013 in respect of the non-residential premises totaling 34.3 sq.m (underground parking).

Land Plot (planned leasehold):

As of the date of valuation the title for the land plot (cadastral #77:01:0004042:62) totaling 43,742 sq.m is under registration. The land plot is provided to OOO “Bellgate Constructions Limited” (subsidiary of the Client) for the purposes of construction of properties in the Central Core of “Moscow City”, according to the minutes #11 dated 30 March 2012 issued by Moscow Urban Planning and Land Commission. For the purposes of this valuation we assumed that the respective long-term leasehold rights will be registered in respect of the land plot in due course.

Tenancies In accordance with the information provided to us by the Client, the Property is currently leased to 414 tenants (on short-term/ long-term leases) that occupy 84,503.15 sq.m.

For the details please refer to Section B of the current report.

Exchange Rate as at valuation date

32.7292 rubles per $1 (Source: Central Bank)

Market Rent per annum $136,199,650 (ERV on Year 1 as if fully let)

Market Value $1,160,000,000 Net of VAT (One Billion, One Hundred and Sixty Million US Dollars)

Capital Value per sq.metre of GLA

$10,820 Net of VAT

This summary is strictly confidential to the addressee only. It must not be copied, distributed or considered in isolation from the full report.

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A VALUATION REPORTTo: AFI DEVELOPMENT PLC represented by FUAMARI SECRETARIAL LIMITED

Spiru Arause, 165, LORDOS WATERFRONT BUILDING,5 floor, office 505, 3035, Limassol, Cyprus

Attention: Ms. Aleksandra Achmizova, Director

Property: AFI Mall

Report Date: March 17, 2014

Valuation Date: December 31, 2013

1 INSTRUCTIONS

APPOINTMENTIn accordance with your request, as confirmed by the Valuation Agreement #12-MOSC-900001, dated November 26, 2012 (“Agreement”), concluded between Cushman & Wakefield OOO (“C&W”) and AFI DEVELOPMENT PLC (“the Client”), we are pleased to submit our valuation report of the freehold interest in respect of AFI Mall (including the underground car parking) and an assumed leasehold interest in the land plot located at: 2 Presnenskaya Embankment, Moscow extending to a gross building area of 283,182.1 sq.m and a total site area of 43,742 sq.m (4.3742 hectares).

We understand that the current valuation will be used for financial reporting purposes only. No other purpose is intended or should be inferred.

The property and interests valued are detailed in Part B of this report.

The extent of our professional liability to you is detailed in Part C of this report. We confirm that we have sufficient knowledge, skills and understanding to undertake the valuation competently.

In addition to the analyses, assumptions, opinions and conclusions set forth in the valuation report we hereby represent and confirm as follows:

1. We were contracted and requested by you, on behalf of Africa Israel Investments Ltd. to prepare the valuation report.

2. We understand that this valuation report is required for financial statements and accounting purposes of Africa Israel Investments Ltd. in accordance with international financial reporting standards (IFRS). The valuation is prepared in compliance with IAS 40 (and its requirements) and in compliance with IFRS 13 (and its requirements).

3. From time to time, we provide real estate appraisals and valuations to other companies within the Africa Israel Investments Ltd. group; however, our company is independent of these companies or any company controlled by this entity.

4. We hereby represent that we do not have any personal interest in the contemplated asset and/or in its owners, and the appraisal thereof hereunder has been prepared by us in accordance with our best and professional knowledge, skills and consideration.

5. We hereby agree that our valuation report will be included in the Africa Israel Investments Ltd.’s publicly published financial statements for the period ending December 31, 2013, which will be published in March 2014.

2 BACKGROUND TO THE VALUATIONThe property is valued as the financial reporting standards require annual valuation.

The effective date of the valuation is December 31, 2013.

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3 BASES OF VALUATIONThe valuation and report has been prepared in accordance with the RICS Valuation – Professional Standards (the “Red Book") by a valuer acting as an External Valuer, as defined within the Red Book. We confirm that the valuer conforms to the stipulated requirements.

The Valuation has also been prepared in accordance with the Federal Valuation Standards of the Russian Federation (FSO #1, FSO #2, FSO # 3) and Federal Law “Concerning Valuation in the Russian Federation” # 135-FZ.

The valuation and report has been prepared in accordance with the IVS 300 – Valuations for Financial Reporting.

BASES

A Basis of Value is defined by the Red Book as:

‘A statement of the fundamental measurement assumptions of a valuation.’

In accordance with our instructions from the Client, the property in Part B has been valued on the following bases, (as appropriate):

Market Value

DEFINITIONS

Market Value

VS 3.2 defines Market Value as:

‘The estimated amount for which an asset or a liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’

4 ASSUMPTIONS, SPECIAL ASSUMPTIONS, DEPARTURES AND RESERVATIONSWe have prepared our valuation on the basis of the assumptions within our instructions detailed in Part C, Appendix III and IV, of this report.

We have made no Special Assumptions.

We have made no Departures from the Red Book.

RESERVATIONS

The valuation is not subject to a reservation.

5 INSPECTIONThe property was inspected by Anton Kalistratov (Senior Consultant, Valuation & Advisory Department) on 30 January 2014.

The property was not measured and we have assumed that the BTI/BOMA measurements, areas and dimensions that the Client has provided to us are accurate and have been calculated by the appropriately qualified professionals in accordance with all the necessary requirements and the local standards of measurements. We have also relied upon the detailed information that the Client provided to us with regard to the internal measurements and dimensions and assume these are also

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accurate. Any variation or inaccuracies in the information provided to us would affect the opinion as to value reported herein.

6 CONFLICTS OF INTERESTA Conflict of Interest is defined by the RICS Valuation Standards (“the Red Book”) as:

‘A threat to independence or objectivity’.

We confirm that Cushman & Wakefield have had no previous/recent involvement with the Property or the Client and therefore no conflict of interest exists in completing this instruction.

7 SOURCES OF INFORMATIONIn addition to information established by us, we have relied on the information obtained from you and others listed in Appendix VI.

8 GENERAL COMMENTOur opinion of value is based on an analysis of recent market transactions and asking prices, supported by market knowledge and market sentiment derived from our agency experience. Our valuation is supported by this market evidence.

Where there are outstanding or forthcoming reviews, rental value has been assessed in accordance with the terms of the occupational lease review provisions. Otherwise, rental value has been assessed on the basis of Market Rent, assuming a new lease drawn on terms appropriate to current practice in the relevant market.

A valuation is a prediction of price, not a guarantee. By necessity it requires the valuer to make subjective judgements that, even if logical and appropriate, may differ from those made by a purchaser, or another valuer. Historically it has been considered that valuers may properly conclude within a range of possible values.

The purpose of the valuation does not alter the approach to the valuation.

Property values can change substantially, even over short periods of time, and so our opinion of value could differ significantly if the date of valuation was to change. If you wish to rely on our valuation as being valid on any other date you should consult us first.

Should you contemplate a sale, we strongly recommend that the property is given proper exposure to the market.

We recommend that you keep the valuation of this property under frequent review.

You should not rely on this report unless any reference to tenure, tenancies and legal title has been verified as correct by your legal advisers.

CURRENCY

The property has been valued in US Dollars.

9 VALUATIONSubject to the contents of this report and based on current values, we are of the opinion that the Market Value of the freehold and assumed long leasehold interest in the Property consisting of AFI Mall Shopping Centre premises (including 2,075 underground parking spaces) with a total area of

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283,182.1 sq.m and a site area of 43,742 sq.m (4.3742 hectares), subject to minor rounding, and as at the date of valuation, is fairly reflected in the sum of:

$1,160,000,000

(One Billion, One Hundred and Sixty Million US Dollars)

Net of VAT

10 CONFIDENTIALITYOur valuation is confidential to those parties to whom this report is addressed, for their sole use, (or to any person to whom we have issued a reliance letter and who has accepted the terms contained therein) and only for the specific purpose stated. We will not accept responsibility to any third party in respect of its contents.

11 DISCLOSURE AND PUBLICATIONYou must not disclose the contents of this valuation report to a third party in any way without first obtaining our written approval to the form and context of the proposed disclosure. You must obtain our consent, even if we are not referred to by name or our valuation report is to be combined with others. We will not approve any disclosure that does not refer sufficiently to any Special Assumptions or Departures that we have made.

Signed for and on behalf of Cushman & Wakefield OOO

Konstantin Lebedev MRICS, CCIM, ASA, ROOPartner, Head of DepartmentValuation & AdvisoryRICS Registered ValuerTel: +7 495 797 [email protected]

Anton Kalistratov MRICSSenior ConsultantValuation & AdvisoryRICS Registered ValuerTel: +7 495 797 [email protected]

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B PROPERTY REPORT

2 Presnenskaya Emb., Moscow, Russia

The property was inspected internally and externally from ground level on 30 January 2014 by Anton Kalistratov (Senior Consultant, Valuation & Advisory Department).

1 LOCATION/SITUATION

GENERAL

The Property is located in the Presnensky Sub-district (the Central Administrative District of Moscow), approximately 5 km west of the Kremlin area, within and close to the Third Transport Ring (200 m east of the inner side), in between Kutuzovsky Prosp. And Zvenigorodskoe Hw., at the Central Core of the Moscow International Business Centre “Moscow City”.

Source: http://maps.google.com

The Presnensky Sub-district (also known as Presnya) is a part of Central Administrative District (CAD) of Moscow, Russia. Its population is estimated at approximately 120,000 people. The sub-district is home to the Moscow Zoo, White House of Russia, Patriarshy Ponds, Vagankovo Cemetery, and Moscow World Trade Centre, as well as Moscow International Business Centre “Moscow City”. There are a lot of factories and plants on the territory of Presnya, which are gradually relocated outside of Moscow centre. In soviet times Presnya was one of the most industrially developed sub-districts of Moscow. But since the beginning of construction of MIBC “Moscow City” and the program for industrial enterprises’ relocation from the city centre, Presnensky Sub-district has started to lose its industrial significance for the Moscow economy. Overall, it is unusually large and diverse among the sub-districts of the CAD, combining affluent residential, administrative and old industrial neighborhoods.

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SURROUNDINGS

The Property is located in the Central Core of the Moscow International Business Centre “Moscow City”.

MIBC “Moscow City” is the business and financial district in the course of development located on Presnenskaya Embankment. It will be a zone of business activity which will comprise business and entertainment facilities, as well as apartment blocks. The footprint for this new construction totals 60 ha.

At the moment “Moscow City” is being actively developed, though the construction process has slowed down or stopped completely for some of the projects (originally envisaged in the concept) due to the financial crisis. However, as of 2013 “Moscow City” already provides the quality stock of over 570,000 sq.m of Class A office premises; by the end of 2014 Eurasia Tower, Multifunctional Business Centre, Exposition and Business Centre and Transport Terminal are expected to be completed, whereas by the end of 2015 there will be a delivery of Evolution Tower and most of “Moscow City” is planned to be fully operational by then. However, due to the high concentration and new massive deliveries of high quality office stock in “Moscow City”, we expect the office vacancy rate to remain relatively high in the area in the coming years, as shows the table below:

YEAR 2004 2005 2006 2007 2008 2009

Vacancy 4.6% 0.2% 0.4% 6.1% 21.6% 17.4%

Stock, sq.m 43,992 73,197 73,197 182,003 353,705 405,830

YEAR 2010 2011 2012 2013 2014* 2015*

Vacancy 23.4% 13.7% 16.02% 24,5% 26,6% 26,0%

Stock, sq.m 405,830 475,940 475 940 573,465 775,465 1,085,552

Source: C&W analysis; * C&W projections

The scheme with existing and future developments is represented below:

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Source: C&W Research

The area surrounding Moscow City also has an extensive pipeline for the future office deliveries:

№ Name Total Area Rentable Area

1 Mirax Plaza, bld. А 79 470 69 5902 Mirax Plaza, bld. B 69 390 59 4953 Mirax Plaza, bld. V 69 950 44 8804 Kulneva str. 4 193 600 114 0005 Poklonnaya str. 3 143 200 85 5726 Park Pobedi 136 554 54 000


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The Central Core is one of the most complex developments of MIBC. It is located on Sites 6, 7 and 8, and consists of 2 parts: underground and above-ground parts. The underground part includes the central metro connection hub for Vystavochnaya metro station (that in the future will include Delovoy Tsentr metro station comprising connection with three metro lines and also link the complex to Sheremetievo and Vnukovo airports via a high-speed transport system), underground parking for 2,718 spaces, technical premises and a lobby with walkways and passages to other buildings in the MIBC, whereas the above-ground part is now represented by retail premises of AFI Mall Shopping Centre and office/hotel premises of CityPoint Tower. The Central Core is surrounded by a road (at the level of 121.00 m) and a perimeter transport ramp (at the level of 129.70 m).

TRANSPORT ACCESSIBILITY

By private transport: the Property can be accessed from the Third Transport Ring, Presnenskaya Embankment and Krasnogvardeysky 1st Proezd, as well as from Krasnopresnenskaya and Tarasa Shevchenko Embankments, Kutuzovsky Prosp. and Zvenigorodskoe Hw. At present accessibility to “Moscow City” by car is very limited due to the heavy traffic congestions of the adjacent roads during rush hours (but the situation is expected to improve after construction of additional connection roads by the end of 2015).

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By public transport: the Property can be accessed from Vystavochnaya and Mezhdunarodnaya metro stations (located within a 5-minute walk from the site, with the connection hub located in the underground part of the Property), as well as by a number of bus and trolley routes going nearby.

Pedestrian access: the Property can be accessed from adjacent embankments and Bagration Bridge.

Planned accessibility improvements (most are expected to be completed by the end of 2015): there are proposed plans for construction of the road connecting MIBC and Zvenigorodskoe Hw.; construction of two secondary highways for Kutuzovsky Prosp.; widening of Krasnogvardeysky 1st Proezd; construction of additional connection roads linking “Moscow City” with Shmitovsky Proezd, Karamyshevskaya Embankment and other streets; construction of additional exits and underpasses from Vystavochnaya and Mezhdunarodnaya metro stations; connection of Vystavochnaya and Park Pobedy metro stations; extention of Filyovskaya and Kalininskaya metro lines; construction of a rail terminal connecting “Moscow City” with Sheremetievo and Vnukovo international airports (respectively 34 km and 31 km away from Moscow City) via high-speed rail system; as well as construction of a number of pedestrian routes.


VISIBILITY

The Property is located in the Central Core of “Moscow City”, which provides for excellent visibility from all adjacent thoroughfares.

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2 DESCRIPTION

SITE

The Subject Property is located on the land plot (cadastral #77:01:0004042:62) with a total area of 43,742 sq.m (4.3742 hectares), which extends to the footprint of the Property. The site belongs to the category of settlement lands and intended for the design and construction of the above ground element of the Central Core. The cadastral value of the land plot is 3,578,677,040 rubles (respective share of AFI Development).

EXTERNAL

The Property represents a 9-level super regional high-quality shopping and entertainment complex (including 3 levels of underground parking and 6 retail levels above) with a gross building area (GBA) of 283,182.1 sq.m and a gross leasable area (GLA) of 107,207.6 sq.m. The total height of the building is 179 sq.m.

As of the date of valuation the complex (with the GBA of 166,072 sq.m) is fully operational: it was delivered in February 2011 and had its soft opening in March 2011 and the grand opening in May 2011. The underground parking (providing 2,718 spaces) is also fully operational (according to the information provided by the Client, 643 spaces have been sold to another owner and do not belong to the Client, so in our valuation we have taken into account only 2,075 parking spaces out of 2,718 in total in the complex). However, according to the information from the Client, there is outstanding capital expenditure (i.e. on installation of new elevators and escalators) in the amount of $2,779,583 net of VAT (which have been taken into account in our valuation).

INTERNAL

The Property represents a high-quality, newly constructed building which meets international standards applicable to quality shopping centres.

According to the information available to us, the Property has all necessary engineering systems installed (and properly maintained on the regular basis) and it is in fully operational condition and does not have any significant technical problems, but this has not been checked and verified by ourselves. For the purposes of valuation we assume this information to be correct.

3 ACCOMMODATIONThe GLA of the Property totals 107,207.6 sq.m.

According to the information provided by the Client, the breakdown of subject premises by functional uses is as follows:

USE SPECIFICATION LEASABLE AREA, SQ.M % OF TOTAL GLASupermarket 1,309.00 1.2%

Department Store 2,227.50 2.1%

Cinema 6,481.10 6.0%

Anchors 20,128.60 18.8%

Mini-anchors 10,130.30 9.4%

Boutiques 400-1000 16,321.30 15.2%

Boutiques 300-400 5,925.30 5.5%

Boutiques 200-300 4,225.40 3.9%

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Boutiques 100-200 13,815.70 12.9%

Boutiques <100 8,414.70 7.8%

FC, Cafés, Restaurants > = 300 4,325.20 4.0%

FC, Cafés, Restaurants 100-300 2,880.40 2.7%

FC, Cafés, Restaurants < 100 1,592.80 1.5%

FC sitting area > = 100 1,142.20 1.1%

FC sitting area < 100 239.50 0.2%

Kiosks > = 6 615.50 0.6%

Kiosks < 6 62.00 0.1%

Storage, technical 1,904.00 1.8%

Offices 1,541.40 1.4%

Winter garden 3,925.70 3.7%

Parking 2,075 spaces

Total 107,207.6 100%

Source: data from the Client, C&W analysis

PARKING PROVISION

The underground parking extends to a GBA of 117,110.1 sq.m and provides 2,718 spaces in total. As of the date of valuation it is fully operational.

According to the information provided by the Client, 643 parking spaces have been sold to another owner and do not belong to the Client, so in our valuation we have taken into account only 2,075 parking spaces (out of 2,718 in total in the complex).

4 STRUCTURAL CONDITION AND REPAIRThe property appears to be in a good structural condition given its age and use. Our verbal enquiries with the building’s facilities manager indicated that he was not aware of any serious problems with the property as at the date of valuation.

We have not carried out a detailed structural survey of the property, and have assumed that the property is in sound condition.

5 SITEThe land plot (cadastral #77:01:0004042:62) totaling 43,742 sq.m (4.3742 hectares) underlying the Subject Property is of irregular configuration and of flat topography.

SERVICES AND UTILITIES

We understand that the Property has all main services including water, electricity, gas and drainage; these were neither tested nor inspected by ourselves.

ARCHAEOLOGY

We understand that the site has no archaeological significance.

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6 ENVIRONMENTAL CONSIDERATIONSDuring our inspection of the property, we did not note and obvious visual signs of contamination or of deleterious materials either on site or in the building fabric. We have not carried out any investigations or tests, nor have been supplied with any information from the owner or from any relevant expert that determines the presence or otherwise of pollution or contaminative substances or any other land (including any ground water).

In view of the characteristics and history of the property we would not expect there to be any outstanding environmental or archaeological issues.

7 ZONING AND PERMITTED USESAccording to the information supplied to us in respect of zoning, the property is currently zoned as settlement land, with permission for a variety of commercial uses (including construction of a shopping and entertainment centre).

8 TITLEBuilding held freehold:

Ownership Certificate 77 AP 121714 dated 24.12.2013 in respect of the non-residential premises totaling 166,072 sq.m (the shopping centre part of the complex);

Ownership Certificate 77 AO 609117 dated 17.05.2013 in respect of the non-residential premises totaling 116,989.8 sq.m (underground parking);





Ownership Certificate 77 AO 609105 dated 17.05.2013 in respect of the non-residential premises totaling 34.3 sq.m (underground parking).

Land Plot (planned leasehold):

As of the date of valuation the title for the land plot (cadastral #77:01:0004042:62) totaling 43,742 sq.m is under registration. The land plot is provided to OOO “Bellgate Constructions Limited” (subsidiary of the Client) for the purposes of construction of properties in the Central Core of “Moscow City”, according to the minutes #11 dated 30 March 2012 issued by Moscow Urban Planning and Land Commission. For the purposes of this valuation we assumed that the respective long-term leasehold rights will be registered in respect of the land plot in due course.

9 TAXESProperty tax has been taken into account in our valuation as part of the operating expenses incurred by the Client (according to the operating budget provided to us by the Client).

Apart from that, we have not reflected any company specific taxes within our valuation as these vary from company to company and should not be reflected in the valuation of a real estate asset.

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For the purposes of valuation we have made no allowance for the Value Added Tax – all projected costs and income cash flows exclude VAT.

10 TENANCIES

LETTINGS

In accordance with the information provided to us by the Client, the building comprising the Property is currently leased to 414 tenants (occupying 84,503.15 sq.m, which is 78.82% of the total GLA or 87.25% of the shops area2 in the mall), whereas 22,704.45 sq.m (i.e. 21.18% of the total GLA) is currently vacant.

Premises are leased to Russian/international retail tenants on short to long term leases.

An aggregated summary of tenancies is presented in the following table.

USE SPECIFICATION LEASED AREA

W.AVERAGE BASE RENTAL RATE

BASE RENT AVERAGE INDEXA-TION

Supermarket 1,309.00 $700 $916,300 8.6%

Department Store 2,227.50 $432 $961,982 5.0%

Cinema 6,481.10 $480 $3,112,767 5.0%

Anchors 13,945.00 $523 $7,296,081 8.3%

Mini-anchors 8,576.10 $687 $5,890,641 8.3%

Boutiques 400-1000 14,271.00 $982 $14,015,352 7.8%

Boutiques 300-400 2,930.80 $1,470 $4,308,956 9.0%

Boutiques 200-300 2,724.80 $2,237 $6,096,660 8.6%

Boutiques 100-200 9,960.90 $2,109 $21,007,301 8.8%

Boutiques <100 6,893.30 $2,952 $20,346,914 8.9%

FC, Cafés, Restaurants > = 300 3,415.20 $1,100 $3,756,517 8.6%

FC, Cafés, Restaurants 100-300 2,880.40 $1,728 $4,978,571 7.9%

FC, Cafés, Restaurants < 100 1,440.50 $2,980 $4,293,283 8.8%

FC sitting area > = 100 442.20 $258 $114,135 8.6%

FC sitting area < 100 164.50 $1,625 $267,375 8.6%

Kiosks > = 6 522.75 $7,413 $3,875,397 8.6%

Kiosks < 6 62.00 $8,511 $527,680 8.6%

Storage, technical 1,904.00 $500 $951,509 8.4%

Offices 426.40 $1,439 $613,658 7.9%

Winter garden 3,925.70 $181 $711,847 8.6%

Total 84,503.15 $104,042,926

Source: data from the Client

2 According to the information provided by the Client, the shops area in the Property comprises 96,849 sq.m.

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All rental rates mentioned above are net of VAT and exclude parking rent. Rental rates are stipulated in US Dollars/ Conventional units/ Rubles and are paid in rubles at the exchange rate of Central Bank of the Russian Federation at the date of payment.

For the valuation purposes we have also taken into account the actual indexation levels in existing leases (ranging from 5% to 10%, depending on the tenant).

We have not reviewed the lease agreements and have fully relied on the information received from the Client in the form of a detailed tenancy schedule. If the terms contained in lease agreements differ from the information supplied to us, the valuation contained herein may be detrimentally affected.

Additionally, the Property generates income from parking. According to the information provided by the Client, as of the date of valuation the parking fees (per space) charged from the visitors using the parking are as follows:

On working days (10 a.m. – 6 p.m.):− First 2 hours – 100 rubles in total (irrespectively of the exact duration of stay at the parking);− Third hour – 50 rubles/ hour;− Fourth hour – 50 rubles/ hour;− Fifth hour and thereafter – 150 rubles/ hour. 6 p.m. – 6 a.m.: 100 rubles for the whole period At the weekends and on public holidays: 100 rubles for 6 hours.

VACANT UNITS

In accordance with the information provided to us as at the date of valuation, the total area of vacant premises is 22,704.45 sq.m, i.e. 21.18% of total GLA:

USE SPECIFICATION VACANT AREAS % OF TOTAL GLA

Anchors 6,183.60 5.77%

Mini-anchors 1,554.20 1.45%

Boutiques 400-1000 2,050.30 1.91%

Boutiques 300-400 2,994.50 2.79%

Boutiques 200-300 1,500.60 1.40%

Boutiques 100-200 3,854.80 3.60%

Boutiques <100 1,521.40 1.42%

FC, Cafés, Restaurants > = 300 910.00 0.85%

FC, Cafés, Restaurants 100-300 0.00 0.00%

FC, Cafés, Restaurants < 100 152.30 0.14%

FC sitting area > = 100 700.00 0.65%

FC sitting area < 100 75.00 0.07%

Kiosks > = 6 92.75 0.09%

Kiosks < 6 0.00 0.00%

Storage, technical 0.00 0.00%

Offices 1,115.00 1.04%

Total 22,704.45 21.18%


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TENANT IMPROVEMENTS

During the inspection we have observed that the finish of the leasable premises is standard. In accordance with the information provided to us all expenses related to renovation before the commencement of commercial activity, together with operating repairs, is fully the tenant’s obligation.

11 NON-RECOVERABLE AND OPERATING EXPENSESOperation expenses are not fully recoverable from the tenants.

According to the information provided by the Client, the Property’s tenants pay operating charges and marketing fees (apart from the base rent), which at the date of valuation are on average at the level of $209/sq.m per annum, as well as compensate part of the utilities charges.

Based on the Client’s projections for 2014 regarding the operating expenses budget and subject to our own analysis, we estimate the factual operating expenses (excluding part of utilities charges that are directly compensated by the tenants and also excluding the property tax) to be incurred by the Property in 2014 at the level of approximately $208 per 1 sq.m of the Property’s total GLA. However, taking into account the fact that the Property has entered the market relatively recently and will still be gaining momentum for some time in the future (until stabilization of the cash flows), we believe that the operating expenses (i.e. marketing expenses and maintenance expenses) are likely to decrease in the future, as the Property becomes more mature and better recognized by the general public – according to our view the incurred operating expenses for the Property are likely to decrease by 5% annually until stabilization of the Property’s cash flows.

NEW PROPERTY TAX COLLECTION SCHEME

Federal Law # 307-FZ dated November 2, 2013 introduces changes in property tax calculation for office and retail premises and properties owned by foreign legal entities that do not operate in Russia via representative offices.

Prior to 2014 property tax was calculated at 2.2% of the property book value posted on the owner’s balance sheet. From 2014 the cadastral values for given premises (excluding underlying land) will be set as the basis for property tax payments. The tax rate will be set by local (regional) authorities under Federal laws. Moscow government announced final tax schedule for properties in Moscow as follows: 0.9% (2014), 1.2% (2015), 1.5% (2016), 1.8% (2017), 2.0% (2018).

According to the Federal valuation standard #4 “the cadastral value is the market value established as a result of state cadastral valuation, which is determined by means of mass valuation, or, if the market value cannot be determined via mass methods, the market value determined individually for a particular property in accordance with the valuation legislation”.

As we understand the new law the intention is for cadastral value to approximate market value. The Moscow government has already performed a mass valuation for some of the properties, and according to the preliminary information that is available, there is likely a divergence between the appraised cadastral value and what market participants would consider market value (i.e. in some cases the new cadastral values are higher). However, according to the new legislation, the property owners involved have a legal right to contest and challenge the new cadastral values through the special committee or the court (if they believe that the new cadastral values are not in line with the market values of respective properties).

Therefore, for the purposes of our valuations, we make a general assumption that the cadastral value of the subject premises will be equal to their respective market value (and if, for some reason, the new cadastral value happens to be higher, the efficient property owner will be able to contest the incorrect cadastral value and bring it in line with the market value).

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Also, please note that the new property tax scheme outlined above involves only the property tax on the existing improvements only (i.e. cadastral value of existing premises excluding the cadastral value of underlying land) – the land tax continues to be calculated separately and the land tax scheme remained unchanged from the last year.

Thus, the new property tax for office and retail premises will be based on the new tax rates (mentioned above) and the new tax base (which should be fair value of the whole property minus the cadastral value of the underlying land).

We have reviewed the list from the Moscow Government’s Decree #772-PP dated 29.11.2013, which contains the list of properties for which this new property tax scheme comes into effect in 2014. We can confirm that the subject Property belongs to this list.

According to the opinion of our C&W Research, as far as retail properties are concerned, the new property tax will be fully transferred to (and recovered from) existing tenants (who will relay this burden further – to consumers), therefore the change in the property tax legislation should not have a significant effect on retail property owners. However, for the purposes of our valuation in respect of AFI Mall, we decided to make a more conservative assumption – at the moment we assumed that the property owner will be able to recover at least 30% of the new property tax amounts (starting from 2015) – which is in line with the expectations of AFI Development. Additionally, according to the current legislation, the mass cadastral valuation (carried out on behalf of and at the expense of the government) should typically happen once in 5 years, so for the purposes of this valuation we assumed that after the end of the projection period (which equals also 5 years), i.e. in Year 6 the cadastral value of the property will be updated and will be equal to the terminal value (the one calculated in our model), but, at the same time, starting from Year 6, 50% of the property tax amounts will be recoverable from tenants.

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12 MARKET OVERVIEW

MACROECONOMIC OVERVIEW

SUMMARY

GDP ESTIMATE 2013 1.4-1.5%

CPI 2013 7.0%

INDUSTRIAL PRODUCTION 2013 0.1% YoY

FIXED INVESTMENTS 2013 -1.4% YoY

UNEMPLOYMENT 2013 6.0%

Russian economy slowed down in the second half of 2013. According to the Ministry of Economic Development forecast the GPD growth in 2013 should be about 3.4%. In the middle of the year the forecast was reviewed and dropped to 2.5% and to 1.8% later in August. In November it was obvious, that economy growth in 2013 will be not more than 1.4-1.5%. (According to Rosstat GPD growth was amounted to 1.2% from January to September 2013).

Stagnation was caused not only by a decreasing demand on energy resources and slowing-down of Eurozone economies, but also by some internal processes – the dramatic drop of industrial production growth to about zero and reduction of fixed investments from 6.6% in 2012 to 0.2% in 2013.

Retail turnover growth which stimulated economy growth in 2012, also slowed down in the second half of 2013. But nevertheless it became one of the main economy drivers. Its increase was caused by raised salaries of government officials and growing volume of bank loans. Mining and extraction as well as paid services sectors made a considerable input into economy in 2013.

At present with rather high export prices for crude oil, industrial production stacked on the level of the previous year. Investments into industrial production can help to avoid further expansion of oil and gas oriented economy.

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Retail trade and consumer market were performing significantly better – 4-5% Y-o-Y growth in a real term.

Inflation remains under control at 6.5% – a relatively low level for Russia.

2014 outlook is also moderately constrained: GDP growth will unlikely exceed 2%, inflation will remain at the similar level. However, in spite of the decrease in 2014 growth forecast, it is still higher than the projected growth in many European countries.

There is also some uncertainty around consumer market. While it still remains rather strong there are indications of a potential slowdown. Consumer credit growth decelerated significantly because banks and government have tightened this market. This will obviously help to avoid consumer debt crisis in the longer term but may affect negatively retail sales in the short term.

In spite of the economy slowdown, real estate market faced a rising real estate cycle. Across all sectors we saw record construction levels. Strong consumer market supported retail and warehouse sector in 2013 with solid demand, but office sector was weak and new supply was almost doubled against net absorption.

In 2014 we again expect high construction levels driven by the development cycle with further deceleration in 2015-2016. In the office market the additional supply in out of the centre locations will create additional competition between the landlords in such properties (though the position of successful schemes in the centre of Moscow will remain strong). In retail and warehouse sector the market balance will remain stable supported by a stronger demand.

The change of the property tax collection scheme for offices and retail premises will eventually lead to the potential increase in the factual operating expenses incurred by the landlords (however, this will have a significant effect mostly for the older buildings, whereas the new ones will be less affected).

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There might be fluctuations of the Rouble exchange rate, however the Russian government is expected to keep the rate under control (through occasional interventions in the monetary market, when necessary).

Investment market will keep at 7-8 bn USD per year threshold and Moscow will remain #3 investment market in Europe.

Additional positive outlook – after Sochi Olympic games in March-April the government may introduce stimulus package or/and make changes to the cabinet of Ministers to stimulate economy growth.

CAPITAL MARKETS

SUMMARY

Total investments into commercial real estate in 2013 were about $7.45 billion which is similar to the volume of investments in 2012. Many transactions were in the process of finalization at the end of 2013 and they are expected to be closed in the first quarter of 2014.

Investors were interested in all segments of commercial real estate as they had been the year before. The volume of investments into the office segment grew up by 7%. In retail segment the growth was about 2% comparing to 2012. In warehouse and industrial segment the volume of deals doubled in 2013.

Traditionally, the deals were closed in the biggest cities. Moscow is an absolute leader by the amount of investments and remains the investment center of Russia. In 2013 about 70% of all investments were attracted to Moscow.

MAIN DEVELOPMENTS

Office segment registered most of the deals in 2013 and its share was more than 41%. The volume of investments in offices was $3.06 billion. In 2013 the largest deal in the office segment was White Square office center sale, which amounted about $1 billion. The second largest Millhouse Capital

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investment into White Gardens business center amounted to about $740 million. And the third largest deal in 2013 was Nagatino i-Land deal which was bought by AFK Sistema.

2013 was a record year by investment volumes in retail segment. Compared to the previous year the growth was about 2% and the volume amounted to $2.64 billion. One of the main deals on the market was the purchase of Metropolis shopping center by Morgan Stanley fund for about $1.2 billion. The second largest deal was the purchase of shopping and entertainment center Aura – one of the best regional projects located in Novosibirsk.

Industrial and warehouse segment hit the record last year by the volume of investments. In 2013 total investments were about $1.4 billion, doubled since 2012. The largest deals were the purchase of MLP portfolio by Bin Group that amounted to about $700 million and the purchase of Eurasia Logistics portfolio by IQ Property Management for about $500 million.

CAPITALIZATION RATES

The current yields for Prime commercial real estate projects in Moscow are 8.5% for offices, 9.0% for retail and 11.0% for warehouse and industrial projects.

In 2014 we expect that capitalization rates for the best properties will not be corrected significantly, however, we assume the fluctuation in the range of 25-50 bps during the year.

RETAIL MARKET

BRIEF SUMMARY

In 2013 the volume of new construction of retail space in Russia was high, 63 new retail complexes have been constructed and delivered in 40 Russian cities. A reduction in the construction of new quality retail premises in Moscow for 2012-2013 is going to be compensated by large-scale and

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expected projects in 2014. Retailers are expanding and are interested in new space both in Moscow and all Russia’s regions. Despite the growing negative consumer expectations retail turnover growth is positive and most of retailers reported income growth. During 2013 rental rents remained stable, as they were in 2012.

CONSUMERS

According to Rosstat, real income of the Russian population in November 2013 grew up by 1.5%, comparing to November 2012. Moreover, it increased by 3.6% in January-November 2013 relatively to the same period of time the year before. The average monthly salary was 30,670 rubles in August 2013 and increased by 11.6% comparing to the previous year.

Total retail trade growth for January-November was 3.9%.

RETAILERS

Retailer demand has remained relatively strong in Russia, with limited new market entrants but existing retailers looking to expand and experiment with new format types.

Several brands started operating directly (Montcler, Tommy Hilfiger), others are expanding through franchising (McDonalds Starbucks, Disney Store). There were a number of monobrand flagship openings among popular brands, such as Reima, Ticcurila, Chicco, Harman, The North Face and some others.

Vacancy rates in prime shopping centres in Moscow are at extremely low levels, with occupiers now transferring interest to the high street as shopping centre space cannot meet the demand.

Those brands already presented in Russia are actively looking to expand into the regions.

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RETAIL SPACE

In Q4, the visiting rate of retail centers was at the higher level than it used to be during some previous years. Buyers’ share (amount of people who made a purchase compared to total number of visitors) stood still at respectively low level of 30.6%. It might indicate that consumer’s activity is decreasing.

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The level of vacant space in the quality retail centers is at the lowest level. During the year 2013 the quality shopping mall vacancy rate was in the range from 1.0% to 1.5%. Low availability was supported by low levels of new construction in Moscow in the last years and Moscow government prohibitive policy for commercial development in Moscow.

In general, there is lack of supply in the quality retail centers in Moscow.

NEW CONSTRUCTION: MOSCOW

Nine quality shopping centers opened in Moscow in 2013. The largest of them was Rio on Leninsky (GLA 57,000 sq m). In Q4 just several neighborhood malls opened (Izmailovsky, SС VDNH) as well as specialized furniture store Roomer.

There are 1.2 mn sq m of quality retail space which is under construction in Moscow at the moment. The largest shopping centers planned for delivery in 2014-2015: Aviapark, that is going to become the largest shopping mall in Europe (GLA 235,000 sq m), Columbus (GLA 140,000 sq m), Vegas Crocus City (GLA 95,000 sq m), River Mall (GLA 91,200 sq m), Mosaika (GLA 67,000 sq m).

Moscow region construction level was also moderate – just 4 new shopping malls with total GLA less than 100,000 sq m have been opened. Besides Moscow region excelled by two new fashion outlets, which are still rare in Russia: Fashion House Outlet-Mall (TSUM, Reserved, Samsonite, Reebok, Tom Tailor, Adidas, Kanzler) and Vnukovo Outlet Village (Adidas, Levi's, Ecco, Kanzler, Lacoste). Angry Birds Park became the unique center of attraction for young shoppers in Vnukovo Outlet Village. In 2014 Bella Vita retail park (GLA 36,000 sq m) might open in Moscow region in Pavlovsky Posad.

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NEW CONSTRUCTION: RUSSIA

90 quality retail schemes (shopping malls, outlets, retail parks) with a total area of 2.8 mn sq. m were planned for delivery in 2013. By the end of the year 63 new retail centers were delivered in Russia with a total area of more than 1.6 mn sq. m. The new construction volume in Russia is stable at the level of 1.4-1.8 mn sq. m annually. In Q4 22 new shopping malls with total GLA 742,000 sq. m have been opened outside Moscow.

Average area of newly constructed shopping centers is decreasing, in 2013 it averaged to 24,000 sq m and this is 30% lower than it was in 2011. The development in the cities with a population less than 1 mn people is very active. A number of shopping malls (32 from 63) were delivered in small Russian cities, for example Aero Park City in Bryansk (GLA 91,000 sq m) and Kristall in Tymen (GLA 75,000 sq m).

According to developers’ plans 3.2 bn sq m of new quality retail space might be delivered next year in Russia, most likely around 60-70% will be opened.

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COMMERCIAL RATES IN SHOPPING MALLS

Moscow retail gallery rental rates are in the range of US$ 500 - 4,000 (per sq m per year before VAT and other expenses) depending on the size of the retail unit and the type of retailer. Throughout H1, and the whole of 2012, rental rates were stable across all sub-sectors.

Moscow’s prime retail indicator* is US$ 3,800 per sq m per annum, as a base rate. However, a tendency towards rate increases was observed in 2013 and near future growth may be higher than 5% (our current conservative estimate).

In other cities, rental rates in shopping malls are typically 30% to 60% below Moscow levels.

Additionally, among other payments there are operational expenses (US$ 150-250 per sq m annually for units smaller than 500 sq m), marketing (US$ 10-25 per sq m annually), and others depending on the project.

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OFFICE MARKET

SUMMARY

The volume of supply steadily increases, showing slowing tenant activity though. 1.58 mn sq. m of office space were bought and leased in 2013, which is by 18.5% lower than the

same indicator in 2012 – 1.94 mn sq. m. The new construction was strongly located outside the historical center – in 2013 more than 49.2%

of new construction was built outside the Third Transport Ring. This year the level of absorption was the same as in the previous year (around 680,000 sq. m), but

new supply exceeds absorption. This tendency creates the prerequisites for over abundant supply. At the beginning of 2013 the market witnessed the growth of rental rates, which was compensated

by an inverse dynamics at the end of the year. As a result the average annual rental rate increased by 7-12% depending on the building, its location and class.

SUPPLY

By the end of 2013, Moscow had 13.85 mn sq. m of quality office space. New construction of 892,000 sq. m was highest since 2010. 49 business centers were delivered to the market; among them are Mercury City Tower, business complex White Gardens, 9 Acres, Park Pobedy, Lotte business center, Newton Plaza etc.

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Only 25% of new quality office space fit Class A requirement, most office space is classified as Class B. About half of new deliveries is located in suburbs (outside Third Transport Ring).

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Altogether there are 1.44 mn sq m of available office premises in 464 existing buildings and 1.8 mn sq m is on the market in buildings under construction.

Class B vacancy rate was rather stable during last 6 years, since 2011 it increased by less than 1 pp. In Class A vacancy rate increased from 16.4% (December 2012) to 21.2% (December 2013), and the average is 18.9%. The tendency of increase in vacancy rates in Moscow will be prolonged in 2014.

DEMAND

The total volume of office deals decreased practically by 20% and it now amounts to 1.58 mn sq. m. Most of occupiers prefer to stay in their offices and to prolong their leasing contracts, discussing with landlords more profitable conditions.

Tenants continue to be interested primarily in existing buildings, the proportion of pre-lease agreements* in 2013 was 6.3% of the total rented space in 2013, there is a significant reduction in the proportion of sales deals (from 20% on average in 2011-2012 to around 10% in 2013).

RENTAL RATES

In Class A, the average asking rental rate is $870. In Class B, the average asking rental rate was stable at $530. Rental rates for prime office space are at the level of $1,200 per year per sq. m (triple net).

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The second year in a row rental rates for offices grow in accordance with inflation. At the end of 2012 and the beginning of 2013 market players were expecting positive dynamics as a result rental rates saw 15% growth, but later they were adjusted, as a result rental rates increase by 7-12% depending on the class of the building and location. In the centre of Moscow (inside the Garden Ring, Novoslobodskiy district) and in Moscow-City average Class A showed the biggest growth. Average class B+ rental rate grew mostly in the suburbs of Moscow.

FORECAST

Next year the total volume of delivered offices will be significantly decreased. We suppose that the main reasons will be a tax reform, reconsideration of the financial plans by developers and continuous cost savings in the occupiers’ policy. 600,000 sq. m or even less will be delivered next year.

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Talking about tenants’ behavior there would be no rise in the prelease activity, with tenants pursuing wait-and-see policy. Tenants’ activity will be limited at the first half of the year, but at the second half the experts expect market revival.




2013 NOTABLE INVESTMENT TRANSACTIONS IN RUSSIA

CATEGORY QTR PROPERTY NAME MARKET OFFICE

RENTABLE,

SQ M

RETAIL

GLA,

SQ M

WAREHOUSE

AREA, SQ M

ROOMS GRADE PRICE

ESTIMATION,

USD

INVESTOR NAME

SINGLE TRANSACTIONS

RETAIL Q4 Vremena Goda (60%) Moscow 64 280 190 Romanov Property Holdings

Q4 Bolshoy Gostiniy Dvor (10%) St. Petersburg 21 000 290 Frot Group

Q2 Aura Novosibirsk 60 439 750 RosEvroDevelopment

Q2 Mozaika (50%) Moscow 68 000 100 OST Group

Q1 Metropolis Moscow 80 000 1 200 Morgan Stanley Real Estate Fund VII

Q1 Frunzensky univermag St. Petersburg 5 500 12,5 Imperia Holding

OFFICE Q4 Nagatino i-Land Moscow 604 240 B+ 374 AFK Sistema

Q3 White Gardens Moscow 63 900 A 740 Milhouse Capital

Q3 iCube Moscow 15 256 B+ 90 O1 Properties

Q2 International Commercial bank building St. Petersburg 8 000 B+ 64,1 Gazprom OAO

Q1 Dvintsev BC bldg B Moscow 12 003 A 67,5 Central Properties

Q1 Aquamarine BC Phase III (50%) Moscow 55 422 A 230 AFI Developments

Q1 Olympia Park Moscow 45 966 A 350 Kaspersky Labs

Q1 White Square office center Moscow 73 526 A 1 000 O1 Properties

INDUSTRIAL Q3 Terminal SV St. Petersburg 20 000 A 22,7 Admiral

Q1 Tomilino Moscow region 52 328 A 100 BIN Group

HOSPITALITY Q2 Renaissance Moscow Hotel Moscow 475 upscale 170 Alexander Klyachin (Azimut Hotels)

PORTFOLIO TRANSACTIONSHOSPITALITY Q2 ALROSA hotel portfolio (ALROSA na Kazachyem,

Vedensky, Zarnitsa, Pur-Navolok, Polyarnaya Zvezda)

Moscow, St. Petersburg, Mirny, Arkhangelsk, Yakutsk

516 upscale 63,5 Nord OOO

W&I Q1 Eurasia Logistics portfolio (Tolmachevo, Biek Tau, Pyshma)

Novosibirsk, Kazan, Ekaterinburg

930 594 A 500 IQ Property management

W&I Q4 MLP portfolio Moscow, St. Petersburg 1 380 803 A 700 BIN Group

Source: Cushman & Wakefield

NOTABLE INVESTMENT TRAN SACTIONS IN RUSSIA IN 2013 НЕКОТОРЫЕ ИНВЕСТИЦ ИОННЫЕ СДЕЛКИ НА РЫНКЕ КОММЕРЧЕСКОЙ НЕДВИЖИМОСТИ РОССИИ В 2013 Г.




13 HIGHEST AND BEST USE ANALYSISAccording to The Dictionary of Real Estate Appraisal, Fourth Edition (2002), a publication from The Appraisal Institute, the highest and best use of a property is defined as:

‘The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.’

Implied in this definition is that the determination of highest and best use takes into account the contribution of a specific use to the community and community development goals, as well as the benefits of that use to individual property owners. An additional implication is that the determination of highest and best use results from the appraisers' judgment and analytic skills; that is, the use determined from analysis represents an opinion, not a fact to be found.

In valuation practice, the concept of highest and best use represents the premise on which value is based. The use should take the highest advantage of the attributes of the property while neutralizing, to the greatest possible extent, any negative characteristics. At the same time, the use should operate within the limits of approved and justified development.

In arriving at an estimation of the highest and best use for the Subject Property, the appraiser has utilized the following four point analysis:

Physically possible – the use to which it is physically possible to construct on the site in question; Legally permissible – the uses that are legally permitted by zoning and deed restrictions on the site; Financially feasible – the possible and permissible uses that will produce a net return to the owner of

the site; Most profitable – from among the feasible uses, the use that will produce the highest net return or

the highest net present value.Based on our analysis of the above points, it is our opinion that the highest and best use of the subject land plot is the current use.

ANALYSIS CRITERIA THE SUBJECT PROPERTYPhysically Possible According to the information provided to us by the Client, the soil conditions, the

size and the shape of the appraised property allow for the operation of a shopping and entertainment complex.

Legally Permissible According to the information and documents provided to us by the Client, the subject land plot belongs to the zoning providing for the operation of a mixed-use complex. Thus, we conclude that the development and operation of a shopping and entertainment complex is legally permissible.

Financially Feasible According to our analysis, the development and operation of shopping and entertainment complex on the subject site will produce a significant return to the Client and is, thus, financially feasible.

Most Profitable In our view, the development and operation of a shopping and entertainment complex is the most adapted to the current market opportunities and will lead to the optimal financial result for the Client.

14 VALUATION METHODOLOGY The three traditional valuation techniques include the cost approach, the sales comparison approach and the income approach. We have valued the property primarily using the income approach.




An overview of The Sales Comparison Approach, the Cost Approach and the Income Approach and how these relate to the Russian Market follows.

SALES COMPARISON APPROACH

It is a fundamental aspect of the comparable approach to valuation that it proceeds by analogy. The valuer isolates those characteristics of the object to be valued which in his view affect value and then seeks another object of known or ascertainable value possessing some or all of those characteristics with which he may compare the object he is valuing. This method therefore involves analyzing all available information on sales or asking prices of comparable properties that have taken place and making adjustments in the prices achieved to reflect the differences in the properties sold and the property to be valued.

This approach hinges on the availability of reliable market evidence of comparable sales. Distinctions must be drawn between information that is known to be accurate and reported information that is second hand or at best hearsay. Only information that is known to be accurate can be relied upon with any degree of comfort to provide an accurate valuation.

There are severe difficulties in applying this valuation approach in emerging real estate markets, including Russia, as due to their comparative immaturity the availability of reliable market information is very limited.

The principal problem is a lack of transparency and a low volume of recorded deals. In mature property markets there is a wealth of information available on completed sales transactions, in the form of yields and total sales prices, and this makes it relatively straight-forward to assess the market value of any property. In the Moscow and Russian real estate market this sort of information is often not available, and where the details of transactions are publicized their accuracy cannot always be guaranteed. In addition, a majority of transactions in the Moscow real estate market takes place “off-market” and therefore details of them are seldom known beyond those who were party to the deal.

Therefore, due to a lack of market evidence and comparable transactions of properties with similar locations, land uses, zoning, tenure and utility characteristics and also taking into account the factors outlined above, we are of opinion that the sales comparison approach is not applicable for the Property’s market value estimation.

THE COST APPROACH

This approach is also known by RICS as the depreciated replacement cost approach. Where a market exists for a residential, retail, commercial and industrial property, there should be sufficient market evidence to establish Market Value using the sales comparison or income capitalization approaches.

Where there is no market evidence, or where a specialized property (e.g. an oil refinery or light-house) that is not normally bought and sold is involved, then the cost approach can be used as the valuation method. The cost approach should not be used where there are market sales of comparable properties, nor should it be used if a cash flow approach based on business profits is more typical of buyer behavior.

The cost approach is based on the supposition that no one would pay more or accept less for an existing property than the amount it would cost to buy an equivalent property, in terms of size and location, plus the cost of constructing an equivalent building at present. Where used for properties that are not new, the cost figure will be written down for age or obsolescence. The cost in such cases will be based on the cost of a simple substitute rather than that of replicating the actual building.

According to RICS valuation standards this approach is relevant only to specialized properties (i.e. properties that are rarely if ever sold on the open market due to their uniqueness which arises from




their specialized nature, use and design of the property) and limited market properties (i.e. properties that because of market conditions, unique features or other factors, attract relatively few buyers). This also produces a “Non-Market Value” suitable for financial statements relating only to “specialized properties”.

We have not applied the cost approach in our valuation analysis as the Property is not a specialized property.

THE INCOME APPROACH

Discounted Cash Flow

One of the most commonly used techniques for assessing Market Value within the Income Approach is the Discounted Cash-Flow (DCF). This is a financial modeling technique based on explicit assumptions regarding the prospective cash-flow of a property or business and the costs associated with being able to generate the income. To this assessed cash-flow a market-derived discount rate is applied to establish a net present value of the income stream. This Net Present Value (“NPV”) is an indication of Market Value3. This approach is considered to be a sophisticated valuation technique as the inputs to a DCF are derived from market data, econometric projections and current prevailing market sentiment.

When applied to an existing investment property, the valuer models the future cash-flow at the premises as contracted in the lease agreements, applying inflation, non-recoverable costs, a deduction for any repairs or capital expenditure required, a deduction for an annual sinking fund and any other income generating or income reducing items that may be appropriate. Where leases expire, the valuer will apply re-letting voids (if appropriate) and assumes that the rent for each space will revert to the currently prevailing Market Rent appropriate to that property and space. Market Rent will be determined according to current market conditions and data, but a conservative growth rate will normally be applied. This growth rate, which is usually nominal and includes inflation, is also determined according to current data about the market and in which direction the market is perceived to be moving.

Once properly modeled, as described above, an exit or terminal yield and a discount rate will be applied to the resulting income stream. The exit yield represents the yield a third party purchaser would pay for the income stream in the final year of the discounted cash-flow and will usually be based on current market yields adjusted for the likely dynamics of the income stream at the end of the holding period. The exit yield assumes a sale of the asset to an investment purchaser and reflects the investor’s likely bid for the property.

The discount rate applied to the income stream represents the purchaser’s market based minimum hurdle rate of return required to purchase the asset. It is thus the rate which a third party purchaser will not venture below to purchase the property (a lower return being below the minimum IRR required to justify buying the asset). This discount rate, when discounted to the present to determine the Net Present Value of the property (here identical to the Market Value) represents the hurdle rate of return which the most competitive investment purchaser would bid in order to buy the property.

The difficulty in applying this method in the Russian market is assessing the correct market derived discount rate, due to the very small number of transactions, the lack of transparency in the reporting of information and in the wide variations in returns required on projects from different investors.

In the Russian market this approach specifically excludes the use of debt and the effect of leverage. The availability of debt, and on what terms, varies widely from investor to investor, and there is no market standard – especially in a comparatively immature debt market such as Russia. Pre-debt/un-

3 International Valuation Standards Seventh Edition – Guidance Note 7




geared discount and capitalization rates are therefore used to represent the risk-return requirement of investors.

We have applied the Investment/Income method in our valuation as the property is clearly an Investment property which would be appraised and purchased by an Investor on the basis of both its income producing characteristics as well as its potential for capital appreciation.

15 VALUATION COMMENTARY AND ASSUMPTIONS

THE COST APPROACH

The cost approach has not been applied for the reasons detailed above in Section 14.

THE INVESTMENT APPROACH

Our DCF valuation model is based on a common set of assumptions, which are outlined below.

DCF MODEL HOLDING PERIODOur model assumes a resale of the asset at the end of a 5-year holding period. Our DCF valuation thus projects incomes and costs for a 5 year period running from 2014 to 2018, with a hypothetical resale of the asset (calculated as the capitalization of the 2019 NOI based mostly on market rents) in Q4 2018, following the 5 year holding period.

PROJECTED LEASE PERIODSIn respect of the signed leases we used the corresponding actual lease periods, information on which was provided to us by the Client and set out in Section B of the Report.

In respect of the premises that were vacant as of the date of valuation, the duration of the leases has been projected with regard to typical market terms and lease durations for similar leases in the current market (for the valuation purposes we assumed these to be 3-year leases).

After expiration of the current lease agreements we have applied a Market Rent after an appropriate re-letting void.

RENTAL VALUEBased on the tenancy schedule provided to us we have reflected each tenancy separately in our calculations. Please refer to the Section 10 of the current report.

ESTIMATED RENTAL VALUE/MARKET RENTIn preparing our valuation we have made reference to rental values appropriate to the nature and use of the accommodation as well as the location of the Property. As at the respective date of valuation we have estimated the rental income based on our ERVs for the different uses and qualities of net leasable area, as follows:

USE SPECIFICATION ERV AS OF VAL DATE, $/SQ M/YEAR

Supermarket $400

Department Store $300

Cinema $300

Anchors $500

Mini-anchors $800

Boutiques 400-1000 $1,000




USE SPECIFICATION ERV AS OF VAL DATE, $/SQ M/YEAR

Boutiques 300-400 $1,500

Boutiques 200-300 $2,100

Boutiques 100-200 $2,300

Boutiques <100 $3,100

FC, Cafés, Restaurants > = 300 $900

FC, Cafés, Restaurants 100-300 $1,800

FC, Cafés, Restaurants < 100 $3,200

FC sitting area > = 100 $200

FC sitting area < 100 $1,000

Kiosks > = 6 $7,000

Kiosks < 6 $9,500

Storage, technical $400

Offices $700

Winter garden $400

Parking $5,671


These figures are based on research carried out by C&W and market data (based on the estimates of C&W Retail and Office Agency teams) as described in the tables below:

RETAIL RENTAL EVIDENCE:

# PHOTOGRAPH PROPERTY DESCRIPTION1 Avia Park

Khodynskoe Pole, Moscow (in between the Third Transport Ring and MKAD)

Delivery: 4Q 2014/1Q 2015

Total area: 400,000 sq.m

Retail GLA: 235,000 sq.m

Parking: 7,000 spaces

Gallery base rental rates: $200 - $8,000 per sq.m (average - $1,000 per sq.m)

2 Evropeysky

2 Kievskogo Vokzala Square, Moscow (in between the Garden and Third Transport Ring)

Delivery: 4Q 2006





3 Atrium

33 Zemlyanoy Val, Moscow (directly at the Garden Ring)




Delivery: 2Q 2002



Parking: 700 spaces


4 Lotte Plaza

21 Novy Arbat Str., Moscow (directly at the Garden Ring)

Delivery: 3Q 2007



Parking: 450 spaces

Gallery base rental rates: $1,000 - $4,000 per sq.m (average - $1,500 per sq.m)

5 Vremena Goda

48 Kutuzovsky Prosp., Moscow (in between the Third Transport Ring and MKAD)

Delivery: 4Q 2007




Gallery base rental rates: $4,000 per sq.m (level 1), $3,000 (level 2) and $2,000 (level 3) on average

Source: C&W analysis and estimates

OFFICE RENTAL EVIDENCE:

# PHOTOGRAPH PROPERTY DESCRIPTION1 Naberezhnaya Tower

10 Presnenskaya emb. Moscow (Moscow City area)

Delivery: 2Q 2004 – 4Q 2007

Total GBA: 215,994 sq.m

Office GLA: 150,000 sq.m

Total parking: 1,188 spaces

Parking ratio: 1/110 – 1/170

Rental rate: $750 – $1250 per. sq. m. + OpEx $130 + VAT

Condition : shell & core

Parking u/g : $450

2 Capital City

8/1 Presnenskaya emb. Moscow (Moscow City area)

Delivery: 4Q 2008 – 4Q 2009



Parking ratio: 1/90

Rental rate: $750 - $1,250 per sq. m. + OpEx $150 + VAT




Condition: shell & core/ fitted out

Parking u/g: $450

3 Northern Tower

10 Testovskaya Str. Moscow (Moscow City area)

Delivery: 1Q 2008 – 2Q 2008



Total parking: 688 spaces

Parking ratio: 1/100

Rental rate: $750-$900 sq. m. + OpEx $130 + VAT

Condition: Fitted out

Parking u/g: $450

4 Federation Tower

15 Presnenskaya emb. Moscow (Moscow City area)

Delivery: 1Q 2008 – 4Q 2013 (planned)



Parking ratio: 1/100 – 1/120

Rental rate: $1,100-$1,200 per sq. m. OpEx $150 (excl. VAT)

Condition: fitted out

Parking u/g: $500

5 Mercury City Tower

14 Krasnopresnenskaya emb. Moscow (Moscow City area)

Delivery: 2H 2013 (planned)



Parking ratio: 1/300

Rental rate: $720-$1,050 per sq.m. + OpEx $150 + VAT

Condition: shell & core

Parking u/g: $450

Source: C&W analysis and estimates

As a result, we have applied triple net Market Rental rates to the Property, consistent with the above market evidence and the opinion of consultants in our Retail and Office Agency Departments, who have a significant amount of experience in letting this type of property. The Market Rent applied is net of operating costs, taxes and insurance costs and assumes appropriate and prevalent current lease terms.

In respect of the parking income calculation we applied the following methodology:

we applied the net parking hourly rate at the level of approximately 42 rubles/hour (an average parking rate in successful shopping centres in Moscow), or approximately $1.3 (recalculated as at the date of valuation);

multiplied it by the number of the Property’s opening hours in a day (i.e. 12) – $15.5358; multiplied it by the number of days in a year (i.e. 365) – $5,671 (this is the potential income from

parking – on assumption that it is 100% occupied all year); multiplied it by the number of parking spaces and calculated the total potential income;




applied an appropriate parking occupancy rate to the projected income cash flow (as discussed below).

ERV GROWTHDuring the cash flow period we have applied a 2.5% annual growth rate in respect of the Market Rental rates, which reflects our cautious approach toward growth in the current, slightly weaker exchange rate environment related to the weak rouble. We believe this may have an impact on retailer revenues and consequently the indexation rates they would agree on entering into new leases.

INDEXATIONIn respect of the signed leases we applied the actual levels of indexation based on the information provided to us by the Client.

BREAK OPTIONSWe have assumed that none of the tenants with break clauses will exercise their break clauses.

VACANCY RATEIn accordance with the information provided to us as at the valuation date 22,704.45 sq.m within the Property is vacant. This represents a vacancy rate of 21.18% at the valuation date.

For the purpose of determining the appropriate occupancy rates in the future, we have applied the following stabilization path as the Moscow City project gains pace, traffic arteries and alternatives are delivered and the mall increases its footfall and market position. We have thus calculated the effective income from the Property – by means of applying our projected occupancy rates to the potential rental cash flow (comprising existing rents and Market Rents by occupier type as described above) in line with the projected schedule below:

PERIOD1Q 2014

2Q 2014 – 4Q 2014

2015 2016 2017 – 2019

PROJECTED RETAIL OCCUPANCY (% OF TOTAL GLA)

78.82% 80% 90% 95% 97%

Source: C&W analysis

Based on C&W knowledge and experience we calculated the stabilized average occupancy of parking depending on the days of the week and times of the day (at the time when the property is already successful and fully leased):

OPENING HOURS MON TUE WED THU FRI SAT SUN

21.00 - 22.00 95% 95% 95% 95% 95% 95% 95%

20.00 - 21.00 95% 95% 95% 95% 95% 95% 95%

19.00 - 20.00 95% 95% 95% 95% 95% 95% 95%

18.00 - 19.00 95% 95% 95% 95% 95% 95% 95%

17.00 - 18.00 60% 60% 60% 60% 60% 95% 95%

16.00 - 17.00 60% 60% 60% 60% 60% 95% 95%

15.00 - 16.00 60% 60% 60% 60% 60% 95% 95%

14.00 - 15.00 60% 60% 60% 60% 60% 95% 95%

13.00 - 14.00 60% 60% 60% 60% 60% 60% 60%

12.00 - 13.00 60% 60% 60% 60% 60% 60% 60%

11.00 - 12.00 60% 60% 60% 60% 60% 60% 60%




OPENING HOURS MON TUE WED THU FRI SAT SUN

10.00 - 11.00 60% 60% 60% 60% 60% 60% 60%

Daily average 72% 72% 72% 72% 72% 83% 83%

Overall average 75%


Thus, as the result of our analysis, we came to a conclusion that the overall average occupancy of the parking (when the Property becomes mature) is at the level of 75%. However, taking into account the fact that now the Property is not stabilised (and there is a lot of leasing process ahead) we think that the overall occupancy of the parking for 2014 should be lower – at the level of 55% - and should grow gradually towards the maturity/full stabilisation, as follows:

PERIOD 2014 2015 2016 2017 – 2019

PROJECTED PARKING OCCUPANCY

55% 60% 65% 75%


Therefore, we used these occupancy rates and applied them to the potential income (from the rentable area and parking respectively) in order to calculate the effective income from these components.

VOID PERIODFor those premises which become vacant due to lease expiries we have assumed that they will be re-let after 90 days (or 3 months), as we have assumed that the landlord will begin marketing the space on the tenant’s service of notice not to renew the lease several months before lease expiry (which would be enough to find a new tenant).

DISCOUNTS FROM RENTAccording to the information provided by the Client, some tenants will be provided discounts (from the rent they pay) as lump sums in line with the following schedule:

PERIOD 1Q 2014 2Q 2014 3Q 2014 4Q 2014

DISCOUNTS AMOUNTS -$2,720,835 -$1,720,547 -$1,456,014 -$1,112,984

PERIOD 1Q,2015 2Q,2015 3Q,2015 4Q,2015

DISCOUNTS AMOUNTS -$152,746 -$63,849 -$63,849 -$63,849

Source: Information from the Client

BROKERS’ FEES ON LEASINGWe assume that the Landlord will use agents in leasing the premises in the Property. Broker’s fees are assumed to be at the level of 5% and have been applied as a cost in our DCF calculation.

RESERVE DEDUCTIONS For the valuation purposes we have assumed annual reserve deduction at 1% of NOI to take into account any needs for minor repairs that might arise in the projection period.

NON-RECOVERABLES AND OPERATING EXPENSESAccording to the information provided, the service charge that is paid by the tenants does not cover all the expenses of the owner. The current situation regarding operational costs is described in detail in section 11 of this Report.




According to the information provided by the Client, the Property’s tenants pay operating charges and marketing fees (apart from the base rent), which, at the date of valuation, are on average at the level of $209/sq.m per annum, as well as compensate part of the utilities charges. For the valuation purposes we assumed that the OPEX charges receivable from tenants will be growing gradually by 2.5% per annum.

Based on the Client’s projections for 2014 regarding the operating expenses budget and subject to our own analysis, we estimate the factual operating expenses (excluding part of utilities charges that are directly compensated by the tenants and also excluding the property tax) to be incurred by the Property in 2014 at the level of approximately $208 per 1 sq.m of the Property’s total GLA. However, taking into account the fact that the Property has entered the market relatively recently and will still be gaining momentum for some time in the future (until stabilization of the cash flows), we believe that the operating expenses (i.e. marketing expenses and maintenance expenses) are likely to decrease in the future, as the Property becomes more mature/stabilises and better recognized by the general public – according to our view the incurred operating expenses for the Property are likely to decrease by 5% annually until stabilization of the Property’s cash flows.

According to the opinion of our C&W Research, as far as retail properties are concerned, the new property tax will be fully transferred to (and recovered from) existing tenants (who will relay this burden further – to consumers), therefore the change in the property tax legislation should not have a significant effect on retail property owners. However, for the purposes of our valuation in respect of AFI Mall, we decided to make a more conservative assumption – at the moment we assumed that the property owner will be able to recover at least 30% of the new property tax amounts (starting from 2015) – which is in line with the expectations of AFI Development. Additionally, according to the current legislation, the mass cadastral valuation (carried out on behalf of and at the expense of the government) should typically happen once in 5 years, so for the purposes of this valuation we assumed that after the end of the projection period (which equals also 5 years), i.e. in Year 6 the cadastral value of the property will be updated and will be equal to the terminal value (the one calculated in our model), but, at the same time, starting from Year 6, 50% of the property tax amounts will be recoverable from tenants (however, this reimbursement assumption in the projection and post-projection periods may be subject for further adjustments in our future valuations, when there will be more information and evidence available from the market and the subject property).

Thus, unrecoverable OPEX is the difference between receivable and incurred OPEX.

CAPITAL EXPENDITURE (CAPEX)According to the information from the Client, there is outstanding capital expenditure (i.e. on installation of new elevators and escalators) in the amount of $2,779,583 net of VAT, which will be incurred according to the following schedule:

PERIOD 1Q 2014 2Q 2014 3Q 2014

OUTSTANDING COSTS $1,063,992 $980,748 $734,843

Source: Information from the Client

These amounts have been deducted from the Net Operating Income in the corresponding periods in our calculations.

CURRENCY EXCHANGE RATE In accordance with the Central Bank of the Russian Federation, as at the valuation date the currency exchange rates were as follows:

32.7292 RUR = $1.




DISCOUNT RATES AND EXIT YIELDS (TERMINAL CAPITALISATION RATES)We have considered the perceived and actual risks associated with the Property, as there is a direct correlation between a property’s perceived risk and the expected rate of return to an investor (the discount rate). Generally, the yield or discount rate is the rate of return that would be required by an investor to purchase the stream of expected benefits (e.g., future cash flows), given the risk of achieving those benefits. Risk is generally defined as the degree of certainty or uncertainty as to the realization of expected future returns.

The term “discount rate” is a rate of return used to convert a monetary sum, payable or receivable in the future, into a present value. Thus the discount rate is used to determine the amount an investor would pay today (the present value) for the right to receive an anticipated stream of payments (e.g., cash-flows) in the future.

The appropriate discount rate will be the rate of return that adequately compensates the investor for the risks taken. As risk rises, the required compensation for the level of risk should also rise, reflected in a rise in the discount rate. The discount rate (the target rate of return) is usually derived by reference to the return on an alternative form of perceived low-risk or riskless asset (frequently the benchmark is the gross redemption yield on government gilts or cash), plus appropriate additions for risk.

The level of rate may vary in different areas of a city or country for many reasons such as condition, desirability of location, which might be related to such factors as accessibility, visibility, reputation, etc. Investors expect larger returns when investing in high-risk income properties. High quality newer investment properties generally have lower yields and discount rates than older existing properties.

Based on our knowledge of required rates of return for various investments, in particular real estate, as well as through discussions with investors active in the real estate market in Russia, we have been able to estimate an appropriate discount rate which reflects the perceived risk and required rate of return for a property such as the subject property.

In determining this discount rate, we have used a number of factors to ensure that it is accurate, applicable, market derived and theoretically robust. Firstly, we have derived the discount rate both from our knowledge of the minimum hurdle rates of return (minimum IRR) required by actual developers and investors currently active in the Russian market (that is, from real market participants and the real rates of return required by our clients).

Secondly, we have used the cumulative method to rationalize and verify the market derived discount rate applied in a more quantitatively and economically robust context. The Cumulative Method assesses the likely return required by investors and developers based on the desired rate of return (also referred to as the discount rate or target rate) conventionally constructed from a risk-free rate and market risk premium; for real estate, investors may also choose to add specific risk premiums.

Finally, we have tested the reasonableness of the discount rates and exit yields applied to the discounted cash flow by considering the initial yield produced by our calculations at the date of valuation based on the current annual income and the Market Value produced by the DCF. This initial yield has been tested against current evidence and market sentiment as to initial yields in the particular property sector ad macro-location considered.

THE DISCOUNT RATE DERIVED FROM THE CUMULATIVE METHOD

While the construction of a discount rate using the cumulative or build-up method may seem to be a relatively straightforward process, actually determining the risk premium is more complex. Although some areas can be estimated quantitatively from historic data, a number of factors, resist that kind of analysis. As a result, investors are required to make subjective or qualitative adjustments to discount rates. The positive interpretation of this is that being aware of a risk, even if one cannot quantify it exactly, is the first step in controlling it.




The following are examples of the sort of factors which may be used in deriving a property risk premium:

1. Risk-free rate of investment2. Market risksa. Illiquidity upon sale (e.g. lot size, transaction times, availability of finance)b. Failure to meet market rental expectations (forecast rental growth)c. Failure to meet market yield expectations (forecast yield shift)d. Risk of locational, economic, physical and functional depreciation through structural changee. Risks associated with legislative change (e.g. planning/privity of contract, changes in fiscal policy)3. Specific risksa. Permitting/Planning risk (for development land or properties)b. Construction risk (for development land or properties)c. Sales or market cycle risk (the risk of failure to let or sell the specific asset due to demand changes)d. Tenant default on rental payment (covenant risk)e. Risk of failure to re-let (void risks)f. Costs of ownership and managementg. Differing lease structures (e.g. rent review structure, lease breaks).The risk-free return rate is normally taken to be the gross redemption yield on a medium-dated government gilt, preferably of the same duration as the assumed holding period of the investment. (Alternatively it is possible to adopt the real return of index-linked gilts, in which case this needs to be applied to cash flows expressed in real terms.) Equally, geared investors or property companies frequently have reference to debt costs or the weighted average cost of capital (WACC) as the core metric against which assets are assessed.

The second group – risks of structural change or market failure – is those that may affect the market as a whole, particular subsectors or groups of property. The structural impacts on the in-town retail market brought about by the introduction of out-of-town retailing and changes to property taxation such as value added tax (VAT) are good examples of this. As such, these risks could be called market or systemic risks.

The third group – property, non-market or ‘unsystemic’ risk factors – are, broadly speaking, risks associated with individual assets.

The asset’s discount rate is derived from the following formula:

Risk-free rate - reflects the overall state of international financial markets. It is a theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. In theory, the risk-free rate is the minimum return an investor expects for any investment because he or she will not accept additional risk unless the potential rate of return is greater than the risk-free rate. In practice, however, the risk-free rate does not exist because even the safest investments carry a very small amount of risk. In real estate valuation practice the rate on Russia’30 rate (the rate on Russian Bonds with a redemption date of 2030) is taken as risk-free rate which at the date of valuation was 4.13%.

Real estate risk - risk related to investing in Russian real estate as an asset class, expressing macro and micro economic, legal and political risks peculiar to the Russian property market as an investment media. We have set the premium at a level of 1%.

The Liquidity risk premium concerns the risk of low liquidity for the asset. It will take much more time and effort to dispose of the subject property than of a highly-liquid market security. Thus, it is reasonable to require an additional return for investing in such an asset. It is calculated as:




Liquidity risk = 1 – (1 / ((1 + Risk Free Rate)^(T/12))),

where T is an exposure period – the sufficient time to allow the property to be brought to the attention of an adequate number of potential purchasers. Taking into account the main characteristics of the property, its location and current market situation we are of opinion that the exposure period for the subject property is 12 months. Based on above the liquidity risk for the subject property is 3.97%.

Market cycle risk - risk related to potential unforeseen changes in market cycles, particularly relevant to development schemes which are commenced during a positive phase of the property cycle but may complete at a point later in the cycle which may give rise to increased sales risk, letting risk or capitalisation/ yield risk deterioration or softening. Uncertainty related to the cyclical nature of property market cycles and market timing. In respect of the Property we have assumed the market cycle risk to be at the level of 1%.

Permitting/planning risk – in a development scheme, risk related to obtaining the required land use category (where a different category is required), planning permission for the outline or detailed scheme, risk related to obtaining a construction permit and state commissioning of the property/development. The subject property represents an operating building and the risk was not applied.

Construction risk – in a development scheme, risk related to the size and complexity of the physical construction process, this also reflects risks of cost over-runs, defects, construction delays, a scarcity or lack of building materials or work force, risks related to weather, hidden construction costs, contractor bankruptcy. The subject property represents an operating building and the risk was not applied.

Management risk premium - risk related to the difficulty and complexity with managing an existing property asset, related to the number of tenants, size of the development, mix of uses, average lease lengths (shorter lease being more difficult to manage). Our assessment of this premium is 3%.

Covenant risk - risk in respect of the credit worthiness of the current or anticipated tenants likely to occupy the property, the risk of default, delinquencies, the ease and likelihood or replace poorly performing tenants with better tenants or the risk of replacing strong credit worthy tenants with weaker covenants. We have assumed this risk to be at the level of 1%.

Income variance risk - the current and short to medium term income dynamics at the subject property, reflecting the risks or rewards required by an investor depending on reversionary, over rented or rack rented nature of anticipated income streams. In our opinion, this premium in respect of the Property should be at the level of 1%.

Summary of discount rate calculation is stated in the following table:

DISCOUNT RATE 15%Risk-free rate 4.13%

Real estate risk 1.00%

Exposure period 12

Liquidity risk 3.97%

Market cycle risk 1.00%

Permitting / planning risk 0.00%

Construction risk 0.00%

Management risk 3.00%

Covenant risk 1.00%




Income variance risk 1.00%


We thus conclude that 15% is an appropriate discount rate for the Property and adequately reflects the risks and return factors in respect of the Property.

MARKET-BASED DISCOUNT RATE

In considering the minimum hurdle rate of return which a potential third party would require for purchasing the asset given its risk profile, we have had regard to the following risk and reward factors, which we believe would strongly influence the IRR required by a potential purchaser in assessing the risks associated with the property:

The size of the Property: AFI Mall is one of the largest high quality shopping centres in Moscow, which is good for the image of the property and would, in time, distinguish from other retail space in the city (however, it is not easy to manage a property of such a size)

The location: the Property is situated in the Central Core of “Moscow City”, which, in time, will become a major business area of the city with a very high concentration of high quality office space that, in turn, would provide a stable footfall for the Property (however, the area is still under development and there is high uncertainty regarding the end and scope of finalization of all planned office construction and infrastructural projects there)

Transport accessibility: as of the date of valuation there is a severe problem with car access to and parking in the area due to the frequent traffic jams and insufficient number of available parking spaces (however, if all the planned infrastructural projects planned by the government are carried out in full and on time, the accessibility issue is going to be improved dramatically)

Vacancy: as of the date of valuation 21.18% of the total GLA is vacant, which implies a significant letting risk and substantial letting period ahead (however, we would expect the leasing process to depend on the overall situation in the surrounding area and timely realization of the announced projects in Moscow City).

We therefore conclude that the asset represents a risky investment opportunity (but with great investment potential) and that a third party purchaser in the current market would require a minimum un-geared/deleveraged internal rate of return or discount rate of 15% in order to purchase the asset.

EXIT YIELDThe exit yield applied in year 2018 of the discounted cash flow, that is, after the holding period in the DCF, assumes a hypothetical sale of the Property at this time through the application of an All-Risks Yield to the final year’s income stream.

In assessing the exit yield to apply, we have had regard to current initial yields for the segment and type of property represented by the subject property, market sentiment relating to anticipated yields in the short term for this type of property and the anticipated state of the property in 5 years. We have also had regard to the likely competition in the retail segment in forthcoming years and the resultant and likely attractiveness of the Property to investors given an increase in supply of similar quality assets.

In conclusion, we have adopted an exit yield of 10% in valuing the Property (taking into account its quality, location and future potential).

CALCULATIONS Please refer to Appendix II of the current report, which includes our calculations.

CONCLUSION ON VALUEGiven the assumptions discussed in detail above, our discounted cash flow valuation produces a value of $1,160,000,000 for the Property at the date of valuation.




16 CONCLUSIONS AND RECONCILIATIONIn the preceding sections of this report, our estimate of Market Value has been derived for the freehold and long leasehold interests in the Property, by a complete analysis of all pertinent data relative to the subject real property. The results of the individual approaches to value are as follows:

APPROACH TO VALUATION MARKET VALUECost Approach Not applicable

Sales Comparison Approach Not applicable

Income Capitalization Approach $1,160,000,000


Subject to the contents of this report and based on current values, we are of the opinion that the Market Value of the freehold and assumed long leasehold interest in the Property consisting of AFI Mall Shopping Centre premises (including 2,075 underground parking spaces) with a total area of 283,182.1 sq.m and a site area of 43,742 sq.m (4.3742 hectares), subject to minor rounding, and as at the date of valuation, is fairly reflected in the sum of:




$1,160,000,000

(One Billion, One Hundred and Sixty Million US Dollars)

Net of VAT

17 MARKETABILITYWe have assumed a marketing period of 12 months prior to the date of valuation.

We would expect interest from international or Russian investors should the property be made available for purchase in the current market and we would anticipate that the property would sell within 12 months should a full and sustained marketing campaign be carried out in respect of the Property, including a legal due diligence period required to complete the transaction




APPENDICES

APPENDIX I VALUATION CALCULATIONS




MOSCOW CITY, MOSCOWAFI MALL

DISCOUNTED CASHFLOW ANALYSIS 1 2 3 4 5 9

PERIOD -335544,32 1 2 3 4 5 6YEAR 2014 2015 2016 2017 2018 2019

01.01.2014 01.01.2015 01.01.2016 01.01.2017 01.01.2018 01.01.201931.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018 31.12.2019

TOTAL CONTRACTED GROSS RENTAL INCOME $103 737 544 $111 292 985 $101 380 736 $111 064 071 $116 432 984 $119 426 717TOTAL UNCONTRACTED GROSS RENTAL INCOME FROM OTHER PREMISES $30 561 960 $31 326 009 $32 197 130 $24 796 628 $33 734 685 $34 578 053TOTAL INCOME FROM PARKING $11 767 239 $12 061 420 $12 395 977 $12 671 161 $12 987 940 $13 312 639EFFECTIVE GROSS INCOME FROM RENT AND PARKING $111 490 349 $135 064 093 $134 033 708 $141 851 471 $155 129 895 $159 091 050DISCOUNTS FROM RENT -$7 010 380 -$344 293 $0 $0 $0 $0NON-RECOVERABLE COSTS

Reserve deductions $1 044 800 $1 347 198 $1 340 337 $1 418 515 $1 551 299 $1 590 911Incurred operating expenses $21 722 312 $20 636 196 $19 604 386 $19 228 924 $19 228 924 $19 228 924Receivable opex & marketing fees from tenants $18 082 032 $20 927 170 $22 642 036 $23 696 678 $24 289 095 $24 896 322Unrecovered OPEX $13 096 202 $8 534 553 $7 994 259 $8 770 536 $9 649 040 $8 140 868Projected Letting Fees $1 379 314 $1 043 488 $2 558 089 $2 147 699 $358 300 $342 400

NET OPERATING INCOME $88 959 653 $123 794 561 $122 141 023 $129 514 722 $143 571 255 $149 016 872

OTHER ADJUSTMENTS TO VALUE

Outstanding construction completion $2 779 583 $0 $0 $0 $0 $0Other Costs $0 $0 $0 $0 $0 $0

TOTAL EXPENDITURE $2 779 583 $0 $0 $0 $0 $0

TOTAL QUARTERLY CASH FLOW $86 180 070 $123 794 561 $122 141 023 $129 514 722 $143 571 255 $149 016 872

TERMINAL VALUE

Exit Capitalisation Rate 10,00%Terminal Value $1 490 168 716Costs of Sale -$7 450 844

PRESENT VALUE

Annual Cash Flow $86 180 070 $123 794 561 $122 141 023 $129 514 722 $143 571 255Discounted Cash Flow $80 195 492 $100 324 136 $86 157 927 $79 153 493 $76 546 079

Terminal Value $1 482 717 873Discounted Terminal Value $737 172 831

TotalTotal Cash Flow $86 180 070 $123 794 561 $122 141 023 $129 514 722 $1 626 289 128Discounted Total Cash Flow $80 195 492 $100 324 136 $86 157 927 $79 153 493 $813 718 911

NET PRESENT VALUE $1 159 549 960MARKET VALUE $1 160 000 000




APPENDIX II PRINCIPAL TERMS AND CONDITIONS OF APPOINTMENT AS VALUERS

1. PRELIMINARY1.1. These terms and conditions (the "Terms of Business") shall apply to all valuation services

(excluding agency services and other forms of professional services, to which separate terms will apply) provided by LLC “Cushman & Wakefield OOO”, a limited liability company having its registered office at Gasheka str., bld. 6, Moscow, Russia, 125047 (“C&W”, “we” or “us”) to the client to whom a real estate valuation agreement (the “Agreement”) is sent (“you”). They shall apply separately to each service subsequently provided to you.

1.2. The Terms of Business are to be read in conjunction with the relevant Agreement and general valuation principles (“Valuation Principles”) attached thereto. In the event of any ambiguity or conflict between the relevant Agreement, the Valuation Principles and these Terms of Business, the provisions in the relevant Agreement shall prevail. These Terms of Business and the relevant Agreement may only be varied in writing by agreement between the parties. It is our practice to review and upgrade our Terms of Business frequently and new versions will be sent to you and agreed with you.

2. PERFORMANCE OF THE SERVICES2.1. We undertake to use all reasonable skill and care in providing the services and advice

described in the relevant Agreement, based on the instructions given by you (the "Services"). We will inform you if it becomes apparent that the Services need to be varied or external third party advice is required. Any variation is to be confirmed in writing and agreed between the parties.

2.2. We may need to appoint third party providers to perform all or part of the Services and we shall agree this with you in advance.

3. BASIS OF FEES3.1. The basis of our fees for our Services is set out in the relevant Agreement.3.2. You shall pay all applicable VAT in addition to any fees and disbursements at the applicable

rate.3.3. You shall pay our fees on completion of our Services (whether or not additional work is still to

be carried out by third parties) or, where the fees are in relation to an ongoing instruction or an instruction of a duration of more than three months, at least quarterly in arrears upon submission by us of quarterly invoices. Payment is due within 10 working days of the invoice date.

3.4. Where valuations are undertaken for a lender for loan security purposes and it is agreed that a borrower will pay our fee, you shall remain primarily liable to pay our fee should such borrower fail to meet its liabilities to us in full. Payment of our fees is not conditional upon the loan being drawn down or any of the conditions of the loan being met.

3.5. If you do not dispute with us an invoice or any part thereof within 15 days of the date of such invoice, you shall be deemed to have accepted the invoice in its entirety.

3.6. If we are required by you to undertake any additional work in relation to an instruction, you shall pay additional fees based upon our usual rates. We will notify you of the amount of such additional fees. This also applies where we are asked to review a legal report or Certificate of Title provided to us more than 8 weeks after we have submitted our Report (either draft or final).

3.7. Where there is a change to the stated purpose for which our valuation is being commissioned and in our sole opinion we deem this to result in an increase in our liability (for example a valuation for annual accounts being used for loan security purposes), we reserve the right to charge an additional fee.




3.8. If you subsequently request our invoice to be re-addressed to a party other than that originally agreed, we reserve the right to make an administration charge of $170. Payment will still be due within 10 working days of the original invoice date.

3.9. In the event that you withdraw our instructions prior to completion of a valuation, you shall be liable to pay us for a fair and reasonable proportion of our fees and any agreed disbursements. If we have sent you draft valuation figures, such fees shall be subject to 50% of the fee originally agreed between us and if we have sent you a draft valuation report, such fees shall be subject to 75% of the fee originally agreed between us.

3.10.We will advise you in advance if it is necessary or convenient to instruct a third party to provide advice or to act as an expert or arbitrator and provide an estimate of the likely cost.

3.11.Where we are instructed to provide Services to one of your subsidiaries or associated / related entities or should you subsequently request that another entity be substituted for you at a later stage and we are unable to seek or obtain payment of any outstanding monies for whatever reason, you shall remain primarily liable to pay those outstanding monies if the subsidiary, associated / related or other entity does not meet its liabilities in relation to payment for the Services provided by us.

4. INTERESTYou shall pay interest on the amount of any invoice for fees or other disbursements that remains unpaid for 10 working days after the date of the invoice in amount of 0,1 per cent for each day but no more than 10 per cent in total.

5. DISBURSEMENTSYou shall pay all disbursements incurred by us in the provision of the Services. Disbursements include, but are not limited to: travel and subsistence expenses at their actual cost.

6. INFORMATION RECEIVED FROM THE CLIENTWe will take all reasonable steps to ensure that property information is accurate where we are responsible for its preparation. Where you provide us with any information on a property that is necessary or convenient to enable us to provide the Services properly, you acknowledge that we will rely on the accuracy, completeness and consistency of any information supplied by you or on your behalf and, unless specifically instructed otherwise in writing, we will not carry out any investigation to verify such information. We accept no liability for any inaccuracy or omission contained in information disclosed by you or on your behalf, whether prepared directly by you or by a third party, and whether or not supplied directly to us by that third party and you shall indemnify us should any such liability arise. If our valuation is required for the purpose of purchase or loan security, you accept that full investigation of the legal title and any leases is the responsibility of your lawyers.

7. CONFLICTS OF INTEREST AND ANTI CORRUPTION7.1. We have conflict management procedures designed to prevent us acting for one client in a

matter where there is or could be a conflict with the interest of another client for whom we are acting. If you are aware or become aware of a possible conflict of this type, please raise it immediately with us. If a conflict of this nature arises, then we will decide, taking account of legal constraints, relevant regulatory body rules and your and the other client’s interests and wishes, whether we can continue to act for both parties (e.g. through the use of separate teams with appropriate Chinese Walls), for one only or for neither. Where we do not believe that any potential or actual conflict of interest can be managed appropriately, we will inform you and consult with you as soon as reasonably practicable.

7.2. You acknowledge that we may earn commissions, referral fees and may charge handling fees connected to the services that we perform and agree that we shall be entitled to retain them without specific disclosure to you. We will not accept any commissions or referral fees in circumstances where we are of the reasonable belief that they would compromise the independence of any advice that we provide to you.

7.3. We confirm that we will not, and will procure that our employees will not, knowingly engage in any activity which would constitute a breach of Russian anti-corruption legislation as well as the UK Bribery Act 2010 and that we have in place a compliance programme designed to ensure compliance with the terms of the UK Bribery Act 2010.




8. MANAGEMENT OF THE PROPERTYWe shall not be responsible for the management of the property nor have any other responsibility (such as maintenance or repair) in relation to the property. We shall not be liable for any damage that may occur while the property is unoccupied. The property shall be your sole responsibility.

9. TERMINATION BY NOTICE9.1. Unless a fixed period has been agreed, either party may terminate the instruction by giving 14

days’ notice in writing to the other party.9.2. In the event of termination by notice, you shall be obliged to pay forthwith all the fees

accrued in relation to the Services and work performed up to the date of termination (and any abort fee) plus any expenses or disbursements incurred by us or to which we are committed at the date of termination.

10. PROFESSIONAL LIABILITY10.1.We shall not be liable to you in contract, tort (including negligence or breach of statutory

duty), misrepresentation, restitution or otherwise, arising in connection with the performance or contemplated performance of the Services in respect of:(i) any direct loss of profit;(ii) any indirect, special or consequential loss whatsoever howsoever caused including without limitation (a) indirect loss of profit; (b) loss of business; (c) loss of goodwill; (d) loss of use of money; (e) loss of opportunity, and the parties agree that the sub-clauses of this clause shall be severable.

10.2.We shall not be liable to you in negligence for pure economic loss arising in connection with the performance or contemplated performance of the Services.

10.3.You acknowledge and agree that the exclusions contained in this clause 10 are reasonable in all the circumstances and that you have had the opportunity to take independent legal advice.

10.4.Where a third party has contributed to the losses, damages, costs, claims or expenses, we shall not be liable to make any contribution in respect of the liability of such third party.

10.5. Save in respect of third parties directly instructed by us and not on your behalf, we shall not be liable for the services or products provided by other third parties, nor shall we be required to inspect or supervise such third parties, irrespective of the third party services or products being incidental to or necessary for the provision of our Services to you.

10.6.Our total aggregate liability (including that of our members and employees) to you or to any other party relying on our valuation and/or report pursuant to this clause 10 in contract, tort (including negligence or breach of statutory duty), misrepresentation, restitution or otherwise, arising in connection with the performance or contemplated performance of the Services shall be limited to an aggregate sum not exceeding twenty times the fee as defined in the relevant Assignment to the Agreement,. Nothing in these Terms of Business excludes or limits our liability: (i) for death or personal injury caused by our negligence; (ii) for any matter which it would be illegal for us to exclude or attempt to exclude our liability and (iii) for fraud or fraudulent misrepresentation.

10.7.We shall be released from our obligations to the extent that performance thereof is delayed, hindered or prevented by any circumstances beyond our reasonable control (examples being a strike, act of God or act of terrorism). On becoming aware of any circumstance which gives rise, or which is likely to give rise, to any failure or delay in the performance of our obligations, we will notify you by the most expeditious method then available.

10.8. To cover any liability that might be incurred by us, we confirm that we will maintain compulsory professional indemnity insurance. .

10.9.Responsibility for our valuation extends only to the party(ies) to whom it is addressed. However in the event of us being asked by you to readdress our report to another party or other parties or permit reliance upon it by another party or other parties, we will give consideration to doing so, to named parties, subject to the following minimum fees:

FIRST EXTENDED PARTY SECOND & SUBSEQUENT




EXTENDED PARTIES

For the first USD1m of reported value

0.075% 0.025% per party

Thereafter 0.035% 0.015% per party

These fees are exclusive of VAT and expenses (including the cost of readdressing the report) and are subject to a minimum fee of $1,250. Should additional work be involved, over and above that undertaken to provide the initial report, we may make a further charge although we will agree this with you before commencing the work.

10.10. Where we consent in writing to reliance on our report by another party or other parties, we do so on the condition that (i) the other party or parties agree in writing to be bound by the Agreement and these Terms of Business as if it / they had been a party to the original Agreement between us, with such written agreement being provided to us, (ii) such other party pay the fees demanded as set out in clause 10.9 above (unless agreed otherwise in writing) and (iii) where you act on behalf of a syndicate or in relation to a securitisation, you agree that you are not entitled to pursue any greater claim on behalf of any other party than you would have been entitled to pursue on your own behalf had there been no syndication or securitisation.

10.11. Where you provide a copy of and / or permit another party or parties to rely upon our valuation report without obtaining our express written consent and fail to provide us with the written consent of any other party or parties who have received our report to be bound by the Agreement and Terms of Business (in accordance with clause 10.10 above), you agree to indemnify us for any and all liability which arises from the use of or reliance upon our report by such unauthorised party.

10.12. Notwithstanding clause 10.11, where a valuation report is prepared or where we consent to a valuation report being used for the purpose of a prospectus, offering (either directly or indirectly), or a circular to shareholders, you agree to indemnify us for any liability whatsoever that we may have to any parties that have not agreed with us in writing to be bound by these Terms of Business which exceeds our aggregate cap on liability (referred to at clause 10.6) arising from their use and / or reliance on the valuation report.

11. QUALITY OF SERVICE AND COMPLAINTS11.1.All our valuation reports are signed by a Member of C&W whose responsibility it is to ensure

that all relevant quality control procedures have been complied with. In particular, for valuations of properties with an individual value of $34m or over, the valuer is required to present and explain his methodology to another member of the Valuation & Advisory Team unconnected with the instruction and who is a Member of C&W.

11.2. If you wish to complain about the level or our service to you, in accordance with the requirements of the Royal Institution of Chartered Surveyors, we have a standard complaints procedure, a copy of which is available on request.

12. DATA PROTECTION12.1.We (and any of our relevant international partnerships, group companies and affiliated

organisations) are data controllers of all personal data collected during the provision of the Services. We shall use such personal data and information we obtain from other sources for providing the Services, for administration and customer services, for marketing and to analyse your preferences. We may keep such personal data for a reasonable period for these purposes. We may need to share personal data with our service providers and agents for these purposes. We may disclose personal data in order to comply with a legal or regulatory obligation and you may request, in writing and upon payment of a fee, a copy of the details held about you by us.

12.2. To help us to make credit decisions about you, to prevent fraud, to check identity and to prevent money laundering, we may search the files of credit reference agencies and we may also disclose details of how you conduct your account to such agencies.




12.3.We may share personal data within our international partnerships, group companies and affiliated organisations and with our business partners for marketing purposes, which may be to countries or jurisdictions which do not provide the same level of data protection as the country in which you are based, or we may send you and your employees information about other organisations' goods and services. We or any business partners may contact you and your employees, directly or via our agents, by mail, telephone, fax, email, SMS or other electronic messaging service with offers of goods and services or information that may be of interest. By providing us with your or your employees' personal data (whether that data is deemed sensitive or not) including fax numbers, telephone numbers or email addresses, you and your employees consent to being contacted by these methods for these purposes.

13. MONEY LAUNDERING REGULATIONSIn order to comply with all applicable money laundering legislation and regulation, we may be required to verify certain of your details and may ask you to assist us in complying with such requirements. Where such information is requested, you will provide such information promptly to enable us to provide our Services. We shall not be liable to you or any other parties for any delay in the performance or any failure to perform the Services which may be caused by our duty to comply with any such legal and regulatory requirements.

14. ELECTRONIC COMMUNICATIONS We may communicate with each other by electronic mail, sometimes attaching electronic data. By consenting to this method of communication, we and you accept the inherent risks (including the security risks of interception of, or unauthorised access to, such communications, the risks of corruption of such communications and the risks of viruses or other harmful devices). In the event of a dispute, neither of us will challenge the legal evidential standing of an electronic document and our system shall be deemed to be the definitive record of electronic communications and documentation.

15. CONFIDENTIALITY 15.1.We owe you a duty of confidentiality. You agree that we may, when required by our insurers

or other advisers, provide details to them of any engagement on which we act or have acted for you, and that we may also disclose confidential information relating to your affairs if required to do so for legal, regulatory or insurance purposes only.

15.2. Subject to clause 16.1, we both agree never to disclose sensitive details of transactions or our advice without the other’s consent. Unless we are expressly bound by a duty of confidentiality which otherwise overrides this, we both shall be entitled to mention to third parties (e.g. in the course of presentations, speeches or pitches) and/or publish (e.g. in brochures, marketing or other written material) that we provide our services to you.

15.3.We shall provide the Services to you only for your sole use and for the stated purpose. We shall not be liable to any third party in respect of our Services. You shall not mention nor refer to our advice, in whole or in part, to any third party orally or in annual accounts or other document, circular or statement without our prior written approval. The giving of an approval shall be at our sole discretion.

15.4.We will not approve any mention of our advice unless it contains sufficient reference to all the special assumptions and/or limitations (if any) to which our advice is subject. Our approval is required whether or not we are referred to by name and whether or not our advice is combined with others.

16. INTELLECTUAL PROPERTYAll intellectual property rights (including copyrights) in the documents, materials, records, data and information in any form developed or provided to you by us or otherwise generated in the provision of our Services shall belong to us solely. You are granted an irrevocable, non-exclusive, royalty-free licence to use or copy such intellectual property rights for any purpose connected with the property.

17. ASSIGNMENTNeither party shall be entitled to assign this contract or any rights and obligations arising from it without the prior written consent of the other, such consent not to be unreasonably withheld.




18. GENERAL18.1. If any provision of these Terms of Business is found by any court, tribunal or administrative

body of competent jurisdiction to be wholly or partly illegal, invalid, void, voidable, unenforceable or unreasonable it shall to the extent of such illegality, invalidity, voidness, voidability, unenforceability or unreasonableness be deemed severable and the remaining provisions of these Terms of Business and the remainder of such provision shall continue in full force and effect.

18.2. Failure or delay by us in enforcing or partially enforcing any provision of these Terms of Business shall not be construed as a waiver of any of our rights under these Terms of Business.

18.3.No term of the relevant Agreement or these Terms of Business is intended to confer a benefit on or to be enforceable by any person who is not a party to the same.

18.4. The Agreement shall be governed by and be construed in accordance with legislation of the Russian Federation. Any dispute arising out or in connection with the services shall be submitted to the exclusive jurisdiction of the Arbitration Court of Moscow.Where the Client is a legal entity established under the laws other than Russian any dispute, controversy or claim which may arise out of or in connection with the present contract (agreement), or the execution, breach, termination or invalidity thereof, shall be settled by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation in accordance with its Rules.

18.5.References to partners of LLC “Cushman & Wakefield OOO” are used to refer to a Member of LLC “Cushman & Wakefield OOO” or an employee or consultant with equivalent standing and qualifications. A list of the members of LLC “Cushman & Wakefield OOO” and of the non-members who are designated as “partners” is open to inspection at our registered office, 6th floor, Gasheka str., bld.6, Moscow, Russia, 125047.




APPENDIX III GENERAL VALUATION PRINCIPLES 1. PRELIMINARY

1.1. These general valuation principles (the "Valuation Principles") shall apply to all valuation instructions, other than agency services and other forms of professional services (to which separate terms will apply), provided by LLC “Cushman & Wakefield OOO”, a limited liability company having its registered office at Gasheka str., bld. 6, Moscow, Russia, 125047 (“C&W”, “we” or “us”) to the client to whom a real estate valuation agreement (the “Agreement”) is sent (“you”). They shall apply separately to each service subsequently provided to you.

1.2. The Valuation Principles are to be read in conjunction with the relevant Agreement and the Terms of Business attached thereto. In the event of any ambiguity or conflict between the relevant Agreement, the Terms of Business and these Valuation Principles, the provisions in the relevant Agreement shall prevail. These Valuation Principles may only be varied in writing by agreement between the parties. It is our practice to review and upgrade our Valuation Principles frequently and new versions will be sent to you and agreed with you.

2. VALUATION BASES 2.1. Unless we have said otherwise within the Agreement, the date of valuation will be the date of

our inspection.2.2. Unless we have said otherwise in the relevant Agreement, the valuation will be prepared in

accordance with the RICS Valuation Professional Standards current at the date of the Agreement (the “Red Book”) by valuers conforming to its requirements, acting as external valuer.

2.3. Each property will be valued on a basis appropriate to the purpose of the valuation, in accordance with the Red Book in part not contradictory to standards for valuation adopted in Russia. The basis of valuation that we will adopt for each property is specified in the relevant Agreement. Unless the definitions below contradict with the mandatory standards for valuation in Russia the definitions are as follows:(i) Market ValueMarket Value is “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.(ii) Market RentMarket Rent is “the estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.(iii) Existing Use ValueExisting Use Value is “the estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business, and disregarding potential alternative uses and any other characteristics of the asset that would cause its market value to differ from that needed to replace the remaining service potential at least cost”.(iv) Fair ValueFair Value is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.” In the context of International Accounting Standard (IAS) 17, the fair value of the leased asset of interest will normally be its market value (see (i) above).(v) Existing Use Value for Social Housing




Existing Use Value for Social Housing is “the estimated amount for which a property should exchange, on the date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had acted knowledgeably, prudently, and without compulsion, subject to the following special assumptions that the property will continue to be let by a body pursuant to delivery of a service for the existing use:a) at the valuation date, any regulatory body, in applying its criteria for approval, would not unreasonably fetter the vendor’s ability to dispose of the property to organisations intending to manage their housing stock in accordance with that regulatory body’s requirements;b) properties temporarily vacant pending re-letting would be valued, if there is a letting demand, on the basis that the prospective purchaser intends to re-let them, rather than with vacant possession; and c) any subsequent sale would be subject to all of the above special assumptions.”(vi) Projected Market Value of Residential PropertyProjected Market Value of Residential Property is “the estimated amount for which an asset is expected to exchange at a date, after the valuation date and specified by the valuer, between a willing buyer and a willing seller, in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

2.4. When assessing either Existing Use Value, Fair Value or Market Value for balance sheet purposes, we will not include directly attributable acquisition or disposal costs in our valuation. Where you have asked us to reflect costs (as required under FRS15), they will be stated separately. In the case of specialised properties (where valuation methods such as market comparison or an income (profits) test cannot be reliably applied), we may use Depreciated Replacement Cost (“DRC”) as a method of estimating Value. The valuation using this method of a property in the private sector will include a statement that it is subject to the adequate profitability of the business, paying due regard to the value of the total assets employed. If the property is in the public sector, the valuation will include a statement that it is subject to the prospect and viability of the continued occupation and use. Any writing down of a valuation derived solely from the DRC method to reflect the profitability/viability of the entity in occupation is a matter for the occupier. If the valuation is being undertaken for inclusion in accounts prepared under International Financial Reporting Standards, our report will contain a statement that because of the specialised nature of the property, the value is estimated using a DRC method and is not based on the evidence of sales of similar assets in the market. If we consider that the value of the asset would be materially lower if the business ceased, the report will contain a statement to this effect.

3. GENERAL VALUATION ASSUMPTIONS3.1. Unless otherwise agreed, we will provide the Services in relation to any property on the

following assumptions:(i) the property and any existing buildings are free from any defect whatsoever;(ii) all buildings have been constructed having appropriate regard to existing ground conditions or that these would have no unusual effect on building costs, property values or viability of any development or existing buildings;(iii) all the building services (such as lifts, electrical, gas, plumbing, heating, drainage and air conditioning installations and security systems) and property services (such as incoming mains, waste, drains, utility supplies, etc) are in good working order without any defect whatsoever;(iv) roads and sewers serving the property have been adopted and that the property has all necessary rights of access over common estate roads, paths, corridors and stairways and to use common parking areas, loading areas and other facilities;




(v) there are no environmental matters (including but not limited to actual or potential land, air or water contamination, or by asbestos or any other harmful or hazardous substance) that would affect the property, any development or any existing buildings on the property in respect of which the Services are provided or any adjoining property, and that we shall not be responsible for any investigations into the existence of the same and that you are responsible for making such investigations; (vi) any building, the building services and the property services comply with all applicable current regulations (including fire and health and safety regulations); (vii) the property and any existing building comply with all planning and building regulations, have the benefit of appropriate planning consents or other statutory authorisation for the current use and no adverse planning conditions or restrictions apply (which includes, but is not limited to, threat of or actual compulsory purchase order);(viii) appropriate insurance cover is, and will continue to be, available on commercially acceptable terms for any building incorporating types of construction or materials which may pose an increased fire or health and safety risk, or where there may be an increased risk of terrorism, flooding or a rising water table; (ix) items of plant and machinery that usually comprise part of the property on an assumed sale are included in the property but items of plant and machinery that are associated with the process being carried on in the property or tenants trade fixtures and fittings are excluded from the property; (x) in reflecting the development potential of any property, that all structures will be completed using good quality materials and first class workmanship;(xi) any occupational leases are on full repairing and insuring terms, with no unusually onerous provisions or covenants that would affect value; (xii) in respect of any lease renewals or rent reviews, all notices have been served validly within any time limits; (xiii) vacant possession can be given of all accommodation which is unlet or occupied by the entity/borrower or its employees on service tenancies; and (xiv) any mineral rights are excluded from the property.

4. VALUATION ASSUMPTIONS FOR PROPERTY VALUED HAVING REGARD TO TRADING POTENTIAL4.1. Unless we have agreed otherwise, for trading related property (such as hotels, marinas and

self storage properties where the property is trading and is expected to continue, we will value on the basis and assumption of a fully equipped operational entity, having regard to trading potential.

4.2. Where we are instructed to value a property having regard to its trading potential, we will take account of any trading information that either the operator has supplied to us or that we have obtained from our own enquiries. We will rely on this information being correct and complete and on there being no undisclosed matters that could affect our valuation. The valuation will be based on our opinion as to future trading potential and the level of fair maintainable turnover and fair maintainable operating profit likely to be achieved by a reasonably efficient operator.

4.3. Unless we have said otherwise in the relevant Agreement:(i) the valuation will be made on the basis that each property will be sold as a whole including all fixtures, fittings, furnishings, equipment, stock and goodwill required to continue trading;(ii) we will assume that the new owner will normally engage the existing staff and the new management will have the benefit of existing and future bookings or occupational agreements (which may be an important feature of the continuing operation), together with all existing statutory consents, operational permits and licences;(iii) we will assume that all assets and equipment are fully owned by the operator and are not subject to separate finance leases or charges;(iv) we will exclude any consumable items, stock in trade and working capital; and




(v) we will assume that all goodwill for the properties is tied to the land and buildings and does not represent personal goodwill to the operator.

5. STRUCTURE5.1. We will not carry out a structural survey of any property nor will we test services. Further, no

inspection will be made of the woodwork and other parts of the structures which are covered, unexposed or inaccessible. In the absence of information to the contrary, the valuation will be on the basis that the property is free from defect. However, the value will reflect the apparent general state of repair of the property noted during inspection, but we do not give any warranty as to the condition of the structure, foundations, soil and services. Our report should not be taken or interpreted as giving any opinion or warranty as to the structural condition or state of repair of the property, nor should such an opinion be implied.

5.2. If we give the age of a building in our report, this will be an estimate and for guidance only.6. MEASUREMENTS

6.1. Where we are required to measure a property we will generally do so in accordance with the latest edition of the RICS Code of Measuring Practice. However, you should specifically note that the floor areas contained in any report we may publish are approximate and if measured by us will be within a 3% tolerance either way. In cases where the configuration of the floor plate is unusually irregular or is obstructed, this tolerance may be exceeded.

6.2. We will not be able to measure areas that we are unable to access. In these cases we may estimate floor areas from plans or by extrapolation. Where we are required to measure land or site areas, the areas will be approximate and will be measured from plans supplied. They will not be physically checked on site.

6.3. The areas we report will be appropriate for the valuation purpose, but should not be relied upon for any other purpose.

7. PLANNING AND STATUTORY REGULATIONS7.1. Unless specifically instructed in writing to make formal searches with local planning

authorities, we shall rely in the provision of our Services on the information provided informally by the local planning authority or its officers. We recommend that your lawyers be instructed to confirm the planning position relating to the property and review our comments on planning in the light of their findings.

7.2. We may consider the possibility of alternative uses being permitted. Unless otherwise notified by you in writing, we shall assume that the property and any existing buildings comply with all planning and building regulations existing uses have the benefit of appropriate planning consent or other statutory authorisation, and that no adverse planning conditions or restrictions apply.

8. VALUATION EXCLUSIONS8.1. We will not inspect title deeds and we will therefore rely on the information supplied as being

correct and complete. In the absence of information to the contrary, we will assume the absence of unusually onerous restrictions, covenants or other encumbrances and that the property has a good and marketable title. Where supplied with legal documentation, we will consider it but we will not take responsibility for the legal interpretation of it.

8.2. We will take into account any information that you provide concerning any tenants’ improvements. Otherwise, if the extent of tenants’ alterations or improvements cannot be confirmed, we will assume that the property was let with all alterations and improvements evident during our inspection (or, in the case of valuation without inspection, as described within the information that you provide).

8.3. Our valuation will take into account potential purchasers’ likely opinion of the financial strength of tenants. However, we will not undertake any detailed investigations on the covenant strength of the tenants. Unless informed to the contrary by you, we will assume that there are no significant arrears and that the tenants are able to meet their obligations under their leases or agreements.

8.4. Any plans we provide to you indicating the site of a property are for identification only. We will rely on our inspection and information that you provide in outlining the extent of each property, but you should not rely upon our plans to define boundaries.




8.5. Where comparable evidence information is included in our report, this information is often based upon our oral enquiries and its accuracy cannot always be assured, or may be subject to undertakings as to confidentiality. However, such information would only be referred to where we had reason to believe its general accuracy or where it was in accordance with expectation. In addition, we have not inspected comparable properties.

8.6. For a recently completed development property, we will not take account of any retentions or outstanding development costs. For a property in the course of development, we will reflect your advice on the stage of construction, the costs already incurred and those still to be spent at the date of valuation, and will have regard to any contractual liabilities.

8.7. We will not make any allowance in our Services for the existence of any mortgage or other financial encumbrance on or over the property nor take account of any leases between subsidiaries.

8.8. Any valuation figures provided will be exclusive of VAT whether or not the building has been elected.

8.9. We will not make any allowance in any valuation advice provided for the expenses of realisation or any taxation liability arising from the sale or development of the property.

8.10.Unless we have said otherwise in the Agreement, each property will be valued individually; in the case of a portfolio, we will assume that the properties would be marketed in an orderly way and not placed on the market at the same time.

8.11. The components of our valuation calculations (such as future rental values, cost allowances, or void periods) may only be appropriate as part of the valuation calculation. They should not be taken as a forecast or prediction of a future outcome. You should not rely on any component of the valuation calculation for any other purpose.

8.12.We will value in the local currency. If we are to report to you in another currency, unless we have agreed otherwise we will adopt a conversion rate equivalent to the closing rate (“spot rate”) on the date of valuation.

8.13.Our valuation does not make allowance either for the cost of transferring sale proceeds to another state, or for any restrictions on doing so.

8.14. In instances where we are instructed to provide an indication of current reinstatement costs for insurance purposes, this will be given solely as a guide without warranty. Formal estimates for insurance purposes can only be given by a building surveyor or other person with sufficient current experience of replacement costs. The property will not be inspected by a building surveyor or qualified building cost estimator and the guide will be based on costs obtained from generic building cost tables. You should not rely on it as the basis for insurance cover.

9. REGULATED PURPOSE VALUATIONS AND MONITORING9.1. In circumstances where a valuation, although provided for a client, may also be of use to third

parties, for instance the shareholders in a company (otherwise defined as a “Regulated Purpose Valuation” in the Red Book), we are required to state our policy on the rotation of the surveyor who prepares the valuation and the quality control procedures that are in place.

9.2. Irrespective of the purpose of the valuation, we will select the most appropriate surveyor for the valuation having regard to his/her expertise and the possible perception that independence and objectivity could be compromised where a valuer has held the responsibility for a particular client for a number of years. This may result in us rotating the surveyor responsible for repeat valuations for the same client although we will not do so without prior discussion with the client.

9.3. For all Regulated Purpose Valuations we are required by the Red Book to state all of the following in our report:(i) the length of time the valuer continuously has been the signatory to valuations provided to you for the same purpose as the report, together with the length of time we have continuously been carrying out that valuation instruction for you;(ii) the extent and duration of the relationship between you and us;(iii) in relation to our preceding financial year the proportion of the total fees, if any, payable by you to our total fee income expressed as one of the following:




less than 5%; or if more than 5%, an indication of the proportion within a range of 5 percentage points;

(iv) where, since the end of the last financial year, it is anticipated that there will be a material increase in the proportion of the fees payable, or likely to be payable, we shall include a further statement to that effect in addition to (iii) above.

9.4. The valuation may be subject to monitoring under the RICS’s conduct and disciplinary regulations.




APPENDIX IV LICENSES AND INSURANCE




APPENDIX V INFORMATION RECEIVED FROM THE CLIENT Copies of title documents; Rent-roll; Operating budget; Outstanding construction costs; Floor plans.




APPENDIX VI TYPICAL FLOOR LAYOUT

strictly confidential for addressee only valuation … · 2014. 3. 30. · a proposal for valuation...

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