Business Park Perm Russia Eng

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Permgrazhdanstroy (PGS for short!) is the biggest developer in Perm city (about 1,200,000 inhabitants and another 800,000 in the surrounding area). PGS has assets of 19 landplots & 3-4 buildings including their offices, value today probably 80M US$. They are proposing 50% equity in the SPV created for their Business Park project, the first modern mixed use complex in Perm right in the city centre; they are also interested in debt finance:

Landplot 2.05 hectares (full freehold ownership of 1.07 hectares)
Complex:
Offices 20,000 M2
Commerce 40,000 M2
Hotel 4* 15,000 M2 (175 rooms, 25 suites)
Luxury apartments 15,000 M2
Parking 27,000 M2
LOI from Strabag for construction, not binding.
LOI from Starwood for management of a Sheraton 4* Hotel.
Jones Lang Lasalle feasibility study, agreement to find tenants/purchasers.

TOTAL INVESTMENT ENVELOPE 200+M Euros.
Landplot valuation 83.3M Euros
PGS have invested 45M Euros in the site, relocation of previous inhabitants, feasibility study, master plan by German architect group, construction permits launched, permits for utilities also launched.
Investor input 50M Euros for 50% equity
Credit lines from Russian banks 89.2M Euros to complete financing
NET PROFIT FOR INVESTOR 114M

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Business Park Perm Russia Eng

  1. 1. Acquisition of 50% interest in the construction project “Business - park”: Retail and office complex with hotel, elite apartments and underground parking in Perm, ul. Kommunisticheskaya 73
  2. 2. TABLE OF CONTENTS § Summary of investment offer 3 § Project description 4 § Marketing concept of the “Business - park” 5 § Investment offer 6 § Schedule of investor’s cash disbursment 7 § Sales plan and exit strategy of the “Business - park” 8 § Terms of payment of the Project 9 § Project model of the “Business - park” 10 § Project status 11 § Architectural concept and technical planning 12 § General contractor 13 § Concept development and market analysis 14 § Hotel operator 15 § Location of the land plot 16 § Neighbouring objects to the land plot 17 § Plan of the land plot 18 § Pictures of the land plot 19 § About Perm 20 § Contact data 21 2
  3. 3. SUMMARY OF INVESTMENT OFFER OFFER: we offer to acquire 50% interest in construction project “Business - park”: commercial and office complex with hotel (4-5 stars), elite apartments and underground parking. Cost of 50% interest in the construction project “Business-park” – 50 million EUR. PROJECT DESCRIPTION: it is planned to construct qualitative multifunctional complex with total area 120 000 sqm, all elements of the complex will have synergetic effect: - Office (area 20 000 sqm), hotel (200 hotel rooms under management of the international hotel operator Sheraton) and residential areas (elite apartments 15 000 sqm) will attract a large number of solvent customers into the shopping centre (area 40 000 sqm), - Office centre will contribute to hotel room occupancy, retail segment will create well-developed infrastructure for the whole Project., - Underground multilevel parking: (area 27 000 sqm) will demanded by hotel guests, visitors of retail and office centres and apartments owners. Business-park wil be constructed on the land plot with area 2,05 hectares, located at the address: Perm, ul. Kommunisticheskaya, 73a. The land plot is situated in the central part of the city, on the crossing of Kommunisticheskaya and Popova streets, in the centre of business activity, in the immediate proximity to the Kama bridge. There are headquarters of many large corporations and city administration, Perm Regional Government, as well as Drama theatre, Oper and ballett theatre, Art gallery and Exhibition Hall. Today there are not similar projects and similar land plots in Perm. -EFFECTIVENVESS OF THE PROJECT: - Total investment volume of the Project is 196,7 million EUR (including 75 million EUR – funds of PermGrazhdanStroy, 50 million EUR – funds of INVESTOR, (32,5 million EUR for Projrct realization, 17,5 milion EUR – funds of PermGrazhdanStroy), 89,2 million EUR – funds of credit institutes - Profit from sale of all objects of business-park, short term leasing and VAT repayment 363,2 million EUR. - Net profit from project realization minus all taxes, including VAT repayment 227,9 million EUR (including investor’s profit – 114 million EUR) - IRR of the Project for INVESTOR – 39,1% Multiple 2,28. 3
  4. 4. PROJECT DESCRIPTION § Project: Retail and office centre with hotel, elite apartments and underground parking § Total gross area: 120 000 sqm § Office area: total area – 20 000 sqm, leasable area - 15 300 sqm § Retail area: Total area – 40 000 sqm, leasable area - 31 500 sqm § Hotel: 200 rooms, 4-star (area - 15 000 sqm) § Elite apartments (area - 15 000 sqm) § Underground parking with several parking levels: (area – 27 222 sqm) 1 184 parking places (extension is possible) § Russia, city: Perm § Land plot: 2,05 hectares, including 1,7 hectares in freehold, no incumbrances, 0,35 are being acquired. § Location: The land plot is situated in the heart of Perm city, opposite to Lenina Street, one of the main streets of Perm. There are buildings of Legislative Assembly and Perm Regional Government, headquarters of many large corporations, bank offices, the Drama theatre, the Organist Hall, shopping centers, City esplanade in front of the project land plot. 4
  5. 5. MARKETING CONCEPT OF THE “BUSINESS-PARK” Area type Target tenant buyer categories Department store under international brand (anchor): Marc & Spencer, Kaufhof … Shopping center • Big clothing store under international brand (anchor): Koenen, Peek & Cloppenburg … • Premium supermarket (anchor) • Clothing and common articles net stores under international and Russian brands • (business class): Zara, Hallhuber, Gizia, Morgan De Toi … • High-end boutiques: Versace, Dior, Escada … • Food court (business class) • Cinema, bowling, entertainment area Representatives of Russian and international corporations Office • Banks, investment companies • Law companies • Consulting companies • Representatives of insurance companies • Offices of leading Perm corporations • 4 – 5 star hotel with 200 hotel rooms under management of international professional Hotel operator with international well-known brand Perm citizens with upper-middle and high income Elite apartments Shopping center operator and separate stores tenants Underground parking • Office center tenants • Hotel • Elite – apartments owners • Tenants of near-by offices • 5
  6. 6. INVESTMENT OFFER Investor invests PGS invests project land 50 million EUR plot (including 32,5 million EUR in the project, (estimated market value PGS transfers 17,5 million 75 million EUR) EUR ) 50% 50% Project Joint Venture with total equity of 107,5 million EUR Debt financing of the construction cost Export refinancing of around 50% of 89,2 million EUR construction cost through major 46% of the total project cost, Term Sheet currently in international western bank (currently in advanced negotiations with 3 Russian Banks) negotiations with several German banks) 6
  7. 7. SCHEDULE OF INVESTOR’S CASH DISBURSEMENT Investor equity use (1 435 million EUR): • Finishing of the relocation and acquisition of additional land plots with area 0,35 hectares – 9,14 million EUR. • Project documentation (architectural concept, project documentation, construction documentation) 4,6 million EUR. • Utilities and infrastructure contracts - 5,16 million EUR. • Shell and core costs – 6,7 million EUR. • Payment of interest on debts in construction period – 14,3 million EUR 2009 2010 2011 Name 1 q. 09 2 q. 09 3 q. 09 4 q. 09 1 q. 10 2 q 10 3 q. 10 4 q. 10 1 q. 11 2 q. 11 3 q. 11 4 q. 11 Relocation of the territory (acquisition 4 112 4 112 of the additional land plots) 938 938 Рbuilding permit 938 938 Working draft 2 313 2 313 Infrastructure costs 0 383 765 1 133 1 486 1 824 2 147 2 454 2 747 3 025 Interest on credit TOTAL 8 300 8 300 0 383 765 1 133 1 486 1 824 2 147 2 454 2 747 3 025 7
  8. 8. SALES PLAN AND EXIT STRATEGY OF THE “BUSINESS-PARK” Maximum profit will be reached through the following exit strategy: Office building and shopping center will be sold to well - known international institutional fund 2 quarters after the complex commissioning • Long term lease contracts with well-known tenants for at least 75% of the lettable area • Long term lease contracts (5-10 years) with anchor tenants (around 45% - 50% of the whole area) will be signed January 2009 – December 2009 • Brokerage agreement with professional international broker with great experience in Russian Federation (candidate is JLL) • Long term lease agreements will be signed all tenants till the end of the construction period • Sale tender will be managed by well-known international broker with wide experience in Russian Federation (candidate is JLL) • Sale tender preparations will be done before the building is commissioned • PGS is already negotiating with several international well-known investment funds potential forward-purchase agreement • It is possible to sign forward-purchase agreement with international well-known investment fund before the construction works start. Sale of the hotel to the well known international institutional fund specializing in hotel real estate in 1-2 years after the complex commissioning • Maximum sale profit will be reached after the 1-2 years hotel stabilization period • It is possible to sign a forward-purchase agreement for the hotel with the discount before the end of construction period (2008 - 2011) to cover the debt interest • Sale tender will be managed by well-known international broker with great experience in Russian Federation (candidate is JLL) Elite apartments will be sold to private owners in first 2 quarters after the complex is commissioned • Pre-sales agreements (with small initial pre-payment) will be signed for about 46% of all units during the construction period (2009- 2011) • Final sales agreements and rest sales is planned for first 2 quarters after the complex is commissioned • Sales and marketing through professional well-known local residential broker • It is possible to use residential pre-sales to cover debt interest 8
  9. 9. TERM OF PAYMENT OF THE PROJECT TOTAL COMPLEX AREA 120 000 sqm CONSTRUCTION COST PSQM (VAT) 850 EUR PROJECT CONSTRUCTION AND SELLING TIME 4 years TOTAL BUSINESS PRICE OF THE PROJECT quot;BUSINESS-PARKquot; 336 224 750 EUR TOTAL HOTEL AREA (4-5 STARS) 15 000 sqm ROOM NUMBER IN HOTEL 200 HOTEL ROOM RATE 180 EUR PROFIT FROM ADDITIONAL SERVICES PER 1 ROOM 103 EUR OCCUPANCY RATE 70% EBITDA (HOTEL) 6 187 775 EUR PRICE OF BUSINESS HOTEL (CAP RATE 9%) 68 752 750 EUR TOTAL OFFICE AREA CLASS quot;Aquot; 20 000 sqm LEASABLE OFFICE AREA 15 300 sqm RENT PER YEAR PSQM. 400 EUR (net of VAT, insurance, EBITDA and public utilities) BUSINESS PRICE OF ALL LEASABLE OFFICE AREAS (CAP RATE 9%) 68 000 000 EUR TOTAL RETAIL AREA 40 000 sqm LEASABLE RETAIL AREA 31 500 sqm RENT PER YEAR PSQM. 425 EUR (net of VAT, insurance, EBITDA and public utilities) BUSINESS PRICE OF ALL LEASABLE RETAIL AREAS (CAP RATE 9%) 148 750 000 EUR SALABLE AREA OF ELITE APARTMENTS 15 000 sqm NUMBER OF APARTMENTS 100 PRICE OF ELITE APARTMENTS IN 2011 PSQM 2 750 EUR PRICE FOR SALABLE AREA OF ELITE APARTMENTS 41 250 000 EUR SALABLE PARKING AREA 27 222 sqm NUMBER OF PARKING UNITS 1 184 PRICE OF A SALABLE PARKING UNIT 8 000 EUR PRICE OF ALL SALABLE PARKING UNITS 9 472 000 EUR 9
  10. 10. PROJECT MODEL OF THE BUSINESS - PARK 2008 2009 2010 2011 2012 INDEX IRR Multiple TOTAL 3 Q. 08 4 Q. 08 1 Q. 09 2 Q. 09 3 Q. 09 4 Q. 09 1 Q. 10 2 Q. 10 3 Q. 10 4 Q. 10 1 Q. 11 2 Q. 11 3 Q. 11 4 Q. 11 1 Q. 12 2 Q. 12 1 Total profit from the business sale, thousand 336 225 0 0 0 0 1 238 1 238 1 650 2 063 2 475 2 888 3 300 3 713 4 125 4 538 7 013 301 987 EUR Business rate Hotel 68 753 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 68 753 Apartment 41 250 0 0 0 0 1 238 1 238 1 650 2 063 2 475 2 888 3 300 3 713 4 125 4 538 7 013 7 013 Number of sellable apartments 100 0 0 0 0 3,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 10,0 11,0 17,0 17,0 Office 68 000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 68 000 Retail 148 750 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 148 750 Parking 9 472 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 472 Operating activities 2. Total rent(before tax, insurance, EBITDA, 13 231 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 616 6 616 public utilities), thousand ruble Hotel 3 051 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 526 1 526 Office 3 060 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 530 1 530 Retail 6 694 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 347 3 347 Parking 426 0 0 0 0 0 0 0 0 0 0 0 0 0 0 213 213 3 Total investment costs thousand EUR net of 193 593 75 000 0 7 661 7 661 9 818 9 818 9 825 9 831 9 837 9 843 9 849 9 855 9 862 10 097 105 4 530 VAT Land plot aquisition 75 000 75 000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Project preparation Relocation (additional land plot aquisition) 8 224 0 0 4 112 4 112 0 0 0 0 0 0 0 0 0 0 0 0 Construction concept 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Building permits 1 589 0 0 794 794 0 0 0 0 0 0 0 0 0 0 0 0 Working draft 1 589 0 0 794 794 0 0 0 0 0 0 0 0 0 0 0 0 Infrastructure costs 3 920 0 0 1 960 1 960 0 0 0 0 0 0 0 0 0 0 0 0 Total project preparation costs net of VAT 90 322 75 000 0 7 661 7 661 0 0 0 0 0 0 0 0 0 0 0 0 Shell & core 86 441 0 0 0 0 8 644 8 644 8 644 8 644 8 644 8 644 8 644 8 644 8 644 8 644 0 0 Hard cost Starting 212 0 0 0 0 0 0 0 0 0 0 0 0 0 212 0 0 Cost for construction management 4 080 0 0 0 0 408 408 408 408 408 408 408 408 408 408 0 0 Total hard cost, net of VAT 90 733 0 0 0 0 9 052 9 052 9 052 9 052 9 052 9 052 9 052 9 052 9 052 9 264 0 0 Brokerage 5 043 0 0 0 0 19 19 25 31 37 43 50 56 62 68 105 4 530 Marketing 1 071 0 0 0 0 107 107 107 107 107 107 107 107 107 109 0 0 Soft cost Financing contract execution 2 141 0 0 0 0 214 214 214 214 214 214 214 214 214 219 0 0 Contingency 4 283 0 0 0 0 427 427 427 427 427 427 427 427 427 437 0 0 Total project soft cost, net of VAT 12 538 0 0 0 0 766 766 772 779 785 791 797 803 810 833 105 4 530 4. VAT Cash flow, thousand EUR (+inflow, - VAT Cash Flow -5 245 0 0 -639 -639 -1 767 -1 767 -1 768 -1 770 -1 771 -1 772 -1 773 -1 774 -1 775 -1 817 1 172 12 615 outflow) Paid VAT 19 866 0 0 639 639 1 767 1 767 1 768 1 770 1 771 1 772 1 773 1 774 1 775 1 817 19 815 VAT repayment 2 382 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 191 1 191 Selling of VAT return from credit, including 12 239 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12 239 discount 5. Project deficit (surplus) (including VAT), 24,2% 1,83 150 618 -75 000 0 -8 300 -8 300 -10 348 -10 348 -9 943 -9 538 -9 133 -8 727 -8 322 -7 917 -7 512 -7 377 14 695 316 688 thousand EUR Sources of financing 6. Project financing, thousand EUR 85 426 75 000 0 8 300 8 300 10 348 10 348 9 943 9 538 9 133 8 727 8 322 7 917 7 512 7 377 -14 695 -80 644 PGS funds 75 000 75 000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Banking credit 89 165 0 0 0 0 10 348 10 348 9 943 9 538 9 133 8 727 8 322 7 917 7 512 7 377 0 0 Debt repayment -89 165 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -11 397 -77 768 Interest -22 139 0 0 0 0 0 -383 -765 -1 133 -1 486 -1 824 -2 147 -2 454 -2 747 -3 025 -3 298 -2 876 Investor's funds 32 564 0 0 8 300 8 300 0 383 765 1 133 1 486 1 824 2 147 2 454 2 747 3 025 0 0 7. Cash Flow balancing, thousand EUR 236 044 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 236 044 8. Total Cash Flow (before profits tax), 26,3% 2,19 128 479 -75 000 0 -8 300 -8 300 0 -383 -765 -1 133 -1 486 -1 824 -2 147 -2 454 -2 747 -3 025 0 236 044 thousand EUR Profits tax 9.1 Profit tax (Russia), thousand EUR 2 857 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 857 9.2 Profit tax (off-shore), thousand EUR 5 310 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 310 11.Project Cash Flow (after profit tax), 25,1% 2,12 120 312 -75 000 0 -8 300 -8 300 0 -383 -765 -1 133 -1 486 -1 824 -2 147 -2 454 -2 747 -3 025 0 227 877 thousand EURe Results 11. Project Cash Flow for Investor, thousand 39,1% 2,28 63 938 0 0 -8 300 -8 300 -17 436 -383 -765 -1 133 -1 486 -1 824 -2 147 -2 454 -2 747 -3 025 0 113 938 EUR 12. Project Cash Flow for Bank, thousand EUR 15,6% 1,30 22 139 0 0 0 0 -10 348 -9 965 -9 177 -8 404 -7 647 -6 904 -6 176 -5 463 -4 765 -4 352 14 695 80 644 10
  11. 11. PROJECT STATUS • 1,7 hectares of project land plot is in freehold • For the rest, 0.35 hectares of land plot, there are sales and relocation agreements • Local architects created an architectural concept, we have already received technical specifications and building permit • PermGragdanStroy signed a contact with leading German architectural bureau Braun Schlockermann Dreesen Planungsgesellschaft GmbH for development of architectural concept. • Currently in negotiations with large western investment funds on the purchasing of the future complex • Negotiations with large Russian and western banks on the construction financing are on the final stage • Signed the preliminary Term Sheet for general contractor agreement with STRABAG AG • In June PGS has signed the Term Sheet and LOI with Starwood on hotel and a part of apartments management contract under the brand Sheraton • In April 2008 PGS has signed a contract with international real estate broker and consultant Jones Lang LaSalle. The full analysis of the Perm real estate market and improve the concept of business-park 11
  12. 12. ARCHITECTURAL CONCEPT, TECHNICAL AND ECONOMIC EVALUATION PermGrazhdanStroy signed a contact with leading German architectural bureau Braun Schlockermann Dreesen Planungsgesellschaft GmbH for development of architectural concept (stage PP). Delivery date: Architectural concept (stage PP) – 2008. Project, technical and economic evaluation (stage P) - 1. q. 2009. Specification technical documents (stage RD) – 1.q. 2009. We cooperate closely with Russian architects for their regional know-how. 12
  13. 13. GENERAL CONTACTOR Signed the preliminary Term Sheet for general contractor agreement with STRABAG AG • PermGragdanStroy approached leading European construction companies. • Discussed the conditions of the LOI for future general contract agreement. • We appreciate experience and know-how of our western partners and entrust them execution and quality control of construction work. 13
  14. 14. CONCEPT DEVELOPMENT AND MARKET ANALYSIS In April 2008 PGS signed a contract with international real estate broker and consultant Jones Lang LaSalle. Jones Lang LaSalle Jones Lang LaSalle analysed and increased the effectiveness of the market strategic of the “Business-park” Jones Lang LaSalle analyzed Perm commercial and residential real estate market for improvement of Project concept Jones Lang LaSalle questioned potential anchor tenants of our Project and recognized a great interest in our Project among western and Russian large tenants. In the middle of 2009 we will sign notes of intent with most of anchor tenants of our Project. Professional western brokerage and consultant agency will carry out rent brokerage of office and retail areas of our Project. 14
  15. 15. HOTEL OPERATOR • PGS has signed Term Sheet and LOI with Starwood on hotel management contract under the brand Sheraton • Sheraton Hotels & Resorts is the Starwood’s largest brand serving the needs of luxury and upscale business and leisure travelers worldwide. Sheraton offers the entire spectrum of comfort. From full-service hotels in major cities to luxurious resorts by the water, Sheraton can be found in the most sought-after cities and resort destinations around the world. • Average room rate growth in Perm in 2007: 10,5% Number of Properties Rooms • Currently there is only one North America 450 153,700 hotel in Perm with official Europe, Africa and the 264 64,600 certification Pacific 124 41,800 • At this moment there is no Latin America 58 12,400 hotels in Perm under Total 896 272,500 professional international management with international brand Number of Properties Rooms Managed and unconsolidated joint venture hotels 426 142,000 Franchised hotels 360 95,800 Owned hotels(a) 85 27,800 Vacation ownership resorts and residential properties 25 6,900 Total properties 896 272,500 15
  16. 16. LOCATION OF THE LAND PLOT The only bridge in the center of the city to the other side of the river – very heavy trafficed – 2nd train station Bridge Kama - river Land plot Main ul . Lenina – train station one of the main streets of Perm Komsomolsky prospekt one of the main – streets of Perm 16
  17. 17. NEIGHBOURING OBJECTS TO THE LAND PLOT The only bridge in the center of the city to the Office other side of the river – very heavy trafficed Shopping centre Land plot Park Drama theatre Park Park Komsomolsky prospekt – one of the main streets ul. Lenina – one of Perm of the main streets of Perm 17
  18. 18. PLAN OF THE LAND PLOT ул. Советская Sovetskaya str. Участок ул. Попова ул. Осинская Project land plot Osinskaya str. Popova str. ул. Коммунистическая Kommunisticheskaya str. 18
  19. 19. PICTURES OF THE LAND PLOT 19
  20. 20. ABOUT PERM § Perm is one of the biggest industrial centres of the Russian Federation § Population: more than 1 million people (The Perm Region population amount to more than 3 million people) § City area: 800 sq. km., length of the city along the river is 65 km § Personal income increase in 2007: 30,2% § Industrial production increase in 2007: 17,3% § Average income in 2007: 600 USD per person (monthly) § New construction in Perm in 2007: 485 000 sq. m. (+12% increase) City direct investment volume in 2006: 85,6 million € (+8% increase) § § Key industries: aircraft, electrical, chemical and oil-refining industries, mechanical engineering 20

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