The total real estate investment volume in Russia in 2008 was €3.28 billion, nearly the same as 2007. There were 44 deals in 2008 compared to 25 in 2007, with most activity in the first half of the year. As the global economic downturn impacted Russia in late 2008, investor demand fell. Office and retail remained the most attractive sectors, accounting for 81% of investments. Foreign buyers represented 79% of investments, with yields rising back to 2006 levels of around 10% for office and retail by the fourth quarter.

1. CB RICHARD ELLIS
MarketView
Russian Investment
www.cbre.ru YE 2008
OVERVIEW
The total real estate investment volume in 2008 in Russia was €3,280 million,
Quick Stats representing a 0.5% decrease on the total for 2007. There were 44 reported deals in
Change from previous year
total, compared with 25 in 2007. Investor interest in Russian real estate was stronger in
the first half of the year, which accounted for 60% of all 2008 investments. By the
2007 2008 beginning of the third quarter of 2008 it was apparent that Russia was being more
strongly affected by the global economic downturn, and investor demand fell
Investment volume
accordingly.
Number of deals Investment by Quarter, 2007-2008
Average deal size
1 400
Prime yields 2007 2008
1 200
1 000
Hot Topics
800
Euro, mln
• Market size almost same 600
as 2007
400
200
• Significant fall in
activity during 4Q 2008 0
Q1 Q2 Q3 Q4
Source: CB Richard Ellis
• Yields started to rise back DEALS
to levels achieved in 2006
• The largest deal of the year was the €590 million sale of the Vivaldi business centre in
Moscow by Otkritie to the German open-ended fund KanAm Grund with a yield of
7.9%.
• Office and Retail remain
the most attractive • The sale of the Vremena Goda shopping centre in Moscow finally closed in Q3 2008.
sub-sectors This consisted of two staged payments and was one of the largest deals of the year,
achieving a yield below 10%. The buyers were Ivanhoe Cambridge, a Canadian
property company, and a fund managed by the Austrian group Europolis. CBRE acted
jointly for the buyers.
For more information regarding the MarketView,
please contact: • The value of the Top Ten deals in 2008 was €2,078 million, representing 63% of the
total (compared with €2,860 million, or 87%, in 2007). Of these, eight involved
CBRE Moscow international buyers, eight involved Russian vendors, eight deals were based in Moscow,
Christopher Peters four were for offices and four for shopping centres. None took place in the final quarter
of the year.
Director, Research Department
PURCHASERS AND VENDORS
CB Richard Ellis
Foreign buyers accounted for 79% of reported investments by value in Russia in 2008.
Trubnaya Street 12, This consisted of 26 deals (compared with 21 deals in 2007, also accounting for 79% by
Millenium House value). The largest foreign source of investment was Germany, though this consisted of
just one deal. Finland accounted for five deals and indeed investors from all the
Moscow 107045 Scandinavian countries were active in the Russian market in 2008, with ten deals at a
t: +7 495 258 3990 combined total of €433 million (see chart on next page).
e: christopher.peters@cbre.com The majority of vendors were, predictably, Russian developers and other property
companies, accounting for 81% of sales by value (or 34 deals) compared with 67% (19
deals) in 2007. Of the deals featuring foreign vendors, three involved the British private
property company London & Regional Properties, which sold two shopping centres and
an office building in Moscow: Solnechny Rai and Solnechny Rai-2 for €42 million and
€29 million respectively, each for a yield of 9.5%, and the office building Ducat Place II
for €118 million (yield not disclosed but believed to be around 8.75%). The buyer in
each case was the Finnish listed property company Sponda plc.
©2009, CB Richard Ellis, Inc.

2. SECTOR
Since the real estate investment market in Russia began to
MarketView Russian Investment
Sources of Investment in 2008
attract significant international attention in 2006, the office
and retail sectors (or mixed-use between the two) have UK, 10%
Other Europe,
clearly dominated. This has been correlated to the boom in 24%
consumer demand (in the case of retail real estate) and the
general growth across many sectors of the economy (in the
case of office real estate). In 2008 office and retail
(including mixed-use) accounted for 81% of investments by Russia, 21%
volume, compared with 74% in 2007 and 78% in 2006.
The industrial sector attracted very little investor interest in
2008, accounting for just 7.6% by value.
Scandinavia,
YIELDS Japan, 1% 13%
The sharp compression in yields seen in the market since
2005 reversed in Q4. Although in current conditions there
are extremely few deals being openly marketed (even if Germany, 18% USA/Canada,
many properties are available), yields can nevertheless be 12%
estimated as having fallen back to the levels of 2006 in Q4 Source: CB Richard Ellis
2008, or approximately 10% for the office and retail sub-
sectors, and 12% or more for industrial. This reflects Investment by Sector in 2008
investors’ increased risk aversion, and looking forward it is
unlikely that there will be enough funding available for all 3 500
developers to restructure or refinance their debt and as a 3 000
result we expect to see an increase in the number of real
estate groups defaulting on debt service payments over the 2 500
next 6-12 months.
Euro, mln
2 000
OUTLOOK 1 500
The Russian investment market remains modest overall,
1 000
particularly in relative comparison with the far smaller 500
countries of Central and Eastern Europe. Since 2007 Russia -
had appeared to be pulling ahead of this CEE, pack and 2003 2004 2005 2006 2007 2008
over the longer term we expect this to continue, particularly Industrial Mixed-use Office Other Residential Retail
as the effects of the banking crisis in CEE unfold, acting
Source: CB Richard Ellis
against CEE’s previous reputation as a safe haven versus
the more “frontier” market of Russia. However, in the first Comparative CEE Investment Levels
half of 2009 there is unlikely to be significant investment
activity in Russia. Nevertheless, many investors continue to 6000
monitor Russia closely, particularly the Moscow market with Pl
its proven history of fast growth and high profits. In the 5000
second half of this year we expect to see this interest 4000
translate into renewed transaction activity. This will be led Ru Ru
Euro, mln
Pl
foremost by Russian investors who still have have access to 3000 Pl
Ru
Cz
significant funds, are less risk-averse than international Hu
Pl
investors, and who will be keen to take advantage of the 2000
Pl
Cz
Cz Hu
lower prices in the market. Renewed activity will be focused 1000 Cz
Hu Cz Hu
Hu
Cz
on Moscow rather than the regional cities of Russia, as Pl
Ru Ru
Ru Hu
international debt finance is not expected to become 0
available in those markets for some time. From 2010 as
2003 2004 2005 2006 2007 2008
demand and transactional activity increase, and the Source: CB Richard Ellis
broader economy recovers, yields will resume their
downward trend, though slower than previously in order to Prime Yields
retain their competitive premium over Western European
cities. 21
19
17
15
%
13
11
YE 2008
9
7
Q1 2005 Q1 2006 Q1 2007 Q1 2008
Industrial - Warehouses Offices Retail - High Street Retail - Shopping Centres
Source: CB Richard Ellis
Page 2
©2009, CB Richard Ellis, Inc.