Presentation on theme: "Gaia Resource Advisors SA. A few observations: Real Estate in CEE was still a small sector prior to 2003—but then it came into vogue! Massive capital."— Presentation transcript:
Gaia Resource Advisors SA
A few observations: Real Estate in CEE was still a small sector prior to 2003—but then it came into vogue! Massive capital raising over past 2 years Expansion, share buy backs, new listings… “Buy & rent” approach doesn’t offer much upside Lots of people are now talking about the sector Development is profitable but very “work intensive”
What RE investors are looking for: “Yield Compression” A Cap rate of 10% means that if you generate $100 in rental income the property is worth $1,000. To achieve a higher return: 1) Rents must rise (they may go to $130-140) 2) Capital in-flows drive cap rates down and value up Or, leverage at low rates to increase return But, what can go wrong?....
We all want to avoid: “Yield De-compression” i.e., what if… Cap rates are based on artificially high prices… Interest rates go up (no leverage or higher interest…) Project risk… Political and economic risk—lower growth rates…
Apartments: quality is hard to find!
Comparing prices internationally—Kiev is not cheap! Elite apartment statistics, 2006 Sources: Global Property Guide, Planeta Obolon, Concorde Capital
Who are the players? The majors: CompanyEUR mln ImmoEast 6,400 Meinl Eur Land 6,100 GTC Poland 2,700 Orco 1,000 Echo Poland 1,200 Raven Russia 730 Sparkassen Immo 900
Meinl European Land
Local players in Ukriane: Company Date of placement Equity raised, USD mln Stake,% MCap at placement, USD mln XXI CenturyDec'0513936%389 Cantik Dev ’ t May'0630100%30 SablinkJun'063573%48 VK DevelopmentNov'062337%62 TMMApr'07naTBDna Sources: Bloomberg, Concorde Capital
Which strategy— Yield vs. Development? RE sector premiums historically high (NAV + 15% plus…vs. 10-15% discount) Tight market, few quality assets, low liquidity One must develop in Ukraine!
An opportunity to “lever up”! Source: World Bank Source: Ukrainian Nat. Mortgage Assoc., Concorde Capital estimates
Extreme supply & demand mis- matches: Offices Office stock per '000 inhabitants in 2005, m 2 Office vacancy rates in 2005, % Sources: Jones Lang LaSalle, Colliers
Mis-matches: Warehousing Stock per 1,000 Inhabitants ’ 06, m 2 Source: Jones Lang LaSalle, DTZ Warehouse Space Prices Source: Jones Lang LaSalle, DTZ
Absence of high quality! Office space by class in Kyiv, 2006 Source: Colliers Warehouse Space by Class, '05 Source: Astera
Drivers for Retail Demand
Retail (cont.) Ukraine’s vs. Global retail sector market Bubble size represents retail turnover
Housing Market—what small dwellings! Residential real estate construction and stock in Ukraine Source: State Statistics Committee
Even wealthy regions have low stock per capita… Source: State Statistics Committee
Igor Mazepa CEO, Concorde Capital Graduated from Kiev’s National Economics University, International Economics faculty In investment banking sector since 1997 Previously: Managing Director of Foyil Securities New Europe & MFK Investment Bank J. Coast Sullenger Partner Gaia Resource Advisors SA 8 yrs as head of Emerging Markets, managed 5 Eastern Europe and Resources & Energy funds at Lombard Odier Darier Hentsch & Cie (LODH), Geneva Was directly responsible for AUM exceeding USD 500m Consistent above average market returns with LODH Pre-LODH headed up sales and trading for Pioneer Securities in Russia Valeriy Kirilko General Director of Concorde Development Graduated from Kiev’s State University of Commerce and Economy, faculty of marketing and economy More than five years of experience in the industry Previous positions: Director of the Castle Development and Real estate Solutions
Igor Taran Head of Consulting Department Graduated from Donetsk’s Commerce University, Mechanical faculty More than 10 years of experience in marketing Previous positions: managerial experience in companies Castle Development and Real Estate Solutions Volodymyr Kochetkov-Sukach Business Development Director Graduated from Kiev’s Polytechnic University, Technical faculty More than six years of experience in real estate sector Previous positions: Director of S&K, KHK, Deputy Director of Ukrainian Trade Guild
Opportunistic: primarily development, across all segments (residential, commercial, office, warehouse space, etc…) Low entry cost, sourcing prime locations Exploit advantages such as relations with local officials, superior architectural and engineering capacity, vision on region, sector…)
Project definition Project development Property management 6-12 quarters4-12 quarters1-3 quarters Idea Research and analysis Decision making Legal documentation Concept Business plan Financing strategy and plan Detailed project design Property management Construction permitsSale of businessLand lease agreement Financing Construction Opening Sale of business when potential is realised
Project Checklist Search & Monitoring Initial Analysis Investment Analysis Concept Development Incoming offers Land auction monitoring Public offers & announcements Mass media monitoring Monitoring of City Council meetings Insider information - General profile - Basic financials - Feasibility study - Marketing analysis - General plan - Risk assessment - SWOT analysis Initial Investment Committee Investment Analysis - Legal audit - Marketing research - Financial audit - Security audit - Business plan - Deal scheme Intermediate Investment Committee Analysis Direction Preliminary Agreement with Project Owner(s) Concept of Project - Marketing concept - General architecture & planning - Financial scheme & business plan - Legal scheme - Development schedule Final Investment Committee Agreement with Project Owner(s)
Concept Development Financing Land Development Approvals & Permits Construction Putting into operation Planning Advertising Campaign Lease / Sale Agreements Operational Management
#DescriptionRegionFormatPhase Site area (ha) Construction size (sqm) Project’s costs, USD Completion dateStake 1Hyper mallKiev Inter-regional trade-exhibition complex Concept development 80less 350 000 420 000 0003qr.201017% 2IdeaKiev Specialized trade center Concept development 5less 31 000 32 000 0002qr.200950% 3Kiev's seaKievCottage villagePreparation works 5less 6 000 4 000 0002 qr.2008100% 4MakarKievCottage villagePreparation works 88less 50 000 38 000 0003 qr.2009100% 5RudnevaSevastopol Regional trade centrePreparation works 3less 31 000 29 000 0001 qr.2009100% 6BalkaSevastopolMultifunctional Concept development 7less 320 000 310 000 0002 qr.2010100% 7BrigantinaDonetsk Trade-office centre, class B+Projection 2less 36 000 38 000 0003 qr.200950% 8MuraveyZaporozhye Specialized trade centerPreparation works 2less 26 000 26 000 0003 qr.200850% TOTAL 191 850 000897 000 000
Hyper Mall in Kiev Region, Trade Complex Concept development Site Area, haConstruction size, M2 Year of completion % stake 80350,0003rd Q, 201017% Idea Specialized Trade Center, Kiev Concept development Site Area, haConstruction size, M2 Year of completion % stake 531,0002nd Q, 200950% Rudneva Regional Trade Center, Sevastopol Concept development Site Area, haConstruction size, M2 Year of completion % stake 331,0001st Q, 2009100%
Balka Multifunctional Complex, Sevastopol Concept development Site Area, haConstruction size, M2Year of completion% stake 7320,0002nd Q 2010100% Makar Cottage Village, Kiev region Preparation works Site Area, haConstruction size, M2Year of completion% stake 8850,0003rd Q, 2009100% Kiev’s Sea Cottage Village, Kiev region Preparation works Site Area, haConstruction size, M2Year of completion% stake 56,0002nd Q 2008100%
Muravey Specialized Trade Center, Zaporozhye region Preparation works Site Area, haConstruction size, M2Year of completion% stake 226,0003rd Q, 200850% Brigantina Trade Office Center, Class B, Donetsk Projection Site Area, haConstruction size, M2Year of completion% stake 236,0003rd Q, 200950%
Identification of deals Constant monitoring of the market. Diversified information sources. Comprehensive evaluation of deals. Multi-level, cost saving project initiation procedure. Analysis of deals In-house marketing research team. In-house business planning team. Six years of real estate experience in local and international environment. More than 60 projects completed in all areas of real estate. Legal and technical due-diligence Diversified connections and cooperation with numerous professional legal companies and architecture teams (local and international). Expertise in local construction standards. Structuring of deals Strong experience in corporate finance. Multiple available and tested investment instruments and schemes. Established cooperation with local and international banks. Execution Constant supervision and monitoring of planning and construction processes. Control over quality and budget spending. Strong connections with local authorities. Established risk control and risk mitigation procedures. Management In-house project management team. Multi-level control and responsibility.
The information contained in these slides has been prepared by GAIA Resources SA in its role as sub-advisor to GAIA Advisors (Cayman) Ltd, the Investment Manager to the GAIA Resources Fund (“the Company") in connection with the proposed application of participating shares in the GAIA Resources Fund. The information contained in these slides and the presentation made to you verbally, is subject to updating, completion, revision, further verification and amendment without notice. These slides have not been approved by local regulatory bodies in Europe, Switzerland or the United Kingdom, as a prospectus, nor is it intended that the final version of the admission document will be so approved. These slides and the presentation do not constitute or form part of any offer for sale or solicitation of any offer, to buy or subscribe to securities, nor shall they or any part of them form the basis of, or be relied upon, in connection with, or act as any inducement to, enter into, any contract or commitment whatsoever. Recipients of these slides who are considering subscribing to the GAIA Resources Fund following publication of the admission document, are reminded that any such purchases or subscriptions must be made only on the basis of the information contained in the admission document in its final form, which may be different from the information contained in these slides. No reliance may be placed for any purpose whatsoever on the information or opinions contained in these slides, or the presentation, or on their completeness, accuracy or fairness. No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of GAIA Resources SA, GAIA Advisors (Cayman) Ltd, and the GAIA Resources Fund, or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in these slides or the presentation, and no responsibility or liability is accepted by any of them for any such information or opinions, or for any errors, omissions, misstatements, negligence or otherwise, for any other communication written or otherwise. Notwithstanding the aforesaid, nothing in this paragraph shall exclude liability for any undertaking, representation, warranty or other assurance made fraudulently. GAIA Resources SA and GAIA Advisors (Cayman) Ltd are registered with the Swiss OAR-G, and Cayman Islands Monetary Authority respectively, and are the sole entities advising the Fund and no one else, in connection with its investment decisions. GAIA Resources SA’s.responsibilities as the Company's sub-adviser under Swiss Law, will be owed solely to the Swiss Financial Authorities and not to the Fund itself, nor to any of its directors, nor any other person in respect of a decision to subscribe to, or acquire, Participating Shares in reliance on the final form of the admission document relating to the Fund. In relation to the application for participating shares in the Fund, GAIA Resources SA advises the Investment Manager and no one else (whether or not a recipient of these slides), and will not be responsible to anyone other than the Investment Manager itself, for providing the protections afforded to investors. These slides are for distribution to authorized persons only, as defined by the Cayman Islands Securities Investment Business Law (2003 Revision) (SIBL) PART III, Section 5(2) & Schedule 4; which defines a person carrying on securities investment business for one or more of the following classes - a sophisticated person, a high net worth individual, a company, partnership or trust (whether or not regulated as a mutual fund) of which the shareholders, unit holders or limited partners are, one or more persons, who may be described as “sophisticated” or “high net worth” * (refer below). Persons who do not fall within any of these definitions should not rely on these slides, nor take any action upon them, but should return them immediately to GAIA Resources SA. These slides are confidential, and are being supplied solely for information, and may not be reproduced, re-distributed or passed on to any other person, or published in whole, or in part for any purpose. By accepting receipt of this document, you agree to the limitations and restrictions set out above. Neither these slides nor any copy of them may be taken or transmitted into the United States of America or its territories or possessions (the "United States"), and distributed, directly or indirectly, in the United States, or to any U.S. Person as defined in Regulation S under the Securities Act 1933 as amended, including U.S. resident corporations, or other entities organized under the laws of the United States, or any state thereof or non-U.S. branches or agencies of such corporations or entities. Neither these slides nor any copy of them may be taken or transmitted into any other jurisdiction which prohibits the same, except when in compliance with local, applicable Securities Laws. Any failure to comply with this restriction may constitute a violation of US or other National Securities Laws. *"A sophisticated person" means, a person -a). regulated by the Cayman Islands Monetary authority b). regulated by a recognized overseas Authority c). any of whose securities are listed on a recognized securities exchange or d). who - i). by virtue of knowledge and experience in financial and business matters is reasonably to be regarded as capable of evaluating the merits of a proposed transaction; and - ii). participates in a transaction with a value or in monetary amounts of at least CI$ 80,000 or its equivalent in any other currency, in the case of each single transaction. "A high net worth individual" means - a). an individual whose net worth is at least CI$ 800,000 or its equivalent in any other currency; or b). any person that has total assets of not less than CI$ 4,000,000 or its equivalent in any other currency.
Conclusions: A focused approach is best—don’t just throw darts! Structural window of opportunity open for several years Invest for consolidation in the sector Invest with people you know…
“ Right decisions for Your projects” 26 O.Gonchara Street Office 88 Kiev, 01034 UKRAINE Office@con-dev.com.ua www.con-dev.com.ua