ELITE RESIDENTIAL REAL ESTATE MARKET Moscow

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1 OVERVIEW REAL ESTATE ARKET oscow Knight Frank EXECUTIVE SUARY High activity was observed on oscow s elite residential real estate market in. Average prices on the primary market grew 10.7, surpassing «pre-crisis» indicators. In arch 2011 a record number of deals was recorded for For the first time, the average price of supply on the primary market surpassed the average price per square meter on the secondary market. Such a growth in prices was facilitated by increased attention from buyers to the market for elite new builds: The quantity of deals with new builds in surpassed the quantity of deals on the secondary market twofold. A price correction continues on the secondary market. A significant increase in the volume of supply was observed. The secondary market practically stopped being filled by apartments less than $2 mln: In the share of such apartments in new supply equalled only 6, and this considering a share in total supply of 11. Basic supply on the secondary market now starts at $2 mln and higher. A small growth was observed in he rental market during arch, after a fall that has been continuing since October 2010.

2 REAL ESTATE ARKET oscow OSCOW. REAL ESTATE ARKET Almost 80 of deals in Q1 on the primary market were closed with budgets up to $5 mln, with the most popular apartments remaining those with prices from $1 to 3 mln, as usual. Distribution of deals on the primary market based on budget limitations 19 less than $1 mln from $1 to 3 mln from $3 to 5 mln Elena Yourgeneva of Residential «Right now on the market a distinct increased demand from buyers of elite residences is being observed as sales in new projects are going actively and much of the best supply is already leaving the market. To those who are planning to acquire apartments in the near future, we recommend not prolonging this questions, as selection with each day decreases and prices increase. The growth in average prices during Q1 has already surpassed the growth for all of We anticipate prices to grow on average 15 during H1 and to 25 for the year. With regards to the most new projects that have recently entered the market, prices are growing significantly at higher rates and supply is contracting perennially due to the large attention of buyers on such projects.» from $5 to 7 mln from $7 to 9 mln more than $9 mln Key indicators. Urban real estate arket segment Primary market Secondary market Average prices, $/sq m; rental rates, $/month One of the main events of Q1 on the elite residential real estate market was an announcement frоm S. Sobyanin, oscow s mayor, about a ban on construction of residences inside the Third Transport Ring. This ban does not refer to projects that have already begun construction, as well as projects with prepared documentation. This ban has already been reflected on the elite Change in average prices / rental rates, arch 2011 For arch 2011 For For 12 months 23,084 22, ,7 18,9 22,225 22, ,61-9,7 Rental* 6,439 6, ,7-2,5 * Rates presented for apartments with a total area of sq m with high-quality furnishings apartment market: By the end of the quarter, buyer activity grew to record indicators for 2010 and 2011 and in arch 68 deals in elite new builds were closed. any developers are have operationally reacted to the increase in demand, having increased prices already by the end of the month. That in April a further increase in prices from the remaining developers awaits us is not excluded. The average price of supply on the primary market sharply increased, having surpassed the average price of supply on the secondary market for the first time. This was facilitated by both a traditional removal of cheap supply and an increase in prices from many developers $/sq m Feb ar Apr ay Jun Jul Aug Sep Oct Nov Dec Jan Feb ar Primary market Secondary market 2

3 PRIARY ARKET Olga Bogoroditskaya, Key Client anagement Prices of supply. Change Average prices, $/sq m Change in average prices, «Today we observe a situation that is characteristic for pre-crisis markets. In many new projects that are already in the beginning phases, of apartments are sold. During the crisis, buyers preferred to buy residences in complexes with a high level of completion, but now we see a restoration of trust towards developers and a larger quality of deals in new projects» The largest growth in average prices for was recorded in «Impersky Dom», a residential complex, at 27.5, with «Legenda Tsvetnogo» not far behind at 25. Italyanskiy kvartal, Fadeeva st., 4 Chetyre Solnca, Tatarskaya Bolshaya st., 13 Sadovye kvartaly, Efremova st., 12 9, , arch 2011 For arch 2011 For For 12 months 23,084 22,403 2,5 10,7 18,9 In contrast to the splash of sales at the end of the summer and beginning of autumn in 2009, caused by a lowering in prices practically to their minimum, as well as by sever al sales events conducted by developers, a growth in sales during occurred on a background of a growth in prices 000 sq m, $/sq m Afanasyevsky, Afanasyevsky Bolshoy lane, 24 16,2 0 III II III IV 2009 III II III IV 2010 I Legenda Tsvetnogo, Tverskoy blv., 2 Imperskiy dom, Yakimanskiy lane, 6 25, 27, Not in all complexes on the primary market was the growth in average prices facilitated by a change in pricing policies by developers. In a series of projects, pricing remained at the levels of 2010, but thanks to a removal of cheap supply average prices grew. Total area of sold apartments According to totals from Q1, average prices on the elite new-build market surpassed «pre-crisis» indicators. At the market s peak in 2008 the average price on the primary market was equal to $22,762 per sq m, and by the end of arch 2011 this indicator reached $23,084 per sp m. Growth for the quarter according to totals equalled 10.7, which is higher than the indicator for all of 2010 (in 2010 average prices on the primary market grew 7.6). The total value of sold apartments equalled approximately $410 mln, which is almost half of the total value of apartments sold during Average price on the primary market A visibly expressed growth period began on the elite residential market. Developers are beginning to lift prices, because they are not ready to sell the current volumes at prices of Work for all projects on the market was started prior to the crisis and sales prices were included in the economics of these projects that were higher than those seen in Currently, seeing the increased demand, developers are correcting prices by increasing them in preparation for a market entry at those indicator levels included in the projects economics. 3

4 REAL ESTATE ARKET oscow arket pulse, TSP (Top Selling Projects)* Sales in TSP as share in the total quantity of sales on the primary market Average prices of supply in TSP, $/sq m Average prices of purchases in TSP, $/sq m Average value of purchased apartments in TSP, $ +15, ,308 12,507 1,870,000 In, the five projects in the primary market with the highest sales were: Italyanskiy kvartal, Legenda Tsvetnogo, Trilogiya, Sadovye kvartaly, Chetyre Solnca. Growth in average price of TSP for the quarter equalled 15,1. ap of the new projects Barkli Park endeleevskaya Krasnoselskaya Novoslobodskaya Prospekt ira Elektrozavodskaya Begovaya Belorusskaya Sukharevskaya Baumanskaya Komsomolskaya Tsvetnoy Bulvar ayakovskaya Trubnaya Sretenskiy Krasnye Vorota Ul Goda Bulvar Chekhovskaya Chistie Prudy Krasnopresnenskaya Turgenevskaya Lubyanka Barrikadnaya Okhotny Ryad Kitay Gorod Pl. Revolutsii Kurskaya Vistavochnaya Borovitskaya Arbatskaya narodnaya Rimskaya Smolenskaya Kievskaya Taganskaya Kropotkinskaya Barkli Virgin Tretyakovskaya House ovskaya Polyanka arksistskaya Studencheskaya Burdenko st. 11 Park Kulturi Paveletskaya Dobryninskaya Frunzenskaya Proletarskaya Oktyabrskaya Trubetskaya alaya st., 28, bld. 2 Sportivnaya Serpukhovskaya Volgogradsky Prospekt Kutuzovsky Av. Vorobievi Gory nadskogo Av. dsky Av. Novy Arbat st. Third Transport Ring Leninsky Prospekt slobodskaya st. Tverskaya st. Garden Ring Shabolovskaya Leninsky Av. ytnaya st. ira Av. Rusakovskaya s Taganskaya st. arksistskaya st. Enthuziastov hw. Dubrovka Tulskaya Avtozavodskaya Kozhukhovskaya Distribution of apartments sold in TSP by area In, sales were opened in four projects, among which three projects that are entering the market for the first time: Barkli Virgin House (Zachatevsky 1st lane, 8), Barkli Park (Sovetskoy Armii st., 6), a residential complex on Trubetskaya alaya st., 28, bld. 2, as well as a residential complex located at Burdenko st., 11, which changed its developer and opened sales after redevelopment of the project less than 120 m 2 from 120 to 180 m from 180 to 220 m 2 more than 300 m 2 *Five complexes with the largest quantities of sales for the quarter comprise the TSP (Top-Selling Projects). The index is calculated quarterly. The total area of apartments in complexes that have entered the market equalled about 35,000 sq m in, which is about 25 of the total supply in December The change in the volume of supply on the primary market of elite residential real estate in oscow '000 sq m Sep Oct Nov Dec Jan Feb ar

5 SECONDARY ARKET The Arbat area is occupying the leading position according to the number of deals on the secondary market as usual, which is facilitated by both a wide selection of secondary supply and a small assortment on the primary market. During, only one complex held sales on the primary market there Arbat 23 Prices of supply. Changes Average prices, $/sq m Change in average prices, arch 2011 For arch 2011 For For 12 months 22,225 22,248 0,2-2,61-9,7 Zamoskvorechye Ostojenka Tverskoy Distribution of sold apartments by price 2 Distribution of sold apartments by area Yakimanka 7 Chistye Prudy Plushikha Sretenka Presnya Khamovniki 1 17 Prechistenka Apartments with a value of $2-4 mln prevailed in the structure of new supply for. The entrance of supply with a value of less than $2 mln practically stopped less than $1 mln $1-2 $2-4 $4-6 New supply on the secondary market Total supply on the secondary market $6-8 more than $8 mln less than $1 mln from $1 to 3 mln from $3 to 5 mln from $5 to 7 mln from $7 to 9 mln more than $9 mln According to totals from, supply in the lower price segment continued to contract and by the end of arch the share of such apartments equalled 11 of the total supply, compared to 15 at the end of One can confidently say that at the given moment quality supply on the secondary market begins at $2 mln. The volume of supply on the secondary market of elite residential real estate grew 35.8 during. According to the condition at the end of arch 2011, the quantity of apartments for sale on the secondary market was about 820. Such a growth in supply is explained first and foremost by a decrease in the number less than 100 m 2 from 180 to 220 m 2 from 100 to 140 m 2 more than 220 m 2 from 140 to 180 m 2 of deals: In the quantity of apartments sold on the secondary market was 68 less compared to the analogical period of As on the primary market, the share of deals with large apartments with an area of more than 220 sq m was sufficiently great: In Q of deals with similar apartments were closed on the secondary market. 44 of sold apartments were in budget $2-4 mln. 5

6 REAL ESTATE ARKET oscow OSCOW. ELITE APARTENT RENTAL ARKET In, the geographic distribution of supply practically did not endure any changes compared to the analogous period of The leading area is Tversky, which did not change and whose market share equals 21 as before. Supply in Sretenky and Khamovniky significantly grew. Supply decreased in Patriarshie Prudy and Arbat Rates*. Changes Average rental rates, $/month Change in average rental rates, arch 2011 For arch 2011 For For 12 months 6,439 6,400 0,9-5,7-2,5 * Rates are offered for apartments with a total area of sq m with high-quality furnishings Tverskoy Arbat By the end of January, average rental rates for elite apartments ended their fall and in arch 2011 a small growth was recorded $/month Chistie Prudy Presnenskiy Zamoskvorechye Sretenka Khamovniki III IV 2008 III II III IV III II III IV III 2011 Patriarshie Prudy Ostojenka Q Tagansky The distribution of supply on the rental market for elite apartments at the end of by area The quantity of apartments up for rent decreased 6.2 according to totals from Apartments Average rental rates decreased 5.7 in Q and in arch 2011 reached $6,439 per month, which is 2.7 less than the analogous indicator from arch oreover, in arch 2011 a 9 increase in rental rates was observed. Rates returned to the level of ay The quantity of apartments offered for rent is moderately declining as usual, which leads to a small, yet stable demand. from 80 to 100 m 2 from 101 to 150 m 2 46 from 151 to 200 m 2 from 201 to 500 m I II III IV I II III IV I

7 OVERVIEW Americas USA Caribbean Europe Belgium Czech Republic France Germany Hungary Ireland Italy onaco Poland Portugal Romania Russia Spain Switzerland The Netherlands UK Ukraine Office Real Estate Stanislav Tikhonov Partner Warehouse Real Estate, Regions Viacheslav Kholopov Retail Real Estate Julia Dalnova Professional Consulting Services Konstantin Romanov Partner Elite Residential Real Estate Elena Yurgeneva Financial arkets and Investing Evgeniy Semyonov Valuation Services Olga Kochetova Saint Petersburg Nikolai Pashkov General Kyiv ikhail Yermolenko General arketing, PR, and arket Research aria Kotova Executive Africa Botswana Kenya alawi Nigeria Tanzania Uganda Zimbabwe Zambia South Africa Asia Cambodia China Hong Kong India Indonesia Japan alaysia Singapore South Korea Thailand Vietnam Australasia Australia New Zealand iddle East Bahrain Established in London more than a century ago, Knight Frank is the renowned leader of the international real estate market. With offices located globally, Knight Frank is able to provide a full range of services in the real estate market all over the world. Together with Newmark Company, Knight Frank s strategic partner, the company encompasses 209 offices in 47 countries across six continents. Knight Frank has been a symbol of professionalism for tens of thousands of clients all over the world for 113 years. After 13 years, Knight Frank has become the leading company in the commercial, warehouse, retail and residential real estate segments of the Russian real estate market. ore than 500 large Russian and international companies in Russia have already made use of the company s services. Knight Frank s employees are professional consultants in various fields connected with real estate, such as rent and sale of properties, selection of properties, attraction of investments, consulting, valuation, market research, marketing and project promotion, property and asset management. We offer the full range of consulting services not only for developers and owners, but also for real estate users; both legal entities and individuals. Now, the company s staff consists of more than 330 employees. This and other Knight Frank overviews can be found on the company website OSCOW Russia, , 11 Bld 2 Timura Frunze Str. Phone: +7 (495) Fax: +7 (495) Knight Frank 2011 ST. PETERSBURG Russia, , 3B ayakovskogo Str. Phone: +7 (812) Fax: +7 (812) KYIV Ukraine, 04071, Horyva Str. Phone: +380 (44) Fax: +380 (44) This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank. 7