Company Presentation for J.P. Morgan Credit and Equities Emerging - PowerPoint PPT Presentation

Company Presentation for J.P. Morgan Credit and Equities Emerging Markets Conference 2017, London October 2017

Table of content Section 1 Summary 3 Section 2 Market Overview 7 Section 3 Company Business Profile 14 Section 4 Board and Shareholders 20 Section 5 Financial Performance 23 Financial Statements Appendix 29 Development Projects Appendix 33 2

Section 1: Summary

Business Model Hub for International Tenants Moscow 100% Market Rents Market Moscow Valuation Yields Dynamics Strong market fundamentals Active asset management NOI 100% Internal Occupancy Office growth Retention Rate Focus on top tenants IRR Target: 15 – 20% Yielding assets Min 90% of GAV ~ 90/10* Acquisitions Yielding/ and Selective Development Disposals IRR Target: 20 – 25% Development assets Max 10% of GAV Healthy balance sheet Target LTV 60% ~ 55/45 Solid ~ 60/40 Leverage Financial Leverage Policies Target ICR >1.8x Strong coverage metrics *GAV of development projects is approx. 4% of total Investment Properties as of CBRE 1H2017 valuation 4

O1 Properties at a Glance 5 3 4 1 2 Key Statistics Sept 2017 638k sqm total  White Square Ducat III Legenda Tsvetnogo White Stone Silver City 524k sqm yielding NRA 1  117k sqm development 6 $3,934m total 7  Market Value 1,2 $3,761m yielding  $173m development 86% Occupancy Rate Vivaldi Lighthouse $584 sqm / year Average Net Rental Rate 3 4.0 9 WAULT to Expiry (years) 8 S&P B+/B, Moody’s B1/B1 Credit Rating Stanislavsky Factory LeFort Key Financials ($m) $m 2015 2016 1H2017 10 11 Rental Revenue 368 316 165 Net Rental Income 325 284 137 EBITDA 321 290 140 Krugozor ICube Investment Property 3739 3702 3654 Total Assets 4282 4242 4238 12 14 15 13 16 Net Debt 2641 2787 2899 Book Equity 1075 995 963 ICR 1,62 1,38 1,38 Zarechie Bolshevik Factory Greendale Kutuzov Avrasis Total LTV (%) 67% 70% 73% Yielding Development Notes: 1 Assuming 100% share in each property belongs to O1 Properties. O1P owns 50.1% share in Bolshevik, which is not consolidated under IFRS. It also holds 85% stake in Greendale, 50.5% in Legenda Tsvetnogo and 50.5% in ICube. 2 As per CBRE valuation as of 30 June 2017. 3 Rental rate post discounts and FX caps. 4 Net Debt is calculated as the sum of total borrowings less cash and cash equivalents and finance lease liabilities. 5

Achievements over the last year Operat erational updat date: e: 1) Vacancy level stabilized 2) Renegotiated with most tenants to bring their rent levels to market levels. 3) Start of residential projects (Bolshevik and A Residence apartments development) Ac Acqu quisit sitions: s: 1) In December 2016 we bought Avrasis Project (yielding office of 9,200sqm and residential project “A Residence” Debt t por ortfolio o optimi timiza zatio tion: 1) Eurobonds of $350mln issued in September 2016 2) New local bond issues ($335mln in Feb 2017, $150 mln in May 2017) 3) Partial senior debt repayment and extended maturity on most of senior loans 4) Interest rate on debt reduced from ~7% to 6.25% Credi edit t Ra Rating: g: 1) New rating from Moody’s (B1) received in September 2016 with stable outlook 2) S&P confirmed B+ corporate rating in July 2017 and improved outlook from negative to stable. B rating assigned to unsecured bond issues due to changes in S&P methodology. 3) Moody’s confirmed B1 rating in Sept.2017 with stable outlook. 6

Section 2: Market Overview

Stabilization of macro - economy indicators Russia GDP Growth Stabilizing Exchange rate dynamics, USD/RUB 400-6 50 Source: RCB, Bloomberg Russia Sovereign Spread to US Treasuries GDP growth indicates a gradual recovery in key sectors of the economy. Estimated GDP growth is 2% in 2017 Russia sovereign spread reduced from 6% to almost 1.5% Low inflation and consumer sector recovery are very positive signs for Real Estate Market. 8 Source: Bloomberg

Real estate market has stabilized due to macro-economy recovery Key market indicators 2015 2016 1H2017 Base rental rates for Class A offices stabilizing Total stock, mln m ² 16.7 17.1 17.1 Class A 3.8 3.9 3.9 Class B 12.9 13.2 13.2 Completions, thousand m ² 715.3 312 21.1 Take-up, thousand m ² 962.2 850 548 Vacancy rate, % 13.9 12.4 11.2 Class A 25.3 18.4 15.8 400-6 50 Class B 10.5 10.6 9.9 Weighted average rental 495 475 470 rates in CBD, $/m ² /year Class A 605 584 565 Class B 355 329 341 Source: Colliers 2Q2017 Source: CBRE, Colliers 2Q2017 The level of rental rates highly depends on quality of the building, its location and vacancy in the building. Oil prices stabilization and ruble appreciation lead to rental rates stabilization in dollar terms. 9

Signs of market recovery: vacancy is going down Vacant space distribution by submarkets as of YE2016 Vacancy dynamic by classes 500 35% thousand sq m 450 30% 400 25% 350 300 20% 250 15% 200 150 10% 100 5% 50 0 0% A B- B+ Average vacancy rate, % Vacancy in CBD is the lowest among submarkets, though the highest supply in absolute value terms due to the relative size of this market (CBD is the largest office submarket with about 5 Mln m ² of office premises) O1 Properties vacancy in CBD assets is in line with the market and stands at around 8% Vacancy in Class A overall stock is going down replicating market behavior after the previous crisis Overall vacancy remains relatively high mainly driven by properties in poor locations and low quality of construction. Available supply is still characterized by a deficit in the segment of large ready-to-move-in premises. This shortage is noticeable for requests over 5,000 m ² in the CBD and over 10,000 m ² outside the CBD in high-quality business centers with a good location. Source: Colliers Research 2016 and 2Q2017. 10

New delivery contracted by more than 4x times Take- up, 000 m² New delivery, mln m² Since the beginning of the year, demand for leases and purchase has maintained last year's trend. In Q2 2017, the volume of transactions amounted to 258 ksqm of office space, while the total figure for H1 2017 reached 402 ksqm, which is comparable to H1 2016 . New office delivery in 2016 is four times lower than in 2014. Projected delivery in 2017 represents old projects completion which is more likely to be postponed. In 1H2017 new delivery is only 21 ksqm. Source: Colliers Research 1H2017. 11

Anticipated Cap Rate Compression Moscow CRE cap rates Russian Government Bonds Yields (USD & RUB) 18 16 14 12 10 8 6 400-6 50 4 2 0 Russian USD Bonds 10y Russian RUB Bonds 10y Source: Bloomberg In 2Q2017 inflation kept the lowers levels in the history of modern Russia. The Ministry of Economics downgraded the forecast for 2017 to 3.8%. Mid term inflation forecast is below 4%, which is the target for Central Bank. Central Bank rate has decreased rate from 10% to 8,5% in 9m2017 and further cuts are expected in 4Q2017. Sovereign USD and RUB bonds yields become lower as well. Economy is recovering, country and real estate risks become lower. Therefore we anticipate moderate cap rates compression from current 9.0-9.5% for prime asset in one year. Low ow Inflatio tion is is a game me changer er in in Russi sian real esta tate mark rket et. 12

Investor sentiment is improving Total investment volume in Russian CRE Real Estate Investments in Russia have stabilized at around $4bln. Some growth is expected in 2017-2019. Office was the leading sector in investment structure with 45% of volume. While the total 1H2017 investments is 30% lower than in 1H2016, investment deals (excluding end-user purchases) rose from $440M to $1.5Bn. Source: Cushman&Wakefield $402.6 million, or 23%, was the share of the total investment volume formed by foreign investors in H1 2017, while last year we mainly observed activity from Russian investors. It is worth noting that the share of foreign investors increased for the first time since 2014, when it constituted a quarter of the total annual investment volume in commercial real estate. The main driver for investors now is the potential of asset value recovery on the back of the market correction. Gorbuskin Dvor Retail Alexei Khotin, Yuriy Khotin Victor Kharitonin 13

Section 3 Company Business Profile

O1 is a Leading Player in Moscow Office Market O1 Properties Investment Portfolio Moscow office stock 600 500 71 71 3.9 3.9 71 89 4.9 74 400 74 300 74 450 453 430 411 200 393 275 247 100 9.1 9.1 0 2011 2012 2013 2014 2015 2016 1H2017 Class А / А + offices, mln m² Class B/B+ offices, mln m² NRA, class A/A+ NRA, class B/B+ Class B- offices, mln m² As of 1H2017 O1 has 524 thousands sq. meters of completed and yielding Class A and B Office Space Estimated O1 share in Moscow class A office market is about 12%. Source: Company data 15

Solid Tenant Base Well-Diversified Tenants Base by NRA Top-10 Tenants List # Tenant Leased NRA (sqm) % of Total Yielding NRA 1 24,474 5.5 % 2 23,875 5.3 % Sectors 3 15,517 3.5 % 4 13,452 3.0 % 5 13,050 2.9 % 6 12,045 2.7 % 7 11,054 2.6 % 8 10,690 2.4 % Type of Tenant 9 9,770 2.2 % 10 7,277 1.6 % Top-10 Tenants 141,652 31.6% Other Notable Tenants NRA Concentration O1P has a base of over 250 tenants consisting of leading Russian and international corporations, with exceptionally low credit risks (non-payments at less than 1% of NRI) 16