Retail in Russia The Initial Questions November 2013 Murat Gursey - PowerPoint PPT Presentation

Retail in Russia The Initial Questions November 2013 Murat Gursey – COO Atrium Russia Print: December 5, 2013 - 09:42

Atrium Snapshot Owner, Manager and Developer of supermarket anchored shopping centers • Leading owner, operator and developer of shopping centers in Central & Eastern Europe • Listed on the Vienna and NYSE Euronext Amsterdam Stock Exchanges (ATRS) • Owns a €2.2 billion portfolio of 156 food-anchored retail properties and shopping centers • Properties located predominantly in Poland, Russia, the Czech Republic and Slovakia • Gross leasable area 1.2 million m 2 • 2012 NRI: €181 million • Development and land portfolio: €0.6 billion Numbers as reported in FY2012 Annual Report 2

Atrium in Russia POPULATION STATISTICS • Atrium assets are located in the European part of Russia: MOSCOW: 11.61 mln ST.PETERSBURG: 4.95 mln YEKATERINBURG: 1.38 mln KAZAN: 1.16 mln ST. PETERSBURG VOLGOGRAD: 1.02 mln KAZAN PARKHOUSE BUGRI / SEVERNIY MALL TOGLIATTI: 0.73 mln GLA: 29,712 m² GLA: 50,882 m² Vacancy: 2.1% Vacancy: 0.1% Catchment: 0.2 mln Catchment: 0.7 mln MOSCOW 2012 Annual traffic: 2.8 mln 2012 Annual traffic: 7.3 mln MALL GALLERY BRATEEVO GLA: 11,395 m² Vacancy: 0.0% Catchment: 1.18 mln 2012 Annual traffic: 4.6 mln MALL GALLERY SIGNALNY GLA: 5,697 m² Vacancy: 2.4% Catchment: 1.99 mln 2012 Annual traffic: 4.1 mln VOLGOGRAD PARKHOUSE GLA: 48,278 m² Vacancy: 0.1% TOGLIATTI PARKHOUSE Catchment: 0.2 mln GLA: 52,927 m² 2012 Annual traffic: 4.9 mln Vacancy: 0.1% YEKATERINBURG PARKHOUSE Catchment: 0.3 mln GLA: 39,390 m² 2012 Annual traffic: 6.7 mln Vacancy: 0.8% Catchment: 0.2 mln 2012 Annual traffic: 6.5 mln AERE-owned GLA and vacancy as per September 30, 2013 3

Russian Portfolio Examples Volgograd, Park House Togliatti, Park House Kazan, Park House Year of opening: 2003 Year of opening: 2006 Year of opening: 2006 GLA (sqm): 48,479 * GLA (sqm): 65,283 * GLA (sqm): 51,205 No. of units / retail units: 170 / 106 No. of units / retail units: 189 / 139 No. of units / retail units: 181 / 109 Occupancy: 99.9% Occupancy: 99.9% Occupancy: 99.9% Food anchor: Karusel Food anchor: Auchan Food anchor: Auchan Parking spaces: 1,148 Parking spaces: 1,674 Parking spaces: 1,850 * including stand-alone OBI DIY box * of which Atrium owns 54,975 sqm; GLA including stand-alone Castorama and Media Markt stores Yekaterinburg, Park House Moscow, Brateevo Moscow, Signalny Year of opening: 2005 Year of opening: 2006 Year of opening: 2006 GLA (sqm): 26,953 * GLA (sqm): 18,952 * GLA (sqm): 39,390 No. of units / retail units: 66 / 64 No. of units / retail units: 50 / 43 No. of units / retail units: 188 / 113 Occupancy: 100.0% Occupancy: 97.6% Occupancy: 99.2% Food anchor: Auchan Food anchor: Auchan Food anchor: Karusel Parking spaces: 1,308 Parking spaces: 1,664 Parking spaces: 1,073 4 * of which Atrium owns 11,395 sqm * of which Atrium owns 5,697 sqm

Russian Economy 5

Retail Turnover – Retail turnover growth will provide support for the expansion of the retail real estate market in Russia – Regardless of the slowdown in economic growth, according to Oxford Economics, Russia leads Europe with annual retail turnover growth reaching 5.1% through to the end of 2015 5-12-2013 6

How to Enter the Market? – Retail Partner • Who is the lease holder? • Controlling the end prices and positioning of the Brand • Buy back option – Buying an existing chain – Own team • Logistics • Taxes, VAT return • Local authorities • Long term targets, no short term perspective – Own team for logistics, shops opened by partners – Using agency services 5-12-2013 7

From Where to Start? – Moscow – St. Petersburg – “Million” cities: (18) • Moscow 11 619 943 • St. Petersburg 4 953 219 • Novosibirsk 1 498 921 • Yekaterinburg 1 377 738 • Nijny Novgorod 1 254 592 • Samara 1 169 184 • Omsk 1 156 583 • Kazan 1 161 308 • Chelyabinsk 1 156 583 • Rostov on Don 1 096 448 • Ufa 1 072 291 • Volgograd 1 018 739 • Perm 1 000 672 • Krasnoyarsk, Voronej, Saratov, Krasnodar, Togliatty • “Saturated” Cities 5-12-2013 8

From Where to Start? – For FY2013 Russian market will receive 1.3m sq m of new quality retail premises, with more than 1.5m sq m in 2014 – Krasnodar and Yekaterinburg are the cities with highest retail area supply. Sources: Jones Lang LaSalle, Rosstat 5-12-2013 9

Moscow Shopping Center Supply – While record completions are expected in Moscow in 2014, saturation levels will remain low versus Europe – The 2014 completions include Aviapark (235,000 m2), Columbus(136,000m2), Vegas City(113,000 m2), Mozaika (68,000 m2) 5-12-2013 10

Moscow Rental Rates – International Retailers keep targeting the Russian Market – Moscow is traditionally the starting point – No significant change in the rental rates in Moscow: The slowdown of the economy is compensated by the high demand from the retailers and stable retail turnover growth (5,1%) – The prime rent for 100 m2 space in quality premises remains at the level of USD 3000- 4500/m2/year. – Average rental rate in shopping centers is USD 500-1800/m2/year 5-12-2013 11

How to Choose the Shopping Center? • Consultants (tenant reps) • Footfall • Competition • Positioning of the Center • Package deals • Present Occupancy in Moscow shopping centers: 98.8%, Atrium Russian Portfolio: 99.2% • No decrease in Rental rates despite the decrease in GDP 5-12-2013 12

Consumer Behavior in the Shopping Center • Price-Quality awareness is rising • Becoming more sensitive to discounts/special offers • Increasing brand orientation • The Center is a place for leisure & shopping for the whole family • The weather conditions motivate the people to spend more time in the malls • The customers are shifting from the traditional open markets to shopping malls for more comfort, more choice of brands as the middle class is growing • Still, the food anchor is the dominant player. (around 40% of Atrium’s mall visitors visit the hypermarket) 5-12-2013 13

Some of the brands in the Russian Market • Existing • Absent 5-12-2013 14