Etalon in Largest St. Petersburg Acquisition to Date

28 May 2012

 

St. Petersburg – Etalon Group Limited (“Etalon Group” or the “Company”), one of Russia’s largest and oldest residential real estate developers, announces it has completed its third acquisition this year with the purchase of development rights for a residential construction project in St. Petersburg with a planned NSA of c. 680 ths sqm. The acquisition, named Project Galactica, is Etalon Group’s largest residential project to date in St. Petersburg.

<hr/>

With Project Galactica the Company has fully delivered on its post-IPO plan to acquire 1.2 million sqm of NSA, enabling it to increase annual deliveries to the level of c. 800 ths sqm of NSA by 2014.

Project Galactica is located on a 38 hectare land plot by Moskovsky prospect and Naberezhnaya Obvodnogo Kanala just south of central St. Petersburg. With a planned 22 residential buildings up to 18 stories high, Project Galactica will create an entire new comfort-class residential district with c. 8,700 flats housing around 22,000 residents. Three kindergartens and three schools are also planned on the territory of the project. Etalon Group expects cash collections for the project to be approximately USD 2.2 billion.

Etalon Group President Viacheslav Zarenkov said: “With this acquisition we have added significant momentum to our already strong and growing business. In 2012 alone we plan to launch sales and construction on eight new projects with a total NSA of 1.5 million sqm, which is fully in-line with our strategy and construction program.

“Project Galactica is Etalon Group’s largest acquisition to date in St. Petersburg and marks a significant milestone in our strategy to increase annual deliveries to 800 ths sqm by 2014, and over one million sqm per year by 2016-2017. The first stage of this project is expected to add approximately 70 ths sqm to our deliveries in 2016 and 110 ths sqm in 2017. Other stages of construction will be delivered in 2018 – 2020.”

Etalon Group CFO Anton Evdokimov said: “Our construction programme is fully land bank sufficient through 2017. With USD 163 million of net cash and USD 503 million of expansion capital on the balance sheet*, we are well poised to continue acquisitions and further strengthen Etalon’s position both in Moscow and St. Petersburg. We are working on a number of new acquisitions in both regions with a view to complete them in the second half of the year.”

Etalon Group Head of Investments Dmitri Boulkhoukov said: “We see several generations of demand for comfort-class living space in Russia, especially in the €˜Golden Triangle’ of St. Petersburg, Moscow and the Greater Moscow Area where much of Russia’s wealth is centred. Etalon Group is among the best-positioned to capitalise on the long-term residential real estate market fundamentals in Russia.

“Etalon Group has worked hard over its 25-year history to build strong brand equity and earn a reputation as a trusted partner. This has helped us build a reliable pre-sales business model, which enables us to finance construction primarily with funds from our own customers.”

* per management accounts as of 1 May 2012

<hr/>

Etalon Group IR Team

T: +44 (0) 20 8123 1328

E: info@etalongroup.com

M: Communications

Sam VanDerlip

T: +7 495 363 2845

vanderlip@mcomgroup.com

<hr/>

About Etalon Group

History and Overview

Founded in 1987 by Viacheslav Zarenkov, Etalon Group has become one of Russia's largest residential real estate developers. With a 25-year history, the Company has one of the longest and most successful track records in the Russian real estate industry.

Today Etalon Group is a leading player in Russia’s “Golden Triangle” – St Petersburg, Moscow and the greater Moscow area, with a dominant position in the “comfort class” segment. The Company’s strong foothold in these markets is reinforced further by its unique nationwide sales network covering 9 of the 10 wealthiest regions of Russia, and spanning 30 cities in total. The sales network generates up to 30% of Etalon Group’s revenue, and has been an important source of stable demand even throughout the crisis.

Etalon Group is one of the only truly vertically integrated businesses in the Russian real estate sector. The Company does everything from acquiring land to sales and cash collections from its customers, which enables it to maximise margins throughout the value chain, and reduces exposure to cost inflation from external service providers. Etalon Group is a company of scale, with a total of 40 business units that employ over 4,000 people, two strong management companies, five general contractors, 16 subcontractors, a crane company, a brick factory and a nationwide sales network.

Etalon Group’s strong financial position is driven by its effective pre-sales business model. The Company aims to pre-sell 70-90% of all residential space before a building is delivered. It also targets an average down payment of 50%. This allows Etalon Group to finance the construction process using money from customers, as opposed to using the loans or funding from shareholders.

In addition to homebuilding, Etalon Group’s long history and superior quality offering has helped it to become a trusted industrial construction partner for clients like General Motors, Toyota, Ford Motors, Bosch, Siemens, Nissan, Suzuki and Gazprom in northwest Russia.

Since 20 April 2011, Etalon Group Limited has had its GDRs traded on the Main Market of the London Stock Exchange.

Operational and Financial Highlights

As of 31 December 2011, Etalon Group’s portfolio comprised 31 projects, with a total of 3.25 million sqm of unsold net sellable area ("NSA") in the St. Petersburg and Moscow Metropolitan Areas. Jones Lang LaSalle valued this portfolio at USD 1,714 million, a 20% increase in the market value from YE 2010.

For the year ended 31 December 2011, Etalon Group’s new contract sales totalled 270,012 sqm, or RUR 18,306 million. Deliveries in 2011 totalled 328 thousand sqm.

The Company recorded revenues of RUB 22.7 billion (USD 774 million) and EBITDA of RUB 8.2 billion (USD 279 million), with an EBITDA margin of 36% for the year ended 31 December 2011, making it one of the most profitable players in the sector.

Etalon Group’s net cash position at 31 December 2011 was USD 167 million, leaving it well positioned to fund continued dynamic growth.

<hr/>

29 May 2012