Etalon Group Announces New Acquisitions & 8-Step Program

20 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 acquired development rights for two new projects in Moscow and St. Petersburg with a total expected NSA of 70 ths sqm. In 2012 the Company plans to launch sales on eight projects with a total NSA of 1.5 million sqm, which together with Emerald Hills will drive 79% of 2014 deliveries.

In line with Etalon Group’s strategy, the new acquisitions in Moscow and St. Petersburg are comfort class residential projects that should further enhance the Company’s geographic presence and brand equity.

The acquisition of development rights for a residential development project on Prospekt Budennogo in Moscow marks another successful step forward in Etalon Group’s expansion of its portfolio and operations in Moscow. This project will be built on a 3.5 hectare land plot that is 12 minutes walk from Shosse Entuziastov metro station, and has access to major roads like shosse Entuziastov, Izmailovskoe shosse and prospect Budennogo. The expected NSA of the Prospekt Budennogo project is c. 40 ths sqm.

In St. Petersburg, where Etalon Group has a c. 11% market share in residential real estate, the Company has acquired developments rights for a project on ulitsa Marshala Tukhachevskogo. The 1.1 hectare land plot in the Krasnogvardeiskiy district of St. Petersburg is 15 minutes by car from the city centre. The expected NSA of this comfort class residential development is c. 30 ths sqm. Etalon Group plans to start construction and launch sales for the ulitsa Marshala Tukhachevskogo project in 2H 2012.

Etalon Group Head of Investments and Member of the Board of Directors Dmitri Boulkhoukov said:

“This year 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. We intend to finish most of these projects in the next two or three years, and six of them should be driving delivery volumes in 2014. Together with Emerald Hills, this eight step program will drive 79% of our 2014 deliveries, and will have a significant positive impact on our new contract sales in 2012 and 2013.”

Etalon Group President Viacheslav Zarenkov said:

“With the launch of sales and ground breaking at Lastochkino Gnezdo, we have completed the first step towards achieving an ambitious eight step program for 2012. This project has a total planned NSA of 319 ths sqm and benefits from an excellent location in a well-developed residential area of St. Petersburg. So far we have seen a phenomenal level of pre-sales of 22% for stage I, both on the waiting list and immediately after the official start of sales.

“We are equally excited about the seven other upcoming projects. Each of them enjoys a good, central location and an attractive comfort-class format. The locations of these projects represent a significant upgrade compared to the traditional areas where Etalon Group has worked, which we expect will have a positive impact on average selling prices. The eight step program is part of our strategy to increase annual deliveries to 800 ths sqm by 2014.

“We believe the residential real estate market in the “Golden Triangle” of Moscow, the greater Moscow area and St. Petersburg continues to offer significant opportunities. Last year, for example, Moscow commissioned just 1.8 million sqm of new property. This translates into approximately 24 thousand apartments, or new homes for just 65 thousand people, compared to a Moscow Metropolitan Area population of c. 12-14 million people.

“Etalon Group is fully land bank sufficient until 2017, with c. USD 490 million* of expansion capital on the balance sheet. Our land bank as at the end of 2011 was 3.25 million sqm, which is roughly the equivalent of 16 Empire State Buildings.”

Etalon Group CFO Anton Evdokimov said:

“Etalon had a net cash position of USD 167 million at the end of 2011, and we have continued to see strong pre-sales and cash collections levels through the first quarter of 2012. With our strong financial position and significant demand driven by long-term market fundamentals, we are confident in our ability to fully extract the potential of our current land bank, maintaining Etalon Group’s significant brand equity and unique product offering while increasing our annual deliveries to around 800 ths sqm per annum by 2014.”

* as of 31 December 2011

Etalon Group IR Team

T: +44 (0) 20 8123 1328

M: Communications

Sam VanDerlip
T: +7 495 363 2845

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.