Property Finance by EBRD

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Property Finance by EBRD

• Oxana Selska, Senior Banker
• 25 September 2009
• Ekaterinburg

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EBRD is

• Established in 1991
• Operates in 30 countries from central Europe to
  central Asia
• 2,750 signed projects
• 44.39 bln commitments
• Total project value 140.47 bln

Cumulative commitments 44.39 billion
As of 30 June 2009
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EBRD Involvement in the Property Sector

• Total commitments as of 30 June 2009
• 1.82 billion to 107 projects (including equity
  participation in funds)
• 6.5 billion total project value

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EBRD general project features

• Project makes economic sense - no soft loans
• Substantial equity contributions by the project
  sponsor, incl. cash
• For commercial projects, need for private
  investment
• Usual need for a B lender
• Limited re-financing

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EBRD Financing Instruments
Equity / Mezzanine
Debt

• Senior, subordinated debt, convertible
• Syndication
• Denominated in major currencies
• Tailor-made security package

• Common stock or preferred shares
• Minority positions only
• Flexible exit strategies
• Mezzanine loans

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EBRD Portfolio Geographic Distribution
As of 30 June 2009
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Current Portfolio by type of financing
As of 30 June 2009
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Property Commitments by sector
As of 30 June 2009
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EBRD Real Estate

• PARTNERS
• Real Estate Developers
• Real Estate Funds
• Operators
• FINANCIAL INSTRUMENTS
• Senior Debt
• Mezzanine / Quasi-Equity
• Equity

• TYPE
• Office Buildings
• Retail / Shopping centres
• Warehouses
• Mixed-use facilities
• Hotels and resorts
• Property Funds, Joint-Ventures
• Residential

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What is on the Market with EBRD

• Investments in
• Developers
• GRDC
• GTC
• Trigranit
• BSR
• Tourism Hospitality
• Jadranka Hotels
• (Croatia)

• Commercial Real Estate
• IKEA Mega Mall (Russia)
• BD Logistics (Russia)
• Raven Russia Novosibirsk (Russia)
• Saratov Shopping Centre (Russia)
• GTC Regional Retail(Romania)
• 19 Avenue Office (Serbia)
• Kashirka Mall (Russia)
• Chisinau Shopping Mall (Moldova
• East Gate Tirana Shopping Mall (Albania)
• Europolis Sema Park (Romania)

• Equity Funds
• Marbleton Fund
• Europolis I, II, III
• Heitman I, II, IV
• Accession Fund
• Global
• Polonia
• BPH
• Bluehouse II
• Arka Property Fund
• Russia Developer Fund

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Typical EBRD financing to real estate

• Financing tailored to the needs and risk nature
  of each project
• Long-term (7-10 years)
• Local / foreign currency
• Target gearing varies
• Competitive pricing
• Clear and fair distribution of risks and returns
  between different financing partners
• Alignment of each financing feature (timing of
  disbursement / repayment, level of return, etc.)
  with the underlying risk nature
• Financing predominantly for new developments
  acquisition financing limited to date

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Structuring solutions

• Project Finance can work for large developments
• Ring-fenced projects, often with
  developers/property managers
• Equity component can reduce loan pricing
• Project completion mitigation (turnkey contracts,
  sponsor support agreed)
• Separation of property assets
• Arms length leases, separate companies
• Financial investors alongside developers/property
  managers

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Financing structures
Debt Project Finance
EBRD

Sponsor

• A-loan (maximum 35 of total project costs)
• Limited recourse to sponsor
• Security on real estate

• Majority ownership property management control

Debt / Equity
Project Company
Equity

• May be divided into operating and real estate
  entities

Minority equity partner(s)
Co-financing Banks

• Possible EBRD equity (a small of debt amount)

• B-lender or parallel lender

Note details are simplified for case study
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Financing structures
Equity Finance
Sponsor
Ordinary Equity / Portage Equity / Mezzanine
Ordinary Equity
Project Company
EBRD
Majority ownership and management control

• EBRD exit through a put to Sponsor with pricing
  in a range depending on performance of the
  Company.
• Alternative is full risk equity or secured debt
  after certain Project Completion financial
  targets are met by Project Company or mezzanine
  financing.
• EBRD risk can be limited to specified (such as
  political risk) events with guarantee from
  Sponsor to apply in other cases.

Minority partner
Note details are simplified for case study
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How to best attract EBRD financing?

• General principles, applicable to all sectors
• Sound integrity
• Energy efficient projects
• Transparency / early dialogue
• Proven track record and market knowledge
• Equity cash exposure
• Clear business plan
• Robust creditworthiness
• Equity investors key driver ROE
• Lenders - key driver Project cash flows / DSCR

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How EBRD can help

• Direct support
• Advice in structuring the project
• As an active or impartial shareholder, in equity
  investments
• As an involved lender, in loans
• Help to secure additional financing
• Preferred creditor status to attract commercial
  lenders
• Investors
• Political comfort
• Due diligence stamp

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Property and Tourism team contact
Sergei Gutnik, Senior Banker,
PropertyTourism EBRD Moscow Tel [phone]
1111 E-mail gutniks_at_ebrd.com