May 2004

1
Russian Real Estate Market Overview Presented by
Real Estate Opportunity in Russia CIS
May 2004
2
I. Market Opportunity
3
Market Opportunity
Industry poised for institutionalization
CRITICAL MASS One of the largest, quickly growing
and most sustainable industries in Russia
ATTRACTIVE MARKET OPPORTUNITY
VALUE EXIT Coming institutional capital will
boost asset values within several years
CAPITAL GAP Large capital gap between supply and
demand in real estate market
LEVERAGE Sophisticated financing solutions became
available over recent years
4
Strong Market Fundamentals
Large, quickly growing and sustainable industry
Moscow Office Market Stock New Construction
Shopping Center Stock vs. Other European Cities
Source Noble Gibbons
Source Colliers International
Moscow Office Market Rental Rates
Moscow Office Market Vacancy Rates
Source Colliers International
Source Colliers International
5
Positive Macro Outlook
Strong economic fundamentals and political
stability form basis for further growth

• Sustained Economic Growth
• GDP growing over 5 consecutive years
• Stable budget
• Reducing inflation and stable currency rate
• Growing per capita income and consumer spending.
• Political Stability
• New consensus leadership
• Vital reforms initiated (tax, pension, judicial,
  protection of shareholder rights, etc.)
• Commitment to further reforms and free market.

Nominal GDP
Inflation Rate
Source State Statistics Committee
6
Market Momentum
The right time to gain exposure to Russian real
estate

• Industry overlooked by domestic and international
  investor groups
• Few professional institutional investors in the
  asset class.
• Investment supply/demand gap in Russian real
  estate market.
• opportunity to gain a leading market position.
• Investment grade projects and existing properties
  command substantial yields.
• More assets becoming available from various
  players.
• Not yet fully transparent market
• Access to attractive opportunities depends on
  local experience and track record.
• Suitable real estate debt financing now available
  to institutional players.
• Further decline in Russian market risk estimates
  and institutionalization of the industry will
  boost values within foreseeable future.
• Improving legal systems.

7
Multiple Exit Options
Liquidity grows as a result of more sophisticated
exit options

• Dividends Substantial and sustainable cash flow
  proceeds generated by real estate assets start
  recouping investors capital immediately after an
  investment and/or necessary operating
  improvements are made.
• Recapitalization The newly available debt
  financing options enable a sophisticated real
  estate investor to return most of investors
  capital via refinancing. More appropriate
  capital structures also improve current yields
  and facilitate the return of capital.
• Domestic Institutional Buyers The emerging
  class of domestic institutional investors, such
  as pension funds, insurance companies and private
  groups, lacks investment options and will move
  into the asset class.
• International Buyers Real estate is one of the
  primary options for leading international
  investors seeking exposure in Russia. Decreasing
  country risk will facilitate this trend.
• Sophisticated Structures High quality
  portfolios managed by professional, Western-style
  sponsors can be packaged and listed in REIT-type
  vehicles domestically or internationally.

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II. Investment Market
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Asset Class Return Characteristics
Attractive risk/reward parameters across various
investment strategies

• Acquisitions Incoming yields of 10-14 for
  investment grade properties
• Class A, premier location.
• High quality tenant list.
• Professional management systems.
• Enhanced Strategies Incoming yields of 15-20
  that can be enhanced through
• Refurbishment and incremental development.
• Repositioning and operating improvement.
• Sophisticated use of leverage.
• Development Still provides speculative returns
• Commercial developments deliver returns up to and
  beyond 30.
• Residential market is booming and provides
  essentially unlimited upside.

Institutional Investors Dilemma Shortage of
existing investment grade assets forces
institutional capital into more speculative
investment areas.
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Fundamental Issue of the Industry
Though profitable and growing, industry suffers
from shortage of smart money

• Property developers and construction companies
  lack access to sufficient financing to absorb
  their substantial project flow. Newly developed
  commercial and residential space is pre-sold
  prior to completion.
• Most owners of significant property portfolios
  has historically focused on sourcing assets and
  also lack capital to improve them.
• Commercial banks have substantial financial
  resources, but do not have expertise to develop
  real estate finance business.
• Financing is required in the form of both equity
  and debt.

Solutions
Opportunity Funds
REIT-like Structures
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Opportunity Funds
Attractive market fundamentals brought new types
of foreign investors

• Provide foreign investors with exposure to high
  quality real estate assets.
• Normally, structured as closed-end vehicles.
• Do not rely upon sponsors existing property
  portfolios (blind pool funds).
• Upon allocation of investment capital, have
  ability to access public markets.

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REIT-like Structures
Provide financing and securitization alternatives
for real estate industry

• Legal Format Closed Real Estate Mutual Fund
  in accordance with 2002 Investment Fund Act
  156.
• Portfolio Requirements 40 to 90 of the funds
  assets need to be comprised of real estate assets
  or equity in construction companies.
• Regulation Focus on protecting investors
  rights.
• Mandatory licensing of the funds management
  company by the newly created Federal Financial
  Markets Agency (FFMA).
• All transactions involving the funds assets need
  to be approved by a Specialized Depository
  (licensed by FFMA). Ownership rights for the
  investment units are registered by a Specialized
  Register (licensed by FFMA).
• The funds portfolio need to be appraised by a
  licensed appraiser on annual basis.
• Liquidity Legal format provides an option to
  list the fund on a domestic stock exchange.
  Investment units can also be used as a quality
  collateral in the construction industry financing
  schemes.
• Existing Players
• Concordia Asset Management 10mm fund listed on
  MSE.
• Management Consulting 32mm fund.

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III. RCFs Real Estate Activities
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RCF Highlights

• Specialized Russia-focused investment banking
  firm.
• Created in 1994, RCF established itself as one of
  the foremost financial advisors to Russian
  companies entering international capital markets.
  
• Facilitated over 1 billion of debt financing in
  the form of syndicated loans, bonds, and
  commercial paper.
• Professional staff includes 28 employees located
  in offices in New York, Moscow, and Geneva.
• Moscow office provides a range of integrated
  investment banking solutions, including
  organization of debt, equity, and project
  financing.
• New York office carries out private and public
  placement of securities
• Registered Broker-Dealer with the NASD,
• Registered with the SEC,
• Member of the Securities Investor Protection
  Corporation (SIPC).
• In-depth industry expertise in Telecommunications,
  Financial Services and Real Estate and
  Construction
• Over the last 2 years, executed over 10
  investment banking transactions with total
  transaction value in excess of 120 million.

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RCFs Construction Financing Vehicle
Financing and securitization mechanism for real
estate and construction industry
Real Estate Assets
Construction Process
Construction company
Investments
Closed Real Estate Mutual Fund
Unit Purchase
Individuals Private Investors
Institutional Investors
Insurance Companies
Banks
Pension Funds
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RCF Real Estate Fund

• RCF Real Estate Fund is an institutional
  investment vehicle focused solely on real estate
  investment opportunities in Russia CIS.
• Sponsored by RCF Group, one of Russias leading
  specialized investment banking firms.
• Benefits from the sponsors unique local
  resources, such as established network of
  relationships and proprietary transaction flow.
• RCFs dedicated real estate team has unique
  combination of Russian and Western experience
• Managed institutional Russia-focused real estate
  funds since 1996.
• Invested in excess of 50 million in more than 10
  real estate and private equity transactions in
  Russia CIS.
• Fundraising Status
• Target Size 100 million
• Completing the pre-marketing campaign.
• Group of strategic anchor investors identified.
• First closing planned for 2nd Quarter 2004.

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Investment Themes
Based on market opportunity, sponsors
capabilities and team experience

• Development Refurbishment Projects
• Highly profitable, sustainable opportunities.
• Returns realized through efficient deal sourcing,
  project development and management.
• Speculative Opportunities with Shorter Investment
  Horizon
• Limited project term, but exceptional return
  characteristics.
• Acquisition of Quality, but Undervalued Assets
• Many existing assets suffer from temporary
  deficiencies.
• Flaws can be corrected under institutional
  ownership through professional asset management.
• Joint Ventures with Strategic Partners
• Partnering with groups that can add specific
  value to portfolio investments.
• Sponsor maintains relationships with a number
  proven and potential partner groups.
• Sophisticated Use of Leverage
• Debt financing became common in the real estate
  market.
• Only available to professional institutional
  players.

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Transaction Sourcing
In opaque Russian market, access to the best
opportunities is essential

• Access depends on the relationships and track
  record of collaboration with the local
  authorities.
• Deal flow is proprietary and often exclusive.
• Partnering with established industry players to
  ensure proper incentives
• Pre-agreed contracts at market terms.
• Partner co-investing with the Fund.
• RCFs Existing Relationships
• Leading Russian development and construction
  companies
• Governmental agencies (State Committee for
  Housing Construction and Maintenance)
• Proven local partners in major regional centers
• Established independent real estate agencies
• Institutional and private investor groups with
  existing exposure to Russian real estate
• Conglomerates with significant real estate
  portfolios
• Leading banking institutions involved in real
  estate finance business.
• Active log of transactions readily available for
  execution.

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Hands-on Portfolio Management

• STRATEGY
• Focused portfolio development strategy
• Disciplined investment process
• Strict investment criteria
• Promotion of corporate profile

HANDS-ON PORTFOLIO MANAGEMENT

• FINANCE
• Efficient financial control
• Optimal cash flows
• Capital structure
• Western financial reporting

• LEGAL
• Competent structuring
• Effective legal control
• Constant deal monitoring
• Fund structure maintenance

• TRANSACTION MANAGEMENT
• Pro-active portfolio management
• Efficient deal partner incentives
• Focused asset management
• Clear organization structure

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Contact Information

• RCF Group
• Mr. Vadim Komissarov
• Managing Partner
• Paveletskaya Pl. 2-1, 12th Floor
• Moscow, 115054, Russia
• Phone [phone]
• Fax [phone]
• Email VKomissarov_at_rcfcap.com
• Internet www.rcfcap.com