Actuality March 4, 2008

Goldman Sachs ( GS)

Investment Bank starts to invest facilities into the Russian development projects. GS' investments into the real estate all over the world exceed $23 bln. As it was found out, GS forms the real estate fund with $4 bln volume for investments into the BRIC countries' real estate (Brazil, Russia, India and China). The half of these facilities will be invested into Russia; in spite of the activity drop at the market of other core funds.

Several investment bankers declared that Goldman Sachs Bank establishes the fund for investments into the BRIC countries' real estate. “The fund volume totals $4 bln. And already $2,5 bln is attracted now and is continued the projects' selection for investments”, reported the source.

The press-service of Goldman Sachs London office declined to comment.

But about creation of the real estate GS fund are well-informed the S.

A. Ricci/King Sturge consulting company partner Vladimir Avdeev and AFI Development investment department director Ivan Vashurin.

According to the one of the Moscow developers, the investment bank has already unofficially informed the market participants that almost half of the fund facilities will be directed to Russia.

About two thirds of them will be invested in Moscow, the other – in St.

Petersburg and other megapolises.

The fund chooses the mixed investment strategy and will invest facilities into the already completed objects and developers' projects with the Russian partners' attraction, experts forecast.

“Lately 70% in the structure of western funds' portfolio in Russia

falls to the already constructed objects, 30% – to the developers' projects”, Ivan Vashurin from AFI Development comments Goldman Sachs prospects. “Investments into the completed objects bring 9-10% per annum”, says Renova Capital managing director Oleg Tsarkov. According to him, investments' profits into the developers' projects total 20-30%, but the risks of such investments are higher. They are related to the long projects' approval by the local authorities and breaking of construction terms.

International Goldman Sachs Investment Bank started to invest money into the real estate in 1991. Since then it has established 18 real estate funds with the total investments' volume $3,7 bln. In Russia it operates since 1998 and renders services in the financial consulting and stock exchange trade area. According to Dealogic data, by the results of 2007 Goldman Sachs occupies the tenth place by the volume of M&A transactions in Russia. It concluded eight transactions to the total sum $7,8 bln.

Goldman Sachs' established fund for BRIC countries will become for the bank

the first large project at the Russian real estate market, marks the director of Uralsib Bank investment- bank maintenance Oleg Lukhton.

Meantime, the direct GS rivals already invest into the Russian developers' business, he states. So, in August, 2006 Morgan Stanley purchased 10% of RosEuroDevelopment stakes for $30 bln (the total projects' portfolio is 2 millions sq.m). And it also established the Special Situation Fund III for $3,6 bln for investments into the Russian real estate. Raiffeisen Bank and the Austrian construction company Strabag AG established the Raiffeisen Evolution Emerges fund, which plans to invest €500 mln into the real estate in Moscow, St. Petersburg and other megapolises by 2010. Also, Strabag coupled with Deutsche Bank established DB Development joint venture for developers' projects realization in Russia.

Foreign investors started to master actively the Russian real estate market in 2005. Together with the large investment banks to Russia came foreign funds, which manage the facilities of private investors (see the table). “Now, in terms of the world liquidity crisis, around 90% of such funds, which operate in Russia, stopped their aggressive expansion”, marks Vladimir Avdeev from S. A. Ricci/King Sturge. “But the crisis did not substantially influence GS. And it is the most suitable time for it to enter Russia, where the real estate prices grow quicker, than in Europe or the USA”.

Largest foreign investment funds at the Russian real estate market

Source: private funds' data