TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
Despite modest Doing Business Index ratings and more limited inflows of FDI relative to its GDP than inneighbour countries, Azerbaijan has been a star economic performer in the last 10 years. Its growth hasbeen among the highest in the World. GDP of Azerbaijan (USD 75 billion in 2014) is now 4.5 times higherthan in Georgia and 6.5 higher than in Armenia
10,1 10,0
8,2
6,5
5,6
5,0
4,3 4,3
0
2
4
6
8
10
12
Turkmenistan Azerbaijan Uzbekistan Tajikistan Kazakhstan Georgia Kyrgyz Republic Armenia
Average yearly GDP growth 2006-2015 (%, source IMF)
20,9
4,5
-0,5
0,0
-4,4
-8,8 -9,3
-13,0-15
-10
-5
0
5
10
15
20
25
Azerbaijan Uzbekistan Turkmenistan Kazakhstan Tajikistan Kyrgyz Republic Armenia Georgia
Azerbaijan authorities were fully aware of the limits of their oil-and-gas rent and managed the economyaccordingly by accumulating unparalleled external surpluses during the oil boom. For that reason,Azerbaijan was well prepared to the recent halving of oil prices that followed ten years of bonanza
Average yearly current account balance/GDP 2006-2015 (%, source IMF)
5,45,1
4,0
2,7
-2,1
-3,1
-3,8
-4,5
-6
-4
-2
0
2
4
6
Azerbaijan Uzbekistan Turkmenistan Kazakhstan Tajikistan Armenia Kyrgyz Republic Georgia
High budget surpluses have been parked in an Oil Fund whose foreign assets were estimated by IMF at 34billion USD (50% of GDP) in 2012. Together with foreign exchange reserves of the Central Bank of theRepublic of Azerbaijan (CBRA) they make up for 67% of GDP, much more than the gross external debt (17%of GDP)
Average yearly General Government balance/GDP 2006-2015 (%, source IMF)
10096
87
75 74
8185
89
114110
115
122
115
120
141
117
50
60
70
80
90
100
110
120
130
140
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 August
Despite the robustness of the external position of Azerbaijan, CBRA has devaluated the AZN in 2015.Thanks to this precautionary approach in line with past cautious macro-economic management, IMFexpects a 3% of GDP current account surplus in 2015 thanks mainly to reduced imports
Real effective exchange rate non-oil sector (December 2000=100, CBRA)
9691
78 7671
0
20
40
60
80
100
120
The impact of the devaluation on exports will remain limited on the short run as 96% of exports werelinked to the oil and gas sectors prior to the fall of oil prices. This reflects the economic distortions againstother productive sectors (agriculture, manufacturing) that were generated by the oil boom, a commonfeature to all natural resource rent driven economies (Dutch disease)
Share of oil and gas in total exports (2013, %, ITC)
100
84
7571
7469
7279
87
95100
106 108
122 122 124131
142 139
147
155161
0
20
40
60
80
100
120
140
160
180
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
But the combination of a more competitive exchange rate and of well targeted State and IFIs supportpolicies will allow Azerbaijan to diversify its economy on the medium run. They will help take full benefitof its comparative advantages in sectors such as agriculture where it has already obtained some goodresults despite Dutch disease
Azerbaijan Gross Agricultural Output (index 100=1992, FAOSTAT)
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
24'449 24'108
18'246 17'761
14'217
9'209 8'681
8'164
5'630 4'998
3'622 2'698
-
5'000
10'000
15'000
20'000
25'000
30'000
Russia Kazakhstan Belarus Azerbaijan Turkmenistan Georgia Ukraine Armenia Uzbekistan Moldova Kyrgyz Republic Tajikistan
Thanks to very strong growth economic growth, GDP per capita in Azerbaijan is now amongthe highest among post-Soviet countries, well above levels of other Caucasian States
GDP per capita PPP USD 2014 (IMF)
25,626,0
26,527,4
28,228,6
29,029,6
30,831,231,231,3
32,733,033,433,733,7
34,534,8
36,036,236,536,7
37,640,1
42,142,1
43,6
0 5 10 15 20 25 30 35 40 45 50
Ukraine
Slovakia
Belarus
Romania
Bulgaria
Montenegro
Kazakhstan
Serbia
Tajikistan
Slovenia
Hungary
Armenia
Poland
Moldova (Republic of)
Kyrgyzstan
Croatia
Azerbaijan
Albania
Latvia
Estonia
Bosnia and Herzegovina
Mongolia
Uzbekistan
Lithuania
Russian Federation
China
Georgia
The former Yugoslav Republic of Macedonia
Meanwhile, economic growth has not been associated with very strong increase in income inequality as inneighbour Georgia or Russia. Therefore, the combination of very strong growth and moderate incomeinequality has led to a reduction of poverty unparalleled in the Caucasus and the emerging of a largemiddle-class
Gini coefficient (2003-2012, UNDP)
9593
6616
4841
0
2000
4000
6000
8000
10000
12000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total population (thsd.person)
population at working age (thsd.person)
Economically active population (thsd.person)
Contrary to other Caucasian countries, the population of Azerbaijan is young and growing even thoughbirth rates have declined from 25.9 per 1/1000 at the end of the Former Soviet Union to 18.1 in 2014. Theage pyramid is ideal with a very high population at working age/total population ratio which often goeson par with high rates of economic growth
Active population (source AzStat)
2000
3000
4000
5000
6000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
urban places
rural places
Even though 37% of the workforce is still employed in agriculture, 53% of the total population was urban in 2015, against 51% in 2000
Population change by type of locality (thsd. persons,source AzStat )
1500
1600
1700
1800
1900
2000
2100
2200
2300
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
After initial contraction following the end of FSU, the population of Baku has steadily increased, attractedby jobs opportunities in sectors such as services with white collars middle-class progressively taking overblue collars farmers or industrial workers
Dynamics of population growth in Baku(at the beginning of the year, thsd. persons, AzStat)
445
1754
1199
735
670
627
567
530
495
489
480
464
400
374
332
308
298
250
241
198
0 200 400 600 800 1000 1200 1400 1600 1800 2000
Total economy
Mining
Finance
Information and communication
Professional, scientific and technical activities
Construction
Administration
Transportation and storage
Manufacturing
Production, share and supply of electricity, gas and steam
State management and defence, social security
Accommodation of tourists and public catering
Other service activities
Trade
Water supply, cleaning and processing of wastes
Real estate activities
Education
Art, entertainment and recreation
Agriculture, forestry and fishing
Human health and social work activities
In sectors such as finance, wages are much higher than on average and there is still much potential forgrowth in employment as the credit to GDP ratio in Azerbaijan (WB, 2013) is only 25.5% against 39.8% inGeorgia and 45.2% in Armenia
Average monthly nominal wages and salaries, 2014 (AZN, AzStat)
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
100 103112
131
179164
201
241
284
345
376
100
119
150
180
200211
224 231240
256265
0
50
100
150
200
250
300
350
400
450
500
2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014*
Construction
Mining
Trade
Total GDP
Manufacturing
Agriculture
The construction sector has been the most dynamic economic sector in the last 10 years,together with oil and gas
GDP and sector growth 2004-2014 (index 2004=100, AzStat)
0
500
1'000
1'500
2'000
2'500
3'000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
rural
urban
This strong growth first reflects pent-up demand following a decade of massive under-investment in the1990s and not a real estate bubble linked to the oil boom: while there has been very few investments inreal estate financed by abroad, the total credit portfolio of banks in construction and real estate was,according to CBRA, only 2.7 bn USD in mid-2015
Dwellings houses submitted into use by type of locality (source AzStat)
0,70,8
1,0
1,7
1,5
1,9
1,61,7
2,0
1,5
2,0
1,8
2,22,3
1,9
0
0,5
1
1,5
2
2,5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
As of today, levels of construction per capita still remain much lower than in Soviet times and are insufficient to deal with the needs of the strongly developing urban middle class
Number of dwellings submitted into use per 1000 population (source AzStat )
860 840
10451100
1181
1630
0
200
400
600
800
1000
1200
1400
1600
1800
2010 2011 2012 2013 2014 2015
In 2015, the Baku housing market was faced with the combined impact of the devaluation and of lowerGDP growth. It led to much lower USD prices for the secondary market (by more than 30%). But prices inthe primary real estate market remain almost unaffected, partly because prime quality real estate is agood storage of value in times of uncertainty
Dynamic of prices on primary real estate market in Baku (mbagroup.az)
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: request for credit
In the future, Government schemes favoring access of the population to property of real estate will keep on sustaining market development
Azerbaijan has already approved the law on mortgage lending
Currently interest rates in AZN are:• 4% - for public servants (through the Azerbaijan State Mortgage Fund)
• 6% - for other categories of population (through the Azerbaijan State Mortgage Fund)
• 8% - for other categories of population (through commercial banks)
From January 2017:• Additional AZN 200 million will be allocated to the existing quota of AZN 600 million for the Azerbaijan State
Mortgage Fund
• The individual ceiling for subsidized mortgage credits will be increased up to 200 000 AZN
• Interest rates will be reduced to :
- 2% - for access to property of young borrowers
- 3% - for public servants
Market conditions for buyers
City center
Near the center
Far off from the center
Outskirts of the city
1800 - 5000 USD
1200 - 2000 USD
800 - 1600 USD
550 - 1000 USD
Great City Construction Project
1100 USD *
Price per 1 m2:
* - Base scenario
Prices in Baku depend on locations in four different circles. The Great City Construction Projectis located in the 2-nd best circle whose prices are in a 1,200/2,000 USD bracket.Proposed sales prices are 1,100 USD/m2, therefore very attractive
Price specificities in primary real estate market in Baku
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
Summary of the Project
• The Great City Project is one of the biggest construction projects in the Republic of Azerbaijan on a territory of 10ha close to the center of Baku
• It is implemented in close coordination with Nikoil Bank that participates in State supported programs for housing and that will provide buyers with cheap mortgage finance
• Its main goal is to supply affordable and comfortable housing for the Baku middle-class
• Construction is capped at 4 floors, which is a very popular type of residence among the middle-class even though currently most new buildings are much higher
• The project includes 60 residential buildings and all infrastructure facilities
Location of the project site: at the heart of the new Baku
• Azerbaijan, Baku 40°24’21.19”C 49°53’53.00”B• Only 2 km from the city center• Only 100 m from Heydar Aliyev Avenue, the backbone of
modern urban development of Baku on the way to theairport and… beaches!
Location of the project site: at the center of high paid jobs location
• On photo 1 a new hospital within walking distance from our residence: jobs and services
• On photos 2 and 3, top market office towers, located just opposite from Great City residence. Headquarters of national oil company SOCAR, AZERSU (State Water Supply Company), Central Bank of Azerbaijan, State Oil Fund…
• No traffic jam to go to your well-paid job in flagship institutions!
Our neighbors:
1 32
Residential buildings:
• Underground parking with total area 24’000 m2
• For each apartment - one parking place• The exterior will be decorated with luxury finishing materials, including
natural granite and wood, as well as individual decorative elements
Architectural approach: efficient beauty
• 960 flats with total area 96’000 m2
• 1-2-3-4 bedroom apartments
• Size of apartments from 91 m2 to 260 m2
• Ceiling height of 3.3 m
• Large halls
• Each apartment will have a guest toilet
• Each bedroom will have a separate bathroom
Providing the highest building standards at affordable prices
school
health center
artificial lake
kindergarten
residential buildings
infrastructurefacilities
supermarket
restaurant
Organization of the residential complex: make life comfortable
Kindergarten
Restaurant
Infrastructure facilities:
Supermarket with total area 6’000 m2
The Project includes all needed infrastructure facilities: school, kindergarten, health center, fitness club, supermarket, restaurant, etc.
The best choice for families
• The Great City Residential Complex is a Green concept with gardens, playgroundsand even an artificial lake
• A private water cleaning system will be installed, providing high quality potabledrinking water, an exception in Baku
• All the territory of the complex will be securely fenced, with a security checkpointat the entrance of the courtyard and of the parking. Green life will be a privilege
A Great Green City
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
Great City LLC: a special purpose company created for the Project
• Great City LLC is a special purpose companyestablished in Azerbaijan for the implementationof the Project
• It is in charge of the whole development andmanagement of the Project until final sale tocustomers
• All the construction works are carried out bycontracted reliable suppliers and contractors
Organizational structure of Great City LLC
• Great City LLC is belonging 100% to O2 HOLDING SA, a Swiss group based in Geneva.
• KAT Holding has been chosen as contracted developer of the
• KAT Holding has extensive experience in the construction of residential and office buildings of varying complexity
• Currently KAT Holding is involved in: construction, manufacture of windows, doors, and glass frames in a J/V with German company IND
• It has extensive experience in working with key local and international partners
• The registered address and headquarters of KAT Holding are Azerbaijan, Baku, İ. Orudjov str. 1 (Nobel Avenue 1), AZ1025
KAT Holding: the experienced developer of the Project
№ Project description:
Co
mp
lete
d
1 9-storeyed office building at address: N.Rafiev-13, Baku, Azerbaijan
2 Hillside Hotel-Restaurant in Zagulba Settlement
3 Residential village at Khatai district, 11 S. Vezirov Street, Baku
4 Office Building at 1- I.Orudjov Street, Baku, Azerbaijan
5 Residential complex in Dnepropetrovsk City, Ukraine
6 Residential village in Gandja City, Azerbaijan
7 Varli recreation zone
8 Multifunctional complex Luxen Plaza
Cu
rre
nt
1 Zabrat Great City residential complex
2 Great City residential complex
3 Business Centre at 20th Site, Baku
4 20-storeyed Business Center at 14th Site
Pla
nn
ed 1 Complex of cottages
2 Complex of offices Izumrud
3 Residential complex Vechnost
Projects developed by KAT Holding
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
Great City residential construction will take place in 6 phases. Each phase of construction iscompletely independent from others. Residential buildings have only 4 floors therefore timeneeded for construction of each phase is only 6 - 7 months. Time needed for construction ofinfrastructure facilities is 14 months
Great City: a sequential business model
2016 2017 2018
12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Construction of 1st 9 buildings
Construction of 2nd 12 buildings
Construction of 3d 10 buildings
Construction of 4th 5 buildings
Construction of 5th 12 buildings
Construction of 6th 12 buildings
Construction infrastructure buildings
The operational cash expenses of the project,including financial cost are 81,67 mln USD in thebase scenario and 82,5 mln USD in the LOWscenario
They are based on contracts in USD alreadysigned with reliable contractors that haveworked for many years with Kat Holding
The slight difference between operational cashexpenses of the two scenarios reflects higherinterest costs in the negative scenario
Operational cash expenses of the project, USD
Operational cash expenses BASE LOW
Preparation of project architect.estimate docs and constr 2 453 720 2 453 720
Construction permissions 913 000 913 000
Preliminary work, cleaning of surface 700 000 700 000
Preparation of Gasification, Electric supply, Water suppl 5 830 000 5 830 000
Purchase of plot of land 18 400 000 18 400 000
Construction of 1st tranche 9 buildings 450 Man/m2 5 315 625 5 315 625
Construction of 2nd tranche 12 buildings 7 087 500 7 087 500
Construction of 3d tranche 10 buildings 5 906 250 5 906 250
Construction of 4th tranche 5 buildings 2 953 125 2 953 125
Construction of 5th tranche 12 buildings 7 087 500 7 087 500
Construction of 6th tranche 12 buildings 7 087 500 7 087 500
Construction School, Store, KG, Restaurant 1100Man/m2 8 250 000 8 250 000
Advertising 70 000 70 000
Infrastructure and decoration 1 900 000 1 900 000
Gross wages developer (exact withdrawal) 1 280 000 1 280 000
TAX (45 man per m2) 3 494 119 3 494 119
VAT (canceled) - -
Insurance 275 000 275 000
Interests paid on loan 2 670 734 3 504 643
Total Operational Cash Expenses Accumulated 81 674 073 82 507 982
Cash Receipts Total per LineCash Sales of 1st 9 buildings * 15 840 400
Cash Sales of 2nd 12 buildings * 21 120 000
Cash Sales of 3d 10 buildings * 17 600 000
Cash Sales of 4th 5 buildings * 8 800 000
Cash Sales of 5th 12 buildings * 21 120 000
Cash Sales of 6th 12 buildings * 21 120 000
Cash Sales Parking 8 640 000
Cash Sales School, Store, KG, Restaurant 12 000 m2 19 200 000
Total Cash Receipts 133 440 400
Cash Receipts Total per LineCash Sales of 1st 9 buildings * 11 520 000
Cash Sales of 2nd 12 buildings * 15 360 000
Cash Sales of 3d 10 buildings * 12 800 000
Cash Sales of 4th 5 buildings * 6 400 000
Cash Sales of 5th 12 buildings * 15 360 000
Cash Sales of 6th 12 buildings * 15 360 000
Cash Sales Parking 6 720 000
Cash Sales School, Store, KG, Restaurant 12 000 m2 14 400 000
Total Cash Receipts 97 920 000
BASE SCENARİO: (STRESSED) LOW SCENARİO:
Calculated sale price per m2 for apartments
Calculated sale price per parking place
Calculated sale price per m2 for infrastructure buildings
1 100 USD
9 000 USD
1 600 USD
800 USD
7 000 USD
1 200 USD
NET CASH FLOW BEFORE RESERVE51,766 327 USD 15,412,018 USD
Total estimated operational cash income from sales fluctuates between 133.44 and 97.92 mln. USD in our two scenarios
Operational cash income from sales
*5% reserve to be deducted from sales amount
Completion of buildings and sales are done step-by-step allowing optimal cash flowmanagement and efficient marketing as volume of supply will remain capped during the Project
Sales plans
2017 2018 2019
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
Cash Sales of 1st 9 buildings
Cash Sales of 2nd 12 buildings
Cash Sales of 3d 10 buildings
Cash Sales of 4th 5 buildings
Cash Sales of 5th 12 buildings
Cash Sales of 6th 12 buildings
Cash Sales Parking
Cash Sales Infrastructure buildings
Financing requirements:During first period of construction, a negative accumulated operational cash flow is generated but largelymitigated by USD 18m advanced disbursement. In the base scenario the extra financing call would bemax USD 16m for a period of 18 - 24 months.
-40000000
-30000000
-20000000
-10000000
0
10000000
20000000
30000000
40000000
50000000
60000000
déc
-15
jan
v-16
févr
-16
mar
s-1
6
avr-
16
mai
-16
juin
-16
juil-
16
aoû
t-16
sep
t-16
oct
-16
no
v-16
déc
-16
jan
v-17
févr
-17
mar
s-1
7
avr-
17
mai
-17
juin
-17
juil-
17
aoû
t-17
sep
t-17
oct
-17
no
v-17
déc
-17
jan
v-18
févr
-18
mar
s-1
8
avr-
18
mai
-18
juin
-18
juil-
18
aoû
t-18
sep
t-18
oct
-18
no
v-18
déc
-18
jan
v-19
févr
-19
mar
s-1
9
avr-
19
mai
-19
juin
-19
Operational cash and credit needs base scenario (USD)
Credit needs (outstanding amounts)
Total Net Operational Cash Accumulated
Equity investment and shareholder advancedisbursement net accumulated
In the low scenario, the negative accumulated operational cash flow not covered by equity andto be financed by debt is slightly higher at USD 17.9 million
-40000000
-30000000
-20000000
-10000000
0
10000000
20000000
30000000d
éc-1
5
jan
v-16
févr
-16
mar
s-1
6
avr-
16
mai
-16
juin
-16
juil-
16
aoû
t-16
sep
t-16
oct
-16
no
v-16
déc
-16
jan
v-17
févr
-17
mar
s-1
7
avr-
17
mai
-17
juin
-17
juil-
17
aoû
t-17
sep
t-17
oct
-17
no
v-17
déc
-17
jan
v-18
févr
-18
mar
s-1
8
avr-
18
mai
-18
juin
-18
juil-
18
aoû
t-18
sep
t-18
oct
-18
no
v-18
déc
-18
jan
v-19
févr
-19
mar
s-1
9
avr-
19
mai
-19
juin
-19
Operational cash and credit needs base scenario (USD)Credit needs (outstanding amounts)
Total Net Operational Cash Accumulated
Equity investment and shareholder advancedisbursement net accumulated
Net cash flow in the base scenario is 51.77 mUSD, and in the (stressed) low scenario 15.41 mUSD. IRR in the base scenario is 49.6%, and in the low scenario 17.3%
Base scenario Low scenario
Calculated sale price per m2 for apartments 1 100 800
Calculated sale price per m2 for apartments (index base scenario=100) 100 70
Calculated sale price per parking place 9 000 7 000
Calculated sale price per m2 for infractructure buildings 1 600 1 200
Total m2 of apartments 96'000 (60X1600) 96 000 96 000
Total parking places 960 (60X16) 960 960
Total m2 of infrastructure buildings 12'000 12 000 12 000
Sales apartments 105 600 400 76 800 000
Sales parkings 8 640 000 6 720 000
Sales infrastructures 19 200 000 14 400 000
Total sales 133 440 400 97 920 000
Net cash flow 51 766 327 15 412 018
IRR 49.6% 17.3%
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
The business model is resilient to the risk of price fluctuations. Current market prices are 23%higher than in the base scenario. Break-even prices are equivalent to the lowest market prices inthe period 2010-2015. Break-even prices required to repay debt are much lower
1 100
800
670625
1 400
1 109
860
-
200
400
600
800
1 000
1 200
1 400
1 600
Base scenario Negative scenario Break-even price (netoperational cash = 0)
Break-even pricerepayment of credit
Current market prices Average market prices(2010-2016)
Lowest market prices(2010-2016)
Calculated sale price USD per m2 for apartments
TABLE OF CONTENTS
A. General background of the Project: key economic and social factors in Azerbaijan
I. Strong capacity to adapt to a changing oil price environment
II. Strongly increasing urban middle-class population
III. Unsatisfied demand for middle-class housing
IV. Robustly sustainable real estate market prices
B. The Great City Project
I. Presentation of the Great City Project
II. Presentation of the sponsors
III. Business model of the Great City Project
IV. Analysis of risks and stress scenarios
V. Conclusion: options for participation
Based on this analysis, these are the financing requirements:
• Max 18m USD
• Tenor: max 24 months
• Currency: USD
• Type of facility: matching cash flows profile in financial model, with progressive disbursements andrepayments (ideally a credit line with disbursements/repayments of at least 1m USD)
Options for participation to the project:
I. Participation to Project finance (credit) together with NIKOIL Bank (local bank) acting as an agent (pledge of the account of Great City LLC together with all other required collateral), OR
II. Direct Project finance with an equity or equity kicker component, or
III. Purchase and prepayment of a lot of apartments (up to first 20 buildings) at discount on market prices
Conclusion: options for participation