Russian Real Estate Investment Fund advantages and practical application of the newbrand financial v

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Russian Real Estate Investment Fund advantages
and practical application of the new-brand
financial vehicle
FOR DEVELOPERS, FOREIGN INVESTORS, LANDOWNERS
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Real Estate Investment Fund

• Are you interested in dynamic Russian Real Estate
  Market?
• Do you want to start a construction project in
  Russia?
• Are you a land owner in Russia?
• Do you think about the diversification of your
  investments?
• Do you want to arrange joint business with
  Russian landowners?
• Then Russian Real Estate Investment Fund (REIF)
  is an ultimate and best solution!

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Approaches on doing business in Russian real
estate market

• purchase of real estate with the following resale
  it at the better price
• acquiring property and getting income from the
  lease payments
• land purchase, construction and development with
  following sale of complete objects
• REIT is the best solution to carry out all these
  types of business

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Dynamics of REIF development
According to investfunds.ru
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Russian REIF. Objects of establishment.

• Involvement of investment resources.
• Attraction of bank crediting.
• Commercial real estate property control
  optimization as well as protection of property
  against hostile takeover (Rent REIF.)
• Construction project control optimization.
  Simplification of a property right reregistration
  procedure as well as tax optimization.
  (Construction and Developer REIF)
• Development of multipurpose regional and/or
  housing programmes.

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Russian REIF. Structure.
Management Company
General Meeting
Property management
Real estate consultants
Legal Advisory
Auditor
Real Estate Properties
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Advantages of the Russian REIF

• Totally legal tax reduction by 80 -100 !
• No profit tax and property tax!
• Possibility to reinvest the Fund income tax
  payment before the moment of unit redemption
  deferred taxation!
• Securitization of different assets, combining
  them into unified property pool with rights
  proved by the securities!
• Possibility of staged quitting the project on
  the rims for the reregistration property rights
  unit as a security increases liquidity of
  assets!
• Possibility of intermediate income payment
  (same as dividend)!
• Possibility to set up a new object into the
  Fund without withdrawing cash out of Fund upon
  completion of one project. In such case the term
  of the fund could be prolongated!
• Property protection from claims by third
  parties and raiders!

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Multilevel protection of investors rights

• Activity of all Funds participants is carried
  out on the authority of the licences
• Asset Management Company performance monitoring
  is carried out by
• Inner controller of the Asset Management
  Company
• Specialized depositary
• Auditor
• State regulatory authority the Federal
  Financial Markets Service
• Management, register and custody functions are
  divided between the Asset Management Company and
  Specialized depositary
• Funds property is registered by the Asset
  Management Company on the special balance and
  individual record is carried out
• The Fund does not respond by its property for
  debts of the Asset Management Company
• Legally speaking participation in the Russian
  Real Estate Investment Fund is equal to actual
  real estate possession

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Tax advantages

• Increment of property value inside the Fund is
  exclusive of profit tax
• Investor pays profit tax only in case of
• Receiving income of redemption or sale of
  investment units
• Receiving of intermediate income of Funds
  trust management
• Property depositing by the time of Fund
  establishment is exclusive of VAT.
• By the Russian Real Estate Investment Fund
  establishment asset writes off the balance of the
  Trust Management founder. Unit (as a security) is
  given in return. The asset is no longer subject
  to the Property tax. Asset Management Company is
  not the property taxpaying agent, the Fund is not
  a taxpayer either in virtue of article 378
  chapter 30 of the Tax Code of Russian
  Federation.
• Asset Management Company is a tax payee as for
  the estimation, deduction and transfer of the
  personal income tax to the budget

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REIF - securitization project
Right to land plot
Project under construction
REIF
Project
Security - Unit
Planning estimates
Contracting and project JSC and LLC
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REIF asset structure

• Core assets
• Real estate units (buildings, industrial
  constructions, land lots)
• Real estate property rights, including leasehold
• Contract rights, i.e. receivables under
  obligations in accordance to constructive
  partnership agreement, investment contract and
  civil works contract
• Corporate assets shares in development and
  construction companies capital (JSC and LLC)
• Non-core assets
• Cash facilities
• Deposits
• Open-market securities
• Units of other Funds

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Possible approaches to investment of ready assets
(income) REIF
REIF
Stock market
Ready assets
Real estate
Construction
Other Funds units
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Example(construction Fund)
Construction costs 30 Mio Objects
construction and sales horizon 2 years Living
floor space 20 000 ?2 Commission for Fund
management - 2 of net asset value
annually
Spread 13
200 000 (22 of gross profit)
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Example (rent Fund)
Gross income from lease of the building amounts
to 5 Mio a year. Building self-cost is 25
Mio. The overall area 10 000 ?2 (8 000 ?2
useful area which brings income from
lease). Expenses incidental to operation and
running of the building amounts to 200 000 a
year.
Spread 1
152 800 (24,02 of gross income)
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