1. Russia’s Hotel Projects and Investments Sven Osmers Head of KPMG’s Real Estate practice Russia & CIS April 10, 2014

2. 1 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Сontent Overview of existing hotel supply and pipeline projects in Russia Overview of major hotel brands activity in the Russian market Hotel investments in Russia

3. Overview of existing hotel supply and pipeline projects in Russia

4. 3 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Branded Hotel Rooms stock in Russia (2001 – 2018) Source: KPMG analysis 20 TIMES INCREASE

5. 4 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Branded hotels in major cities Source: KPMG analysis 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 05,00010,00015,00020,00025,000 Future room inventory 10,834 21,845 Existing room inventoryFuture room inventory Population, thousand 6,911 St. Petersburg 8,861 (28% ) 11,069 21,845 ( 97% ) Moscow 12,828 3,042 5,056 (66% ) Sochi 4,168 Regions

6. 5 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Major regional Hotel markets Source: KPMG analysis Population, thousand Future room inventory 1,310 606 Existing room inventoryFuture room inventory

7. Overview of major hotel brands activity in the Russian market

8. 7 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Projection of Branded Hotels Rooms inventory leader by 2018 CARLSON REZIDOR HOTEL GROUP Hotel network leader by 2018 ACCOR Rooms Hotels Source: KPMG analysis

9. 8 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Segmentation: Top performers Vs. Russian regions Moscow, St.-Petersburg, SochiRussian regions Source: KPMG analysis Q1 2014By 2018

10. 9 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investing in branded hotels: factors to consider ■New development/ reconstruction ■Optimal room inventory (from 120 up to 300 rooms) ■Average room size (mid-scale hotel: 22-28 m²) ■Gross build area per room (mid-scale hotel: 40-67 m²) ■New development/ reconstruction ■Optimal room inventory (from 120 up to 300 rooms) ■Average room size (mid-scale hotel: 22-28 m²) ■Gross build area per room (mid-scale hotel: 40-67 m²) CONCEPT CONCEPT LOCATION ■Population of the city more than 300 000 people. ■Cities (regions) with existing properties under same brand (specifically recreational properties) ■Location that makes business sense for the Hotel property ■Visibility & accessibility

11. Hotel investments in Russia

12. 11 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Decision To brand or not to brand? Efficient business processes BRANDED Easier access to financing and easier exit ADR and Occupancy increase due to brand recognition Operational risks decrease More control over operations INDEPENDENT Less CAPEX Lower marketing and reservation costs Flexibility in pricing and positioning THOROUGH FEASIBILITY ANALYSIS

13. 12 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Level of influence on efficiency of the hotel project Summarised expenses Influence on the project efficiency ■HBU ■Market analysis ■Concept development ■ROI analysis ■ State permits ■ Design ■Shell and core construction ■ FF&E ■Staff recruiting ■Training ■Set up of business processes ■Start of sales & marketing activities ■Hotel management decision FEASIBILITY ANALYSIS PROJECT DOCUMENTATION CONSTRUCTION PREOPENING AND COMMISSIONING Source: KPMG analysis

14. 13 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Drivers for hotel development in Russia FIFA World Cup 2018: 19,000 Hotel Rooms Industries Development: Automotive cluster in Kaluga Sochi Olympics 2014: 12,000 Hotel Rooms Destination marketing: Major goal a/p Federal program Infrastructure development: Special Touristic Economic Zones

15. 14 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Hotel projects financing sources Financing sources Debt financingCo-investment Strategic funds Portfolio funds Governmental banks Private banks Rarely used Mainly refinance In Russia Source: KPMG analysis

16. 15 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Debt financing: what banks look at? Feasibility study/ Business plan Agreement with reputable operator (interna- tional/ domestic) Prior experience Legal due diligence/ state permits/ project documentation

17. 16 © 2014 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. How we can help ■Feasibility analysis and Valuation ■Market analysis ■HBU analysis of land plots ■Concept development ■Assistance in the raising of finance and investment planning ■Operator selection and negotiating operating agreements ■Analysis of Hotel operations and performance, recommendations to optimise performance Advisory services provided by KPMG for the hospitality and leisure industry

18. Thank you Sven Osmers Director Head of Real Estate Russia & CIS KPMG Tel:+7 (495) 937 4477 Fax:+ 7(495) 937 4400 E-mail: SvenOsmers@kpmg.ru

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