Eurasia RED

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27476
Company name	Home Mart LLP
Country	Kazakhstan
Sector	Construction and Real Estate
Environmental category	B
Department	Global Manufacturing & Services
Status	Active

Date SPI disclosed	August 29, 2008
Projected board date	October 20, 2008
Previous Events	Invested: June 26, 2009 Signed: May 18, 2009 Approved: March 26, 2009

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Eurasia Real Estate Development Ltd (ERED or the company) is a leading Kazakh commercial property development company which develops and leases high quality shopping malls and business centers throughout Kazakhstan. ERED currently owns an operational class B+ business center on the Manas-Satpayev street intersection in Almaty.

The company’s near term plans include building two shopping centers located in Almaty for a cost estimated at approximately $185 million. The shopping centers will also offer cultural as well as entertainment services. The project will consist of:

- a 55,000 m2 shopping center on Raimbek Avenue, Almaty; and
- a 100,000 m2 shopping center on Kulja Avenue, Almaty.

These two developments will be implemented in a phased manner. The shopping center on Raimbek Avenue was about 60% completed as of September 1, 2008 and is expected to open in February 2009. The company is planning a 45,000 m2 extension of the shopping center on Raimbek Avenue project depending on the level of demand for retail space.

Project sponsor and major shareholders of project company

The project sponsors and Major Shareholders of ERED are Yerlan Mukashev and Sailau Mukashev, two well established local businessmen, who were also behind Eurasia Gold Inc., a successful gold-mining company. Eurasia Gold Inc. was listed on the Toronto Stock Exchange before being acquired in 2007 by Kazakhmys PLC, a FTSE 30 company and one of the top ten copper producers in the world, for about $260 million. Following their sale of their stake in Eurasia Gold, the shareholders focused their attention on the real estate business and founded ERED in 2007.

The company undertakes its property development project through fully owned special purpose vehicles. ERED is currently going through a restructuring of its ownership in order to streamline and optimize its tax and legal structures and consolidate all of its subsidiaries under one Hungarian-based holding company. This process is expected to be completed by end of Q3 2008. The ownership of the new holding company will remain in the hands of Yerlan Mukashev and Sailau Mukashev who will each have a 50% ownership in the holding.

Total project cost and amount and nature of IFC's investment

Total project cost is estimated at $185 million ($75 million for the first shopping center on Raimbek Avenue and $110 million for the second shopping center on Kulja Avenue), out of which about $19.1 million (10.3%) will be for land acquisition, $154 million (83.2%) will be for construction costs and $11.9 million (6.4%) for contingency.

The proposed IFC investment will consist of a $20 million A loan and $25 million equity/convertible C loan on IFC’s account and a $50 million syndicated B loan.

Location of project and description of site

The two shopping centers will be located on prime sites in Almaty with strategic access to main transportation axes, the Almaty ring road and in proximity to urban developments. The first shopping center on Raimbek Avenue will be situated in the western part of Almaty on a high traffic road (nearby the exit to Bishkek in Kyrgyzstan) and the second shopping center on Kulja Avenue will be located in the eastern part of the city between the downtown area and the future international airport (nearby the exit to China).

Anticipated development impact of the project

The project will contribute to filling the large gap between supply and demand for quality retail space in Almaty and provide much needed property infrastructure in the largest city of the country, as well as introduce modern international retail and entertainment operators to the largest city of Kazakhstan. The project will also contribute to improve Almaty’s ongoing efforts at urban renewal, its competitiveness as a domestic and regional center, and its stock of modern real estate and mass-market retail formats.

Other areas of development impacts include:

- creation of direct (over 4,000 jobs) and indirect jobs (estimated at 6,000 jobs);
- modernization of the landscape for local retail properties;
- improvement in and introduction of quality standards;
- benefit to other sectors of the economy, from suppliers of products in the shopping centers to final consumers.

IFC's expected development contribution

IFC will play an important role in the project in terms of:

- providing and mobilizing of long-term financing needed for this type of project, and not readily available in Kazakhstan especially under the current financial markets conditions;
- demonstration effect on other potential investors, especially in light of the current instability of the domestic banking sector;
- offering of global retail and sectoral expertise;
- environmental & social standards and green building practices.

Environmental and social issues - Category B

The proposed project is a category B project according to IFC's environmental and social review procedure. A summary of IFC’s environmental and social review findings for the project including the rationale for the B categorization is available in the Environmental and Social Review Summary (ESRS).

The Environmental and Social Action Plan (ESAP), which is attached to the ESRS, contains specific tasks that the client will undertake to mitigate perceived risks and impacts from the project, and to ensure compliance with IFC’s Performance Standards

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