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| Georgian Reconstruction and Development Company |
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| 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 | 25500 |
| Company name | Georgian Reconstruction & Development Company |
| Country | Georgia |
| Sector | Construction and Real Estate |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Pending Signing |
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| Date SPI disclosed | June 11, 2007 |
| Projected board date | July 12, 2006 |
| Previous Events | Approved: October 16, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| Georgia Reconstruction and Development Company (GRDC or the company) is a real estate company established in February 2004 to make and manage investments in urban real estate infrastructure development in Georgia. Following decades of minimal investment in housing and commercial property developments, Georgia’s existing urban real estate infrastructure is primarily composed of outdated and badly maintained office and apartment blocks. Since the turn of the century and more specifically following the Rose Revolution in Georgia, construction has been quickly ramping up with demand for quality residential, office and commercial space rapidly outpacing supply, spurred by strong performance of the economy. The proposed IFC investment will help support GRDC’s strategy of expansion and consolidation in the Georgian property market as a market leader in delivering quality residential, office and commercial real estate. |
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| Project sponsor and major shareholders of project company |
| GRDC was established under the laws of the Netherlands Antilles on February 3rd 2004. The main shareholders include two prominent Georgian businessmen, Mamuka Khazaradze and Badri Japaridze, and a Dutch national, Bob Meijer, a private equity and real estate investor with 30 years of experience in Europe, the United States, Russia and Georgia. Together Mssrs. Khazaradze, Japaridze, and Meijer own 36% of GRDC, while the rest is owned by a mix of Georgian and foreign individual investors, including investors from the U.K, France and the United States. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is estimated at $210 million. IFC is considering an equity investment at the holding company level for up to $15 million as well as an A-loan for IFC’s own account for up to $40 million at project level. The debt facility would finance the construction, refurbishment and operation of five commercial properties including two office buildings, one retail centers, the Central Railway Station and a mixed-use residential and commercial development. |
| Location of project and description of site |
| The project is located in Georgia, with the majority of properties situated in the capital city of Tbilisi and its surroundings. GRDC also owns properties in the cities of Mtskheta, Borjomi and Mitarbe. |
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| Anticipated development impact of the project |
The project would have significant development impact in Georgia because of its effect on the following stakeholders:
- Residential, office and commercial tenants – by developing quality residential and business infrastructure which will help improve the quality and volume of stock available to the local population, as well as foreign and local businesses.
- Contractors, subcontractors and other related businesses – by increasing demand for their services and contributing directly and indirectly to job creation in the construction sector and other related sectors of the economy.
- Banks and mortgage clients – by improving the quality and quantity of real estate stock which in turn will have important downstream effects on the mortgage/housing finance market, a sector which is currently in its early stage of development in Georgia.
- Government – by creating opportunities for additional revenues generated through the payments of taxes.
The project will also mobilize technical assistance services along the project supply chain of property management, including capacity building at the contractor/subcontractor and tenant levels, where applicable, sustainable urban development and energy efficiency schemes, etc. Finally, the project will implement high environmental and social standards by requiring GRDC to ensure adherence by each development project to IFC’s environmental and social guidelines and to Georgia’s regulations in those respects as well. |
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| IFC's expected development contribution |
| IFC will provide long term financing for urban real estate infrastructure development in Georgia, where such funding is currently virtually non-existent. In addition, IFC’s presence will bring comfort to potential institutional investors who may be interested to support GRDC in the near to medium-term, particularly when it will start preparing for a listing on a major stock exchange in Europe. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
Based on the nature of operations of the company, the applicable requirements will be:
- The IFC FI Exclusion List;
- The Applicable National Environmental and Social Laws and Regulations; and
- Performance Standard 5 for land acquisition.
IFC will also review, if required, the capacity of the FI to manage environmental and social risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.
Based on the review, the project will be required to:
- Develop an SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities are consistent with the Applicable Requirements;
- Submit a periodic report to IFC as per a format to be provided by IFC |
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| For inquiries about the project, contact: |
Tbilisi: Irakli Kilauridze
Chief Executive Officer
GRDC
18/5 Uznadze Str.
0102 Tbilisi, Georgia
Mobile: +995 99 507 394
Telephone: +995 32 942 207
Fax: +995 32 946 766
Email: irakli@grdc.ge
London: Dan Geoghegan
Consultant, Head of Investor Relations
Argo Saint George LLP
48 Charles Street
LONDON W1J 5EN
Mobile: +44(0) 7776 156 111
Telephone: +44(0) 207 493 2797
Fax: +44(0) 207 493 2796
Email: dg@argo-sg.com |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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