26th Feb 2015 11:21
LONDON (Alliance News) - Russian real estate developer AFI Development PLC Thursday said its expects to record a net valuation loss and book impairments in the fourth quarter, due to a fall in the value of its projects, which have been hit by a weakening Russian economy.
AFI Development focuses on developing and redeveloping high-quality commercial and residential real estate assets across Russia, with Moscow being its main market. It sells the residential properties it develops and either leases its commercial properties or sells them for a favourable return. Its existing portfolio comprises commercial projects such as offices, shopping centres, hotels and mixed-use properties, as well as residential projects.
In a statement Thursday, the company said it expects to record a net valuation loss on investment properties, investment properties under development and inventory of real estate during the fourth quarter of 2014 of around USD210 million before taxes. It said its estimated loss after tax for the fourth quarter, including foreign exchange loss, will be around USD300 million. The company said it also expects its quarterly results to be affected by an equity deduction in the region of USD390 million.
"The valuation loss and impairment reflect a decrease in the value of the company's projects due to negative developments in the macroeconomic environment in Russia, which resulted in several negative factors influencing valuation models across the portfolio of properties," the company said in its statement.
AFI Development said it expects the gross value of its portfolio of properties to decrease to around USD2.0 billion at end-December 2014, from around USD2.5 billion at end-September 2014.
AFI Development said its fourth-quarter results were hit by the significant devaluation of the Russian rouble against the US dollar.
"Second, the recent downgrades of the Russian Federation sovereign credit rating by Standard & Poor's and Moody's triggered an increase in the risk-free rate and a corresponding increase in the discount rate employed in DCF [discounted cash flow] valuation models," the company added.
AFI Development shares were untraded Thursday mid-morning. The stock was last traded at USD0.333 per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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