Understanding Reached with Moscow City Government

25 March 2011 

UNDERSTANDING REACHED WITH THE MOSCOW CITY GOVERNMENT ON TVERSKAYA PROJECTS AND AFI MALL CITY

AFI Development PLC ("AFI Development" or the "Company") confirms that, further to the coverage of real estate projects in the vicinity of the Belorussky rail terminal by Moscow's Mayor Mr. Sergey Sobyanin on the TV Center channel on March 23, 2011, it has reached a non-binding understanding with the Moscow City administration to transfer its development rights in the Tverskaya Zastava shopping centre to the City of Moscow in exchange for it being fully compensated for its development costs incurred in the project to date. Such compensation may take the form of the City of Moscow granting additional building rights for the Company's other projects. The City of Moscow intends to convert the retail space into an underground parking facility at its own expense.

As part of the non-binding understanding reached with the City of Moscow it is intended that AFI Development will remain the owner of the projects surrounding Tverskaya, equating to nearly 350,000 sqm of commercial and residential space. It is also intended that such projects will retain their key development criteria and it is the Company's understanding that the current planning documentation will remain in place.

In addition, a non-binding understanding with the Moscow City administration was reached regarding the purchase from the City of Moscow of its 25% share in AFI MALL City and 2,700 parking lot adjacent to AFI MALL City, for a total consideration of approximately US$ 310 million.

The Company will provide further updates once the definitive agreements on the aforementioned matters are concluded.

The Company notes that the understandings reached with the City of Moscow are not legally binding and therefore remain subject to change.

Lev Leviev, the Chairman of the Board of Directors of AFI Development commented:

"We fully support the city-planning policy of the Moscow's Mayor Sergey Sobyanin to enhance road transportation systems aimed at improving the quality of life of the capital's residents. We are satisfied with the City's decision to allow us to continue development of the Tverskaya surroundings in volumes and functionalities agreed in the past, while receiving compensation for work completed on the Tverskaya Zastava shopping centre project. We are also pleased to have reached an understanding with respect to the purchase of the City of Moscow's 25% share in AFI MALL City"

Alexander Khaldey, Executive Director of AFI Development commented:

"Management of AFI Development PLC confirms to all our shareholders that this understanding is mutually beneficial to both parties. The City government, in line with its proposed strategy of improving infrastructure and availability of parking will finance the traffic interchange and underground parking facility under the Tverskaya Zastava Square, whereas AFI Development, as investor, is fully compensated with development costs incurred in the project to date and receives a green light to develop the Tverskaya surroundings projects with volumes and functionalities in the planning documentation Remaining unchanged and equating to nearly 350,000 sqm of commercial and residential space. The agreement to purchase the City of Moscow's 25% stake in AFI MALL City will also allow AFI Development to retain full control of this landmark project."

- ENDS -

For further information, please contact:

AFI Development

Stanislav Joukov +7 495 796 9988

Natalia Ivanova

Citigate Dewe Rogerson, London +44 20 7638 9571

David Westover

Sandra Novakov

Lucie Holloway

About AFI Development

AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction, and quality and customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets in Moscow, the Moscow Region, and other major cities in Russia and the CIS. The Company's existing portfolio of 30 development projects comprises commercial projects focused on offices, shopping centers, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favorable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighborhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.