AFI Development swings to loss

AFI Development, the Russian development arm of Africa-Israel Investments, swung to a net loss of $63 mln (EUR 50 mln) in the first half of 2010, following devaluations of its land bank and hotel property portfolio.

The figure compares to a net profit of $215 mln in the same period a year before. Revenues increased to $39.5 mln in the first six months of the year, compared to $30 mln in the first half of 2009.

With a view to the admission of the company's B shares to the London stock exchange, the company asked Jones Lang LaSalle in May this year to perform a full valuation of its land bank and hotel properties that had not been valued since 2008, as a result of market conditions. The valuation led to an impairment of $34 mln on these assets, the company said. At the same time, AFI decided not to recognise upward revaluations of more than $100 mln reported on the remaining assets, in line with its 'conservative approach'.

The company confirmed plans that it will open the 180,000 m² Mall of Russia in early December 2010, with a minimum expected occupancy of 75%. Approximately 58% of the 305 stores is now pre-let. The Russian group said that it has also resumed construction of Phase III of its Ozerkovskaya Embankment project, which is due for completion in 2011.

'Over the last few years we have carefully managed our financial position and the implementation of our developments to reflect the state of the market. We believe the positive growth trend in the real estate sector and the wider Russian economy is now firmly established and will be sustained,' said Lev Leviev, chairman of AFI Development.

He added: 'We continue to selectively resume the development of suspended projects, which are supported by the financing lenders. We believe that by applying this approach we will be ready to meet demand at the right moment with a pipeline of successful new projects.'