29161 - Russian Hotel Investments BV

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Summary of Proposed Investment

Project Number

29161

Company Name

Russian Hotel Investments B.V.

Date SPI Disclosed

Jan 15, 2010

Country

Russian Federation

Industry

Infrastructure

Projected Board Date

Feb 26, 2010

Status

Completed

Sector

Construction and Real Estate

Department

Regional Industry MAS LAC & EUR

Environmental Category

B - Limited

Previous Events

Approved : Apr 26, 2010
Signed : Apr 27, 2010
Invested : Mar 26, 2012

Project Description

Development of five mid-market greenfield hotel properties in the Russia Federation, at an estimated total cost of EUR98.5 million, to be operated by Accor, in the frontier regions of Kaliningrad and Yaroslavl, and in Samara and Krasnoyarsk (the “Project”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	36.51
Equity	3.64

Development Impact

The Project is expected to have the following development impacts:

(i) Improve the Supply of Hotel Services: The Project will help meet the growing demand for hotel accommodation in the presently under-served mid-market hotel sector in four regional cities (of which two are in frontier regions) in Russia. The Project is expected to improve the availability and the standard of hotel services to travelers and business communities, thereby contributing to the improvement of the business infrastructure of the country. While the international hotel chain involvement assures guests of an established product and service quality to customers, it will also encourage broad improvements in the standards of existing hotels and the transfer of hotel management expertise to the local staff.

(ii) Private Sector Development: The Project will support the development of a local enterprise by helping it meet its strategic objective. The presence of an Accor Ibis chain will send a positive signal to other foreign hotel investors who are considering investments in Russia, especially at a time when Russia is experiencing an economic crisis. The Project is also expected to have an impact on the upgrade and development of tourism and travel related infrastructure by the local administration, such as water supply and waste water treatment, power, roads, and airports.

(iii) Improved Environmental and Social Standards: IFC''s requirement for the Company to implement and maintain high environmental, fire, life safety and social standards, including obtaining comprehensive insurance policies will have a demonstration effect on other firms in the industry.

(iv) Employment and Local Linkages: The Project will help create demand for locally sourced materials, service and labor, both during the construction and operation stages of the hotel properties. The hotel properties are expected to support small and medium sized enterprises, including a wide range of goods and service providers such as produce farmers, food processors, furniture companies, transportation agencies, restaurateurs, and art and crafts manufacturers.

(v) Increase in Domestic Revenue: The Project is expected to contribute to the domestic economy through increased tax revenues.

Provision of Long-Term Financing:
IFC will provide and arrange for long term financing in a form that meets the Sponsor''s and the Company''s needs, and which are not readily available in Russia. The proposed long term loan and equity financing package will help the Company meet its financial needs while reducing its leverage and risk profile. Local and international banks are hesitant to provide term loans in an adverse economic situation which is more pronounced due to the crisis.

Global Business and Sectoral Knowledge:
IFC''s global hotel sector expertise will help it advice the Company on development and adoption of formal risk mitigation measures and guidelines on the basis of industry benchmarks, which will be expected to improve the efficiency of the Company going forward.

Environmental & Social Standards and Corporate Governance:
IFC will conduct a thorough environmental and social review ensuring that the Company implements international standards in its environmental, fire and life safety and social practices. In addition, IFC will assist the Company in improving its corporate governance standards. This is expected to raise the Company''s profile and make it operationally more efficient.

Stamp of Approval:
IFC''s participation through debt and equity financing is expected to enhance the Company''s and the Sponsor''s profile and hence their ability to attract other strategic investor/s.

The proposed project is being developed in accordance with internationally well recognized standards by companies committed to establish good environmental and social management systems, implement recognized life and fire safety management systems, follow international labor standards, and avoid any significant pollution. The hotels will also avoid resettlement as all sites are vacant lots and the land was obtained through willing buyer/seller/leaser situations. With only readily mitigated environmental issues the project is being processed as a Category B project.

Contacts

For Inquiries About the Project, Contact

Mr. Cuneyt Baltaoglu, (Джюнейт Балтаоглу)
Title: General Director
Address Rusakovskaya Street 13/1, Borodino Plaza, 10th floor , 107140, Moscow Russia
Email cuneyt.baltaoglu@kasa-akfen.com
Tel: +7 495 987 4809
Fax : +7 495 987 4865

For Inquiries and Comments About IFC, Contact

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Local Access of Project Documentation

The SPI is translated into Russian and locally disclosed at the following location:

Kasa-Akfen Real Estate Development
Rusakovskaya str. 13, bld.1, 107140 Moscow Russia

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. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

Key Parameters	Samara	Kaliningrad	Yaroslavl	Krasnoyarsk	Total
Hotel IBIS	207	210	180	150	747
Hotel NOVOTEL				150	150
Total Area (sqm)	9,750	9,836	9,127	15,872	44,585

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