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AFI Development to shed 2 Moscow office assets for 7.89B rubles

AFI Development Plc is selling two office buildings at Aquamarine III Business Centre in Moscow for a total price of 7.89 billion Russian rubles, net of the applicable Russian value-added tax.

The company agreed to sell Building 2 and Building 4 at the completed development to an unidentified Russian bank. Two Russian law-governed agreements form part of the deal — a sale-purchase contract for a gross buildable area of about 39,636 square meters, which includes 328 underground parking units; and a sales-purchase agreement for a roughly 57% share in the title to the premises of a gross buildable area of about 3,729 square meters.

The transaction will take place in three tranches. Under the first tranche, the buyer is expected to pay half of the consideration in the coming days. In the second tranche, the remaining half will be deposited under a covered irrevocable letter of credit and AFI Development will receive 40% when the buyer is registered as the owner of the acquired properties. In the third tranche, AFI Development will obtain the remaining 10% when the buyer is registered as co-lessor.

As the Aquamarine III Business Centre is mortgaged in favor of VTB Bank PJSC, most of the sale proceeds from the deal will be transferred to the bank as partial repayment of the Ozerkovskaya III loan, which expires in January 2018.

The mortgages will be removed after the first tranche of the payment is complete. The company expects to reduce the outstanding balance of the loan to about US$86 million following completion of the deal.

The deal is subject to Russian profit tax, estimated at 440 million rubles, and AFI Development expects to see a loss of about US$12.4 million, according to a company release.

As of Nov. 30, US$1 was equivalent to 58.47 Russian rubles.