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LSR Group

July 16, 2008

LSR Group acquires ZAO Nova-Stroy, a major real estate developer in Yekaterinburg

LSR Group, a leading real estate developer and building materials producer in Russia (LSE: LSRG; MICEX, RTS: LSRG) today announces the Board approval of the acquisition of a 100% stake in ZAO Nova-Stroy. This acquisition is in line with the strategy of setting up the company’s regional division in the Urals region based on an integrated business model combining real estate development and building materials production. The deal value is EUR 100 million.

ZAO Nova-Stroy is one of the leading developers in the Yekaterinburg property market occupying 3rd place among the Yekaterinburg developers by its delivery volume with a market share of 4.3%, according to the report of the city’s Construction Committee for 2007. The company’s core businesses are area development and the construction of new neighbourhoods including housing construction combined with office and retail space, parking lots and social infrastructure in the economy and business class segments.

Since its foundation in 2002, the company has constructed and delivered 20 residential properties with a total net selling area in excess of 145,000 sq.m, 30 commercial built-in and annexed premises and buildings with a total NSA of approx. 7,000 sq.m, and also a parking lot for 147 vehicles. The Nova-Stroy brand is well-known in Yekaterinburg: according to independent research conducted by Socium Foundation Co. in March 2008, the aided awareness of ZAO Nova-Stroy is over 67% so by this indicator the company ranks 2nd among the Yekaterinburg developers. The company employs around 200 highly professional specialists.

Today ZAO Nova-Stroy has the ownership rights for:

• Properties under development and land plots to be used for housing construction with a total NSA of more than 530,000 sq.m. The open market value of the above properties, as at 1 February 2008, is around US$ 198 million (or EUR 127 million at the exchange rate of 24 June 2008), according to the DTZ independent appraiser.  With that in mind, today’s increase in the portfolio of LSR’s real estate development projects (taking into account the land acquisitions in Moscow) is at least around 800,000 sq.m resulting in the portfolio’s value increase of US$ 325 million.*

• 25% share in the authorized capital of OOO PKU Nova-StroyProekt design office. The Board of Directors of LSR Group approved the decision to acquire a 75% stake in the above company on 26 June 2008. Consequently, after the transaction is closed, LSR Group will consolidate the entire 100% stake in Nova-StroyProekt.

• 100% share in the authorized capital of OOO SMU Nova-Stroy, Yekaterinburg’s largest construction contractor (with over 500 employees) holding a license to construct buildings and facilities. In 2007 alone, the company completed more than 40,000 sq.m of residential and office space.

Igor Levit, CEO and a member of the Board of Directors of LSR Group said:

“ZAO Nova-Stroy stands for a diversified land bank and a team of top professionals with a long-standing experience in the implementation of real estate development projects in Yekaterinburg and the Sverdlovsk region, one of the strategically important markets for the growth of LSR Group. The new acquisition will enable us to link the chain of our businesses:    production of building materials and prefabricated structures** — real estate development, designing and construction, as well ŕs to improve our performance in the development and construction of properties on the plots of land previously acquired by LSR in Yekaterinburg.”

*According to DTZ’s report, as at 31 December 2007, the portfolio of LSR’s real estate development projects included 8.24 million sq.m with a total value of US$ 5.7 billion.

**In April 2008, LSR Group acquired an 87% stake in OJSC Betfor Reinforced Concrete Factory, Yekaterinburg’s largest prefabricated construction company and producer of reinforced concrete, ready-mix concrete and aerated concrete. In addition, as of today LSR Group already owns around 60 hectares of land in Yekaterinburg and is planning to use it for launching new neighbourhood development projects of economy class residential property.




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