LSR Group (“LSR” or the “Group”), one of the leading real estate developers and building materials producers in St Petersburg and the Leningrad region, announced today its operational results for 2007.
All of the Group’s business divisions (Real Estate Development and Construction, Commercial Property, Production of Building Materials and Aggregates and Provision of Construction Services) have shown a strong performance attributable to a number of factors:
• Favourable macroeconomic situation
• increase in construction volumes and growth in demand
• successful implementation of programmes aimed at upgrading existing production facilities and commissioning new ones
• efficient marketing efforts
Commenting on the results Igor Levit, the CEO of LSR Group said: “All our product business units recorded strong growth of sales volumes in 2007. Positive price dynamics throughout the year will be the second growth driver of sales revenues to be reflected in our 2007 financial results.”
Elite Residential Real Estate Development
In 2007, LSR completed two developments in St. Petersburg at 56-58 Kamennoostrovsky Prospekt, Phase 1 of the Dom u Morya (Seaside House) development and Phase 2 of the Konung development in Vyborg, Leningrad Region.
A total of 41,500 sq. m of net sellable area and 494 parking spaces were transferred to customers, an increase of 24% and 78% respectively compared to 2006.
(In accordance with the accounting policy of LSR Group, revenues and costs are recognized in the income statement after the transfer of the property to the customer.)
Mass Market Housing Real Estate Development
In the mass market housing segment, LSR Group completed in St. Petersburg such projects as Pulkovsky Posad (Phase 2), Dom na Chudnovskogo and Dolgoozyorny (Phase 1).
A total of 132,000 sq.m of net sellable area were transferred to customers, a significant increase on last year of 124%.
Gated Communities Development
The development of gated communities in the suburbs of St. Petersburg in 2007 resulted in approximately 3,000 sq.m of net sellable area transferred by LSR to its customers. Year on year comparable data is not available on this segment as LSR Group started to develop gated communities in 2004 and the first transfer of properties to customers took place in 2007.
Business Class Real Estate Development in Moscow
In Moscow, LSR Group completed its business class project the Dom na Davydkovskoy, the first property developed by LSR in Moscow.
A total of 15,000 sq.m of net sellable area and 108 parking spaces were transferred to the customers.
Prefab Panel Construction
In 2007, two house building operations forming part of LSR Group transferred approximately 310,000 sq. m to their customers.
In 2007, in the Commercial Property segment LSR Group completed 5,000 sq.m of net sellable office space and 21 parking spaces at the Apollo business centre (Class A) in St. Petersburg. The new business centre won a federal commercial property award in the ‘Class A Business Centre – St. Petersburg’ category of the Commercial Real Estate Federal Awards.
In 2007, LSR Group granted a lease of 10,000 sq.m of office space: Apollo (5,000 sq.m), Litera at Galernaya Street (2,100 sq. m of net rentable area) and Helios at Marata Street (2,600 sq. m of net rentable area and 16 parking spaces). The occupancy rate of the business centres as at the end of 2007 was 99 %.
Production of Construction Materials and Aggregates, Provision of Construction Services
The company has also shown stable growth in the production and sales volumes of construction materials and aggregates.
Last year LSR Group sold 578,000 cub.m of reinforced concrete products, 14% increase on 2006. For ready-mix concrete the quantity sold was 1.6 million cub.m (up by 31%), for bricks – 289 million pieces (up by 6%), for aerated concrete – 555,000 cub.m (up by 6%).
For aggregates the volumes sold in 2007 were as follows: sand – 13,451 thousand cub.m (up by 15% on 2006), crushed granite – 4,275 thousand cub.m (up by 19%). Overall, all the Group’s production facilities in this segment were working at nearly 100% capacity.
The capacity of LSR Group’s construction services has also increased. In 2007, the company leased 45 new tower cranes, 40 of them imported from abroad (16 Potain cranes and 24 Liebherr cranes). In addition, 12 Stros hoists and one 100-ton Grove crane truck were purchased. All lifting equipment was immediately installed on construction sites: 24 units in St. Petersburg, and 21 units in Moscow.
In 2007 LSR Group has expanded geographically and significantly increased the production capacity of its plants. The Group started construction of a new aerated concrete plant in Ukraine with an expected annual capacity of 400,000 cub.m of aerated concrete. In 2007, work started to increase the capacity of the Group’s existing aerated concrete plant in Latvia from 82,000 (2006) to 102,000 cub.m. (2007) to be subsequently brought to 205,000 cub.m. in 2008.
The ready-mix concrete production and distribution business demonstrated fast growth during the year with two new concrete plants commissioned n Moscow and one plant commissioned in St. Petersburg to replace one of the existing plants.
In aggregates production in 2007, the company started extracting quarry sand from two quarries, Kirsino and Pugarevo-3, as well as from the Stirsudden-Kyurenniemi seabed sand deposit. In addition, the upgrading of alluvial sand extraction equipment began. In the crushed granite segment new plants also became operational: in August 2007, the company put into service a new Telsmith mobile crushing and screening plant with the rated capacity of 600,000 cub.m per year.
In 2007, LSR Group continued implementation of two investment projects in the Leningrad Region for cement and brick production. A tender was launched and contracts were signed with FLSmidth&Co. A/S (Denmark) for a total amount of EUR126 million for supply of cement plant equipment. Another tender was conducted to select equipment suppliers for the brick project. The winning bidder was CERIC international industrial group, with a contract amount of EUR70.7 million.
Expansion of LSR’s Real Estate Development Portfolio
At the end of December 2007, LSR Group acquired 100% of the share capital of “Investproekt” LLC - an entity which owns two land plots in Yekaterinburg with a total area of 50 hectares. The transaction totaled Euro 50 million and was financed with borrowings as well as proceeds from the recent IPO of the Group.
Also in 2007, LSR Group acquired ownership of a total of 611 hectares of land. The plots are located in the Krasnogvardeysky District of St. Petersburg, near Piskaryovsky Prospekt, where LSR Group is implementing its project known as Tsvetnoy Gorod/Ruch’i. The area development concept provides for the construction of mass market housing, social and business centres, public amenities centres and parking lots, which will result in creating an entirely new housing quarter in St. Petersburg. As part of the St. Petersburg regional authority’s Metro Development Programme plans are in place for an underground station to be opened in Ruchi’i near the land plots owned by LSR.
Following the auction conducted by the St. Petersburg Property Fund for the right to integrated planning and management of an area in the Krasnoselsky District of St. Petersburg (lots 3 and 4 north-west of the junction of Doblesty street and Marshala Zakharova Street), LSR has signed a lease agreement for the integrated planning and management of a plot of land totalling 23.9 hectares.
In 2007, LSR Group obtained the ownership of a 0.83 hectares plot of land at 34-A Deputatskaya Street in St Petersburg. The area to develop is located on Krestovsky Island that today accommodates a large number of newly-built quality properties of business and elite categories as the area is one of the most environment-friendly in the city. The plot is located along the banks of the Srednyaya Nevka and overlooks a park on Yelaginsky Island.
The Group also entered into an investment contract to develop property on a 0.39 hectares plot of land at 5 Kovensky Per. in St. Petersburg. The development area is located in St. Petersburg’s Central Administrative District, in a quiet neighbourhood just a few minutes’ walk from the city’s main street, Nevsky Prospekt.