Wilanow One Valuation PRINT 12.08.2013 (ze zgoda na ... · plots Nos. 2/80, 2/65, 2/66, 2/67, 2/77...

VALUATION REPORT Wilanow One Project: three apartments, three penthouses and eleven garages located in existing buildings as well as undeveloped land of 178,723 sq m designated for residential and commercial purposes. Przyczolkowa, Sarmacka, Branickiego Sts., Warsaw, Poland

Wilanow One Sp. z o.o. Valuation date: 30th June 2013

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TABLE OF CONTENTS

1 EXECUTIVE SUMMARY

2 VALUATION REPORT

3 PROPERTY REPORT PROPERTY DETAILS

LEGAL CONSIDERATIONS

MARKET COMMENTARY

VALUATION CONSIDERATIONS

OPINION OF VALUE

4 APPENDICES

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CONTENTS TABLE OF CONTENTS

1. EXECUTIVE SUMMARY 4

EXECUTIVE SUMMARY 5

2. VALUATION REPORT 8

VALUATION REPORT 9 SCOPE OF WORK & SOURCES OF

INFORMATION 16 VALUATION ASSUMPTIONS 16

3. PROPERTY REPORT 23

PROPERTY DETAILS 24 LEGAL CONSIDERATIONS 31 MARKET COMMENTARY 36 VALUATION CONSIDERATIONS 79 OPINION OF VALUE 85

4. APPENDICES 87

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APPENDICES

A. LOCATION AND SITE PLANS

B. PHOTOGRAPHS

C. FLOOR AREA SCHEDULE AND LAYOUT PLANS

D. TENURE DOCUMENTS

E. PLANNING DOCUMENTS

F. VALUATION PRINTOUTS

G. INSTRUCTION LETTER

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1 EXECUTIVE

SUMMARY

EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY

The Property

Address: Przyczolkowa, Sarmacka, Branickiego Sts., Warsaw

Main Use: Wilanow One Project: three apartments, three penthouses and eleven garages located in existing buildings as well as undeveloped land of 178,723*) sq m designated for residential and commercial purposes.

NB. * Wilanow One Sp. z o.o. is no longer the owner of the plot no. 2/65 of 981 sq m however, we have been asked by the Client to take into account the above plot in the valuation.

Tenure

Wilanow One Sp. z o.o. has the perpetual usufruct right to the land until 27th September 2089 and owns the freehold of the buildings.

Tenancies and Covenant Strengths

The property is not the subject of any leases.

Purpose of valuation

The valuation was commissioned by the Client for internal purposes.

Valuation Date

30th June 2013

EXECUTIVE SUMMARY

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Market Value of the undeveloped site of 178,723 sq m under Special Assumption (1)

Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved.

PLN 156,113,000 (ONE HUNDRED AND FIFTY SIX MILLION ONE HUNDRED AND

THIRTEEN THOUSAND PLN)

The above value is net of purchaser’s costs and VAT.


Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved and that the site has been geodetically divided into five properties in accordance with the new zoning:

PLN 180,728,000 (ONE HUNDRED AND EIGHTY MILLION SEVEN HUNDRED AND

TWENTY EIGHT THOUSAND PLN), including:

Site B1 (symbol 2MW(ZP)): 43,656,000 PLN


Site C1,2,3 (symbol 3MW(U)): 22,685,000 PLN

Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP), 7UH/U): 65,102,000 PLN

Site UO (symbol 5UO): 5,186,000 PLN


Market Value of 3 penthouses, 3 apartments and 11 garages

Market Value of 3 penthouses, 3 apartments and 11 garages:

PLN 4,966,000 (FOUR MILLION NINE HUNDRED AND SIXTY SIX THOUSAND PLN)


Comments

Positive

Prestigious location close to the Wilanow Palace within a fast developing residential area consisting of new, low-rise residential buildings;

Regular shape of the site;

Proximity of recreation areas such as Natolin Park, Marysin Park and the Kabacki Forest;

New Master Plan currently under approval procedure.

EXECUTIVE SUMMARY

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Negative:

Located in the suburbs of the city, with a significant distance to the city centre;

Average accessibility with respect to public transport (only bus lines serve the area);

Subject of perpetual usufruct right;

Large size of the site (17 ha);

Mixed use (residential, office and educational project);

Large scale of the project - together with numerous planned/pipeline residential estates within the district may keep apartment prices at a low level.

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2 VALUATION REPORT

VALUATION REPORT

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VALUATION REPORT

CBRE Sp. z o.o.

Rondo ONZ 1 00-124 Warsaw

Poland

Switchboard +48 22 544 80 00 Fax +48 22 544 80 01

Report Date 17th July 2013

Addressee The Directors

Wilanow One Sp. z o.o.

271-279 Przyczolkowa St.

Warsaw

Poland

For the attention of Michal Stepien

Property Description Wilanow One Project: three apartments, three penthouses and eleven garages located in existing buildings as well as undeveloped land of 178,723 sq m designated for residential and commercial purposes.

Instruction To provide a valuation on the basis of Market Value as at the Valuation Date in accordance with the agreement dated 30th June 2013.

Capacity of Valuer External

Purpose of Valuation Internal

Subject and Scope of Valuation

The subject of the valuation is three apartments, three penthouses and eleven garages located in existing buildings as well as undeveloped land of 178,723* sq m designated for residential and commercial purposes, located in Warsaw, Wilanow District at Przyczolkowa/Sarmacka/Branickiego Sts.

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The properties are described in the Real Estate Registers Nos. WA2M/000196355/4, WA2M/00474976/6, WA2M/000496681/1 (undeveloped land) and WA2M/00474968/7, WA2M/000474974/2 (3 penthouses, 3 apartments and 11 garages).

The scope of our valuation includes the RPU interest in the undeveloped land of 178,723*)sq m covering the plots Nos. 2/80, 2/65, 2/66, 2/67, 2/77 as well as the freehold interest in 3 penthouses, 3 apartments and 11 garages.


Valuation Date 30th June 2013

Currency Exchange Rate

We have adopted in our valuation the currency exchange rate EUR1 = 4.32 PLN.


Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved.

PLN 156,113,000 (ONE HUNDRED AND FIFTY SIX

MILLION ONE HUNDRED AND THIRTEEN THOUSAND

PLN).



Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved and that the site has been geodetically divided into five separated properties in accordance with the new Master Plan:

PLN 180,728,000 (ONE HUNDRED AND EIGHTY

MILLION SEVEN HUNDRED AND TWENTY EIGHT

THOUSAND PLN),including:




Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP)

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7UH/U): 65,102,000 PLN




Market Value of 3 penthouses, 3 apartments and 11 garages:

PLN 4,966,000 (FOUR MILLION NINE HUNDRED AND

SIXTY SIX THOUSAND PLN)


Special Assumptions Special Assumption (1):

That the new Master Plan for the undeveloped site of 178,723 sq m has been approved.

Special Assumption (2):

That the new Master Plan for the undeveloped site of 178,723 sq m has been approved and that the site has been geodetically divided into five separated properties in accordance with the new Master Plan.

Moreover, all Market Values are calculated under the additional Special Assumption that the owner of the plot no. 2/65 of 981 sq m is still Wilanow One Sp. z o.o.

Compliance with Valuation Standards

The valuation has been prepared in accordance with the Polish legal regulations (incl. Property Management Act), General National Valuation Principles (PKZW), Valuation Standards of the Polish Federation of Valuers Association (PFVA) and the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards (2012).

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuation competently. Where the knowledge and skill requirements of The Red Book have been met in aggregate by more than one valuer within CBRE, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuer complies with the requirements of The Red Book.

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Assumptions The property details on which each valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below.

If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figures may also be incorrect and should be reconsidered.

Variation from Standard Assumptions

No

Market Conditions The values stated in this report represent our objective opinion of Market Value in accordance with the definition set out above as of the date of valuation. Amongst other things, this assumes that the properties had been properly marketed and that exchange of contracts took place on this date.

Going forward, we would draw your attention to the fact that the current volatility in the global financial system has created a significant degree of turbulence in commercial real estate markets across the world. Furthermore, the lack of liquidity in the capital markets means that it may be very difficult to achieve a sale of property assets in the short-term. We would therefore recommend that the situation and the valuations are kept under regular review, and that specific marketing advice is obtained should you wish to effect a disposal.

Verification We recommend that before any financial transaction is entered into based upon these valuations, you obtain verification of the information contained within our report and the validity of the assumptions we have adopted.

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We would advise you that whilst we have valued the property reflecting current market conditions, there are certain risks which may be, or may become, uninsurable. Before undertaking any financial transaction based upon this valuation, you should satisfy yourselves as to the current insurance cover and the risks that may be involved should an uninsured loss occur.

Methodology Due to the fact that the property is planned for development we have used the Mixed approach and Residual method in our valuation.

We have applied the comparative approach and sales comparison technique for the valuation of penthouses, apartments and garages.

Valuer The property has been valued by a valuer who is qualified for the purpose of the valuation in accordance with the RICS Valuation – Professional Standards (The Red Book), PFVA Standards and the Polish law.

Independence The total fees, including the fee for this assignment, earned by CBRE Sp. z o.o. from the Addressee are less than 5.0% of the total revenues.

Disclosure The principal signatory of this report has not been the signatory of valuations for the same addressee and valuation purpose as this report. CBRE Sp. z o.o. has not continuously been carrying out valuation instructions for the addressee of this report.

Conflicts of Interest We confirm that we have had no previous material involvement with the property and that copies of our conflict of interest checks have been retained within the working papers.

Reliance This report is for the use only of the party to whom it is addressed for the specific purpose set out herein and no responsibility is accepted to any third party for the whole or any part of its contents.

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Publication Neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear.

Such publication of, or reference to this report will not be permitted unless it contains a sufficient contemporaneous reference to any departure from the Valuation Standards or the incorporation of the special assumptions referred to herein.

The report may be published by Africa Israel Properties Ltd. as appendix to the financial report as of 30th June 2013.

We do not take responsibility to any other parties than mentioned in the valuation agreement attached to this report. Our professional liability is limited to 15,000,000 EUR as stated in this valuation agreement.

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Yours faithfully

Yours faithfully

Maciej Wójcikiewicz MRICS

Senior Director

Property Valuer License no. 3359

For and on behalf of

CBRE Sp. z o.o.

Agnieszka Wierzchowska MRICS

Associate Director

Property Valuer License no. 3761

For and on behalf of

CBRE Sp. z o.o.

T: 22 544 80 21 T: 22 544 80 79

E: [email protected] E: [email protected]

CBRE Sp. z o.o. – Valuation & Advisory Services

T: 22 544 8000

F: 22 544 8001

W: www.cbre.com

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SCOPE OF WORK & SOURCES OF INFORMATION

Sources of Information

We have carried out our work based upon information supplied to us by Client (Wilanow One Sp. z o.o.) which we have assumed to be correct and comprehensive:

Wilanow One - Business Plan

Excerpts and maps from the Land Register

Excerpt from the Master Plan

Project of the new Master Plan

Building Permit for B1 phase

Occupancy Permit for the building A1 and A2

Floor plans of apartments and penthouses

Property Tax declaration

Inspection We inspected the Property on 9th July 2013. The inspection was undertaken by Agnieszka Wierzchowska.

Areas We have relied upon the areas provided by the Client for the purposes of this valuation.

We have not undertaken site and apartments check measurements

Environmental Matters

We have not undertaken, nor are we aware of the content of, any environmental audit or other environmental investigation or soil survey which may have been carried out on the property and which may draw attention to any contamination or the possibility of any such contamination.

We have not carried out any investigation into the past or present uses of the property, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.

Repair and Condition For the completed apartments, we have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious

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or hazardous materials or techniques have been used, or are present, in any part of the property. We are unable, therefore, to give any assurance that the property is free from defect.

Town Planning We have been provided with the planning documents by the Client. We have undertaken a verbal planning check with the local authorities. Information supplied to us by planning officers is given without liability on their part and we cannot therefore accept responsibility for incorrect information or for material omissions in the information supplied to us.

Titles, Tenures and Lettings

Details of title/tenure under which the property is held and of lettings to which it is subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser.

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VALUATION ASSUMPTIONS

Capital Values The valuation has been prepared on the basis of “Market Value”, which is defined by the Property Management Act dated August 21, 1997 with later amendments as below:

“Market Value of the Property constitutes the most probable price, likely to be achieved on the market, established with the consideration of transactional prices and based on the following assumptions:

1. the Parties had each acted in an arm's-length transaction, without compulsion and having the firm intention to conclude an agreement;

2. the Property was exposed to the market for a sufficient period of time to negotiate the terms of an agreement.”

A similar definition of “Market Value” is included in the PFVA’s Valuation Standards (KSWP 1), in the International Valuation Standards Committee (IVSC) and adopted by the RICS Valuation – Professional Standards (2012) – VS 3.2) as well as by TEGoVA (European Valuation Standards 6th edition - S 5).

“Market Value” is defined as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

No allowances have been made for any expenses of realisation nor for taxation which might arise in the event of a disposal. Acquisition costs have not been included in our valuation.

No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charges.

No account has been taken of the availability or otherwise of capital based Government or European Community grants.

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Key Valuation Dates If it was not specified otherwise, the date on which a property value was established is identical to the date on which a property condition was determined.

Special Assumptions According to the Valuation Standards, a “Special Assumption” is an assumption that:

either assumes facts that differ from the actual facts existing at the valuation date,

or that would not be made by a typical market participant in a transaction on the valuation date.

Rental Values Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes nor do they necessarily accord with the definition of Market Rent.

Legal and Factual Basis

Below we present a list of legal and formal bases, upon which our valuation has been based:

Civil Code, Law of 23rd April 1964 (Dz. U. No. 16 item 93 with further amendments);

Building Law of 7th July 1994 (Dz. U, No. 243 item 1623 of 2010);

Law of 21st August 1997 Act on Property Administration (unitary text Dz. U. No. 102, item 651 of 2010) with further amendments;

Council of Ministers Ordinance 21st September 2004 on the detailed principles of preparing property valuations and of conditions and procedures of preparing valuation surveys (Dz. U. No. 207 item 2109 of 2004) with further amendments

RICS Valuation – Professional Standards (2012).

Professional Standards for Property Valuers, PFVA. 2007;

General National Valuation Principles, PFVA.

Valuation Methodology

Comparative Approach, Sales Comparison Method

This approach involves comparing the subject property with the closest comparable properties, of which at least three used for comparison have been sold. The prices achieved for these properties are then applied to the subject property or site following an adjustment to

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reflect the difference in the nature of the subject property or investment.

Residual Method

The residual method is described as a method of determining the value of a property that has potential for development, redevelopment or refurbishment. The estimated total cost of the work or construction, including fees and other associated expenditure, plus an allowance for interest, developer’s risk and profit, is deducted from the gross value of the completed project. The resultant figure is therefore the amount which is available to purchase the site.

The Property Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building.

Landlord’s fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations.

Process plant and machinery, tenants’ fixtures and specialist trade fittings have been excluded from our valuations.

All measurements, areas and ages quoted in our report are approximate.

Environmental Matters

In the absence of any information to the contrary, we have assumed that:

(a) the property is not contaminated and is not adversely affected by any existing or proposed environmental law;

(b) any processes which are carried out on the property which are regulated by environmental legislation are properly licensed by the appropriate authorities.

Energy Performance Certificates

We have been informed that the buildings where the penthouses and apartments are located all possess a current Energy Performance Certificate.

Repair and Condition In the absence of any information to the contrary, we have assumed that:

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(a) there are no abnormal ground conditions, nor archaeological remains, present which might adversely affect the current or future occupation, development or value of the property;

(b) the property is free from rot, infestation, structural or latent defect;

(c) no currently known deleterious or hazardous materials or suspect techniques, including but not limited to Composite Panelling, have been used in the construction of, or subsequent alterations or additions to, the property; and

(d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general condition of the property. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Planning and Lettings

Unless stated otherwise within this report, and in the absence of any information to the contrary, we have assumed that:

(a) the property possesses a good and marketable title free from any onerous or hampering restrictions or conditions;

(b) all buildings have been erected either prior to planning control, or in accordance with planning permissions, and have the benefit of permanent planning consents or existing use rights for their current use;

(c) the property is not adversely affected by town planning or road proposals;

(d) all buildings comply with all statutory and local authority requirements including building, fire and health and safety regulations;

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(e) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; and

(f) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of the property to comply with the provisions of the relevant disability discrimination legislation.

VAT All rents and capital values stated in this report are exclusive of VAT.

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3 PROPERTY REPORT

PROPERTY REPORT

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PROPERTY DETAILS

Location

The subject site is located in southern Warsaw, in Wilanow District, between Przyczolkowa and Sarmacka St., south of the intersection with Branickiego St.

Rzeczpospolitej Ave., which is currently under construction, is some 200 meters west from the property is the one of the district’s main exit roads running from intersection with Herbu Korczak St. up to the crossing with Wilanowska Ave. In the near future an extension of Rzeczpospolitej Ave. to the south to Sarmacka St. and then further on to the Warsaw Southern Bypass road is planned. The city’s road scheme planning also includes the construction of a viaduct over Wilanowska Ave. that will serve as a direct connection between Rzeczpospolitej Ave. and Sobieskiego St and will improve car access to the city centre.

Wilanowski Palace – a historic monument and one of the major Warsaw tourist attractions is situated about 1 km to the east from the subject site.

Kabacki Forest Reserve – one Warsaw’s major recreation areas is located 6 km south of the subject property. Further south, there is Konstancin Jeziorna town, where a health park and luxury villas are located.

A location map is attached in Appendix A.

Accessibility

Car and pedestrian access is enabled from Sarmacka and Branickiego Sts. as well as being facilitated from the planned Uprawna St. to the south and supported with internal access roads.

Public transport is currently secured with two bus lines (217, 422) with stops at Rzeczpospolita Ave, approximately 200 m from the property as well as numerous running along Przyczolkowa St. and Wilanowska Ave respectively 0.5 km and 2 km from the property.

There is a bus depot located at the crossroads of Wiertnicza St. and Wilanowska Ave, some 1.5 km north from the property.

Situation

The immediate neighbourhood comprises of residential developments as well as undeveloped land.

The property borders:

Sarmacka St. and further multi-family residential developments from the west. There is a hospital building located at Rzeczpospolitej Ave approximately 200 m west from the property;

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Przyczolkowa St. and further single and multi-family residential developments to the east;

Branickiego St. to the north and further multi-family residential apartments to the north and north-west as well as undeveloped land to the north-east;

Undeveloped land and further on the planned southern ring road to the south.

A site plan is attached at Appendix A.

Site Description

The development site has a total area of 178,723 sq m and consists of the following plots:

Schedule of plots Plot No Precinct Real Estate Register (KW)

Number Plot area (sq m)

2/66 1-10-37 4,254

2/77 1-10-37 2,534

2/67 1-10-37 2,321

2/65*) 1-10-37 981

2/80 1-10-37 168,633

Total 178,723

Source: Land Register


The site is close to rectangular in shape. Its longer sides are adjacent to Przyczolkowska St. (to the east) and to Sarmacka St (to the west). Its shorter side is adjacent to Branickiego St. (to the north).

The plots presented in the table above are not developed and are planned for the development of the future phases of the Wilanow One project.

The plot nos. 2/78 (WA2M/00474968/7) with a total area of 10,223 sq m and 2/79 (WA2M/000474974/2) with the total area 4,976, sq m, not listed above, have been developed with the buildings in which the valued apartments, penthouses and garages are located.

Project Description

The site of 178,723 sq m is planned for the development of a mixed use residential, office and educational project in following phases:

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Site B1 (symbol 2MW(ZP)) Phase Type of accommodation PUM (sq m) or GLA (sq m) or amount

of car park spaces

B.1.1a Apartments 11,198 sq m

B.1.1a Car Park 243

B.1.1b Apartments 12,503 sq m

B.1.1b Car Park 271

B.1.2c Apartments 10,303 sq m

B.1.2c Car Park 224

B.1.2d Apartments 10,256 sq m

B.1.2d Car Park 223

Source: Area breakdown provided by the Client

Site B2 (symbol 4MW(ZP)) Phase Type of accommodation PUM (sq m) or GLA (sq m) or amount

of car park spaces

B.2.1 Apartments 11,960 sq m

B.2.1 Car Park 260


B.2.2 Car Park 260


B.2.3 Car Park 260


B.2.4 Car Park 260


Site C1,2,3 (symbol 3MW(U)) Phase Type of accommodation PUM (sq m) or GLA (sq m) or amount

of car park spaces

C.1 Apartments 7,360 sq m

C.1 Car Park 160


C.2 Car Park 160


C.3 Car Park 160


Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP), 7UH/U) Phase Type of accommodation PUM (sq m) or GLA (sq m) or amount

of car park spaces

Com-1 Office 12,000 sq m

Com-1 Car park 344


Com-2 Car park 344


Com-3 Car park 344


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Phase Type of accommodation PUM (sq m) or GLA (sq m) or amount of car park spaces

Com-4 Car park 344


Com-5 Car park 344


Site UO (symbol 5UO) – there is no architectural concept with regard to the development of this part of the site.

The planned residential complex will offer 114,180 sq m of apartments. The five planned office buildings will accommodate 60,000 sq m as specified in the tables above.

The existing two residential phases A1 and A2 are located in the north-west part of the site, adjacent to the Sarmacka St. The completed phases accommodate 275 apartments, including valued 3 apartments, 3 penthouses and 11 garages.

We have not been provided with details relating to the standard of the planned apartments and office buildings however we have assumed the residential phases will be of a similar standard to that typical for this part of Wilanow District. For the office part we have assumed modern high quality office accommodation.

Photographs of the property are attached in Appendix B.

Services and Amenities

The site has access to the following services:

Electricity;

Gas

Water supply;

Central heating;

Sewerage and drainage.

Accommodation

Areas

Due to the property currently being undeveloped we have relied on the schedule of floor areas provided to us by the Client, as described in the “Project Description” section above.

With regard to the existing penthouses, apartments and garages we have also based our valuation on the information provided by the Client as presented below:

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Schedule of areas – apartments Building Number Floor Area (sq m) Terrace area (sq m)

A1 Penthouse 95 (D) 4 133.83 69,13

A1 Penthouse 96 (D) 5 126.17 71,73

A1 Penthouse 120 (E) 5 123.27 74,58

A2 Apartment 45 (C) 2 98.75 23,19

A2 Apartment 51 (C) 3 98.04 23,13

A2 Apartment 57 (C) 4 97.59 23,31

Total 677.65

Source: Geodesy Measurement provided by the Client

Also the following 11 garages are subject to the valuation:

Schedule of garages Building Garage number

A1 145

A1 158

A1 182

A1 201

A1 183

A1 202

A1 94

A2 1

A2 23

A2 54

A2 74

Fit-out residential (existing buildings)

The high quality fit-out of the residential buildings is as follows:

stone facade (granite, marble, travertine), finishing details in glass and wood;

height of the apartments of 3 m;

safety systems including monitoring and intercom system;

additional infrastructure to improve comfort (air-conditioning)

plastered brick internal/division walls and wooden windows.

Fit-out office

The planned high quality fit-out of the building and office areas is assumed as follows:

Raised floors to a height of 15 cm above the flooring slabs in the tenants’ areas, finished with carpeted flooring;

Floors in common spaces (circulation routes, entrance lobbies and lift lobbies) finished with stone flags and ‘gres’ tiles;

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Suspended plasterboard ceilings or modular suspended ceilings in tenants’ areas and common spaces;

The ceilings and staircase walls will be finished with a mineral plaster coating and will be painted;

Walls in the common spaces will be wooden, stone or large format ‘gres’ tiles;

Partition walls – plasterboard walls on a steel sub-frame with mineral wool insulation.

State of Repair

CBRE has not undertaken a structural survey, nor tested the services. We have not been supplied with any survey report. We have undertaken only a limited state of repair inspection for valuation purposes.

According to our limited inspection for valuation purposes the two existing buildings completed in 2008 and 2009 are in a very good condition. No major repairs are required or planned.

Environmental Considerations

We have not been instructed to undertake any investigations in relation to the presence or potential presence of contamination in land or buildings or the potential presence of other environmental risk factors and to furthermore to assume that if investigations were made to an appropriate extent then nothing would be discovered sufficient to affect value. We have not carried out any investigation into past uses, either of the property or of any adjacent lands, to establish whether there is any potential for contamination from such uses or sites, or other environmental risk factors and have therefore assumed that none exists.

Property Tax and RPU fee

Rating

Property Tax Rate Annual fee (PLN)

Property Tax Development Land (178,723 sq m)

(0.88 PLN/sq m) 157,276

Total 157,276

Source: Property Tax Declaration 2013

We have been informed by the Client that:

Right of the Perpetual Usufruct Fee for 2013 was calculated at the level of app. 4.5 million PLN

the debt concerning the Right of Perpetual Usufruct Fee to Agencja Nieruchomosci Rolnych is currently at the level of app. 16.7 million PLN, including principal fee and the penalty interest.

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Town Planning

There is a valid Master Plan for the area where the subject property is located, issued on January 18, 2001 (the resolution no. 405 approved by Warszawa-Wilanow Commune Council). According to this Plan, the site is coded as 19UM and is designated for a services function with accompanying residential.

Based on the Plan, a development has to meet the following basic requirements:

Biological active area: minimum 30% of undeveloped site area;

Built-up area: 70% of a site area;

Maximum height of buildings: 4 floors above ground, maximum 16 m with admissible dominant of 5 m;

Building density ratio: 1.1 ;

Roof slope: 30o to 45o.

Each area of land designated for the development process should be checked for potentially difficult soil and water conditions, especially in the region of the Warsaw Escarpment.

Part of the plot is subject to the Heritage Supervisory protection and requires archaeological research.

According to our verbal enquiry the new Master Plan for the area where the subject property is located was issued by the city council on 11th July 2013. According to the provisions of the new Master Plan the site is coded as: MW(U) – multi-family residential with services on the ground floor, MW(ZP) – multi-family residential with green areas, UH/U – retail and services, ZP (green areas) and UO – educational services.

Based on the new Plan, a development has to meet the following basic requirements:

Biological active area: minimum 10% (UO), 30% (MW/U, UH/U), 40% (MW/ZP), of undeveloped site area;

Built-up area: 70% (MW(U), UO), 65% (UH/U) 60%(MW(ZP), of a site area;

Maximum height of buildings: 5 floors above ground, maximum 18 m (MW(U), UH/U); 3 floors above ground, maximum 12 m (UO);

Building density ratio: 1.3 (UO), 1.8 (MW(U), MW(ZP), UH/U);

Roof slope: 25o to 45o.

We have been provided by the Client with a copy of the Occupancy Permit no. AM-BK/7353/956/07-08/WR dated 29th April 2008 for the multi-family residential development located on part of the land B1.

We have been provided by the Client with a copy of the Occupancy Permit no. IV-OT/7/U/2009, PINB/IVOT/AJ/7357/9895/08 for the multi-family residential building with underground car park , issued by the Building Supervisory in Warsaw on 1st January 2009.

Having regard to the above information, we are not aware of any issues which would adversely impact upon the value of the property.

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31

LEGAL CONSIDERATIONS

Tenure

Our tenure information has been based upon the following electronic access to the Real Estate Registers Nos. WA2M/000196355/4, WA2M/00474976/6, WA2M/000496681/1 (undeveloped land) and WA2M/00474968/7, WA2M/000474974/2 (3 penthouses, 3 apartments and 11 garages) on 15th July 2013.

Separate Real Estate Registers for the valued apartments and penthouses have not been created yet.

Below we present a summary of the Real Estate Registers.

Real Estate Register No. WA2M/000196355/4

Chapter I-O (Property Description)

Warsaw, Wilanów District, Przyczolkowa, Sarmacka Sts. Undeveloped land comprising plots: 2/66, 2/77, 2/67, the total area of 9,109 sq m.

Chapter I-Sp (Rights) Perpetual usufruct right to the land till 27th September 2089.

Chapter II (Ownership)

Owner The State Treasury holds a freehold to the land.

Perpetual usufruct right holder

Wilanow One Sp. z o.o. in Warsaw has the perpetual usufruct right.

Chapter III (Burdens and Limitations)

Easements in the form of provisions of two preliminary purchase agreement s for the benefit of a private individual Maciej Łukasz Targowski and legal entity Senica Anstalt, both dated 2007; Land easement in the form of a free of charge establishment of ownership of garage as well as a transmission right for the benefit of RWE Stoen.

Chapter IV (Mortgages)

Joint Real Estate Mortgage up to the amount of PLN 367,027,988.70 securing the bank loan in favour of Kredyt Bank S.A.

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Warsaw, Wilanów District, Przyczolkowa St. Developed land comprising plot: 2/80, the total area of 168,633 sq m.

Chapter I-Sp (Rights) Perpetual usufruct right to the land till 27th September 2089.




Wilanow One Sp. z o.o. in Warsaw has the perpetual usufruct right.


Land easement on the plot no. 2/80 in the form of use right of communication infrastructure on the plot 2/80 providing an access right to the plots nos. 2/78, 2/79.

Chapter IV (Mortgages) Joint Real Estate Mortgage up to the amount of PLN 367,027,988.70 securing the bank loan in favour of Kredyt Bank S.A.

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Warsaw, Wilanów District, Sarmacka St. Developed land comprising plot: 2/79, the total area of 4,976 sq m.

Chapter I-Sp (Rights) Right of use of communication infrastructure on the plot 2/80 in favour of the owner of the plot no. 2/79. Perpetual usufruct right to the land till 27th September 2089.




Wilanow One Sp. z o.o. in Warsaw and co-holders has the perpetual usufruct right.


Land easement in the form of a free of charge establishment of ownership of a garage as well as transmission right t for the benefit of RWE Stoen. Claims relating to the exclusive use of the home gardens for the benefit of several owners of premises. Land easement on the plot no. 2/79 in the form of free ride and passage and a use right for communication infrastructure providing an access right to the plots no. 2/78, 2/79. Land easement in the form of free ride, passage and use of a recreation area on the plot no. 2/79 to the benefit of every perpetual usufruct right holder to the land and each owners to the building of the plot no. 2/78


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Warsaw, Wilanów District, Sarmacka St. Developed land comprising plot: no. 2/78, with a total area of 10,223 sq m.

Chapter I-Sp (Rights) Right of use communication infrastructure on the plot no. 2/80 in favour of the perpetual usufruct holders of the plot no. 2/78 Perpetual usufruct right to the land till 27th September 2089.




Wilanow One Sp. z o.o. in Warsaw and co-holders have the perpetual usufruct right.


Easements in the form of provisions of two preliminary purchase agreements tfor the benefit of private individuals: Michał Wrzołek and Maciej Łukasz Targowski, both dated 2007; Land easement in the form of a free of charge establishment of ownership of garage as well as transmission right for the benefit of RWE Stoen. Land easement on the plot no. 2/78 in the form of a free ride and passage and use right of communication infrastructure providing an access right to the plots nos. 2/78, 2/79. Land easement in the form of free ride, passage and use of recreation area on the plot no. 2/78 to the benefit of every perpetual usufruct right holder to the land and each of the owners to the building on the plot no. 2/79


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Warsaw, Wilanów District, Adama Branickiego St. Undeveloped land comprising plots: 2/65*), with the total area of 981 sq m.

Chapter I-Sp (Rights) No entries.




No entries.


No entries.

Chapter IV (Mortgages) No entries.


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36

MARKET COMMENTARY

Introduction

We set out below an overview of the Polish economy together with a detailed analysis of the Warsaw residential market. Where possible we provide details of market transactions comparable to the subject property, completed within the last two years.

Macroeconomic Overview

Poland has a population of 38.5 million inhabitants. Warsaw is the capital city as well as the most significant political and economic centre of the country. The city is also an administrative hub of the Mazovian Voivodship, one of 16 voivodships in Poland.

Currently, the major concern for the country’s economy is associated with the recession in the Eurozone countries fuelled by the budgetary instabilities. However, the extent of influence of the recession is not predicted to be profound, as the potential slowdown has already been accounted for by market participants. Furthermore, the recent decision of the European authorities in introducing a coherent buyout plan of the distressed countries’ governmental bonds has been generally accepted by economists, who claim it should give the most problematic economies enough time to introduce savings programs, aimed at reducing public debt, which is considered as the most significant problem of the European economy. If the outcomes of the plan match up to the expectations, the current slowdown might be overcome in the near future.

Nevertheless, one of the biggest threats concerning Polish short-term economic expansion is the possibility of a second wave of economic instability in the European Union, which could again increase pessimism throughout the financial markets. However, since the middle of 2012, the attitudes of the market participants have seemed to improve.

The recent economic indicators in Poland confirm the general slowdown well observed across Europe. Although 2011 GDP growth exceeded analysts’ expectations and amounted to 4.3%, the GDP growth in 2012 decreased to 2.0%, indicating a deteriorating trend. The deceleration of the Polish economy is affecting most of the components of GDP growth. After the EURO 2012 championship the level of construction diminished as a number of public investments had already been completed. Industrial output and domestic consumption have also been affected by the slowdown. However, although the PLN has recently appreciated against the EUR Polish goods still remain strongly competitive in Europe, especially among Western European countries whose inhabitants who are being put under pressure to limit their spending.

Although signs of a slowdown are evident, Poland remains perceived as one of the most stable economies in the CEE region. Forecasts for the upcoming years predict a further slowdown of GDP growth, which however, should remain positive and amount to 1.3%.

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GDP Growth in Poland 2003-2013

Source: Central Statistical Office; *Oxford Economics forecasts

The Consumer Price Index (CPI) which registered a slight increase over the whole of 2011 did however decrease in 2012. In April 2013, y-o-y CPI amounted to 0.8% which represented a significant 3.2 % point decrease in comparison with April 2012. Owing to the constant volatility of the CPI index and signs of rebound in the global economy, the Polish monetary authorities signalled a new monetary tightening campaign at the beginning of 2011. After a number of increases in 2011 and one in 2012, the base interest rate reached 4.75% at the beginning of May 2012. Although the level of inflation remained initially above the National Bank of Poland target of 2.5% +/- 1%, the Monetary Policy Council started to loosen its policy and cut the level of interest rates. The slowdown of GDP growth together with a decrease of CPI determined a continuation in the easing policy that started in November and December 2012. After six decreases in 2013 the base interest rate now stands at 2.50%.

Interest Rate and Inflation (%)

Source: NBP; F – PMR and Oxford Economics forecasts

0%

1%

2%

3%

4%

5%

6%

7%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

*

0

2

4

6

8

10

12

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

F

Reference Interest Rate Inflation

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38

The business conditions in Poland remain very attractive in comparison to other European economies. Massive infrastructure investments, partly triggered by the EURO 2012 event and supported by large EU funds, have improved the image of Poland as an attractive investment destination and have contributed to the creation of new retail, office and industrial hubs.

In the next European Financial Perspective Poland will remain a beneficiary of funds. On 8 February, EU leaders agreed on a total budget of EUR 960 billion for the EU in 2014-2020, significantly less than the EUR 1.025 trillion originally proposed by the Commission – a difference of at least 6.34%. The two main pillars for the EU’s development aid are the European Development Fund (EDF) and the Development Cooperation Instrument (DCI). Both have been slashed significantly as part of the budget negotiations. The slimmed-down proposal appears to be a victory for British Prime Minister David Cameron, who has held out for sharp reductions in spending at a time when most national governments are producing austerity fiscal plans. Poland negotiated the total amount of EUR 105.8 billion, which is regarded as a success in general particularly when compared to the period of 2007-2013 (EUR 101.5 billion).

Despite the unstable economic situation on the global markets, Poland is considered to be one of the top potential destinations for new investment or expansion projects in Europe.

Foreign Direct Investments in Poland (in billion EUR)

Source: NBP, * - NBP preliminary data, 2012

According to the preliminary data published by NBP, the total inflow of foreign direct investment (FDI) into Poland reached almost 2.8 billion in 2012 showing a significant decrease when compared to 2011 (EUR 13.5 billion).

The interest in Poland, showed by foreign investors, attests the good condition of the Polish economy. According to the PAIiIZ (Polish Information and Foreign Investment Agency), the key motives behind the decision to invest in Poland include the size and absorptive capacity of the market (with over 38 million people Poland ranks as the largest country in Central Europe), relatively low labour costs, good business environment, growing integration into the global economy and the success of Poland’s privatisation programme.

02468

1012141618

2004

2005

2006

2007

2008

2009

2010

2011

2012

F

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39

As at May 2013 the Polish Information and Foreign Investment Agency was running more than 157 projects worth almost EUR 3.9 billion. These projects are to generate nearly 29,800 job positions. The majority of the investment comes from the US (44 projects worth EUR 0.9 billion), Germany (20 projects worth EUR 0.48 billion), China (12 projects worth EUR 0.24 billion) as well as the United Kingdom (10 projects), Switzerland (9 projects) and Sweden (7 projects). The most popular sectors are BPO (38 projects, EUR 37 million), automotive (24 projects, EUR 1.34 billion) and R&D (15 projects). In 2013, the Polish Information and Foreign Investment Agency closed 18 projects (EUR 0.48 billion)

In order to attract new investors, the Polish government and local authorities have implemented a number of programs offering different incentives for newcomers. The most popular schemes are tax exemptions, support in terms of co-financing of the adjacent infrastructure and others, including direct funding in Special Economic Zones (SEZs).

Currently there are 14 SEZs located in different regions and cities. They differ in terms of size, location, business profile, land development conditions, road and technical and telecommunications infrastructure. The zones are to operate until 2017, with the exception of the Katowice SEZ (until 2016) and Euro-Park SEZ in Mielec (until 2015). The zones are mainly focused on supporting manufacturing industry, but some of them also include a number of office buildings (e.g. in Katowice and Lodz). An entrepreneur who establishes a business within a SEZ may draw on regional support in the form of income tax deductions or direct grants. The type and amount of the support usually depends on the value of the capital expenditure incurred or the number of new jobs created.

The most prosperous economic sectors connected with new foreign investment in Poland include: automotive, aviation, biotechnology, BPO, domestic appliances, electronics, IT, mechanical industry, metal industry, R&D and renewable energy.

The unemployment rate in Poland in March 2013 stood at 14.3% (compared to 13.3% in March 2012), indicating an increasing trend. The rise of unemployment is caused by the conservative attitudes of companies, which seem to reflect European uncertainty. In line with long term forecasts, despite the strong fundamentals of the Polish economy, the unemployment level may gradually increase till the end of Q2 2013.

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Unemployment Rate in Poland (%) and Average Headcount Employment (‘000) in Poland

Source: Central Statistical Office; F – Oxford Economics forecasts

After a rapid growth of average gross salaries in the enterprise sector in 2007-2008, the growth of wages started decelerating post 2009. Nevertheless, in 2011 it turned out to be still positive, amounting to 3.2%, and exceeded 4% in 2012.

Average gross monthly salary in the enterprise sector in Poland and selected voivodships - March 2013 (EUR)

Source: Central Statistical Office, 1 EUR = 4.15 PLN (average in 2013)

12 500

13 000

13 500

14 000

14 500

15 000

15 500

16 000

16 500

0%

3%

6%

9%

12%

15%

18%

21%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

F

2014

F

Unemployment Employment

0

200

400

600

800

1 000

1 200

Pola

nd

Slas

kie

(Kat

owic

e)

Maz

owie

ckie

(War

saw

)

Pom

orsk

ie (G

dans

k)

Wie

lkop

olsk

ie(P

ozna

n)

Mał

opol

skie

(Kra

kow

)

Dol

nosl

aski

e(W

rocl

aw)

Lube

lski

e (L

ublin

)

Lodz

kie

(Lod

z)

Lubu

skie

(Gor

zow

Wlk

p.)

Podk

arpa

ckie

(Rze

szow

)

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Microeconomic Overview

Location

The area of Mazowieckie region covers 35,600 sq km and is home to 5.37 million inhabitants i.e. 14% of the total population in Poland. According to the latest studies, Warsaw has 1.7 million registered citizens plus the estimated 250,000 of unregistered persons living within the city followed by another 500,000 travelling to Warsaw on a daily basis. That adds up to almost 2.5 million inhabitants in total. The city covers an area of 517 sq km and has a population density of 3,300 people per 1 sq km.

The River Vistula divides the capital into west and east sides, with central Warsaw largely situated on the west side of the river. The city is divided into 18 districts, 11 of which are located on the left bank of the Vistula and the remainder on the right.

Commercial developments are located mostly to the west of the river in Srodmiescie, Wola, Ochota and Mokotow districts. Industrial space accounts for 5% of the city’s area and is situated mainly in Bialoleka, Targowek, Ursus, Bielany and nearby the Warsaw Frederic Chopin Airport in Okecie. The green areas in Warsaw cover 38% of the city’s surface with the biggest share in Rembertów (80%), Wawer (80%) and Bialoleka (45%).

Infrastructure

Warsaw Frederic Chopin International Airport is located just 10 km away from the city centre. With over 320 international and domestic flights a day and over 9.5 million passengers in 2012 it is by far the largest airport in Poland. In 2008 and 2011 the airport underwent an expansion program. During the first phase of expansion a new terminal was added. As a result of the second extension, the number of gates was increased from 15 to 27. Future plans concerning the area of the airport involve the construction of a multi-use area known as Chopin Airport City. Apart from a park and a small public plaza, it will comprise 150,000 sq m of usable space and consist of a business park, conference centre, a shopping mall, hotels and a fitness centre. The planned budget of the investment is estimated at EUR 2.5 billion.

The main railway station in the city is Warszawa Centralna. As a result of the UEFA EURO 2012 sport event that was held in June 2012, it has recently been renovated. The station is the main railway hub connecting Warsaw with the majority of Polish regional cities and European capitals. In Warsaw, there are also 5 additional major train stations and a number of smaller stations for suburban lines. Currently the Polish Railway (PKP) is working on a strategy to develop and refurbish a number of railways and stations throughout the country in cooperation with private investors.

Warsaw is Poland’s main road, rail and air transportation hub; however it lacks a good circular road system. Currently, two ring roads as well as the second metro line are being constructed. Improvement to the existing bridges and development of new ones is also under way. One of the most important improvements in the near future will include the completion of the S2 route, being a part of the Warsaw ring road. In 2013 the part of the route connecting the A2 highway and the Warsaw Airport should be delivered.

The Warsaw metro is one of Europe's newest metro systems and the only one in Poland. It consists of a single north-south line that links central Warsaw with its densely

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42

populated northern (Mlociny, Bielany) and southern suburbs (Kabaty). The first section was opened in 1995, with the final section being completed in October 2008. Around 580,000 passengers are transported during an average working day by the current metro line.

The construction works of the second line, crossing the city from east to west, were commenced in September 2010. Its first, central section will consist of 7 stations: Rondo Daszynskiego, Rondo ONZ, Swietokrzyska, Nowy Swiat, Powisle, Stadion and Dworzec Wilenski. It will pass under the Vistula River between the Powisle and Stadion stations. The vast part of the financing for building this section has been secured from the European Union’s funds. The original plan to finish this section in time for Euro 2012 appeared to be overoptimistic. Currently, the central part of the second line is announced for delivery by the end of 2014. The construction works are being carried out using a modern boring technology which should allow for much faster construction compared to the first line. The remaining part of the second line, which will consist of 28 stations in total, will be built later on.

The long-term plans concerning the metro line involve a short third line, which will eventually connect central Praga with its southern part.

Target Express Road System in Warsaw

Source: CBRE

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Education

Warsaw has 78 centres of higher education with circa 295,000 students. It is by far the largest academic centre in the country. The most important universities in Warsaw include:

University of Warsaw (UW), the biggest university in Poland, with 60,000 students;

Warsaw School of Economics (SGH) educating over 18,000 students;

Warsaw University of Agriculture (SGGW) (30,000 students);

Technical University of Warsaw (PW) with 31,000 students; it is one of the largest universities of its kind in the Eastern Europe.

Economy & Industry

In April 2013 the average gross monthly salary in the private sector in the Mazowieckie Region was at the level of PLN 4,747 (EUR 1,117) and the unemployment rate oscillated around 11.5%. Warsaw is the city with one of the highest gross monthly salary levels in the private sector in Poland (PLN 5,130 in April 2013).

Despite the uncertainty caused by the recent European fiscal turbulence, forecasts show that the employment level in Warsaw will be constantly growing, particularly in Business, Financial and other Services, which, to a large extent, generate the demand for modern office space. The average yearly growth in these sectors between years 2013 and 2020 is estimated at around 1%.

With the highest GDP among Polish cities, Warsaw produces more than 13% of the national income. The majority of Warsaw citizens are employed in Wholesale and retail trade (14%), Transport and storage (12%) and Professional, scientific & technical activities (10%). The city hosts not only many national institutions and government agencies, but also a large number of domestic and international companies.

Warsaw also features some other industries, including manufacturing, steel, electrical engineering, and automotive, although there have not been many industrial investments recently attracted to the city. The major factories operating in the administrative borders of the city are the Arcelor Steel Mill and FSO.

Major economic indicators in Warsaw

2010 2011 2012 2013* 2014* 2015*

Population* (‘000s) 1,715 1,720 1,726 1,732 1,738 1,743

GDP Growth* 3.8% 4.0% 3.0% 2.2% 2.9% 3.4%

Headcount Employment* (‘000) 1,257 1,291 1,279 1,285 1,294 1,301

Office based employment* (‘000) 512 537 542 550 559 566

Unemployment rate 2.8% 3.7% 4.9% 5.1% 5.0% 4.7%

Source: Central Statistical Office, * - Oxford Economics forecasts and estimates, March 2013

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Wilanow District

Wilanow is one of the 18 Warsaw districts and is located on the west bank of the Vistula River. It occupies an area of 36.7 sq km and is home to around 19,600 inhabitants.

The district is famous for the Wilanow Palace, the summer residence of the King Jan III Sobieski. Interesting landscapes, easily accessible cultural monuments and the great number of lakes constitute the district’s main qualities. The assets of Wilanow are its large green areas, the possibilities of recreation in Natolinski Park and in Kabacki Forest, Marysin which is situated by the eastern edge of the Palace Park and a charming area by the Vistula River. The district also benefits from the largest number of bicycle trails in the capital, ca. 8 km.

Wilanow also disposes of significant investment potential. The local preferences for investments have included inter alia housing, villa residences and apartment complexes accompanied by commercial and services functions. Construction of the first large retail project known as Wilanow Shopping Centre of aproximately 60,000 GLA has been announced by GTC.

The district’s dynamic development both in terms of residential schemes supported by infrastructure (extension of main exit route: Rzeczypospolitej Ave. and the other main district artery of Wilanowska Ave.) and commercial investments (eg. Wilanow Office Park, the above mentioned retail project by GTC) each year attract new inhabitants seeking a quiet, undisturbed and convenient place to live.

Warsaw Residential Market

General Overview – all segments

The global financial crisis that broke out in mid 2008 had a direct negative effect on the residential market in Poland.

The increasing number of restrictions on credit due to the growing impact of the financial turmoil was reflected in the toughened policy of the Banking Supervision Commission (Komisja Nadzoru Bankowego) resulting in higher equity costs, diminishing credibility of private individuals and the lower LTV levels offered by banks to customers.

Due to slowing demand, developers had to cut their margins, however, in some projects it was not enough –many were postponed or converted into office and services functions.

As a result (together with the uncertainty on the labour market), a drop in apartment sales ensued, with the worst period recorded at the end of 2008 and beginning of 2009. The fall in sales was simultaneously followed with a decrease in the number of new completions.

In the last two years there has been a significant decrease in the number of newly completed apartments for sale or rent. In 2011 the total number of new apartments amounted to only 9,262 in Warsaw, which is a 22% decrease compared to 2010 and more than a 50% decrease since 2009. However, in 2012 the number rose to 13,118 units, with a noticeable revival and an increase of 42% when compared to 2011.

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Supply of residential apartments in Warsaw: 2000 –2012

Source: Central Statistical Office

In 2012, the housing market witnessed an increase in the number of completed apartments, which was largely as a result of the projects for which construction started in 2010. The recovery of 2010 was continued in 2011 when an increasing number of residential projects were started.

The construction of 11,797 residential units was started in 2012, (of which almost 90% was by developers, for sale or rent). The number of Building Permits issued amounted to 12,714 residential units (these figures representing respectively a 19.9% and 18.8% decrease when compared to 2011).

The average size of dwelling completed in 2012 amounted approximately 70.1 sq m and showed a decrease when compared to 2011 by 9.3 sq m. The average size of apartments for sale of rent amounted to 64.6 sq m (a 3.6 sq m decrease). The reduction continued the decrease trend observed over the last five years.

In the 2012, the majority of dwellings were built within Bialoleka, Mokotow, Bemowo, Bielany and Praga Poludnie districts (over 50%). Only 2% of completed dwellings were located in Srodmiescie district.

0

4 000

8 000

12 000

16 000

20 000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Individuals Developers Housing cooperatives

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Breakdown of new apartments supply in Warsaw by districts in 2012

Source: Central Statistical Office

For 10 years, developers have held a dominant position in the accommodation developed for sale or rent. The role of housing coopertatives on the market, mainly due to changes in the law, has been recently limited.

The vast majority of accommodation is sold in a so called “developers’ standard” that includes only: installation supply to the premises, windows and exterior doors, without the so-called "white assembly." In some housing projects, developers are also offering paid finishing packages that include painted walls, finished floors, furnishings, kitchen fittings and bathroom equipment.

Most of the new development projects have commercial premises located on the ground floor of the building designated for sale or rent. These properties are occupied mostly by grocery stores, pharmacies, beauty salons or bank branches. In the more prestigious locations tenants or owners of the premises also include restaurants, cafes or designer clothing stores.

Upper class residential apartments

The analysis of upper class residential apartment projects before 2006 shows that the average price for the most expensive ones, mainly located in the city centre was at the level of PLN 10,000. For the most expensive project - Residence Opera House, located at Saski Park, housing unit prices ranged from 14,000 to 15,000 PLN.

High quality finishing of standard projects includes among others, the following elements, emphasizing prestige:

stone facade (granite, marble, travertine), finishing details in glass and wood;

advanced safety systems, including front desk, monitoring, video intercom system;

additional infrastructure to improve comfort (air-conditioning, further processed water) and recreation (swimming pool, sauna, spa, exercise room);

high quality “white assembly” finishing is offered sometimes in several standards directly by the developer.

Bemowo11%

Bialoleka14%

Bielany7%

Mokotpw12%

Ochota3%

Praga Pld9%

Srodmiescie2%

Wola10%

Zoliborz5%

Others 27%

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47

Further analysis of the projects reveals some additional aspects related to the characteristics of this market:

projects were largely rather small in size with the number of apartments usually not exceeding 50 (Residences: Opera, Sea Eye, Villa Monaco) with a maximum of just over 70 (Residence Multico);

diversified apartment sizes with, in the majority, large premises of more than 100 sq m, with a complementary range of small apartments of 60 sq m. The number of smaller apartments was rather limited with those of less than 50 sq m present only in single projects where (such as Opera Residence, Sea Eye, Mondrian House) the flats were not very large. Apartments of more than 200 sq m are usually only common for penthouses on the top floors often provided with large terraces;

in the years 2006 - 2008, a significant increase in housing prices in all segments, including luxury, prompted developers to begin more new projects of a higher standard with asking prices often exceeding PLN 20,000 per sq m.

In addition to small projects from a few to several dozen apartments, new investments of a much larger scale started to emerge on the market (Atelier Residence or Restaura Gorskiego). The availability of financing meant that even projects with a low level of sales had a chance to start and continue. This led to a situation where when the financial crisis of 2009 began, there were many projects finished or in an advanced stage of construction with a large number of homes available that could not find buyers. This difficult situation forced the following changes to the offer of premium class apartments:

offer prices, after a year of stagnation witnessed slow, gradual reductions. Only the most attractive flats were purchased and those that had prices which were really competitive, often decreased further because of the financial problems of the developer;

lowered prices forced developers to abandon the costly add-ons offered to enhance the prestige of the investments such as : pool, sauna, exercise room;

reduced offer levels for apartments finished to a "turnkey" standard were not considered as very popular by clients. Some projects abandoned the offer of turnkey finishing that had been initially available.

As a result of the changes detailed above the recent characteristics of upper class projects can be characterized as follows:

high-quality finish of the building remains as a standard, including stone, wood and glass finishes, protection and monitoring in selected projects with a reception in single projects. The turnkey standard is now offered only in individual projects and it is being replaced by external companies cooperating with the developer that undertake the finishing works according to individual housing arrangements in line with the customers’ preference;

an air-conditioning system or the technical preparation of the building installation for mounting individual devices within homes is increasingly popular.

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Competition for new projects still remains for luxury apartments on the secondary market, finished to a very high standard and in the most prestigious locations.

Despite the crisis, prices of luxury apartments remain at a relatively high level especially in the most prestigious locations.

Apartments in high rise buildings

The limited number of tower projects (not only residential but also commercial) among the many that were presented on the market, have finally been completed. The reason for this situation being that most of the announced investments were not so much determined by the needs of buyers (residential), but by a kind of land speculation.

Tower buildings are successfully built in highly urbanized cities in developed countries as they are a response to the real needs of the market, namely the physical absence of development sites for the realization of projects with a smaller number of units. In this context, Warsaw and the other largest regional cities in Poland do not suffer from such limited availability of land for redevelopment of low and medium-high buildings.

The high cost of construction of such facilities and the very purpose of realization - maximum utilization of expensive space in the city centre (very high cost of land purchase), results in apartments in such projects being directed at the wealthiest inhabitants.

Among the five highest residential/mixed use towers built in Poland, only two of them: Sea Towers in Gdynia and the Sky Tower in Wroclaw exceed a height of 100 m. The remaining three, developed in Warsaw, include Lucka City, Cosmopolitan and Zlota 44 (the last two are currently under construction).

Demand

The situation on the market relating to the financing of apartments has been changing dynamically during the last few years. At the end of 2009 banks started to loosen their restrictive mortgage policies (easier access to financing, increasing the LTV ratio to even 100%). The changes were trigged mainly by the high level of savings accumulated in the banking sector as well as by the stabilization on the global and local markets.

This trend was continued in 2010 but changed by mid 2011 as a result of the worsening situation on the international financial markets, compounded by banks further risk-limiting procedures. Due to the increasing bank requirements, by the end of 2011 the offer of mortgage financing for residential properties was severely limited and available almost only in Polish currency.

The second half of 2011 and the beginning of 2012 also brought changes in the legal regulations concerning developers’ businesses, the banking sector and borrowers, which noticeably influenced the availability and methods of property financing. The major changes included a Developers’ Law (in force since 29th April 2012) and Commission of Financial Supervision recommendations (in force partially since mid-2011 and partially since mid-2012).

The Developers’ Law limited the possibility of new project development financing with financial inputs from future purchasers and obliged developers to keep an escrow

PROPERTY REPORT

49

account – to accumulate the future purchasers’ inputs. The law also introduced the necessity of widening the information policy relating to developers (an obligation of issuing a prospectus) as well as concluding pre-sale agreements in the form of Notarial Deeds.

As a result of the state of Polish public finance, a further increase in the VAT rate is probable. Assuming its steady growth in the next few years it may reach the level of 10%, which would lead to increased prices and could limit demand on the primary residential market.

Due to the significant budgetry burdens as of 1st January 2012 the program “Rodzina na swoim” supporting the purchase of residential apartments by young families was closed. According to the program the State Treasury financed up to 50% of the mortgage interest for the first 8 years. The total amount of mortgage loans supported by the program in 2011 and 2012 amounted respectively to 10.2 and 7.9 billion PLN.

Currently there are on-going plans for another program “Mieszkanie dla młodych”, supporting citizens who are purchasing their first apartment by increasing their cash deposits for apartment purchases. The program is scheduled to be launched at the beginning of 2014.

Cumulative Amount of Mortgage Loans: Poland

Source: Central Statistical Office, National Bank of Poland

The unstable economic situation on the global financial markets, caused mainly by the economic problems of major European countries including Greece, Ireland, Spain, Portugal, Italy or Hungary has had a negative impact on the perception by investors of the whole Western and Central European region; this may result in a drop in foreign direct investment in Poland and consequently may have an impact on the capital outflow from the Polish market. The described situation would negatively influence the Polish economy as well as the real estate market including its residential segment.

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Obligatory changes in risk management introduced in the banking sector with Recommendation S of Financial Supervision, which introduced an obligation of creditworthiness calculated on the basis of a 25 year credit period, limit the creditworthiness of potential borrowers.

Prices

Residential apartment prices – Poland

According to a survey of redNet Consulting, at the end of April 2013, the average transaction price of residential units sold reached a value lower than the average asking price of apartments available on the market. The largest price differences for apartments sold and the asking price per apartment offered was recorded in Katowice and Gdansk (-8.0%); in other Polish cities the negative difference between asking prices of available and sold apartments shows a declining trend (8% in February, 6% in March and 5% in April – the average for 7 agglomerations). Only in Lodz have the average asking prices for sold apartments been higher than those recently offered on the market (1.6% difference). The largest increase in prices of units sold in April 2013 compared to the previous month was recorded in Gdansk (3.0%) and was smaller in Wroclaw, Katowice and Warsaw (between 0.2 -0.5%). Taking into account the seven largest agglomerations, the average price of sold apartments increased by 0.7% compared to the previous month.

Average asking prices of sold apartments within the primary market in the seven largest agglomerations in Poland - April 2013

Source: redNet Consulting, data os of April 2013 r.

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Asking prices Asking prices - sold apartments

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51

The average asking price of an apartment in Warsaw city, in April 2013, was at the level of 7,591 PLN / sq m and was about 4.2% higher than the gross price of new apartments sold in a given period (an average of 7,281 PLN / sq m). The average asking price of sold apartments in the whole Warsaw agglomeration in April 2013 was at the level of 7,249 PLN / sq m with little difference when compared to March 2013 (7,049 PLN / sq m).

Below is a graph illustrating the asking prices in Warsaw city and the Warsaw agglomeration over the last few years.

Average asking prices for apartments on the primary market: Warsaw and Warsaw Agglomeration – historic data.

Source: redNet Consulting

From the above graph it is possible to note the slow downward trend in the asking prices of apartments offered on the primary market over the last few years.

Residential apartment prices – Wilanow

Below we present a number of transactions of residential apartments and penthouses in selected projects in Wilanow district concluded within the last two years that are, in our opinion, most comparable to the subject property. The Wilanow One project delivers to the market apartments and penthouses of the highest quality in this part of Wilanow District, therefore in searching for the most comparable apartment transactions’ we focused on this project. As the market for penthouses is quite narrow we also searched for other projects which sold large size penthouses with terraces.

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Asking price Asking price - sold apartments

PROPERTY REPORT

52

Comparable transactions (apartments) - Wilanów One, primary market, 2011-2013

Date Project Floor

Apartments Usable Area (sq m)

Balcony, Terrace, Loggia

Net Price (PLN/sq m)

11-10-2011 A1, Apartment no. 1 1 98.39 18.73 5,190

11-10-2011 A1, Apartment no. 43 4 85.45 12.83 6,861

11-10-2011 A1, Apartment no. 65 4 85.73 12.66 6,861

11-10-2011 A1, Apartment no. 75 1 117.24 3.82+14.33 5,190

11-10-2011 A1, Apartment no. 81 2 117.32 17.86 (14.05+3.81) 5,278

11-10-2011 A1, Apartment no. 87 3 117.42 3.73+13.98 5,454

11-10-2011 A1, Apartment no. 99 1 88.43 12.15+12.8 (12.08) 5,718

11-10-2011 A1, Apartment no. 103 2 117.77 13.89+3.72 5,278

11-10-2011 A1, Apartment no. 109 3 116.48 14.01+3.73 5,454

11-10-2011 A1, Apartment no. 115 4 116.83 13.85+3.75 5,333

11-10-2011 A1, Apartment no. 116 4 87.70 11.89+12.20 6,245

11-10-2011 A1, Apartment no. 175 1 97.84 5,190

11-10-2011 A2, Apartment no. 8 2 76.60 9.21 6,597

11-10-2011 A2, Apartment no. 22 1 77.26 19.47 5,630

11-10-2011 A2, Apartment no. 23 1 89.28 19.19 5,630

11-10-2011 A2, Apartment no. 24 1 120.28 22.64 4,917

11-10-2011 A2, Apartment no. 26 2 89.44 18.83 5,894

11-10-2011 A2, Apartment no. 27 2 119.61 22.51 5,806

11-10-2011 A2, Apartment no. 29 3 89.86 18.89 6,333

11-10-2011 A2, Apartment no. 32 4 89.88 18.83 6,421

11-10-2011 A2, Apartment no. 36 1 114.28 22.65 5,190

11-10-2011 A2, Apartment no. 37 1 56.36 9.72 6,597

11-10-2011 A2, Apartment no. 38 1 56.75 9.91 6,597

11-10-2011 A2, Apartment no. 39 1 97.87 22.87 5,718

11-10-2011 A2, Apartment no. 46 2 57.95 6,069

11-10-2011 A2, Apartment no. 47 2 90.68 11.06 6,685

11-10-2011 A2, Apartment no. 52 3 58.01 6,245

11-10-2011 A2, Apartment no. 53 3 90.65 11.02 6,773

11-10-2011 A2, Apartment no. 54 4 114.20 22.5 6,421

11-10-2011 A2, Apartment no. 58 4 58.09 6,333

11-10-2011 A2, Apartment no. 77 4 76.64 9.27 6,949

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53

Factor Values

Min Price (PLN/sq m) 4 917

Average Price (PLN/sq m) 5 963

Max Price (PLN/sq m) 6 949

Min Price/Average Price 0,825

Max Price/Average Price 1,165

Comparable transactions (penthouses) - Wilanów disctrict, primary market, 2011-2013

Date Project Floor

Apartments Usable Area (sq m)

Balcony, Terrace, Loggia

Net Price (PLN/sq m)

15-06-2012 A2, Wilanow One, penthouse no. 21

5 83.45 79.78 8,488


5 130.14 86.68 8,333


5 108.52 72.87 8,333


5 141.54 13.46+63.23 8,333


5 113.22 80.48 8,580


5 149.29 62.95+20.56 8,333


5 129.78 86.96 8,561

25-07-2012 Rzeczpospolitej Ave. 2/92 5 100.10 43.6 8,694

21-09-2012 Rzeczpospolitej Ave. 2/114 5 84.50 50.6 8,674

17-01-2012 Hlonda 10D/101 5 111.82 65.01 8,396

16-10-2012 Sarmacka 12G/67 5 119.50 163.9 8,678

Source: Notarial Deeds

Factor Values

Min Price (PLN/sq m) 8,333

Average Price (PLN/sq m) 8,491

Max Price (PLN/sq m) 8,694

Min Price/Average Price 0,981

Max Price/Average Price 1,024

PROPERTY REPORT

54

Below we present apartment prices in selected residential projects which are currently under construction in Wilanow district:

Selected residential projects under construction currently offered on the primary market in Wilanow - Q2 2013 Project Developer

Address Net price (PLN/sq m)

Parking Spaces (PLN)

Delivery Date

Aura Park (Mill-Yon)

Sarmacka 6,389 28,455 12.2014

Sródmiescie Wilanów (Polnord)

Herbu Szraniawa 6,019 – 6,667 24,390 A - QIV 2013 C - QII 2014

Wilanów Garden (Green House Development)

106, Bruzdowa 5,674 – 5,815 12,195 Q4 2014

Apartamenty Syrena (Sirena Projekt)

17, Rzeczypospolitej 5,926 – 6,667 16,260 Q1 2014

Source: CBRE, current offers

Office Market Overview

Warsaw is divided into two main office markets (the City Centre and Non Central Warsaw) and into nine submarkets. Such division enables the market to be analysed more thoroughly.

Warsaw Office Sub-markets

Source: CBRE

PROPERTY REPORT

55

The submarkets within the City Centre include:

Core – Central Business District (Srodmiescie);

Fringe of City Centre;

whereas the Non-Central market is divided into:

North (N) – Zoliborz and Bemowo;

East (E) – Praga and other eastern districts;

Lower South (LS) – along Pulawska St.;

South East (SE) – Sadyba and Wilanow;

South West (SW) – Ochota, Wlochy and Okecie – mostly along Jerozolimskie and Zwirki i Wigury streets;

Upper South (US) – Mokotow district including Sluzewiec Przemyslowy up to the railway line to Radom;

West (W) – Wola.

The development of office hubs in Warsaw rarely depended on tenant’s preferences in the past. The major factor influencing investors’ decisions regarding the location of their projects was usually the availability of development sites in easily accessible locations. The first office hubs were developed in the post-industrial areas and on the sites of old factories, such as Empark – the very first business park in Warsaw. For tenants, the most important location factor, apart from the costs and the standard of the buildings, are the proximity to the City Centre or the Airport as well as the car and public transport accessibility.

In the long term, infrastructure development is to be considered as the major factor influencing tenants’ decisions regarding their location preferences. Future roads and metro lines will influence the choice of occupiers and are predicted to move a vast share of leasing activity to the city fringes in the long run.

An area that is especially attractive in this regard is the West (W). The zone is located relatively close to the City Centre and offers a wide availability of post-industrial land for sale. It is strongly possible that in the longer run this area will become a significant office hub in Warsaw. Developers have already taken note of that opportunity and are joining forces in order to promote the area as the new, dynamic and attractive office destination. Furthermore, Wola should benefit greatly from the completion of the second metro line, which will significantly improve the public transportation in the district.

Supply and Pipeline

Since 2000 the number of office buildings and the total office area in Warsaw has been constantly increasing. In Q1 2013, the total modern office stock increased by over 76,000 sq m in 4 new projects. In total, the modern office stock in Warsaw stands at over 3.9m sq m located in over 400 modern office buildings. Around 33% of this space is located in the City Centre.

Circa 63% of the total office space in Q1 2013 was delivered vacant, on a speculative basis.

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56

Completions of office buildings in Q1 2013

Building Zone Developer Size

(sq m)

Ambassador Office Building US Kronos Real Estate 15,600

Konstruktorska Business Center US HB Reavis 48,000

Oxygen Park I SW Yareal Polska 8,940

Plac Bankowy 1 CC Plac Bankowy 1 4,000

TOTAL 76,540

Source: CBRE

The largest existing standalone office buildings in Warsaw (>30,000 sq m)

Building Address Delivery Owner Zone Area (sq m)

Rondo One Rondo ONZ 1 2006 MGPA CBD 57,000

Warsaw Financial Center

Emilii Plater 53 1998 Allianz / Tristan CBD 49,800

Pulawska Financial Center

Pulawska 15 1998 PKO BP, Centrum Finansowe Puławska

US 49,100

Konstruktorska Business Center

Konstruktorska 11

2013 HB Reavis US 48,000

PZU Tower Jana Pawla II 24 2000 PZU CBD 47,200

Marynarska Business Park

Tasmowa 7 2008 Heitman US 45,370

Agora HQ I&II Czerska 8/10 2002 Agora SE 42,000

Warsaw Trade Tower Chlodna 51 2000 Akron Investment CEE Fund

CC 40,320

Lipowy Office Park Zwirki i Wigury 31

2009 CA Immo SW2 38,730

International Business Center I, II

Armii Ludowej 14 2002, 2007

DEKA CC 37,190

Mokotow New City Marynarska 15 2010 Hines US 35,000

Park Postepu Postepu 21 2009 Immofinanz US 34,360

Horizon Plaza Domaniewska 39a

2009 Union Investment Real Estate

US 34,170

Metropolitan Plac Pilsudskiego 1

2003 Aberdeen Immobilien

CC 33,600

Millennium Plaza Jerozolimskie 123A

1999 Atlas Estates CC 32,600

Blue Office Jerozolimskie 179

2005 Sinspiel Investeringen / Avandrous

SW 32,000

Warta Tower Chmielna 85/87 2000 Warta Investment CC 30,760

Trinity Park III Domaniewska 49 2009 SEB Asset Management

US 30,516

North Gate Bonifraterska 17 2008 Deka Immobilien N 30,250

Source: CBRE

PROPERTY REPORT

57

The majority of the standalone buildings are usually located in the City Centre and the surrounding area, while the business parks tend to be located in the fringe of the city or in the post – industrial areas such as Sluzewiec Przemyslowy in Mokotow (US) or along Lopuszanska St. and Jerozolimskie Ave.

The largest business parks in Warsaw (>30,000 sq m)

Scheme Address Owner Year Zone Existing (sq m)

Total planned

(sq m)

Empark Domaniewska Heitman PP/ Immofinanz

1995-2001 US 107,200 125,200

Poleczki Business Park

Poleczki UBM & CA Immo International

2010-2012 LS 66,000 210,000

Trinity Park Domaniewska 49

SEB, Pramerica, CBRE GIA

2006-2009 US 71,500 71,500

Platinium Business Park

Domaniewska 42/44

Allianz 2007-2012 US 54,200 67,300

Wisniowy Business Park

1 Sierpnia/ Ilzecka

Polonia/Morley / ABN Amro

1997-2007 SW 49,200 59,200

Ochota Office Park

Jerozolimskie 181

Mahler Project International

1996-2000 SW 44,600 44,600

Park Postepu Postepu 21 Immofinanz 2009 US 34,000 34,000

Harmony Park Zaryna 2 Azora Europa, ComerzReal

2008-2010 US 30,250 30,250

Source: CBRE

Currently, the preferred locations for the majority of office occupiers are the Central zone, the South-West and Upper South parts of Warsaw including Mokotow and Okecie districts. These particular locations have already encountered a dynamic development activity. Additionally, there are also many older office buildings located around the aforementioned locations, which may effectively compete with the new stock, once refurbished.

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58

Office completions by Warsaw submarkets

Source: CBRE / WRF

The current economic situation has had a strong impact on development activity. The market is strongly influenced by the banking sector, which introduced more restrictive and risk aware credit policies in the time of economic slowdown. The access to financing, which has been strongly limited during the recent years, is still being restrained, due to the uncertainty caused by the fiscal problems of the Euro area. A standard practice for the bank is to ask for at least a 5% pre-let for each instalment of the loan (in total up to even 40%). Moreover, banks expect their own contribution to be at the level of at least of 30% of the value of the project.

Warsaw Office Completions

Source: CBRE, F – forecasts

Only those projects for which construction should start by the end of the H1 2013 should be considered as likely to be delivered by the end of 2014. The relatively high level of new office space expected for delivery in 2013-2015 corresponds with the strong level of demand recorded since the market’s recovery registered in 2010.

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PROPERTY REPORT

59

Currently, there is around 608,000 sq m of modern office space being built in Warsaw in 38 projects. Most of them are being developed outside the City Centre (circa 468,000 sq m), representing some 76% of total office space under construction. Only 32% of the currently developed office space has already been pre-leased. In comparison to other European cities, Warsaw is one of the most active in terms of the amount of constructed new stock.

As a result of the turmoil on the world’s financial markets, developers have been quite cautious with regard to their strategic decisions. Currently however, their attitudes seem to have become more optimistic, fuelled by the strong performance of tenants over the last two years. Below we present the biggest projects, currently being developed in Warsaw.

Major office buildings under construction in Warsaw

Building Office space (sq m) Pre-leased (sq m) Delivery

Warsaw Spire 100,000 14,600 2014/2015

Gdanski Business Centre 49,000 0 2014

Miasteczko Orange 43,700 43,700 2013

Plac Unii 41,307 17,960 2013

The Park Warsaw I 38,000 0 2013

T-Mobile Office Park 36,000 27,000 2013

Park Rozwoju 32,000 7,000 2014/2015

Eurocentrum Office Complex I 27,700 11,460 2014

Wola Center 27,572 22,930 2013

Nimbus 19,000 0 2014

Lopuszanska BP II 16,000 12,900 2013

Atrium One I 15,700 1,122 2013/2014

Powisle Park (MSPiG HQ) 15,000 15,000 2014

Karolkowa Business Park 14,651 0 2014

Garden Plaza 13,000 0 2014

Plac Malachowskiego 12,000 0 2014

Bolero Office Point I 11,300 600 2014

Green Wings 10,850 0 2014

Source: CBRE

At the same time there are a number of planned projects on the Warsaw investment map, including high towers in the City Centre as well as business parks in a number of Non-Central locations. The most significant projects (over 30,000 sq m) at the planning stage, for which delivery is scheduled within the next 3 years, are presented below. The given year of delivery is based on rough estimations.

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Largest planned office schemes in Warsaw – completion scheduled by the end of 2016 (>30,000 sq m)

Planned delivery Building Address Developer Planned

(sq m)

City Centre

2015/2016 Echo Office Building Jana Pawla II 22 Echo Investment 54,000

Non-Central

2016 South Park I Zwirki i Wigury / 1 Sierpnia Hochtief Development

40,000

2015 / 2016 Business Garden II phase

Zwirki i Wigury / 1 sierpnia SwedeCenter 34,729

2015 HB Reavis Postepu Postepu 14 HB Reavis 33,000

2016 Concept Office Park I Kolumbijska Concept Development

32,504

2016 Mokotow One Domaniewska 49 Apricot Capital Group

32,000

2016 West Station I Rondo Zesłancow Syberyjskich

HB Reavis 32,000

2016 Eurocentrum II phase Jerozolimskie Capital Park 25,800

Source: CBRE

Wilanow Office Competition

Wilanow constitutes a part of the South East office submarket (Sadyba and Wilanów). Both the existing and under construction/planned modern office projects in Wilanów (SE) as well as others located in the Non-Central submarket Lower South (LS) and partially selected buildings in the south part of the Upper South (US) present the greatest competition for the office part of the subject project.

Currently, the South-East submarket encompasses 21 completed modern office buildings comprising a total office area of almost 181,000 sq m. Additionally, 1 project with a total area of around 8,000 sq m is currently under construction, with a further 6 projects at the planning stage; projects planned and under construction will together comprise a total area of around 175,000 sq m, out of which 152,300 sq m is scheduled for delivery between 2014 and 2015.

The existing, under construction and planned office buildings listed below are, in our opinion, competition for the subject property:

Selected existing modern office buildings in Warsaw South East and Lower South submarkets (>5,000 sq m), Q1 2013

Year of delivery

Zone Building Location Office Space

(sq m)

Vacancy Rate

2002 SE Agora HQ I & II Czerska 8/10 42,000 0

1997, 2000

US UBC I

UBC II Szturmowa 11,400

19,700 9%

0

2010 LS Poleczki Business Park A1 Poleczki 33/35 24,000 11%

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Year of delivery


(sq m)

Vacancy Rate

2010 LS Poleczki Business Park A2 Poleczki 33/35 21,000 2%

2012 LS Poleczki Business Park II Poleczki 33/35 21,000 35%

2012 SE Wilanow Office Park A (Assecco HQ)

Plaskowickiej-Bis 20,400 0

1998 LS Platan Park I Poleczki 21 14,200 15%

2009 US Catalina Wyscigowa 6 14,200 17%

2002 SE Media Business Center Wiertnicza 166 13,500 0

1997 SE Natpoll Migdalowa 4 13,200 11%

2007 SE Comfort Offices Czerniakowska 100 13,000 0

2006 SE CPF Bobrowiecka Bobrowiecka 6 12,450 0

2012 SE Czerniakowska Business Centre

Czerniakowska 100a 9,600 0%

2001 LS Platan Park II Poleczki 23 9,250 5%

2006 LS Parkur Tower Klobucka 25 8,470 7%

2010 SE Wilanów Office Park B1 Branickiego 7,800 0

2012 SE Wilanow Office Park B3 Plaskowickiej-Bis 9,100 13%

1999 LS Ursynów Business Park Pulawska 303 7,500 0

2008 SE Canal+ Pory 4 7,250 0

1998 SE Mon Grand Plaisir Bobrowiecka 1 7,000 6%

2010 LS Juwentus HQ Poloneza 91 6,525 0

2012 LS Pulawska 366 Pulawska 366 5,800 49%

2001 LS Light II Pulawska 435 a 5,100 9%

Source: CBRE

Selected under construction and planned modern office buildings in Warsaw South East and Lower South submarkets (>5,000 sq m), 2014-2015

Year of delivery


(sq m)

Vacancy Rate

Under construction 2014 SE Robyg Business Centre A Rzeczypospolitej Ave. 8,000 100%

Planned

2015 SE Europark Stegny B-D Sobieskiego/Sikorskiego 57,000 n/a

2015 SE Echo Sikorskiego Beethovena/Witosa 57,000 n/a

2014 SE Royal Wilanow Przyczolkowa/Klimczaka 27,000 100%

2015 LS Netia HQ Poleczki 13 16,000 n/a

2014 SE PZPN HQ Jana Sobieskiego / Wilanowska

11,300

2015 LS Jastrzebowskiego Office Building

Jastrzebskiego 10,000 n/a

PROPERTY REPORT

62

Year of delivery


(sq m)

Vacancy Rate

2014 SE Przyczolkowa Office Przyczolkowa 6,400 100%

2014 SE Wilanow Office Park B2 Plaskowickiej-Bis 6,400 100%

Source: CBRE

We present below the details of the existing and planned office projects that offer space for lease and are in our opinion most comparable to the subject property:

Wilanów Office Park

Developed in 2010-2012, B+-class existing and planned office buildings located at Plaskowickiej-Bis St. and Branickiego St. The office park will offer 140,000 sq m of office space in total.

Asking rent: 13-14 PLN/sq m/mth

Service charge: 20 PLN/sq m/mth

Car park: 60-70 EUR/space/mth

Robyg Business Centre A

This A class office building, currently under construction, should be delivered in 2014 and is situated at Rzeczpospolita Ave. The building will offer 8,000 sq m of office space.

Asking rent: 12-14 EUR/sq m/mth


Car park: 70 EUR/space/mth

Royal Wilanow A class office building, which should be delivered in 2014. The planned building currently offers 27,100 sq m of space available for lease.

Asking rent: 15 EUR/sq m/mth


Car park: 85 EUR/space/mth

PROPERTY REPORT

63

Catalina OC

Developed in 2009, this is an A class office building located at 6 Wyscigowa St. in a 10-storey building. The building offers currently around 2,400 sq m available for lease.

Asking rent: 14.50 EUR/sq m/mth

Service charge: 17.70 PLN/sq m/mth

Car park:45-85 EUR/place /mth

UBC I&II

These A class office buildings were completed in 1999. Developer: Creaco. The buildings currently offer 1,734 sq m of space available for lease.

Asking rent: 13.50 EUR/sq m/mth

Service charge: 19.00-20.00 PLN/sq m/mth

Car park: 50-80 EUR/space/mth

Demand level

For years, the demand for modern space in Warsaw has been characterised by stable, strong growth, fuelled by the strong performance of Poland’s economy. A single year of slowdown was registered in 2009, caused mainly by external factors associated with the global financial crisis. However, in 2010 the market returned to its previous growth path. In the last year, the total office take-up in Warsaw amounted to 608,500 sq m, of which 28% was attributable to the Central locations, while the rest was registered in Non-Central locations, mostly in the Mokotow and Jerozolimskie area. The results of Q1 2013 confirm that the demand for office space in Warsaw remains healthy.

The demand for modern offices throughout 2013 should remain strong. Companies and investors have become accustomed to operating within uncertain circumstances and are much better prepared for any foreseen general slowdown than three years ago.

The long term economic forecasts relating to the level of employment in the Financial and Business sector in Warsaw suggest that companies will need more office space in order to expand their operations and to create additional working places for new employees.

As with the previous quarters, the demand in Q1 2013 was triggered mainly by companies from the manufacturing, business services and the financial sector. In Q1 2013, the largest deals included the renewal of BNP Paribas (11,000 sq m) in Trinity Park II, renewal and expansion of Play (9,600 sq m) in Marynarska Business Park and the pre-lease agreement of Konsalnet (8,200 sq m) in Jana Kazimierza 53/55.

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64

Letting Activity by Sector in 2012 (%)

Source: CBRE

Warsaw, as the capital of Poland will undoubtedly develop in the future, attracting new investors. A simple way to estimate the future demand for office space is to analyse predictions regarding future employment levels, as this has a direct impact on office take-up. However, it is important to note that many other factors (such as GDP and FDI growth) also influence the level of demand for office space and all the possible demand drivers form a very complex structure. Therefore demand forecasts may differ in different market scenarios. According to the Oxford Economics data the employment levels in sectors generating demand for office space (services, finance, business services, and public services) should grow by at least 50,000 till 2017. Assuming that the average office space required for one employee is around 12 sq m, we can forecast that the market absorption within the next 5 years should reach at least 120,000 sq m per year. The most intensive increase should be observed in business, financial and other services. Public administration is forecasted to decrease in terms of employment, in line with the debt reduction efforts.

The total take-up figure includes expansion of existing space, pre-lets, owner-occupied space, lease renewals and new transactions. The share of renegotiations amounted to almost 37% of the total leasing activity in Q1 2013. Around 38% of the take-up volume was attributable to new deals in existing buildings. The share of pre-let transactions totalled a significant amount of 19%, thanks to a number of large pre-lease transactions: the biggest pre-lease was closed by Konsalnet (8,200 sq m) in Jana Kazimierza 53/55 developed in the West zone by Laris, followed by a deal of Schneider (7,000 sq m) in Park Rozwoju. The third biggest pre-lease was Alior (6,100 sq m) in Lopuszanska Business Park II (South West zone). The scheme, which is developed by Ghelemco is scheduled for delivery at the end of 2013.

18%

14%

20%14%

14%

1%4%

15%

Manufacturing & Energy

Business Services

Financial Services

Unknown

Computers / Hi-Tech

Public Sector

Consumer Services

Professional Services

PROPERTY REPORT

65

Warsaw office take-up in sq m

Source: CBRE, WRF; F – forecasts

While in the Western markets built-to-suit agreements in offices are quite common, in Poland pre-construction transactions are scarce, even if the pre-let take-up share has been claimed to be high. For many market players the phrase ‘pre-let’ does not always mean the same, as there are three types of pre-lease agreements in the markets: Built-to-Suit, Pre-construction and Pre-completion leases. From the financing point of view, the most important are the first two cases, when developers manage to secure tenants for the buildings, before bearing the major costs of the construction. In total, since 2003, only 20% of all pre-let and 4% of lease transactions volume in Warsaw were signed prior to the construction. That situation has greatly improved since the beginning of 2011 with a number of large pre-lease transactions being registered, including Orange (43,700 sq m), T-Mobile (27,000 sq m) and Frontex (14,600 sq m). As the historic figures show, many office buildings in Warsaw and in other Polish cities as well, were delivered empty, on a speculative basis.

Pre-let agreements in Warsaw (sq m)

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F

Warsaw Net Take-up

0

50 000

100 000

150 000

200 000

250 000

300 000

2006

2007

2008

2009

2010

2011

2012

Q1

2013

Pre-Design (Build-to-Suit) Pre-Construction Pre-Completion

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Since the beginning of 2009 the market has been dominated by small lease transactions – the size of average deal oscillates around 1,000 sq m. The largest deals concluded in 2013 are presented in the table below.

Major office lease transactions in 2013

Source: CBRE, WRF

Vacancy Rates

As a result of low levels of new supply and accelerating demand in past quarters, the overall Warsaw office vacancy rate has been declining since 2009. In 2011 it hit a cyclical low at 6.7% in Q4 2011. However, due to the growing amount of speculative completions, the vacancy rate entered a growth path at the beginning of 2012. Nevertheless, the increased amount of vacant office space should be gradually absorbed in the longer run.

The lowest availability ratio at the end of Q1 2013 was recorded in the South-East (5%), Northern (7%) and City Centre (9%) zones. The highest vacancy rate was registered in the Lower-South (16%) and Eastern (12%) zones.

At the end of Q1 2013 the vacancy rate in Warsaw amounted to 9.9%, with the level of 9.6% registered in the City Centre and 10% in Non-Central locations.

Q Zone Building Tenant Size (sq m)

Type

1Q US Trinity II BNP Paribas 11,000 renewal

1Q US Marynarska BP Play 9,600 renewal + expansion

1Q W Laris Konsalnet 8,200 pre-let

1Q US Park Rozwoju Schneider 7,000 pre-let

1Q SW Lopuszanska Business Park Alior 6,100 pre-let

1Q CBD Warsaw Financial Center CMS Cameron McKenna 5,000 renewal

1Q CC Warsaw Trade Tower Avanssur 4,200 renewal

1Q US New City II Eniro Polska 3,900 pre-let

1Q US Iris Dago Centrum 3,600 new

1Q US Mokotów Nova Cegedim 3,400 new

1Q SW Eurocentrum Office Complex Beta

Randstad 2,700 pre-let

1Q US IO-1 Ciech SA 2,500 renewal

1Q CC Sienna Center Nextira One 2,400 new

1Q CC Sienna Center Witualna Polska 1,850 renewal

1Q US Konstruktorska Business Centre

HB Reavis 1,800 owner occupation

1Q CC Focus Samsung 1,800 expansion

1Q CC Warsaw Trade Tower American Express 1,700 renewal

1Q LS Light II (aka Lighthouse) SCA 1,500 renewal

PROPERTY REPORT

67

Warsaw office vacancy rates by submarket

Source: CBRE / WRF, Q1 2013

In Non-Central locations, the existing buildings offering the most vacant space (over 5,000 sq m) are listed below.

Existing office schemes with a vacancy rate over 5,000 sq m (Q1 2013)

Building Address Zone Vacancy (sq m) Asking Rent Q4 2012 (mth/sq

m)

Konstruktorska BC Konstruktorska 11 US 35,403 15.00 EUR

Ilmet Jana Pawła II 15 CBD 10,340 16.00 EUR Poleczki Business Park II

Poleczki 33/35 LS 8,231 15.00 EUR

Millennium Plaza Jerozolimskie 123A CC 7,235 16.00 EUR

Iris Cybernetyki 9 US 6,769 14.00 EUR Chmielna 134 (Aktyn) Chmielna 132/134 CC 6,670 16.25 EUR

Concept Tower Grzybowska 87 W 6,464 18.00 EUR

Oxygen Park I Jutrzenki 137 SW 6,099 15.00 EUR

Lumen Złota 59 CBD 6,069 23.50 EUR Wolf Marszałkowska

Marszalkowska 89

CC

5,799

27.00 EUR

Sienna Centre Sienna 73 - 75 CC 5,775 18.50 EUR

Nowa Praga Brechta 7 E 5,585 13.00 EUR

Equator II Jerozolimskie 128a SW 5,332 16.75 EUR

Empark Orion Postepu 18b US 5,110 12.50 EUR

Platan Park I Poleczki 21 LS 5,013 11.50 EUR

Source: CBRE / WRF , March 2013

Net absorption (understood as the new space leased on the market) in 2012 accounted for almost 170,000 sq m, i.e. 28% of total take-up. The average level of annual absorption registered since 2009 is lower than the amount of office space that is expected for delivery in the next two years. That should translate into increased vacancy levels in the nearest future.

10% 9% 11% 9%

11%16%

9%

12%

5%7%

0

20 000

40 000

60 000

80 000

100 000

120 000

0%

5%

10%

15%

20%

25%

Tota

l War

saw US

SW

City

Cen

tre

Cor

e LS W E SE N

Vacant Space (sq m) Vacancy Rate (%)

PROPERTY REPORT

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As most of the companies are applying a conservative strategy towards their future expansion plans, no significant increases in the level of absorption should be expected in the near future.

Warsaw office net absorption and average vacancy rates

Source: CBRE, F – forecast

Warsaw Market Summary Q1 2013

Zone Stock (sq m)

Vacancy (sq m)

Vacancy Rate

Take-up (sq m)

Completions (sq m)

Core 500,850 55,626 11.11% 20,878 4,000

City Centre 786,494 68,468 8.71% 27,261 0

East 172,076 20,312 11.80% 1,490 0

Lower South 176,396 28,783 16.32% 2,218 0

North 129,030 8,455 6.55% 4,007 0

South East 187,881 9,112 4.85% 1,580 0

South West 633,789 72,049 11.37% 19,983 8,543

Upper South 1,061,094 99,905 9.42% 62,499 63,676

West 287,637 25,488 8.86% 15,543 0

Central 1,287,344 124,094 9.64% 48,139 4,000

Non-Central 2,647,903 264,104 9.97% 107,320 72,219

Total 3,935,247 388,197 9.86% 155,459 76,219

Source: CBRE / WRF

Rental Evidence and Lease Terms

The worsening attitudes on the global financial markets translated into a significant decrease of the level of prime headline rents in Warsaw, which reached the cyclical low in the end of 2009, at the level of EUR 21 – 23/sq m/month. However, 2010 brought a gradual increase in the rental level, which was carried well into 2011 and 2012.

0%

3%

5%

8%

10%

13%

15%

18%

20%

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Net absorption forecast Vacancy Rate (%)

PROPERTY REPORT

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In the end of Q1 2013 prime headline rents in Warsaw amounted to EUR 26 – 27/sq m/month in the City Centre and to EUR 15 – 16 in Non-Central locations. Average headline rents in modern office buildings located within the City Centre range from EUR 20 to 22/sq m/month, whereas in Non-Central located office buildings rents vary between EUR 14 and 15/sq m/month. Due to the increasing amount of modern office space under construction in Warsaw, no rental increases should be expected in the nearest future.

Office Rental Levels in Warsaw

Monthly per sq m Q1 2012 Q1 2013 Change

City Centre

Headline rents EUR 26 - 27 EUR 26 - 27 0%

Effective Rents EUR 22 - 25 EUR 22 - 25 0%

Non – Central

Headline rents EUR 15 - 16.50 EUR 15 - 16 2%

Effective rents EUR 12 - 13 EUR 12 - 13 0%

Source: CBRE

Developers, in the light of tough competition, offer a number of incentives, particularly in Non-Central locations. Tenants’ incentives are less common in prime office buildings within the City Centre, reflecting the smaller discrepancy between headline and effective rents, which are usually 15-20% lower than the headline rates. As the amount of speculatively constructed office space in Warsaw remains high, we expect an increased pressure on the average rental level throughout 2013.

Examples of currently offered rental terms

Building Zone Asking Rent

(sq m/month) Service Charge (sq m/month)

Add-On Factor

Parking Fee space/month

City Centre

Lumen CBD EUR 23.50 PLN 24.00 11.8% EUR 150

Atrium Centrum CBD EUR 17.5 – 18.0 PLN 22.00 7.0% EUR 150

Roma Office Centre CBD EUR 19.00 PLN 20.00 10.0% EUR 200

Skylight CBD EUR 25.00 PLN 22.00 10.1% EUR 200

Wolf Marszalkowska CC EUR 27.00 PLN 25.00 10.0% EUR 250

Senator CC EUR 26.00 PLN 19.00 10% EUR 200

Non – Central

Mokotow Nova US EUR 15.75 PLN 16.00 4.30% EUR 90

Marynarska BP US EUR 16.00 EUR 4.50 3.85% EUR 75

Catalina Office Centre US EUR 14.50 PLN 17.55 3.51% EUR 85

Equator II SW EUR 16.75 PLN 18.00 6% EUR 80

Libra BC SW EUR 14.90 PLN 14.50 6% EUR 85

Bitwy Warszawskiej BC SW EUR 13.00 PLN 21.00 5.95% EUR 85

Konstruktorska BC US EUR 15.00 PLN 18.00 4.3% EUR 85

Source: CBRE

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As the amount of speculative office space that will be delivered to the market in the near future remains significantly high, the average rental level might decline gradually during the next 12 months. However, prime rental levels remain relatively high as the availability of office space in the most desirable locations is still limited. Therefore, the prime rental level for those office buildings located in the CBD should remain stable throughout 2013.

Warsaw office prime rents

Source: CBRE, F - forecast

The average lease format is as follows:

Average lease length: 3-5 years;

Rents are denominated rarely in PLN, mostly in EUR, and paid in PLN;

Service charges, taking account of all costs of maintaining and insuring the property, are usually at between EUR 3.00 and EUR 5.50 per sq m and are more often quoted in PLN;

Indexation usually incurred on an annual basis, according to Euro-Zone CPI or inflation rate of the Polish Central Statistical Office (GUS);

Rent free period: 3-9 month’s (depending on the lease length and covenant strength);

Rental deposit: 3-6 month’s rent or bank guarantee;

Rentable space includes usable space occupied by the tenant and common space (add-on factor) that usually does not exceed 10% of rentable space and includes an entrance hall, lift lobbies, toilets and kitchens (if such facilities are situated outside of the company’s office).

0

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/sq

m /

mon

th

City Centre Non-Central

PROPERTY REPORT

71

Opinion of Market Rent

Having regard to the comparable evidence presented in the market commentary section above as well as taking into account the location and planned quality of the subject property we have adopted the following market rental values:

Office – PLN 60 per sq m per month

Car park spaces – PLN 270 per space per month

Investment Market and Yield Evidence

After a period of a general slowdown in terms of real estate investment and turbulence on the financial markets, 2011 and 2012 brought a recovery in this regard. Last year, Poland witnessed strong demand for quality products, driven mainly by the core funds. Prime quality assets with sustainable and proven locations were of interest to investors. The activity was focused primarily on Warsaw, where the majority of the office transactions took place and on the big regional cities where significant retail transactions were completed. In addition, the share of logistic investments was above the average due to the portfolio disposals that were completed last year.

In 2012 investment volume in Central & Eastern Europe was around 35% lower than in 2011 and reached €7.4 billion, despite solid year-end economic results in Poland and Russia. Notably, these two markets are increasingly driving CEE volumes, although both of them saw a year-on-year fall in transaction volumes. Total investment activity in Poland amounted to EUR 2.7 billion in 2012, which is some 0.5% less in comparison to 2011. It is notable that Q4 2012 proved to be the most active quarter for Poland since 2006, with transactions worth over €1.6 billion in total.

Last year, retail and office investment volumes registered a slight decline, while industrial investment considerably improved. In total, 47 investment transactions were completed in 2012. Offices are considered to be the most liquid assets in Poland with 16 schemes transacted last year, amounting to 35% of the investment volume. The retail sector was responsible for 48% of investment share with 17 schemes worth over EUR 1.3 billion sold last year. The industrial stake improved from 5% in 2011 up to 17% in 2012 with 11 transactions amounting together to EUR 460 million.

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Poland Investment Volume (EUR million)

Source: CBRE

Investor demand is relatively strong and focused both on the prime assets as well as the value-add opportunities. The interest in Polish assets remains viable mostly due to the political and economic stability of the country, accompanied by the sound performance of tenants in all sectors of the commercial property market. Moreover, the market fundamentals and the economic forecasts are relatively positive for Poland, which should sustain investor demand in the long run. However, due to a general scepticism caused by the uncertainty over the economic performance of the European Union, the investment volumes in Poland are being put under a gradual downward pressure, particularly in the retail sector.

European investors are the most active group of purchasers in Poland. German open-ended and close-ended funds are considerably important in this regard, being responsible for 40% of transaction volume in 2012. A significant, 19% share has also been registered by American investors. A visible trend is the increasing activity of domestic buyers recording a level of 10% in 2012.

Purchasers’ nationality in Poland, all investment sectors (2012)

Source: CBRE

0

1 000

2 000

3 000

4 000

5 000

6 000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

OFFICE RETAIL INDUSTRIAL OTHER

40%

18%

19%

9%

10%3%

1%

Germany

France

USA

UK

Poland

Other

Austria

PROPERTY REPORT

73

Investment transactions in Poland in 2012-2013

Year Quarter Building Size (sq m)

Initial yIield (Equivalent)

Price(EUR m)

Purchaser

2012 Q1 Marszalkowska 76 5,550 (6.75%) 23 Raiffeisen AM

2012 Q1 Prima Court 3,850 8-9% 11,5 Griffin

2012 Q2 Harmony Office Center II 18,250 6.9% 54 Azora

2012 Q2 Renaissance 5,200 6.35% 27 GLL

2012 Q3 Twarda Office Tower 27,000 c.a. 12% 75 Europa Capital

2012 Q3 Norway House 5,400 c.a. 7% 21 IVG

2012 Q3 Bacha 7,000 c.a. 13% 3 Eurostar

2012 Q3 Swiat Ksiazki HQ 4,000 n/a 4,5 Griffin

2012 Q4 Platinium Office Park 47,000 6.7% 138,84 Allianz

2012 Q4 WFC 50,000 c.a. 6.5% 210 Allianz/Tristan

2012 Q4 IBC1&2 37,199 c.a. 6.5% 148 Deka

2012 Q4 Marynarska BP 43,000 sub 8.5% 116 Heitman

2012 Q4 Okecie BP 1,600 n/a 3 n/a

2013 Q1 Mazowiecka, Malachowskiego 17,500 n/a 75 KSP

2013 Q1 New City 44,000 7.80% 127 Hines

2013 Q1 Green Corner 27,000 6.50% 90 RREEF

2013 Q1 Holland Park 11,000 9.38% 50 KSP

2013 Q1 Platinium Business Park V 11,650 6.70% 34 Allianz

2013 Q1 Grzybowska 81 8,916 n/a 25 BPS

2013 Q1 Trinity Park I (50% stake) 18,500 8.50% 20 Pramerica

2013 Q1 Batory, Philips House 12,000 11%(10%) 1,67 Griffin

2013 Q2 Senator 25,500 (6,5 %) 4,70 Union

2013 Q2 Ochota Office Park 40,000 n/a n/a Adgar

Source: CBRE

Strong investment demand in the few last years has been clearly noticeable and has had a direct impact on yields. Moreover, it has not been subject to any downward pressure in Q1 2013. It is estimated that since 2002 prime office yields in Warsaw gradually declined from 10% to the level of 5.40% - 5.50% in the end of 2007, when the observed compression stopped. Since 2008 yields began to grow, especially in the office sector. The global financial crisis resulted in a shortage of money supply and the increase in interest rates which were the reasons for the yield decompression in all CEE countries.

In Q1 2013 prime office yields in Warsaw were estimated at circa 6.25% for the best performing buildings. With the limited evidence of office investment transactions outside of Warsaw, the prime office yields in regional cities are estimated at around 7.3% for the best schemes. It is expected that the gap between prime and secondary yields will increase through to the end of 2013.

PROPERTY REPORT

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Prime schemes in Poland are still considered as very desirable by investors and their availability remains limited. What is more, some investors have already started indicating interest for value-added opportunities in prime office locations in order to pro-actively prepare for the anticipated increasing vacancy.

Prime Office Yields (%)

Source: CBRE

Aggregate completions of office space are expected to increase sharply in 2013-14, although they will remain below the pre-recession peak. This will be driven by a significant upturn in development in a few cities, namely London and Paris in Western Europe and St Petersburg, Moscow and Warsaw in CEE. Significantly, this will add the first major wave new speculative office buildings to the market since the downturn, as some large schemes were started when confidence was on a higher level in 2010-2011. However, outside the non-core cities development will remain low and heavily dependent upon pre-lets.

A strong investment demand in Poland is particularly focused on Warsaw locations, yet investors are said to be more selective due to the development pipeline and anticipated pressure on rents and vacancy rate increases. It is worth indicating that there are on-going office transactions, which were committed to in 2012 and are expected to be closed by the end of 2013. New office opportunities are to be delivered to the market during the course of 2013, both in Warsaw and the regional cities. In addition to the strong demand for prime assets, with yields softening in the non-prime zones and for secondary quality assets, opportunities are increasing in the value-add segment of the office market.

0%

2%

4%

6%

8%

10%

12%

14%

16%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Prime Yields in Warsaw Prime Yields in Regional Cities

PROPERTY REPORT

75

Alongside France, Germany and the UK, the Polish market is still a preferred destination for numerous investors. German funds, investors from the USA and France, as well as local entities, are active here. Even so, 2013 poses other challenges to investors due to the turbulence in the Eurozone. For instance, average transaction closure periods have become more protracted, with restricted bank policies in terms of access to credit lines, revealing the relatively high risk aversion of investors.

Opinion of Valuation Yields

Below we present investment transactions of comparable office buildings in Warsaw in

2012 – 2013:

Marynarska Business Park – “A” class office buildings of 43,000 sq m lettable space located on Marynarska St. Transaction concluded in Q4 2012 by Heitman (buyer) for the price of approximately 116 million Euros at an initial yield of below 8.5%.

LOT HQ – “B+” class office building of 11,000 sq m lettable space located on 17 Stycznia St. Transaction concluded in Q2 2012 by PZU (buyer) for the price of approximately 25 million Euros at an initial yield of ca. 8%.

New City– “A” class office building of 44,000 sq m lettable space located on Marynarska St. Transaction concluded in Q1 2013 by Hines (buyer) for the price of approximately 127 million Euros at an initial yield of ca. 7.75%.

Comparable office buildings which are currently for sale in Mokotów and Ursynów district are being negotiated at the level of between 7.75% and 9%.

Having regard to the comparable evidence presented above and taking into account the quality of the property, as well as the current situation on the property market, we have adopted a yield of 7.75% in the calculation of the Market Value.

Land Market

After a significant decrease of land values since late 2008 and a fall in demand, currently there is a positive influence on the market brought about by decreased construction costs, increasing investment activity and availability of finance.

Demand is focused on prime sites designated for small and mid size projects, mainly driven by the high level of equity required , in comparison to previous years,

The key market features that affect land values are as follows:

location – distance to city centres, presence of green areas and access to services (shops, schools, kindergartens);

car and public transport access;

surroundings – quality and character of neighbouring developments;

planning situation (if the site benefits from a valid Outline Building Permit, Master Plan or Building Permit);

density of potential development – the larger the building that can be developed on the site the higher the value;

PROPERTY REPORT

76

size and shape of the site – prices for large sites are usually lower than for smaller sites;

access to infrastructure (water, central heating, electricity and sewerage);

tenure – sites held on a perpetual usufruct basis are usually cheaper than these hold on freehold basis due to the fact that annual RPU fees can be substantial and influence total development costs.

Usually the strongest impact on land values is the location and presence of planning permits. The factor which has the weakest impact is title to the land (freehold/perpetual usufruct).

Due to the size of the subject property and lower supply and demand for such sites we decided to analyse Notarial Deeds of sites located not only in Wilanow District but generally in Warsaw.

Below we present selected sales transactions concluded between 2011 and 2013 for sites above 10,000 sqm located in Warsaw:

Residential Land Transactions – Warsaw, 2011 – 2013, sites of above 10,000 sq m

Date Location Land size (sq m.)

Net Price (PLN/sq m.)

Descritpion

25-07-2011 Bemowo, Batalionow Chlopskich St.

38.740 503 Purchaser: Budimex Nieruchomosci;

No Master Plan;

06-05-2012 Bemowo, Powstancow Slaskich St.

23.344 600 Purchaser: ROBYG Kameralna;

No Master Plan;

13-03-2012 Wilanow, Kolo Drogi St.

15.391 620 Purchaser: RM1;

Master Plan, plots designated for residential developments with services;.

01-12-2011 Bemowo, Szeligowska St.

66.536 645 Purchaser: Fort Property;

Site developed with buildings of very poor technical condition probably designated for demolition;

Share deal;

27-06-2012 Mokotow 15.372 698 Purchaser: Premium Property Rulewicz;

Master Plan, plots designated for single and multi-family residential developments;.

06-06-2012 Mokotow, Jasminowa St.

118.400 701 Purchaser: Ronson;

Master Plan, plots designated for multi-family residential developments;

Final agreement not signed yet;

29-10-2012 Wilanow, Rzeczpospolitej Ave.

40.100 745 Purchaser: ROBYG;

Master Plan, plots designated for residential and services developments;

15-03-2012 Mokotow, Jasminowa St.

60.357 805 Purchaser: MS Opoka;

Master Plan, plots designated for single and multi-family residential developments;.

11-09-2012 Bialoleka 16.713 808 Purchaser: Murapol;

Master Plan, plots designated for multi-family residential complex;

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Below we present selected sales transactions concluded between 2011 and 2013 of sites below 10,000 sq m located in Warsaw, Wilanow District:

Residential Land Transactions – Warsaw, Wilanow District, 2011 – 2013, sites below 10,000 sq m



Descritpion

26-11-2012 Wilanow, Przyczolkowa St.

5.122 508 Purchaser: BJK Sp. z o.o.;

Master Plan, plots designated for residential and services developments (25UM);

26-05-2011 Wilanow, Przyczolkowa St.

3,296 610 Purchaser: Rezydencje Palacowa;

Not regulated tenure;

21-04-2011 Wilanow, Bruzdowa St.

8.970 669 Purchaser: ROBYG;

Master Plan, plots designated for multi- residential and services developments (MU);

15-03-2012 Wilanow, Syta St.

3.919 781 Purchaser: SPS Real Estate;

Building Permit for residential and services project;.

08-01-2013 Wilanow, Syta St.

5.616 1,100 Purchaser: INART;

Master Plan, plots designated for residential and services developments (MU2);.

The most attractive sites are those situated in well recognized residential locations and benefitting from a valid planning permit (Outline Permit, Building Permit or Master Plan). Currently land prices, outside the city centre of Warsaw, range from approximately 503 to 1,100 PLN per sq m of site.

We have also analyzed the offers of large areas of investment land designated for residential and services currently offered on the market. Below we present selected recent offers of land of above 20,000 sq m available on the market outside the city centre of Warsaw.

Recent Investment Land Offers

Location Land size (sq m.)

Offer Price (PLN)

Net Offer Price (PLN/sq m)

Comments

Wilanow, Zawady

29.200 20.435.000 570 Master Plan, plots designated for residential and services developments;

Close to planned ring road;

Infrastructure on site;

Wilanow, 22.200 21.159.000 770 Master Plan, plots designated for residential and services developments;

Close to planned ring road;

Infrastructure on site;

Mokotow, Siekierki,

57.300 51.480.000 730 Master Plan, plots designated for multi-family residential and services developments;

No Infrastructure on site;

Wilanow, Powsin, Zakamarek St.

30.000 10.500.000 285 Master Plan, educational services;

Maximum height of developments 15m;

PROPERTY REPORT

78

Location Land size (sq m.)

Offer Price (PLN)

Net Offer Price (PLN/sq m)

Comments

Wilanow, Powsin,

24.000 24.000.000 1,000 Master Plan, mixed use: single family residential and residential and services developments;

Maximum height of between 10 and 15.m;

Zoliborz, Armi Krajowej

28,500 32,000,000 1,123 Site designated for multi- family residential developments

Approximately 1 km from Warsaw metro.

Mokotow, Siekierki

172,000 172,000,000 810 Site designated for multi phase residential project

Master Plan – multi- family residential with services

Additionally, retail entertainment and public services

Source: CBRE

For the purpose of the valuation of the site designated for educational purposes (symbol 5UO) we have collected details of transactions for sites of a similar designation. Bearing in mind that such sites are very rarely the subject of market transactions we searched for such transactions not only on the Warsaw market but also in other major cities in Poland. Below we present selected recent transactions of land of above 1,000 sq m designated for educational services:

Educational Land Transactions – 2011-2013



Descritpion

2012-12-19 Poznan, Morasko District

12,758 213 Building Permit for students dormitory, kindergarten and canteen.

2012-06-11 Poznan, Naramowice District

11,790 187 Master Plan: educational services (UN) and (UO)

2012-06-04 Poznan, Bulgarska St.

3,227 868 Outline Building Permit for school.

2012-03-28 Poznan, Chodzki St.

1,873 738 Master Plan: educational services (UN/U)

2011-11-10 Wroclaw, Raclawicka St.

21,000 362 Site bought by Fundacja Edukacji Miedzynarodowej for the development of an educational complex. Master Plan.

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VALUATION CONSIDERATIONS


This is Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved.

In calculation of this Market Value we have assumed that the site will be developed as a whole, i.e. as one mixed use office and residential project, without division into five separated sub-projects according to the new Master Plan.

Key Valuation Factors

Positive

Prestigious location close to the Wilanow Palace within a fast developing residential area consisting of new, low-rise residential buildings;

Regular shape of the site;

Proximity of recreation areas such as Natolin Park, Marysin Park and the Kabacki Forest;

New Master Plan under approval procedure.

Negative:

Located in the suburbs of the city, with a significant distance to the city centre;

Average accessibility with respect to public transport (only bus lines serve the area);

Subject of perpetual usufruct right;

Large size of the site (17 ha);

Mixed use (residential, office and educational project);

Large sale of the project - with numerous other planned/pipeline residential estates within the district apartment prices may be kept at a low level.

Marketability and Potential Purchasers

We have had regard to the marketability and attractiveness of the subject property. We

bullet point our main comments and assumptions below:

The property represents a very large size (17 ha ) site located out of the city centre of Warsaw.

The new Mater Plan designates the site for mixed use office and residential purposes together with an educational component;

The site benefits from good marketability and would be attractive for large commercial or residential developers.

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Valuation Methodology

We detail our main methodology and market assumptions relating to the subject property. We bullet point our main comments and assumptions below:

We have based the valuation on the following areas and assumed the following timing and construction costs:

Site B1 (symbol 2MW(ZP)) Phase Type of

accommodation PUM (sq m) or GLA (sq m) or amount of car park spaces

Timing: preconstruction/ construction

Construction costs (PLN/sq m)

B.1.1a Apartments 11,198 sq m 3/18 3,200

B.1.1a Car Park 243 3/18 -

B.1.1b Apartments 12,503 sq m 15/18 3,200

B.1.1b Car Park 271 15/18 -

B.1.2c Apartments 10,303 sq m 27/18 3,200

B.1.2c Car Park 224 27/18 -

B.1.2d Apartments 10,256 sq m 39/18 3,200

B.1.2d Car Park 223 39/18 -

Source: Area breakdown provided by the Client.





B.2.1 Apartments 11,960 sq m 51/18 3,200

B.2.1 Car Park 260 51/18 -

B.2.2 Apartments 11,960 sq m 63/18 3,200

B.2.2 Car Park 260 63/18 -

B.2.3 Apartments 11,960 sq m 75/18 3,200

B.2.3 Car Park 260 75/18 -

B.2.4 Apartments 11,960 sq m 87/18 3,200

B.2.4 Car Park 260 87/18 -


Site C1,2,3 (symbol 3MW(U)) Phase Type of




C.1 Apartments 7,360 sq m 99/12 3,200

C.1 Car Park 160 99/12 -

C.2 Apartments 7,360 sq m 111/12 3,200

C.2 Car Park 160 111/12 -

C.3 Apartments 7,360 sq m 123/12 3,200

C.3 Car Park 160 123/12 -


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Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP), 7UH/U) Phase Type of




Com-1 Office 12,000 sq m 12/18 5,600

Com-1 Car park 344 12/18 -

Com-2 Office 12,000 sq m 24/18 5,600

Com-2 Car park 344 24/18 -

Com-3 Office 12,000 sq m 36/18 5,600

Com-3 Car park 344 36/18 -

Com-4 Office 12,000 sq m 48/18 5,600

Com-4 Car park 344 48/18 -

Com-5 Office 12,000 sq m 60/18 5,600

Com-5 Car park 344 60/18 -


Site UO (symbol 5UO) – there is no architect concept with regard to development of this part of the site.

The area of the plots designated for roads has been divided between all 5 phases proportionally according to their share in 178,723 sq m;

Based on the evidence presented in the Market Commentary section we have assumed the following Market Rental Values for the office accommodation:

Function Rent (PLN/sq m or space/month)

Office 60

Car park 270

Source: CBRE

Incentives in the form of rent-free periods of 3 months;

Equivalent yield of 7.75%, due to the location, quality and scale of the planned scheme for which Market Value as if completed exceeds PLN 600 million;

Based on the evidence presented in the Market Commentary section we have assumed the following sale prices for the residential accommodation:

Function Sale price net (PLN/sq m or space)

Residential 6,000

Car park 20,000

Source: CBRE

Disposal fees for office buildings: 1.00%;

Disposal fees for residential: 3.00%;

Acquisition costs of 1.50%;

Architect fee: 4% (2.5% when the Building Permit has been already issued);

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Project manager fee: 4%;

Contingency: 5%;

Finance costs of 7.50%;

Developer’s profit on costs of 20%.


This is Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved and that the site has been geodetically divided into five properties in accordance with the new zoning.

In calculation of this Market Value we have assumed that the site will not be developed as a whole, i.e. as one mixed use office and residential project, but the site will be divided into five separated land areas and each of them may be developed separately.

All the assumptions for Market Value under Special Assumption (2) are the same as for Market Value under Special Assumption (1) except for the preconstruction periods which are presented below:




B.1.1a Apartments 11,198 sq m 3/18

B.1.1a Car Park 243 3/18

B.1.1b Apartments 12,503 sq m 15/18

B.1.1b Car Park 271 15/18

B.1.2c Apartments 10,303 sq m 27/18

B.1.2c Car Park 224 27/18

B.1.2d Apartments 10,256 sq m 39/18

B.1.2d Car Park 223 39/18





B.2.1 Apartments 11,960 sq m 6/18

B.2.1 Car Park 260 6/18


B.2.2 Car Park 260 18/18


B.2.3 Car Park 260 30/18


B.2.4 Car Park 260 42/18


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Site C1,2,3 (symbol 3MW(U)) Phase Type of



C.1 Apartments 7,360 sq m 6/12

C.1 Car Park 160 6/12


C.2 Car Park 160 18/12


C.3 Car Park 160 30/12


Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP), 7UH/U) Phase Type of



Com-1 Office 12,000 sq m 6/18

Com-1 Car park 344 6/18









Bearing in mind that there is no architectural concept with regard to the development of the part UO (symbol 5UO) designated for educational purposes we have calculated its value using the sales comparison method.

Sales Comparison Method - UO (symbol 5UO)

For the purpose of the valuation we have analysed undeveloped sites designated for educational uses in major cities from all over Poland. We have selected the following sites sold between 2011 and 2012 which, in our opinion, are the most comparable to the subject property:



Descritpion

2012-12-19 Poznan, Morasko District

12,758 213 Building Permit for students dormitory, kindergarten and canteen.

2012-06-11 Poznan, Naramowice District

11,790 187 Master Plan: educational services (UN) and (UO)

2011-11-10 Wroclaw, Raclawicka St.

21,000 362 Site bought by Fundacja Edukacji Miedzynarodowej for development of an educational complex. Master Plan.

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After analysing the comparable land transactions as well as taking into account attributes of the subject property, in our opinion, the Market Value of the subject site is PLN 356 per sq m of the site of 14,568 sq m i.e. 5,186,000 PLN. The site of 14,568 sq m consists of 12,400 sq m plus a share in the road plots.

A table with corrections made to the comparable properties is enclosed in Appendix F.


We detail our main methodology and market assumptions relating to the valuation of the subject 3 penthouses, 3 apartments and 11 garages:

We have based the valuation of the penthouses and apartments on the schedule of areas provided by the Client as below:

Building Number Floor Area (sq m)

Terrace area (sq m)

Market Value (PLN/sq m)

Market Value (PLN)

Market Value (PLN)

rounded

A1 Penthouse 95 (D)

4 133,83 69,13 7,700 1,030,491 1,030,000

A1 Penthouse 96 (D)

5 126,17 71,73 7,700 971,509 972,000

A1 Penthouse 120 (E)

5 123,27 74,58 7,700 949,179 949,000

A2 Apartament 45 (C)

2 98,75 23,19 6,100 602,375 602,000


3 98,04 23,13 6,100 598,044 598,000


4 97,59 23,31 6,100 595,299 595,000

Total 677,65 4,746,000

We have based the valuation of the garages on the schedule of garages provided by the Client as below:

Building Garage number

Net Market Value (PLN/garage)

Market Value (PLN)

A1 145 20,000 20,000

A1 158 20,000 20,000

A1 182 20,000 20,000

A1 201 20,000 20,000

A1 183 20,000 20,000

A1 202 20,000 20,000

A1 94 20,000 20,000

A2 1 20,000 20,000

A2 23 20,000 20,000

A2 54 20,000 20,000

A2 74 20,000 20,000

Total 220,000

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Sensitivity Analysis

Below we detail our main assumptions with regard to sensitivity analysis:

Market Value: EUR 156,113,187 (rounded: EUR 156,113,000)

ERV change: +/- 10.00% (percentage)

Construction Costs: +/- 10.00% (percentage)

Yield change: +/- 0.25% (fixed)

Sale Price: +/- 500 PLN per sq m (fixed)

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OPINION OF VALUE

Market Value of undeveloped site of 178,723 sq m under Special Assumption (1)

Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved as of 30th June 2013 is:

PLN 156,113,000

(ONE HUNDRED AND FIFTY SIX MILLION ONE HUNDRED AND THIRTEEN THOUSAND

PLN)


Market Value of undeveloped site of 178,723 sq m under Special Assumption (2)

Market Value of the undeveloped site of 178,723 sq m under the Special Assumption that the new Master Plan has been approved and that the site has been geodetically divided into five properties in accordance with the new zoning as of 30th June 2013 is:

PLN 180,728,000

(ONE HUNDRED AND EIGHTY MILLION SEVEN HUNDRED AND TWENTY EIGHT

THOUSAND PLN)

including:




Site Commercial 1,2,3,4,5 (symbol 6UH/U(ZP), 7UH/U): 65,102,000 PLN




Market Value of 3 penthouses, 3 apartments and 11 garages as of 30th June 2013 is:

PLN 4,966,000

(FOUR MILLION NINE HUNDRED AND SIXTY SIX THOUSAND PLN)


All detailed calculations are presented in the Appendix F.

Wilanow One Valuation PRINT 12.08.2013 (ze zgoda na ... · plots Nos. 2/80, 2/65, 2/66, 2/67, 2/77...

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Transcript of Wilanow One Valuation PRINT 12.08.2013 (ze zgoda na ... · plots Nos. 2/80, 2/65, 2/66, 2/67, 2/77...