Transformational 692m Retail Portfolio Acquisition. December PDF Free Download

Transformational 692m Retail Portfolio Acquisition December 2017

EPP Mission Building a national retail champion that leverages both its scale and relationships to provide a leading and cash-generating property company that delivers consistent high returns to shareholders. Asset Management Development & Extensions Acquisitions 2

COMPLEMENTARY PORTFOLIOS 13 million people (34% of Poland) lives within a 30-min drive 3 Combined annual footfall will grow 61% to 120 million

KEY FACTS 446 500 GLA (s.q.m.) 7.1% Entry Yield* 49.0 m Sustainable NOI 8.9% RTS >34 000 Potential extension GLA 1.8% Vacancy 4 8%-10% Development yield 6.4 yrs WALT by GLA *end of masterlease * Acquisition yields excluding transaction costs; 6.8% for the total portfolio including transaction costs

PORTFOLIO HIGHLIGHTS Location, location, location Bespoke shopping centres Tenants 5 Performance

TRANCHE 1 M1 Czeladz M1 Krakow M1 Łodz M1 Zabrze TRANCHE 2 M1 Bytom M1 Czestochowa M1 Radom PP Olsztyn PP Opole PP Kielce TRANCHE 3 M1 Poznan M1 Tychy M1 POZNAN PP OPOLE M1 ZABRZE M1 BYTOM PP OLSZTYN M1 LODZ M1 RADOM PP KIELCE M1 CZESTOCHOWA M1 CZELADZ M1 TYCHY M1 KRAKOW 6

M1 Czeladź GLA 53 600 m² 8

Czeladź GLA [sqm] 53 600 Parking places 1 985 Annual footfall 6.5 million Turnover change +3.1% RTS 9.4% Catchment within 30 min. 2 000 000 NOI 8.1 milion Extension potential GLA 2 700 9

M1 Kraków GLA 49 600 m² 10

Kraków GLA [sqm] 49 600 Parking places 1 801 Annual footfall 7.8 million Turnover change +8.9% RTS 9.6% Catchment within 30 min.. 940 000 NOI 8.1 million Extension potential GLA 3 500 11

M1 Zabrze GLA 52 800 m² 12

Zabrze GLA [sqm] 52 800 Parking places 3 446 Annual footfall 4.8 million Turnover change +14.1% RTS 9.0% Catchment within 30 min.. 1 100 000 NOI 5.8 million 13

Łódź GLA [sqm] 38 400 Parking places 2 425 Annual footfall 2.9 million Turnover change +2.7% RTS 8.3% Catchment within 30 min. 800 000 NOI 3.1 million 14

Bytom GLA [sqm] 28 200 Parking places 1 482 Annual footfall 2.4 million Turnover change -0.3% RTS 8.3% Catchment within 30 min. 2.100.000 NOI 2.1 million 16

Częstochowa GLA [sqm] 29 900 Parking places 1 595 Annual footfall 6.2 million Turnover change +0.6% RTS 7.5% Catchment within 30 min. 230 000 NOI 3.3 million Extension potential GLA 10 000 17

Radom GLA [sqm] 37 000 Parking places 1 703 Annual footfall 4.3 million Turnover change +7.2% RTS 9.4% Catchment within 30 min. 350 000 NOI 4.1 million Extension potential GLA 9 200 18

Power Park Olsztyn GLA [sqm] 32 500 Parking places 1 039 Catchment within 30 min. 170 000 NOI 2.4 million 19

Power Park Opole GLA [sqm] 20 700 Parking places 862 Catchment within 30 min..120 000 NOI 1.7 million 20

Power Park Kielce GLA [sqm] 35 700 Parking places 1 018 Catchment within 30 min. 200 000 NOI 2.7 million 21

Poznań GLA [sqm] 45 400 Parking places 3 106 Annual footfall 5.7 million Turnover change -1.2% RTS 9.4% Catchment within 30 min. 750 000 NOI 5.9 million Extension potential 8 700 23

Power Park Tychy GLA [sqm] 22 700 Parking places 728 Catchment within 30 min.. 128 000 NOI 1.7 million 24

Tenant Exposure Tenant Mix (NRI) Auchan no. 1 hypermarket operator in Poland and 5th largest worldwide; a 20 year track record in the Polish market; 7 year agreements with Auchan. Tenant Mix (GLA) OBI the leading DIY operator with over 50 stores in Poland and a 19 year track record in the Polish market; 15 existing lease agreements in place. 25 MediaMarkt German based leading consumer electronic retailer with over 60 stores in Poland and a 19 year track record in the Polish market; opportunity to decrease space and re-rent at better rents.

Deal structure & Financials 26

Master Lease What EPP buys and pays for 12 properties with a master lease agreement with Metro Properties Sp. z o.o. ( Metro Master Lease ) valid until April 2024, secured by the parent company Metro AG. Metro AG is one of the biggest international retailers with a market cap of over 5.9 billion. EPP s purchase price for the properties is based on a sustainable NOI which is calculated in accordance with the current market rent levels. For the next 4 years or sooner a rental guarantee has been furnished by the Seller to EPP in respect of each property, therefore if the income received from the master lease is lower than the sustainable NOI for that property, the difference is reimbursed by the Seller, and if income from the master lease is higher than the sustainable NOI then EPP returns the difference to the Seller. 27 That means that the rental guarantee with the Seller fixes our NOI for a maximum of 4 years at the level of sustainable NOI EPP has paid for in the purchase price.

Master Lease Terms of operations after Metro Master Lease termination Our properties will earn a secured income from the master lease and incur no property costs and capital expenditure Metro is responsible for the leasing activities and all costs related to the property operations. Metro Master Lease may be terminated earlier only if concluded terms and conditions meet minimum requirements of EPP. The purchase price paid by EPP may be adjusted to reflect the impact of the adjusted rents payable under certain new or amended lease agreements. After the termination, EPP will fully take over leasing activities, asset management and incur property costs and capital expenditure in a normal course of business and expect an increase in rent. 28 From then on, EPP will be able to create additional value by our firstclass active asset management, extensions of selected properties and benefit of scale.

DEAL STRUCTURE 4 properties 358.7 million GAV 25.1 million sustainable NOI 7.0% acquisition yield * 6 properties 222.5 million GAV 16.3 million sustainable NOI 7.3% acquisition yield * Tranche I - January 2018 Tranche II - June 2019 Tranche III - June 2020 29 2 properties 110.9 million GAV 7.6 million sustainable NOI 6.9% acquisition yield * * Acquisition yields excluding transaction costs; 6.8% for the total portfolio including transaction costs

DEAL FUNDING Tranche I - January 2018 358.7 million GAV funded by: 223.7m current senior debt (62% LTV) 97.5m share issue to LVS II Lux XXVII S.à r.l & Oaktree* 37.5m EPP cash (from sale of offices) Tranche II - June 2019 222.5 million GAV funded by: 147.3m current senior debt (66% LTV) 75.2m EPP cash (from future equity issue and/or recycling of offices or 40 million equity undertaking by Redefine Properties) Tranche III - June 2020 110.9 million GAV funded by: 30 66.8m current senior debt (60% LTV) 44.1m EPP cash (from future equity issue and/or recycling of offices) * Total share issue to LVS II Lux XXVII S.à r.l & Oaktree is 112.5m, excess over 97.5m will cover transaction costs

SUMMARY OF THE M1 PORTFOLIO ACQUISITION GLA (sqm) Sustainable NOI (EUR) GAV (EUR) Entry Yield * M1 Czeladz 53 600 8.1 million 123.5 million 6.6% M1 Krakow 49 600 8.1 million 126.3 million 6.4% M1 Lodz 38 400 3.1 million 33.7 million 9.3% M1 Zabrze 52 800 5.8 million 75.2 million 7.7% First Tranche Portfolio 194 400 25.1 million 358.7 million 7.0% M1 Bytom 28 200 2.1 million 22.9 million 8.9% M1 Czestochowa 29 900 3.3 million 51.4 million 6.4% M1 Radom 37 000 4.1 million 58.3 million 7.1% Power Park Olsztyn 32 500 2.4 million 31.8 million 7.5% Power Park Opole 20 700 1.7 million 22.6 million 7.5% Power Park Kielce 35 700 2.7 million 35.6 million 7.7% Second Tranche Portfolio 184 000 16.3 million 222.5 million 7.3% M1 Poznan 45 400 5.9 million 89.2 million 6.7% 31 Power Park Tychy 22 700 1.7 million 21.7 million 7.8% Third Tranche Portfolio 68 100 7.6 million 110.9 million 6.9% Total 446 500 49.0 million 692.1 million 7.1% * Acquisition yields excluding transaction costs; 6.8% for the total portfolio including transaction costs

Unlocking the value after master lease expires Active asset management Increasing the F&B and entertainment offerings Right sizing retail units Boost the short term leases income Cost optimisation Extensions Potential of increasing the GLA by 8-10 % and NOI by 10-15 % Increase of the existing rents Scale Through the combined scale of EPP and M1 portfolio we will attract retail market leaders and assist with their growth aspirations Further leverage the relationship with retailers 32

TRANCHE I STANDALONE 2018 FINANCIALS Standalone 2018 financials (1) EURm Sustainable NOI 25,1 Finance & other costs (7,9) Net profit 17,2 Gross asset value 358,7 Less acquisition debt (223,8) Purchase price 134,9 Transaction taxes and costs 15,9 Debt arrangement fees 2,7 Equity investment (2) 153,5 Price per share (3) 1,27 Number of shares (4) 120,9 (1) Full year financials of Tranche I under the assumptions that the acquisition takes place effectively on January 1st, 2018 (2) Total equity investment of 153.5m to be financed by: (i) 112.5m EPP shares issue to LVS II Lux XXVII S.à r.l & Oaktree and (ii) 41.0m EPP cash from disposal of offices (3) Price per share for 112.5m EPP shares issue to LVS II Lux XXVII S.à r.l & Oaktree (4) Implied number of shares for illustrative DPS calculation purpose, as if the whole equity investment was covered by the new shares issue Standalone DPS (eurocents) 14,2 33

IMPACT ON EPP - POST TRANSACTION NOW January 2018 June 2019 June 2020 14 retail properties 18 retail properties excluding Młociny and Towarowa 24 retail properties excluding Młociny and Towarowa 26 retail properties excluding Młociny and Towarowa 426 200 m² retail GLA 620 600 m² retail GLA 804 600 m² retail GLA 872 700 m² retail GLA 1 258 (milion) retail portfolio value 1 617 (milion) retail portfolio value 1 839 (milion) retail portfolio value 1 950 (milion) retail portfolio value 34 NOI 80 million NOI 105 million NOI 121 million NOI 129 million

TRANSACTION SUMMARY 35

PROPERTY HIGHLIGHTS Well established retail properties with ~20 year trading histories and in great urban locations Large individual sites in catchments, generally situated along the motorway at major junctions (land base >200 ha) Food and DIY anchored with top international brands providing the greatest retail offer and best prices Permitted and planned extensions will reinforce competitiveness of each property and grow NOI 36 Strong tenant-mix including top brands: Auchan, OBI, MediaMarkt, TK Maxx, H&M, C&A Abundant car parking

INVESTMENT SUMMARY Excellent entry yield of >7%* Capital value of 1,550 per sqm GLA is equal to replacement cost Low average rent across portfolio of 9.1 per sqm per month Low RTS ratio of <9% suggesting rental growth Guaranteed NOI through 2024 from Metro AG master lease Excellent diversification of tenants and income 37 Potential of increasing the GLA by 8-10 % and NOI by 10-15 % * Acquisition yields excluding transaction costs; 6.8% for the total portfolio including transaction costs

STRENGHTENED RETAIL PLATFORM Pre-Transaction Pro Forma Post-Transaction 14 properties +12 26 properties 426,200 sqm of GLA +105% 872,700 sqm of GLA 1,258m portfolio value +55% 1,950m portfolio value 80m NOI +61% 129m NOI 38 76m footfall +57% 120m footfall

COMPLEMENTARY PORTFOLIOS 13 million people (34% of Poland) lives within a 30-min drive 39 Combined annual footfall will grow 61% to 120 million

40 APPENDICES

Polish macroeconomics 41

Polish macroeconomics 42 WHY POLAND? Poland is the 8th largest European economy with a positive pace of growth, higher than major Western European economies Between 2007 and 2016 Poland experienced 31% growth in GDP and 68% growth in exports. High consumer confidence and continued increases in average household income has spurred robust growth in private consumption which is expected to reach 4.4% in 2017. Q1 16 Q1 17 the number of jobs in the business service sector increased by 32,000 (i.e. by 15%) to over 244,000 people. By 2020 the sector is forecasted to employ over 300,000 people; 80 out of Fortune s Global 500 investors have business services centres in Poland; 10th place Poland s standing globally in terms of English language skills in the 2016 English Proficiency Index survey; EUR 105.8bn of EU funding to be allocated to Poland between 2014 and 2020; Poland s export reached EUR 176.7bn in 2016 (up by 2.7% y-o-y); Attractive incentives for foreign investors (especially those from service sector, banking, R&D and IT); PLN 500+ government programme (PLN 500 / month for second and each next child) introduced in April 2016 has led to a considerable growth of retail sales. 2016 2017 (f) 2018 (f) Private Consumption (%,yoy) 3.8% 4.8% 3.4% GDP growth (%, yoy) 2.7% 3.7% 3.1% Retail sales growth (%, yoy) 5.9% 6.8% 4.0% Consumer spending (%, yoy) 3.8% 4.8% 3.4% Average monthly salary growth 3.8% 4.7% 6.0% Inflation (%) -0.7% 1.9% 1.8% Unemployment rate (%) 6.2% 4.7% 4.0% GDP per capita growth in selected EU countries 4.0% 3.0% 2.0% 1.0% 0.0% Poland UK France Germany EU Average 2016 2017 (f) 2018 (f) Source: Oxford Economics, National Bank of Poland

Polish macroeconomics WHY POLAND? - CONTINUED Poland is the largest EU development fund beneficiary with 105.8 billion allocated for the years 2014 to 2020 Selected recent significant investments or planned investments in Poland Largest CEE recipient of foreign investment between 2012 and 2015 driven by: relative political stability geographic positioning within the EU and proximity to Germany (Mercedes Benz) 500m engine factory 326m Lithium-Ion battery plant 60m Supplier of components to Boeing, Airbus and Rolls Royce an improved business climate With relatively low cost of occupation and a highly skilled labour force, Poland is a beneficiary of trend by European companies to transfer operations to cheaper locations (anticipated to accelerate post Brexit) Liquid and growing real estate market supported by increasing consumer spending driven by consistent growth in employment and stable inflation levels 800m commercial vehicle factory Announced expansion of Warsaw office Launched operations centre in Warsaw Poland is currently considered an advanced emerging market according to FTSE country classification Will be reviewed for potential promotion to developed status 43 Centre for excellence European Excellence Hub

Polish macro-economics Poland a developed economy by WorldBank 44

Polish macroeconomics POLAND STABLE AND LIQUID MARKET Economic background Investment attractiveness Improving international rankings Outlook 45 8th biggest EU economy in terms of GDP 3.7% estimated GDP growth in 2017 54.4% of GDP public debt burden, compared to EU average of 83.5% 1.7% current inflation rate (July 2017) Low unemployment rate: currently 4.8% (June 2017) Growing industrial production, retail sales and domestic demand Healthy and well-capitalised, resilient banking sector High supply of skilled, welleducated workforce Relatively low cost of doing business (wages and rents lower than most of EU) Geographical proximity to Western Europe Borders Germany, Poland s biggest trading partner, accounting for 27.3% of all Polish exports and 23.4% of all imports (2016) Special Economic Zones enabling tax exemptions Growing manufacturing and services sector with rapid growth in business process outsourcing (BPO) and shares services centres (SSC) 24th in the world in Ease of Doing Business ranking 2017 (World Bank) (SA ranked 74th) 13th position in the Global Real Estate Transparency Index and 1st in CEE (Ranked higher than Switzerland, Denmark or Japan). The top ten highly transparent real estate markets attract 75 percent of global investment. (SA ranked 25th) Regional leader in leader in the outsourced IT and BPO services. Krakow 1st position in Europe in the Emerging Outsourcing Destinations (9th in the world) Katowice Special Economic Zone is the best special economic zone in Europe according to Global Free Zones of the Year 2016 28th largest receiver of foreign direct investment according to World Investment Report 2017 Poland is seen as one of the most attractive locations in the world for professional services It is anticipated that the growth in jobs and hence consumption will continue thanks to the levels of FDI and investors entering the market As part of the acceleration of an established trend, in the aftermath of Brexit, Poland is well placed to benefit as companies in the UK consider transferring part or all of their operations Poland, due to the myriad of factors discussed, is a preferred destination The stability and liquidity of the Polish market will continue to attract investment This together with solid economic growth fundamentals should be reflected in the real estate market The probability of yield compression in line with convergence with developed Europe will provide an opportunity to increase asset values

Polish macroeconomics POLAND VS SOUTH AFRICA Poland South Africa Population 38 million 56 million GDP per capita (PPP, current international dollar) $ 27,764 $ 13,225 GDP % Change Y/Y (2016) 2.7% 0.3% GDP growth forecast 3.7% 0.8% Global GDP ranking (2016) 23 38 Growth in GDP per capita ($) 30 000 25 000 20 000 15 000 10 000 5 000 0 Debt / GDP ratio (2016) 54.2% 50.5% Reference rate / Repo rate 1.50% 6.75% CPI y/y 1.7% 4.6% 10yr bond rate 3.32% 8.58% Unemployment rate (2016) 6.1% 26.7% Credit ratings Poland South Africa S&P Long term: BBB+ Outlook stable Long term: BB+ Outlook negative 46 Moody s A2 Outlook: stable Baa3 Outlook: negative Fitch Long term: A- Outlook: stable Long Term: BB+ Outlook: stable

EUR million EUR million Volume (EUR milion) EUR millions Investment Market FOCUS ON REAL ESTATE INVESTMENT Investment volume by sector in Poland (EUR million) High investors activity, driven mostly by portfolio transactions 5 000 4 000 3 000 2 000 1 000 0 Considering the ongoing transactions, the end-year volume is forecasted to be close to EUR 4.5bn Despite relatively low investment volume recorded in H1 2017 the second half of the year is expected to boom with a few large transactions which will finalise by year end Yield compression on office and retail since 2014 and a stabilisation at 5.25-5.50% since 2016 Offices Retail Logistics Other Forecast Investment volume by region of origin in Poland 5 000 4 000 3 000 2 000 1 000 Top investors by volume of transactions finalised between 2015 H1 2017 1 250 1 000 750 500 250 0 0 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 Domestic EU US AsiaPac Middle East South Africa Other 47 Investment volume* in CEE 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 CE (excl. Poland) Poland Eastern Europe (excl. Russia) *All types of properties, based on RCA data. Source: Savills, RCA Prime office & retail yields in Poland 8.00% 7.00% 6.00% 5.00% 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 Warsaw office Retail

OUTSTANDING FUNDAMENTALS AS LEADING CEE ECONOMY The largest country and market in the CEE region Largest EU development fund beneficiary: 105.8bn allocated 2014-2020 Outstanding macroeconomic conditions Poland accoutns for 46% of the region s consumer spending Recorded a 123% increase between 2000 and 2016 A further 26% increase forecasted between 2016 and 2020 This has been largely driven by consistent growth in employment and stable inflation levels Highly attractive real estate fundamentals Solid market liquidity in Poland 48

OUTSTANDING FUNDAMENTALS AS LEADING CEE ECONOMY Rapid increase in consumer expenditure The highest GDP growth in CEE Underpinned by significant further wealth convergence potential to the EU Still offering attractive yield spread despite stablity Most attractive market in CEE for total real estate investment with volumes reaching 4bn in 2015 thereof c. 1,273m for office and c. 2,261m retail. In 2016 to date total investment volume in Poland across all sectors amounted to c. 4,540m, thereof c. 1,800m for office and c. 1,958m for retail Large, stable and liquid real estate market in the focus of international investors who represented over 95% of real esate investment volumes in 2015 & 2016 49 Although Warsaw still remains the largest retail market followed by other large agglomerations such as Katowice Agglomeration, Krakow, Tri-City, Lodz, Poznan, Wroclaw and Szczecin, smaller cities are also gaining popularity among investors.

Transformational 692m Retail Portfolio Acquisition. December 2017