1
Echo Polska Properties N.V.
(Incorporated in the Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
Common Code: 148164843
(“EPP”or “the company”)
PROSPECTUS
This prospectus has been prepared under Part IV of the Luxembourg law on prospectus securities dated July 10,
2005, as amended, for the purpose of an admission of 514 529 131 ordinary shares to the Official List and to
trading on the Euro MTF market of the LuxSE. The prospectus cannot be used for any other purpose.
The definitions and interpretations commencing on page 14 of this prospectus have been used on these cover
pages.
This prospectus has been prepared and issued in terms of the LuxSE Rules and Regulations and in respect of the
listing of EPP’s ordinary shares on the Euro MTF market of the LuxSE on Tuesday, 30 August 2016. Upon the
listing on the LuxSE:

the authorised share capital of the company comprises 2,572,645,659 ordinary shares of EUR 0.81 each and
1 preference share of EUR 0.81;

the issued share capital of the company comprises 514 529 131 ordinary shares of EUR 0.81 each, listed on
the LuxSE, and 1 preference share of EUR 0.81, not listed on any stock exchange; and

there are no treasury shares in issue.
Following the listing of the company’s ordinary shares on the LuxSE, EPP will undertake a private placement to
raise the Rand equivalent of approximately EUR 100 million, with the right to upscale depending on demand, by
way of an offer for subscription to invited investors only for approximately 71.5 million ordinary shares in the
share capital of the company, at an issue price, payable in Rand, to be determined by demand and at a
EUR:ZAR exchange rate to be hedged by the company and as notified by the company to investors following
the close of the offer for subscription on Tuesday, 6 September 2016, and for which an indicative issue price of
EUR 1.45 per ordinary share has been used in this prospectus. The company has the right to upscale the number
of shares issued and capital raised if supported by investor demand. The salient dates are as follows:
2
Proposed listing of the ordinary shares on the LuxSE on
Opening date of the private placement at 09:00 on
Closing date of the private placement at 12:00 on
Results of the private placement released on SENS and on the LuxSE
website on
Results of the private placement published in the press on
Proposed listing of the ordinary shares (including those ordinary shares
issued pursuant to the private placement) on the JSE from the
commencement of trade at 09:00 on
Proposed listing of the ordinary shares issued pursuant to the private
placement on the LuxSE from the commencement of trade at 09:00 on
2016
Tuesday, 30 August
Wednesday, 31 August
Tuesday, 6 September
Wednesday, 7 September
Thursday, 8 September
Tuesday, 13 September
Tuesday, 13 September
Notes
1
All references are to local dates and times in Luxembourg. These dates and times are subject to amendment. Any such amendment will
be released on the LuxSE website and SENS (once the JSE listing has occurred).
2
Invited investors must inform their CSDP or broker of their acceptance of the private placement shares in the manner and cut-off time
stipulated by their CSDP or broker.
Important points of note
Applications in terms of the private placement must be for a minimum subscription of R1 000 000 per investor
acting as principal.
Assuming that the private placement is fully subscribed, immediately after the private placement and the listing
on the JSE:

the authorised share capital of the company comprises 2,572,645,659 ordinary shares of EUR 0.81 each and
1 preference share of EUR 0.81;

the issued share capital of the company will comprise approximately 585 999 168 ordinary shares of EUR
0.81 each (all of which will be listed on the LuxSE and the JSE) and 1 preference share of EUR 0.81 (not
listed on any stock exchange); and

there will be no treasury shares in issue.
At the date of the LuxSE listing the anticipated market capitalisation of the company should be approximately
EUR 416 768 596.11. At the date of the JSE listing, assuming the private placement is fully subscribed for, the
anticipated market capitalisation of the company should be approximately EUR 849 698 793.60.
On listing, all EPP ordinary shares will rank pari passu in respect of all rights. There are no convertibility or
redemption provisions relating to any of the ordinary shares offered in terms of the private placement. The
private placement shares will be issued in dematerialised form only. No certificated private placement shares
will be issued. There is no intention to extend a preference on allotment of private placement shares to any
particular company or group in the event of an over subscription of private placement shares in terms of the
private placement, however final allocations will be at the discretion of the directors. The JSE listing is not
subject to a minimum amount being raised in terms of the private placement. There will be no fractions of
private placement shares offered in terms of the private placement. The proceeds of the private placement will
be used by EPP to settle the costs associated with the private placement and the listings on the LuxSE and the
JSE, as well as to pay advisory fees and partially fund the purchase of five additional properties that form part of
the acquisition portfolio.
The private placement has been underwritten up to an aggregate amount of EUR 100 million. Save for the
underwriting agreement, as at the last practicable date, the company has not received any binding subscription
commitments.
The JSE is expected to grant EPP a primary listing of all of its issued ordinary shares in the “Real Estate –Real
Estate Holdings and Development” sector on the Main Board of the JSE, under the abbreviated name:
3
“PolskProp”, JSE share code: EPP and ISIN: NL0011983374, which listing, if granted, will be effective from
the commencement of trade on Tuesday, 13 September 2016. This will be a foreign inward listing.
The listing on the JSE is subject to the company having satisfied the requirements of the JSE Listing
Requirements regarding the spread of shareholders, being public shareholders holding not less than 20% of the
issued ordinary share capital of the company at the point of listing on the JSE.
EPP ordinary shares will only be capable of being traded on the LuxSE and JSE in dematerialised form.
The directors, whose names are given in paragraph 4 of this prospectus, collectively and individually, accept full
responsibility for the accuracy of the information given herein and certify that, to the best of their knowledge
and belief, no facts have been omitted which would make any statement false or misleading, and that all
reasonable enquiries to ascertain such facts have been made and that this prospectus contains all information
required by law and the LuxSE Rules and Regulations.
Warning statement
Potential investors must be advised of the risk of investing in an entity listed on the Euro MTF market. The Euro
MTF market is not an EU-Regulated Market, as defined in the European Directive 2004-39-EC of the European
Parliament and of the Council of 21 April 2004 on markets in financial instruments, and is outside the scope of
certain EU regulations and directives such as Regulation (EC) No 1606/2002 of the European Parliament and of
the Council of 19 July 2002 on the application of international accounting standards, Directive 2004/109/EC of
the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency
requirements in relation to information about issuers whose securities are admitted to trading on a regulated
market and Directive 2008/11/EC of the European Parliament and of the Council of 11 March 2008 amending
Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to
trading. It must be noted, however, that the Euro MTF market falls within the scope of Regulation (EC)
596/2014 on market abuse and the related Directive 2014/57/EU on criminal sanctions for market abuse setting
out criminal sanctions for market abuse.
All potential investors should also carefully consider the entire contents of this prospectus and in particular the
risk factors outlined in Section Five before deciding whether or not to subscribe for ordinary shares in the
company. There may be risks of which the directors are not aware. Investors should consider carefully whether
investment in EPP is suitable for them, in the light of their personal circumstances and the financial resources
available to them.
In this prospectus, unless otherwise stated, an indicative exchange rate of EUR1.00:ZAR15.00 has been used.
Corporate advisor, bookrunner and JSE sponsor
LuxSE listing agent
Independent reporting accountant and auditors
Independent property valuer
Legal advisor as to Dutch law
Legal advisor as to South Africa law
4
Date of issue: Tuesday, 30 August 2016
This prospectus is available in English only. Copies of this prospectus may be obtained during normal business
hours on business days from Tuesday, 30 August 2016 for as long as the ordinary shares are listed on the LuxSE
at the following addresses, as well as on the company’s website at www.echo-pp.com:

Echo Polska Properties N.V.
Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands

Java Capital Proprietary Limited
6A Sandown Valley Crescent, Sandown, Sandton, 2196

M Partners
56, rue Charles Martel L-2134, Luxembourg

Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
5
CORPORATE INFORMATION
Registered office
(Registration number 64965945)
Prins Bernhardplein 200
1097 JB Amsterdam
The Netherlands
Company secretary
Rafal Kwiatkowski
(Master of Laws)
al. Solidarnosci 36
25-323 Kielce
Poland
(Postal address as above)
Corporate advisor and bookrunner
Java Capital Proprietary Limited
(Registration number 2002/031862/07)
6A Sandown Valley Crescent
Sandown
Sandton, 2196
(PO Box 2087, Parklands, 2121)
South Africa
JSE sponsor
Java Capital Trustees and Sponsors Proprietary
Limited
(Registration number 2006/005780/07)
6A Sandown Valley Crescent
Sandown
Sandton, 2196
(PO Box 2087, Parklands, 2121)
South Africa
LuxSE listing agent
M Partners
56, rue Charles Martel L-2134
Luxembourg
(Postal address as above)
Independent property valuer
Savills Advisory Services Limited
(Registration number 06215875)
33 Margaret Street
London W1G 0JD
United Kingdom
(Postal address as above)
Dutch Statutory Auditors
Ernst & Young Accountants LLP
(Registration number 13000742)
Cross Towers
Antonio Vivaldistraat 150
1083 HP Amsterdam
(Postal address as above)
The Netherlands
JSE Accredited Auditors
Ernst & Young Inc.
(Registration number 2005/002308/21)
102 Rivonia Road
Sandton, 2196
Johannesburg
(Private Bag X14, Sandton, 2146)
South Africa
Independent reporting accountants
Ernst & Young Inc.
(Registration number 2005/002308/21)
102 Rivonia Road
Sandton
Johannesburg
(Private Bag X14, Sandton, 2146)
South Africa
Legal advisor as to Dutch law
Loyens & Loeff N.V.
Fred. Roeskestraat 100
1076 ED Amsterdam
(Postbus 71170, 1008 BD Amsterdam)
The Netherlands
Legal advisor as to South African law
Cliffe Dekker Hofmeyr Inc.
(Registration number 2008/018923/21)
11 Buitengracht Street
Cape Town, 8001
(PO Box 695, Cape Town, 8000)
South Africa
Bankers
Cooperative Rabobank U.A.
(Registration number 30046259 0000)
Croeselaan 18
3521 CB Utrecht
The Netherlands
(Postal address as above)
6
South African transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
South Africa
LuxSE paying agent, registrar and transfer agent
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
South Africa
Place and date of incorporation
Incorporated in Amsterdam on 4 January 2016
Forward-looking statements
This prospectus includes forward-looking statements. Forward-looking statements are statements including, but
not limited to, any statements regarding the future financial position of the group and its future prospects. These
forward-looking statements have been based on current expectations and projections about future results which,
although the directors believe them to be reasonable, are not a guarantee of future performance.
7
TABLE OF CONTENTS
The definitions and interpretations commencing on page 14 of this prospectus have been used in the following
table of contents.
Page
Corporate information
Salient features
Important dates and times
Definitions and interpretations
Inside front cover
9
13
14
Prospectus
Section One –Information on EPP
1.
Overview and background
2.
Investment case
3.
Growth opportunities and prospects
4.
Directors, office holders and material third parties
5.
Share Incentive Scheme
6.
Major and controlling shareholders
7.
Tax considerations
22
24
39
42
48
48
50
Section Two –Details of the property portfolio
8.
Summary of the initial property portfolio
9.
Overview of the initial property portfolio
10.
Analysis of the initial property portfolio
11.
Summary of the enlarged property portfolio (including the acquisition portfolio)
12.
Overview of the acquisition portfolio
13.
Analysis of the enlarged property portfolio (including the acquisition portfolio)
14.
Valuation reports
15.
Property, assets and business undertakings acquired or to be acquired
16.
Vendors
17.
Property, assets and business undertakings disposed or to be disposed of
51
51
53
55
55
56
57
57
57
59
Section Three –Details of the private placement
18.
Purpose of the private placement
19.
Salient dates and times
20.
Particulars of the private placement
21.
Application of proceeds
22.
Minimum subscription
23.
Listing statement
60
60
60
64
64
64
Section Four –Financial information
24.
Forecast statements of comprehensive income
25.
Consolidated pro forma statement of financial position
26.
Historical financial information
27.
Share capital
28.
Adequacy of capital
29.
Dividends
30.
Material commitments, lease payments and contingent liabilities
31.
Material borrowings
32.
Loans receivable
33.
Material changes
65
65
65
65
66
66
67
67
67
68
Section Five –Additional material information
34.
Risks
35.
Material contracts
36.
Commissions paid or payable
69
72
72
8
37.
38.
39.
40.
41.
42.
43.
Government protection and investment encouragement law
Corporate governance
Litigation statement
Directors’responsibility statement
Incorporation by reference
Preliminary expenses and issue expenses
Documents available for inspection
Annexure 1
Annexure 2
Annexure 3
Annexure 4
Annexure 5
Annexure 6
Annexure 7
Annexure 8
Annexure 9
Annexure 10
Annexure 11
Annexure 12
Annexure 13
Annexure 14
Annexure 15
Annexure 16
Annexure 17
Annexure 18
Annexure 19
Annexure 20
Annexure 21
Annexure 22
Group structure
Details of major subsidiaries
Information on the directors, management and material third parties
Current and past directorships and partnerships
Salient features of the service contracts of executive directors
Extracts from the Articles of Association
Material contracts
Details of the initial property portfolio
Acquisition portfolio
Independent valuer’s summary valuation report
Details of acquisitions and vendor
ROFO projects
Forecast statements of comprehensive income of the EPP group
Independent reporting accountants’limited assurance report on the forecast
statements of comprehensive income of the EPP group
Consolidated pro forma statement of financial position of the EPP group
Historical financial information of EPP
Independent reporting accountants’ report on the historical financial
information of EPP
Group accounting policies
Capital structure
Material borrowings
Corporate governance statement
Tax considerations
72
72
72
73
73
73
74
75
76
77
81
84
86
94
123
125
127
150
152
153
157
160
167
171
172
180
190
194
200
9
SALIENT FEATURES
The information set out in this section of the prospectus is an overview only and is not intended to be
comprehensive. It should be read in conjunction with the information contained in other sections of this
prospectus in order to gain a comprehensive overview of the EPP group.
The definitions and interpretations commencing on page 14 of this prospectus have been used in this section.
1.
OVERVIEW AND BACKGROUND
EPP is a real estate company that indirectly owns a portfolio of prime retail and office assets throughout
Poland, a dynamic CEE economy with a highly attractive real estate market.
EPP was incorporated in the Netherlands as a private limited liability company (besloten vennootschap
met beperkte aansprakelijkheid) under Dutch law on 4 January 2016 and converted to a public company
under Dutch law (naamloze vennootschap) on 12 August 2016.
On 1 June 2016, and pursuant to the Redefine transaction, Redefine acquired a 75% stake in EPP’s
issued ordinary share capital, subsequently reducing its shareholding to just under 50% through the onsale of EPP ordinary shares to a consortium of selected co-investors. Since the date of the on-sale,
Redefine holds the EPP ordinary shares as nominee on behalf of the co-investors. The remaining
approximately 25% of EPP’s issued ordinary shares is held by Echo Prime Assets B.V., a wholly owned
subsidiary of Echo, a recognised market leader in Polish commercial and residential property
development and investment.
EPP will be listed on the Euro MTF market of the LuxSE on Tuesday, 30 August 2016, which constitutes
a primary listing and anticipates that it will obtain a dual primary listing on the LuxSE and the JSE on or
around Tuesday, 13 September 2016.
The first year end of the company is 31 December 2016, the financial year of the company is the calendar
year.
2.
PROSPECTS
EPP has a high quality portfolio of Polish commercial properties with attractive and secure yields,
tenanted by a diverse range of primarily blue-chip global clients. With the predominantly retail portfolio
located in one of the most dynamic and fastest growing economies in Europe, experienced management
and well reputed strategic partners, EPP represents a compelling investment.
Already the largest listed yielding Polish property company, EPP’s goal is to become the dominant retail
landlord in Poland while targeting sustainable double digit annual growth in dividends per share in the
short and medium term through a combination of organic and acquisitive growth.
Organic growth represents growth opportunities that are already built into the EPP portfolio and include
(i) filling of vacancies in newly developed properties; (ii) 22,000m2 of retail extensions to two of EPP’s
existing retail centres that are currently underway; (iii) the 25% stake in ten ROFO assets acquired by
EPP (which entitles EPP to a 25% share in development proceeds as well as a first right of offer to
acquire the ROFO assets); (iv) EPP’s 70% stake in the Warsaw retail development one of the last and
best sites for retail development in Warsaw with a planned 110,000m2 retail development.
The organic growth opportunities already built into the EPP portfolio are in addition to the potential for
increasing retail rentals through a combination of the current high levels of retail sales growth in Poland
(at 6.5% year on year in June 2016) and the active asset management of EPP’s portfolio of dominant
regional shopping centres by a strongly incentivised, dedicated and proven executive management team
who intends leveraging EPP’s platform with retail tenants to achieve higher rentals - a strategy that will
be further enhanced by the development of the Warsaw retail development site.
10
In addition to organic growth, EPP’s executive management team has access to numerous earnings
accretive acquisitive opportunities, including through its strategic relationships with Echo, a recognised
market leader in Polish commercial and residential property development and investment, and Griffin, a
leading, dynamically developing investor operating in the CEE real estate market. These relationships
provide the company with a significant advantage in the identification and sourcing of high quality real
estate assets.
EPP’s acquisition strategy will be focused on acquiring retail assets in strategic locations, allowing the
company to further leverage its portfolio and platform with retail tenants. In the office sector, EPP may
selectively acquire high quality, well located office assets in major Polish cities, let to strong
international and domestic tenants where the management team believes there is scope for further value
uplift. EPP will pro-actively trade office assets to ensure that its portfolio remains balanced and
competitive in the long term while aiming to maintain a weighted average unexpired lease term in excess
of four years. EPP will also closely monitor the logistics and fulfilment centre sectors for acquisition
opportunities that meet its strategic criteria.
In addition to the opportunities for growth in distributions per share, the company believes that there are
significant opportunities for growth in underlying net asset value per EPP share. The Warsaw retail
development, the ROFO assets and the extensions to certain existing retail assets all represent the
potential for (in some cases substantial) enhancements in underlying net asset value of EPP given the
costs at which they are being acquired and/or developed relative to the anticipated valuation yields.
Given the strength and growth of the Polish economy (as well as the potential upgrading of Poland by
FTSE from advanced emerging to developed market status in the near future) the company also believes
that there is the potential for further compression in Polish commercial property yields, which would in
turn result in an increase in the value of the EPP portfolio.
EPP’s listing on the LuxSE and the JSE is anticipated to provide it with significantly improved access to
expansionary capital and provide existing and future shareholders with an opportunity to invest in a
highly-attractive European economy.
3.
DETAILS OF THE PRIVATE PLACEMENT
A private placement to raise the Rand equivalent of approximately EUR 100 million, with the right to
upscale depending on demand, will be undertaken by way of an offer, to invited investors only, for
subscription for approximately 71.5 million ordinary shares in the share capital of the company, at an
issue price, payable in Rand, to be determined by demand and at a EUR:ZAR exchange rate to be hedged
by the company and as notified by the company to investors following the close of the offer for
subscription on Tuesday, 6 September 2016, and for which an indicative issue price of EUR1.45 per
ordinary share has been used.
Invited investors may apply to subscribe for private placement shares that will be listed in either the
European market or the South African market. Invited investors who wish to apply for private placement
shares to be listed in the European market are advised to contact the bookrunner for further instructions.
There are no convertibility or redemption provisions relating to the private placement shares. Private
placement shares will be issued in dematerialised form only. No fractions of private placement shares
will be issued.
4.
UNDERWRITE AND SUBSCRIPTION COMMITMENTS
In terms of the underwriting agreement, the private placement has been underwritten up to an aggregate
maximum amount of EUR 100 million at EUR1.45 per share, by the following underwriters and in the
following amounts:
11

Redefine –EUR 50 000 000;

CV Cinque Limited –EUR 11 194 030;

Anchor Capital Proprietary Limited –EUR 13 805 970;

Oxiana Limited –EUR 17 666 667;

Argon Holding Inc. –EUR 7 333 333.
Each underwriter has undertaken to subscribe for its pro rata portion of the applicable shares offered but
not subscribed for in terms of the private placement, subject to the above maximum commitment. The
underwriters will subscribe for the applicable available shares in proportion to their respective
commitments.
Each underwriter has submitted a sworn affidavit to EPP confirming that it has the financial resources to
meet its commitments in terms of the underwriting agreement, and the directors have made due and
careful enquiry to confirm that each underwriter is able to meet its commitments in terms of the
underwriting agreement.
The bookrunner will, solely on behalf of the company, be mandated to offer certain potential investors
that meet minimum pre-commitment requirements a “pre-commitment fee”, provided that the aggregate
amount of all pre-commitment fees paid to all qualifying investors shall not exceed an amount of
EUR835 000 (the “pre-investment commitments”).
As at the last practicable date, no pre-investment commitments have been received.
The salient features of the underwriting agreement, including details of the underwriting fee payable to
the underwriters, are set out in Annexure 7.
5.
LUXSE LISTING
Upon the initial listing of the shares on the Euro MTF market of the LuxSE:
6.

the authorised share capital of the company comprises 2,572,645,659 ordinary shares of EUR 0.81
each and 1 preference share of EUR 0.81;

the issued share capital of the company comprises 514 529 131 ordinary shares of EUR 0.81each,
listed on the LuxSE, and 1 preference share of EUR 0.81, not listed on any stock exchange; and

there are no treasury shares in issue.
STATEMENT AS TO LISTING ON THE JSE
The JSE is expected to grant EPP a primary listing of all of its issued ordinary shares on the JSE in the
“Real Estate –Real Estate Holdings and Development”sector on the Main Board of the JSE under the
abbreviated name: “PolskProp”, JSE share code: EPP and ISIN: NL0011983374, which listing, if
granted, will be effective from the commencement of trade on Tuesday, 13 September 2016. This will be
a foreign inward listing. The listing on the JSE is subject to the company having satisfied the
requirements of the JSE Listing Requirements regarding the spread of shareholders, being public
shareholders holding not less than 20% of the issued ordinary share capital of the company at the point of
listing on the JSE.
Once listed on the JSE, the company will have a dual primary listing on the Euro MTF market of the
LuxSE and the Main Board of the JSE.
7.
FURTHER COPIES OF THE PROSPECTUS
12
Copies of this prospectus may be obtained during normal business hours on business days from Tuesday,
30 August 2016 for as long as the ordinary shares are listed on the LuxSE at the following addresses, as
well as on the company’s website at www.echo-pp.com:

Echo Polska Properties N.V.
Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands

Java Capital Proprietary Limited
6A Sandown Valley Crescent, Sandown, Sandton, 2196

M Partners
56, rue Charles Martel L-2134, Luxembourg

Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
13
IMPORTANT DATES AND TIMES1
The definitions and interpretations commencing on page 14 of this prospectus have been used below:
2016
Prospectus released on the LuxSE website on
Tuesday, 30 August
Listing of ordinary shares and commencement of trading on the LuxSE
on
Tuesday, 30 August
Opening of the private placement at 09:00 on
Wednesday, 31 August
Abridged pre-listing statement for the JSE listing released on SENS and
the LuxSE website on
Wednesday, 31 August
Abridged pre-listing statement for the JSE listing published in the press
on
Thursday, 1 September
Closing of the private placement at 12:002 on
Tuesday, 6 September
Results of the private placement released on SENS and the LuxSE
website on
Wednesday, 7 September
Notification of allotments to successful invited investors from
Wednesday, 7 September
Results of the private placement published in the press on
Thursday, 8 September
Listing of ordinary shares and the commencement of trading on the JSE
at 09:00 on
Tuesday, 13 September
Listing of the ordinary shares issued pursuant to the private placement
on the LuxSE and the commencement of trading at 09:00 on
Accounts at CSDP or broker updated and credited in respect of
dematerialised shareholders on3
Tuesday, 13 September
Tuesday, 13 September
Notes
1 All references are to local dates and times in Luxembourg. These dates and times are subject to amendment.
Any such amendment will be released on the LuxSE website and SENS.
2 Invited investors must inform their CSDP or broker of their acceptance of the private placement shares in the
manner and cut-off time stipulated by their CSDP or broker.
3 CSDPs effect payment on a delivery-versus-payment basis.
14
DEFINITIONS AND INTERPRETATIONS
In this prospectus and the annexures hereto, unless inconsistent with the context, an expression which denotes
one gender includes the other genders, a natural person includes a juristic person and vice versa, the singular
includes the plural and vice versa and the expressions set out in the first column bear the meaning assigned to
them in the second column.
Unless inconsistent with or contrary to the context, any reference to “EPP’s portfolio”, “EPP’s management”,
“EPP’s stake in”, “EPP’s designee” or “EPP’s rights” shall be interpreted to mean the “portfolio”,
“management”, “stake in”, “designee”or “rights”, as the case may be, of the EPP group or any entity forming
part of the EPP group. As dictated by the context, any similar term shall be interpreted mutatis mutandis.
“acquisition portfolio”
those properties identified in Annexure 9, being the five
additional properties (some with multiple phases) to be acquired
by EPP in terms of the acquisition agreements;
“acquisition agreements”
collectively, the Warsaw retail development acquisition
agreement and the ROFO project acquisition agreement;
“AIFMD”
Directive 2011/61/EU
Managers;
“advisory agreements”
collectively, the East Management advisory agreement and the
Griffin advisory agreement;
“articles of association”
the articles of association of the company, extracts of which are
set out in Annexure 6;
“auditors”
collectively:
(i)
Ernst & Young Accountants LLP (Registration number
13000742), a limited liability partnership registered
with the Chamber of Commerce in the Netherlands, in
its capacity as statutory auditor, and
(ii)
Ernst & Young Inc. (Registration number
2005/002308/21), a personal liability company
incorporated in accordance with the laws of South
Africa, in its capacity as JSE accredited auditor,
full details of which are set out in the “Corporate Information”
section;
“Blackview”
Blackview Holdings Limited (Registration number 1906166), a
company incorporated in accordance with the laws of the
British Virgin Isles and a wholly-owned subsidiary of Serengeti
Trust;
“board”or “directors”or “board of
directors”
the board of directors of EPP, particulars of which are set out in
Annexure 3;
“Brexit”
Brexit is an abbreviation for “British exit”which refers to the
June 23, 2016 referendum where British citizens voted to exit
the EU;
“business day”
a day (other than a Saturday or Sunday or public holiday in the
Netherlands, South Africa or Luxembourg) when banks are
generally open in the Netherlands, South Africa and
Luxembourg for normal business, as the context may require;
on
Alternative
Investment
Fund
15
“Camas Investments LLC”
Camas Investments sp. z o.o.. (Company number 0000541969),
a company organised and existing under the laws of Poland and
a wholly-owned subsidiary of EPP;
“Camas Investments LP”
Camas Investments sp. z o.o. S.K. (limited partnership)
(Partnership number 0000423211), a partnership organised and
existing under the laws of Poland and a wholly-owned
subsidiary of EPP;
“Caporia”
Caporia Limited (Registration number 1812041), a company
incorporated in accordance with the laws of the Britain Virgin
Islands, the majority shareholders of which are CVC Poland
Limited and Astoria Investments Limited);
“CEE”
Central and Eastern Europe;
“Clearstream”
a clearing and settlement environment for security transactions
to be settled and transfer of ownership to be recorded
electronically, managed by Clearstream Banking S.A.;
“common monetary area”
collectively, South Africa, the Kingdoms of Swaziland and
Lesotho and the Republic of Namibia;
“CSDP”
a Central Securities Depository Participant in South Africa
appointed by a shareholder for purposes of, and in regard to,
dematerialisation, and to hold and administer securities or an
interest in securities on behalf of a shareholder;
“dematerialisation”or “dematerialised” the process whereby ownership of the shares is electronically
recorded and the shares are recorded in the sub-register of
shareholders maintained by a CSDP or broker;
“dematerialised shareholders”
shareholders who hold dematerialised shares;
“dematerialised shares”
ordinary shares having been dematerialised and incorporated
into the Strate system, title to which is not represented in any
other way than by the sub-register of shareholders maintained
by a CSDP or broker;
“development services agreements”
collectively, the development services agreements entered into
between Echo and each of Galaxy – Projekt Echo – 106 sp. z
o.o. sp.k. and Outlet Park –Projekt Echo –126 sp. z o.o. sp.k.
(both wholly-owned subsidiaries of EPP) on 1 June 2016, in
terms of which Echo will render development and leasing
services in respect of the extensions, as more fully described in
paragraph 3.2 below, the salient terms of which are set out in
Annexure 7;
“East Management”
East Management sp. z o.o. sp.k. (Company number
0000561003), a company organised and existing under the laws
of Poland;
“East Management advisory
agreement”
the advisory agreement entered into between EPP, East
Management and Camas Investments LLC on 1 June 2016, and
amended on 1 August 2016 in terms of which East Management
renders certain advisory services to Camas Investments LLC, as
more fully described in paragraph 2.6 below, the salient terms of
which are set out in Annexure 7;
“Echo”
Echo Investment S.A.
(Company number 0000007025), a
16
company organised and existing under the laws of Poland and a
strategic investor in EPP;
“Echo Prime Assets B.V.”or “EPA”
Echo Prime Assets B.V., a private limited liability company
(besloten vennootschap met beperkte aansprakelijkheid) under
Dutch law, registered with the Chamber of Commerce in the
Netherlands under number 66260701, being a wholly owned
subsidiary of Echo through which Echo holds its shares in EPP;
“enlarged portfolio”or “enlarged
property portfolio”
EPP’s portfolio of 21 properties following the purchase of the
acquisition portfolio, comprising, collectively, the initial
portfolio and the acquisition portfolio;
“EPP”or “the company”
Echo Polska Properties N.V. (Company number 64965945), a
public company under Dutch law (naamloze vennootschap),
having its official seat (statutaire zetel) in Amsterdam, the
Netherlands, the issued ordinary share capital of which is listed
on the Euro MTF market of the LuxSE and is to be listed on the
JSE, full details of which are set out in the “Corporate
Information”section;
“EPP Facility Management”
EPP Facility Management Minster Investments Sp. z o.o. S.K.,
a Polish limited partnership fully controlled by EPP;
“EPP group”or “the group”
collectively, EPP
Annexure 1;
“EPP Property Management”
EPP Property Management Minster Investments Sp. z o.o. S.K.,
a Polish limited partnership fully controlled by EPP;
“EU”
the European Union;
“EUR”or “Euro”
the currency used by the Institutions of the European Union and
the official currency of the European Union;
“EURIBOR”
Euro Interbank Offer Rate;
“Exchange Control Regulations”
the Exchange Control Regulations of South Africa issued under
the Currency and Exchanges Act No 9 of 1933, as amended;
“extensions”
means planned extensions to the Galaxy Shopping Centre,
Outlet Park Phase III and Outlet Park Phase IV;
“FIZ acquisition agreements”
the investment certificates transfer agreements entered into
between Echo and EPP on 17 February 2016, in terms of which
Echo transferred all investment certificates in the FIZs to EPP,
thereby effectively transferring ownership of the initial property
portfolio to EPP, the salient terms of which are set out in
Annexure 7;
“FIZs”
Forum XXIX and Forum XXXIV, each a Polish closed-end
investment fund and each a wholly-owned subsidiary of EPP,
and “FIZ” shall mean any one of them, as the context may
require;
“Forum”
Forum TFI S.A., the fund manager (Towarzystwo Funduszy
Inwestycyjnych) of the FIZs;
and
its
subsidiaries,
as
detailed
in
17
“GDP”
gross domestic product;
“GLA”
gross lettable area, being the total area of a property that can be
rented to a tenant;
“Griffin”
Griffin Real Estate sp. z o.o. (Company number 0000236246), a
company organised and existing under the laws of Poland and a
strategic investor in Echo;
“Griffin advisory agreement”
the advisory agreement entered into between EPP, Griffin and
Camas Investments LLC on 1 June 2016, and amended on 1
August 2016,in terms of which Griffin renders certain advisory
services to Camas Investments LLC, as more fully described in
paragraph 2.6 below, the salient terms of which are set out in
Annexure 7;
“independent reporting accountants”
or “EY Inc.”
Ernst & Young Inc. (Registration number 2005/002308/21), a
personal liability company incorporated in accordance with the
laws of South Africa, full details of which are set out in the
“Corporate Information”section;
“independent property valuer”or
“Savills”
Savills Advisory Services Limited (Registration number
06215875), a company incorporated in accordance with the laws
of England and Wales, full details of which are set out in the
“Corporate information”section;
“initial properties”or “initial portfolio” collectively, the properties detailed in Annexure 8;
or “initial property portfolio”
“invited investors”
the financial institutions, selected private clients and selected
retail investors to whom the offer under the private placement
will be addressed and made;
“issue price”
the Rand equivalent of the Euro-denominated price per private
placement share, to be determined by demand and at a
EUR:ZAR exchange rate to be hedged by the company and as
notified by the company to investors following the close of the
offer for subscription on Tuesday, 6 September 2016, and for
which an indicative issue price of EUR 1.45 per ordinary share
has been used in this prospectus;
“IFRS”
International Financial Reporting Standards, as issued by the
International Accounting Standards Board;
“Java Capital”
collectively, Java Capital Proprietary Limited (Registration
number 2002/031862/07), in its capacity as corporate advisor
and bookrunner, and Java Capital Trustees and Sponsors
Proprietary Limited (Registration number 2006/005780/07), in
its capacity as sponsor, both private companies incorporated in
accordance with the laws of South Africa, full details of which
are set out in the “Corporate Information”section;
18
“JSE”
the Johannesburg Stock Exchange, being the exchange operated
by the JSE Limited (Registration number 2005/022939/06) and
licensed as an exchange under the Financial Markets Act No 19
of 2012, as amended in accordance with the laws;
“JSE listing”or “listing on the JSE”
the listing of the issued ordinary shares of the company in the
“Real Estate – Real Estate Holdings and Development”sector
on the Main Board of the JSE;
“JSE listing date”
the date on which the JSE listing is effective, expected from the
commencement of business on Tuesday, 13 September 2016;
“JSE Listings Requirements”
the Listings Requirements, as issued by the JSE from time to
time;
“King III”
the Code of Corporate Practices and Conduct in South Africa
representing principles of good corporate governance as laid out
in the King Report, as amended from time to time;
“last practicable date”
Friday, 26 August 2016;
“loan facility agreements”
collectively, the loan facility agreements entered into by EPP, as
more fully described in paragraph 3 below, the salient terms of
which are set out in Annexure 7;
“LuxSE”
the Luxembourg Stock Exchange;
“LuxSE listing”or “listing on the
LuxSE”
the listing of the issued ordinary shares of the company on the
Euro MTF market of the LuxSE, in terms of the LuxSE Rules
and Regulations and effective from Tuesday, 30 August 2016;
“LuxSE listing agent”
M Partners, a law firm regulated by the Barreau de Luxembourg,
incorporated in accordance with the laws of Luxembourg, full
details of which are set out in the “Corporate Information”
section;
“LuxSE Rules and Regulations”
the Rules and Regulations of the LuxSE governing, amongst
other things, the Euro MTF market;
“m2”
square metres;
“major subsidiary”
a major subsidiary as defined in the JSE Listings Requirements,
namely a subsidiary that represents 25% or more of the total
assets or revenue of the consolidated group;
“master lease agreements”
collectively, the master lease agreements entered into between
Echo (as tenant) and each of Galaxy –Projekt Echo –106 sp. z
o.o. sp.k. and Outlet Park –Projekt Echo –126 sp. z o.o. sp.k.
(both indirectly wholly-owned subsidiaries of EPP) (as
landlord) on 1 June 2016, relating to the lease of that part of the
extensions to the Galaxy Shopping Centre and Outlet Park
Phase III Shopping Centre that will be not be leased to tenants
on the date on which such extension is opened to clients, as
more fully described in paragraph 3 below, the salient terms of
which are set out in Annexure 7;
“Minster Investments”
Minster Investments sp. z o.o. sp.k. (limited partnership)
(Partnership number 0000552872), a partnership organised and
existing under the laws of Poland and a wholly-owned
subsidiary of EPP;
19
“NOI”
net operating income;
“OECD”
the Organisation for Economic Co-operation and Development;
“ordinary shares”or “EPP ordinary
shares”
ordinary shares of EPP, each with a par value of EUR 0.81;
“own-name dematerialised
shareholders”
shareholders holding dematerialised shares and who have
instructed their CSDP to hold their ordinary shares in their own
name on the sub-register of shareholders maintained by a CSDP
or broker in South Africa;
“Pivotal Global”
Pivotal Global Proprietary Limited (Registration number
2015/291941/07), a company incorporated in accordance with
laws of South Africa and a wholly-owned subsidiary of The
Pivotal Fund Limited (Registration number 2005/030215/06), a
public company incorporated in accordance with the laws of
South Africa, the issued share capital of which is listed on the
JSE;
“PLN”
Polish zloty, the lawful currency of Poland;
“preference share”
a non-convertible preference share of EPP, with a par value of
EUR 0.81, entitling Echo Prime Assets B.V. to profit
distributions referenced off the net operating income generated
by the extensions as determined post their completion, as more
fully detailed in Annexure 19, which preference share is held
by Echo Prime Assets B.V. (being a wholly owned subsidiary of
Echo) and which is not and will not be listed on any stock
exchange;
“press”
the Business Day newspaper in South Africa;
“private placement”
the private placement of the private placement shares, to raise
the Rand equivalent of up to approximately EUR 100 million at
an indicative issue price, payable in Rand, of EUR 1.45, as
more fully detailed in Section Three of this prospectus;
“private placement shares”
up to approximately 71.5 million ordinary shares, to be offered
and issued in terms of the private placement;
“promoter”
the parties responsible for the formation of a company and who
earn(s) a fee therefrom, in cash or otherwise, if any;
“the/this prospectus”
this prospectus dated 30 August 2016, including all annexures;
“R”or “Rand”or “ZAR”
South African Rand, the lawful currency of South Africa;
“Redefine”
Redefine
Properties
Limited
(Registration
number
1999/018591/06), a public company incorporated in accordance
with laws of South Africa and registered as a real estate
investment trust, the issued share capital of which is listed on
the JSE;
20
“Redefine transaction”
the acquisition by Redefine of a 75% stake in EPP’s issued
ordinary share capital, effective on 1 June 2016, it being
recorded that such stake has subsequently been reduced to just
under 50%, through the on-sale of EPP ordinary shares to a
consortium of selected co-investors;
“Redefine transaction agreement”
the share purchase and subscription agreement concluded
between Echo, Redefine and EPP on or about 1 March 2016 and
amended in terms of a deed of amendment dated 1 June 2016,
relating to, inter alia, the Redefine transaction, the salient terms
of which are set out in Annexure 7;
“ROFO agreements”
collectively, the ROFO office agreement and the ROFO retail
agreement;
“ROFO office agreement”
the ROFO office agreement entered into between Echo, EPP
and Minster Investments on 1 June 2016, in terms of which
Echo grants EPP a right of first offer to acquire the office
ROFO projects, the salient terms of which are set out in
Annexure 7;
“ROFO project acquisition
agreements”
the binding term sheet concluded by EPP and Echo on 5
July 2016, in terms of which EPP will acquire the O3 Business
Campus Phase I, A4 Business Park Phase III, Tryton Business
House and Symetris Business Park Phase I, being the properties
numbered 2 to 5 in Annexure 9, the salient terms of which are
set out in Annexure 7;
“ROFO projects”
means the buildings and other structures detailed in Annexure
12;
“ROFO retail agreement”
the ROFO retail agreement entered into between Echo, EPP and
Camas Investments LP on 1 June 2016, in terms of which Echo
grants EPP a right of first offer to acquire the retail ROFO
project, the salient terms of which are set out in Annexure 7;
“ROFO SPV”
a company or partnership that is the direct holder (i.e. owner
and/or perpetual usufruct holder) of a property on which a given
ROFO project is being developed at the relevant time;
“SA Companies Act”
the South African Companies Act, 2008 (Act 71 of 2008), as
amended;
“shareholders”or “EPP shareholders”
holders of shares, as recorded in the share register;
“shares”
ordinary shares and/or the preference share, as the context may
require;
“SARB”
South African Reserve Bank;
“SENS”
Stock Exchange News Service of the JSE;
“South Africa”
the Republic of South Africa;
“Strate”
Strate
Proprietary
Limited
(Registration
number
1998/022242/07), a private company incorporated in
accordance with the laws of South Africa and the electronic
clearing and settlement system used by the JSE to settle trades;
21
“subsidiaries”
the FIZs and other entities detailed in Annexure 1;
“transfer secretaries”or
“Computershare”
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07), a private company
incorporated in accordance with the laws of South Africa, full
details of which are set out in the “Corporate information”
section;
“underwriting agreement”
the agreement entered into between EPP and the underwriters,
in terms of which the underwriters have agreed to underwrite
the private placement up to an aggregate amount of EUR 100
million, which agreement constitutes a binding subscription
undertaking by the underwriters, further details of which are set
out in paragraphs 4 and 20.11 of the prospectus and the salient
terms of which are set out in Annexure 7;
“underwriters”
those entities identified as the underwriters in paragraphs 4 and
20.11 of this prospectus and “underwriter” refers to each of
such entities;
“vendors”
the vendors of the material assets purchased by the group since
the date of incorporation of the company (namely, the initial
portfolio) or proposed to be purchased (namely, the acquisition
portfolio);
“Warsaw
retail
acquisition agreement”
development
the binding term sheet concluded by EPP, Fidelin Development
sp. z o.o. sp.k. and Echo on 6 June 2016, in terms of which EPP
will acquire the Warsaw retail development site, the salient
terms of which are set out in Annexure 7;
“Warsaw retail development site”
the Warsaw retail development shopping centre, being the
property numbered 1 in Annexure 9, and surrounding
properties;
“WAULT”
weighted average unexpired lease term; and
“yield”
the distribution available to a holder of a share in any financial
year divided by the market price of that share.
22
Echo Polska Properties N.V.
(Incorporated in the Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
Common Code: 148164843
(“EPP”or “the company”)
Directors of the company
Hadley Dean (Chief executive officer)
Maciej Drozd (Chief financial officer)
Robert Weisz (Independent non-executive chairman)
Marek Belka (Independent non-executive director)
Marc Wainer (Non-executive director)
Andrew König (Non-executive director)
Maciej Dyjas (Non-executive director)
Nebil Senman (Non-executive director)
Dionne Hirschowitz (Independent non-executive director)
Andrea Steer (Independent non-executive director)
Peter Driessen (Independent non-executive director)
SECTION ONE - INFORMATION ON EPP
1.
OVERVIEW AND BACKGROUND
1.1.
Incorporation and nature of business
1.1.1.
EPP is a real estate company that owns a portfolio of 10 retail and 6 office assets
located throughout Poland, a dynamic CEE economy with a highly attractive real
estate market.
1.1.2.
EPP was registered and incorporated in the Netherlands as a private limited
liability company under Dutch law (besloten vennootschap met beperkte
aansprakelijkheid) on 4 January 2016 and converted to a public company under
Dutch law (naamloze vennootschap) on 12 August 2016.
23
1.2.
1.3.
1.1.3.
The official seat (statutaire zetel) of the company is Amsterdam, the
Netherlands, and the registered office address and postal address of the company
is set out in the “Corporate Information”section.
1.1.4.
The company’s first financial year end is 31 December 2016, and the financial
year is the calendar year
History
1.2.1.
EPP was incorporated with Echo as its sole shareholder.
1.2.2.
EPP acquired the initial property portfolio on 17 February 2016, through the
acquisition from Echo of all the investment certificates in the FIZs. The FIZs
indirectly own the initial properties through various special limited partnerships
and special purpose vehicles, as more fully set out in Annexure 1.
1.2.3.
On 1 June 2016, and pursuant to the Redefine transaction, Redefine acquired a
75% stake in EPP’s issued ordinary share capital, subsequently reducing its
shareholding to just under 50% through the immediate on-sale of ordinary shares
to a consortium of selected co-investors. Since the date of the on-sale, Redefine
holds the EPP ordinary shares as nominee on behalf of the co-investors. The
remaining approximately 25% of EPP’s issued ordinary shares continues to be
held by Echo, through its wholly-owned subsidiary, Echo Prime Assets B.V..
1.2.4.
The salient terms of both the FIZ acquisition agreements and the Redefine
transaction agreement are set out in Annexure 7.
Group structure
1.3.1.
Subsidiaries
The company has two major subsidiaries. The full name, place of incorporation,
date of incorporation, nature of business and the percentage held by EPP of each
major subsidiary, is set out in Annexure 2.
1.3.2.
Corporate structure of EPP’s group
1.3.2.1.
EPP does not directly hold any properties. Such properties are
held indirectly through the FIZs which are limited partners in
Luxembourg special purpose limited partnerships (the “Lux
SPVs”), which in turn are limited partners in Polish special
purpose vehicles (the “Polish SPVs”) that directly hold the
properties. The general partners of both the Lux SPVs and the
Polish SPVs are wholly owned subsidiaries of EPP. The detailed
corporate structure of EPP’s group is set out in Annexure 1.
1.3.2.2.
The FIZs in EPP’s group are managed by Forum, which acts as
the fund manager (Towarzystwo Funduszy Inwestycyjnych) of
such FIZs. The fee for the services of Forum is approximately less
than EUR 100,000 annually. Forum is responsible for portfolio
and risk management with respect to the FIZs (under the strict
control of the general meetings of the FIZs, which consist of
EPP), and manages the relationships between EPP, the Lux SPVs,
service providers (auditors, etc.), regulators and any contractors of
the FIZs. Forum is responsible for achieving the investments goals
of the FIZs and also takes full responsibility with respect to the
Polish Financial Supervision Authority. Generally, Forum, as the
fund manager, takes independent decisions with respect to the
assets of the FIZs, i.e. regarding interests in Lux SPVs (but not the
properties themselves or the interests in the Polish SPVs which
24
directly hold the properties), which are taken by general partners
of the Lux SPVs and the Polish SPVs that are wholly owned by
EPP.
1.3.2.3.
1.3.3.
The fact that EPP holds investment certificates in the FIZs does
not entitle it to force Forum to act in a certain way; nevertheless
the business decisions with respect to all of the properties are
made at the level of EPP due to the following:
1.3.2.3.1.
all material (key) decisions of the FIZs with respect
to their assets (interests in Lux SPVs) require the
prior consent of the meeting of the investors (being
EPP), such as the acquisition, disposal or
encumbrance of material assets (i.e. interests in
partnerships or companies);
1.3.2.3.2.
all material (key) decisions relating to interests in
the Polish SPVs (including decisions in relation to
disposals of interests in such SPVs) are taken at the
level of the Lux SPVs by their general partners
which are wholly owned by EPP; and
1.3.2.3.3.
all material (key) decisions relating to all properties
(including decisions in relation to property
management, further development and/or the
disposal of a property) are taken at the level of the
Polish SPVs by their general partners which are
wholly owned by EPP.
General remarks regarding the FIZs
The FIZs are Polish closed-ended investment funds which are regulated by the
Investment Funds and Management of Alternative Investment Funds Act
(“IFMAIF Act”). Closed-ended investment funds are established by a fund
manager (Towarzystwo Funduszy Inwestycyjnych) (“CEI fund”), a joint-stock
company, the activity of which is regulated by the Polish Financial Supervisory
Authority (“PFSA”).
The establishment of a CEI fund requires the prior consent of the PFSA. CEI
funds issue equity financial instruments called ‘investment certificates’. A CEI
fund’s governing authorities comprise the fund manager and the meeting of the
investors. The detailed scope of the competencies of a CEI fund’s authorities is
set forth in its statute, the provisions of which are subject to the IFMAIF Act.
The fund manager establishes, manages and represents the CEI fund in dealings
with third parties. From the moment a CEI fund is registered in the registry of
investment funds, the fund manager acts as one of the CEI fund’s authorities.
The meeting of the investors is an authority through which all of the CEI fund’s
investors can be represented.
2.
INVESTMENT CASE
2.1.
Introduction
EPP has a high quality portfolio of commercial properties with attractive and secure yields,
tenanted by a diverse range of primarily blue-chip global clients, which portfolio is to be
supplemented by the acquisition portfolio. With the portfolio located in one of the most
25
dynamic and fastest growing economies in Europe, experienced management and well reputed
long term strategic shareholders, EPP represents a compelling investment.
The company’s strategy is to create the leading commercial real estate platform in Poland and
the directors are of the opinion that it is well placed to achieve this strategy, as more fully
described in this paragraph 2 and paragraph 3 below.
EPP’s listing on the LuxSE and JSE is anticipated to provide it with significantly improved
access to expansionary capital and provide existing and future shareholders with an opportunity
to invest in a dynamic and highly-attractive economy.
2.2.
Overview of the initial and expanded portfolios
2.2.1.
Initial portfolio
EPP’s initial portfolio comprises 10 retail and 6 office properties, all located in
leading Polish cities, with a combined market value of EUR 1 209 600 000 as at
30 June 2016. By market value, retail properties comprise 78% of the initial
portfolio.
Figure 1: Sector split of initial portfolio by market value
26
Figure 2: Geographic location of EPP’s properties (including acquisition
properties and ROFO assets) in Poland
27
Figure 3: Split of rental income and GLA from initial properties by sector
*Based on rent rolls as at last practicable date
Figure 4: Yielding asset split for office and retail by city based on GLA
Figure 5: Yielding asset split for office and retail by city based on rental income
*
B
a
s
e
d
o
n
f
o
r
e
c
a
*Based on forecast rental income for the 12 months ended 31 December 2017
The initial properties are high quality and modern assets with solid property
fundamentals. The majority of buildings are less than 5 years old.
28
The initial portfolio offers an attractive and secure yield profile with
approximately 6 – 7% fully let net operating income yield and a long lease
expiration profile and a portfolio weighted average unexpired lease term of over
five years.
The initial portfolio has a diversified tenant base of leading retailers with
international brands representing approximately 61% of income in the case of
retail properties and a tenant base of primarily blue chip companies in the case of
office properties.
The average cost of debt on the initial portfolio is under 2%. Around 93% of
rental contracts are denominated in Euros and approximately 94% have CPI
indexation.
Full details of the initial properties are set out in Section Two of this prospectus
and in Annexure 8.
29
2.2.2.
Expanded portfolio
The acquisition portfolio is valued at EUR 185 900 000 as at 30 June 2016. The
purchase of the acquisition portfolio will see EPP’s expanded portfolio comprise
a total of 10 retail and 10 office properties, as well as a dominant retail
development all located in leading Polish cities, with a combined market value of
EUR 1 395 500 000 as at 30 June 2016.
The above aggregate valuations include a 70% stake in the Warsaw retail
development site, at an acquisition price of EUR 84 000 000. The site, initially a
land acquisition that is one of the last and best sites for retail development in
central Warsaw, is the subject of an intended 110,000m2 dominant retail
development that will significantly alter its use and increase its value.
With purchasing power close to the EU average, Warsaw attracts the highest
prime rentals and has the lowest vacancy rates in Poland. The Warsaw retail
development has garnered strong interest from potential tenants. The
development will have an estimated stabilised NOI after completion (planned for
2020) of EUR 33.76 million. The dominant nature of the development will
enhance EPP’s negotiating ability with retailers across its entire portfolio.
Ownership of Tryton Business Park, A4 Business Park Phase III, O3 Business
Campus Phase I and Symetris Business Park Phase I (being the ROFO assets) is
expected to transfer to the group by the end of 2016. Transfer of ownership of
the remaining properties and phases of properties within the acquisition portfolio
to EPP is subject to the fulfilment of certain conditions precedent, as further
detailed in paragraph 3.1.
Figure 6: Sector split of expanded portfolio by market value
Based on the acquisition of Tryton Business Park, A4 Business Park Phase III, O3 Business Campus
Phase I and Symetris Business Park Phase I, which are expected to be complete by December 2016
Figure 7: Split of rental income and GLA in respect of the enlarged portfolio (by
sector)
30
Based on the acquisition of Tryton Business Park, A4 Business Park Phase III, O3 Business Park
Campus I and Symetris Business Park Phase I which are expected to be complete by December 2016
Figure 8: Yielding asset split for office properties in respect of the enlarged
portfolio (by city)
*Based on forecast rental income for the 12 months ended 31 December 2017 including the acquisition
of Tryton Business Park, A4 Business Park Phase III, O3 Business Campus Phase I and Symetris
Business Park Phase I which are expected to be complete by December 2016.
Full details of the acquisition portfolio are set out in Section Two of this
prospectus and in Annexure 9.
2.3.
Poland as a real estate investment destination
2.3.1.
Macroeconomic factors
Poland is one of the largest countries, and consistently one of the fastest growing
economies, in Europe. As reflected in Figure 9 below, it has real GDP growth
rates well in excess of the EU average which it is expected to sustain.
31
Figure 9: Real GDP growth for a selection of EU countries showing sustained,
comparatively high growth for Poland
Poland was the only European country which
avoided recession in 2009
Real GDP growth (%)
10
5
0
(5)
(10)
2006A
2008A
Poland
Greece
Italy
Hungary
2010A
Germany
Spain
EU15
UK
2012A
2014A
2016E
Ireland
France
Czech Republic
EU 28
Source: EIU
In the last 25 years, the Polish economy has more than doubled as measured by
real GDP. Poland was the only EU country to avoid recession during the global
financial crisis and is now the sixth largest economy in the EU and the largest
economy in Central Europe, accounting for 44% of the region’s nominal GDP. In
the last 20 years, exports increased more than 25 times. Poland has the highest
growth in CEE underpinned by significant further wealth convergence potential
to the EU. Its impressive growth over the last two decades, alongside a healthy
and well-capitalised banking sector, has positioned the country well to become a
growth engine in Europe.
Figure 10: Forecast growth in GDP per capita for a selection of Eastern
European countries
Consumer confidence in Poland has reached pre-crisis highs driven
predominantly by continued increases in average household income. This has
spurred robust growth in private consumption which is expected to reach 4.1% in
2016.
Figure 11: Key macroeconomic statistics for Poland showing rising consumer
growth, decreasing unemployment which is underpinning growth
32
Source: European Commission 2016
Unemployment in Poland is at a 25-year low and expected to continue falling.
Economic growth in the region has been driven by increased domestic and
international investment.
Figure 12: Investment volumes into Poland by origin showing Germany as an
important investor
2015 investment volumes by origin of investor
Potential for Eurozone accession while commercial real estate
values, loans and rents already mostly EUR-denominated
Others
12%
Global
5%
Germany
26%
Poland
6%
South Africa
9%
USA
21%
UK Total investment 2015:
21%
€4,090m
Source: JLL Research
Poland is the largest EU development fund beneficiary with €105.8 billion
allocated for the years 2014 to 2020. It has been the recipient of record-levels of
foreign investment over the last years due to inter alia relative political stability,
geographic positioning within the EU (bordered by Germany, the largest EU
economy) and an improved business climate. Germany is Poland’s biggest
trading partner, accounting for 27.1% of all Polish exports and 22.9% of all
imports for 2015.
In the OECD education ranking, Poland is ranked 11th in the world and 5th in
Europe (ahead of Britain and the United States of America).
Poland is also the regional leader in outsourced IT and business process
outsourcing (BPO) services. According to the Tholons report for 2015, Krakow
occupies the first position in Europe in the Emerging Outsourcing Destinations
and 9th in the world.
As part of the acceleration of an established trend, in the aftermath of Brexit,
Poland is well placed to benefit, as companies in the United Kingdom consider
transferring part or all of their operations. Poland, being one of the most costefficient countries in terms of office space and human resources, with a highly
skilled labour force, is therefore an attractive destination.
Poland has a healthy and well-capitalised banking sector.
33
2.3.2.
Yields and market liquidity
Although Poland is now considered part of developed Europe, yield spreads are,
as reflected in Figure 13 below, still attractive.
Figure 13: Polish office and retail prime yields and average commercial yield
spread
Commercial real estate— prime yields
4.0
6.5
6.0
3.0
5.5
2.0
5.0
1.0
4.5
4.0
2011
Note:
1
2012
2013
Average prime office and retail yields minus Poland 10y government bond yield
Office prime
yields (LHS)
Retail prime
yields (LHS)
0.0
2015
2014
Average commercial
yield spread (RHS)
Source: FactSet, JLL
Increased interest in Poland and the CEE region has provided increased liquidity.
As returns from core European markets continue to tighten, the CEE region is
expected to attract further capital and re-pricing.
Figure 14: Average European prime office yield vs benchmarks showing
tightening
Average European Prime Office Yield vs. Benchmarks (%)
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
'00
'02
'04
Office Yield
Source:
'06
'08
'10
'12
14
Q1'16
Euro 5-Year Swap Rate
10-year Bonds EU 27
Eurozone Inflation
JLL (Office Yield), Thomson DataStream (Swap Rate and Bond Yield), Oxford
Economics (Inflation), April 2016
The National Bank of Poland cut its main policy interest rate in October 2015
and March 2015 by 100 basis points, and the reference rate remains at a record
low of 1.5%. Public investment is set to accelerate in 2017, with projects cofinanced with EU funds entering the implementation phase.
34
Figure 15: Investment volumes into the CEE region over the period 2012 to 2015
showing significant growing investment into Poland
CEE: Investment Volumes 2012–2015
8,828
9,000
260
358
679
7,741
6,180
(€m)
6,000
90
44
146
684
3,000
788
1,121
366
297
257
427
3,967
351
598
453
1,386
2,037
3,448
3,181
2,652
275
2,729
4,090
0
2012
Poland
Source:
Note:
2.4.
2013
Czech Republic
Hungary
2014
Romania
2015
Slovakia
Other CEE
JLL CEE Capital Markets, June 2016
Volumes include development transactions.
The Polish property sector
2.4.1.
Retail market review
The Polish market has noted increased activity among foreign retail centre
operators and investors, resulting from their search for new attractive markets.
Similarly, the tenant base in the retail sector is becoming increasingly
international. By the end of 2015, the total retail stock reached 10.9 million m²
including 9.3 million m² in shopping centres. During the past year, about
623,000 m² of new retail space was delivered to the market. Extensions of
existing schemes constituted 25% of new supply.
Among retail formats, traditional shopping centres still dominate, however
factory outlets are gaining some traction.
In 2015, approximately 25 new international brands(including à Tab, Superdry,
Kiabi, Sportisimo, Gate, Origins and Decimas, the gastronomy chains Dairy
Queen, Dunkin‘Donuts and Fuddruckers, as well as Fitness 24 Seven) debuted
in Poland.
35
Figure 16: Value of retail real estate investments and prime yields in Poland
Source: Company reports and CBRE
While Warsaw remains the largest retail market, followed by other large cities
such as Tri-City, Poznan, Wroclaw, Krakow, Lodz, Katowice and Szczecin,
smaller cities are gaining popularity among investors.
Figure 17: Shopping centre density and purchasing power per capita in main
Polish cities
Source: JLL
In 2015, the retail vacancy rate in major Polish cities was below 4%. The highest
level was noted in Łódź, Kraków and Upper Silesia (3.8%), while the lowest was
in Warsaw (1.5%). The lowest amount of available space was recorded in
Wrocław and Poznań.
36
Figure 18: Shopping centre yields for a selection of European countries
Source: CBRE
2.4.2.
Office market overview
At the end of Q2 2016, the total office stock (in nine major cities) was estimated
at 8.5 million m². During 2015, developers completed over 587 400 m² of office
space. Warsaw is by far the largest office market in Poland and accounted for
47% of the new supply added in 2015. However, regional business centres have
started expanding rapidly, driven by growing demand for office space in smaller
cities. There is a high level of construction activity in Warsaw, Wroclaw and
Krakow, however Katowice, Poznań, Gdansk, Łódź and Tri-City are becoming
preferred destinations for the business process outsourcing and the shared service
centres industry.
Figure 19: Value of office real estate investments in Poland
Source: Company reports and CBRE
According to Colliers, 2015 was a record year in terms of the amount of leased
space in Poland. Gross demand registered from the first to the fourth quarter
exceeded the previous year by 35% and reached 1.38 million m2. Net absorption
37
was estimated at 572,800 m2. Pre-let deals constituted a significant proportion of
transaction volumes (20.7%).
Figure 20: Value of office stock in Poland and rentals
The vacancy rate in Poland declined slightly in 2015 11.6% as compared to
12.4% at the end of 2014.
2.5.
Strategic investors
2.5.1.
2.5.2.
Overview of strategic partners
2.5.1.1.
EPP has the benefit of long term strategic relationships with a
wealth of real estate experience and proven track records.
Strategic partners include Redefine, a leading South African
property fund and Echo, a recognised market leader in the Polish
commercial and residential property development and investment
space. Echo’s in-house development and asset management team
has been recognized over the years with many awards.
2.5.1.2.
Echo is backed by highly reputable international investors with a
strong track record, such as Oaktree, that has been a major
investor in Poland for almost a decade, Pacific Investment
Management Company LLC (PIMCO) and Griffin, a leading,
dynamically developing investor operating on the commercial real
estate market in the CEE region. Griffin has invested over
EUR650 million of equity in over 30 deals from 2010 to date and
currently has around EUR4 billion in assets under management.
2.5.1.3.
More information in relation to Echo is available on the Echo
website (www.echo.com.pl/en/home/).
Lock-in of strategic investors
2.5.2.1.
Save for permitted intra-group disposals, a disposal to Redefine
International plc or its subsidiaries, or disposals to the coinvestors as set out in paragraph 1.2.3, or the disposal
contemplated in the note under the table in paragraph 6.4,
Redefine has agreed that it will not dispose of any of its ordinary
shares, without the prior written consent of Echo Prime Assets
B.V., prior to 1 June 2017.
2.5.2.2.
Echo Prime Assets B.V. is contractually entitled to sell 10% of its
ordinary shares, i.e. 2.5% of EPP’s issued ordinary share capital
before or around the JSE listing, to Przemyslaw Krych and/or
Maciej Dyjas and/or Nebil Senman (being key executives of Echo
38
and Griffin) and/or Lisala and Echo Partners B.V. and/or entities
directly or indirectly controlled by any of them (the “minority
Echo stake holders”).
2.5.2.3.
Save for permitted intra-group disposals, a disposal to one or more
minority Echo stake holders or the disposal contemplated in the
note under the table in paragraph 6.4, Echo Prime Assets B.V. has
agreed that it will not dispose of any of its ordinary shares,
without the prior written consent of Redefine, prior to 1 June
2017.
2.5.2.4.
If Echo Prime Assets B.V. has sold any ordinary shares to
minority Echo stake holders, as contemplated in paragraph
2.5.2.2, the minority Echo stake holders will be required to retain
100% of their ordinary shares until the fifth anniversary of the JSE
listing date.
2.5.2.5.
If Echo Prime Assets B.V. has not sold ordinary shares to
minority Echo stake holders, it will retain the following
percentages of ordinary shares (determined as at the date that of
the JSE listing):
2.5.2.5.1.
100% until the first anniversary of the JSE listing
date;
2.5.2.5.2.
at least 70% until the second anniversary of the JSE
listing date (or 60% with the consent of Redefine);
2.5.2.5.3.
at least 50% until the third anniversary of the JSE
listing date (or 40% with the consent of Redefine);
2.5.2.5.4.
at least 20% until the fifth anniversary of the JSE
listing date,
whereafter it will be entitled to sell its ordinary shares without
restriction.
2.5.2.6.
2.6.
The lock-in provisions in respect Echo Prime Assets B.V.’s
ordinary shares will fall away inter alia if Redefine’s shareholding
in EPP falls below 30% of EPP’s issued share capital or if
Redefine agrees to release Echo Prime Assets B.V. from the lockin restrictions.
Management and advisory services
2.6.1.
EPP’s asset management function is undertaken by EPP’s strongly incentivised,
dedicated and proven executive management team, subject to strategic oversight
by Echo. Each management team member has 15-20 years’experience in asset
management covering all areas, including inter alia, acquisition and development
through redevelopment, repositioning, leasing, negotiations, financing and
disposals, reporting, tenant relationship management and marketing. The
experience relates mainly to Poland, but also includes other EU countries and the
United States of America. Incentives are market level compensation,
performance related bonuses and a contemplated long term incentive share
scheme, further details of which are set out in paragraph 2.4 of Annexure 3.
From incorporation to 30 June 2016, EPP’s property management function was
undertaken by an external limited partnership. With effect from 1 July 2016, the
EPP group acquired all general partner and limited partner rights in the property
manager, such that the company’s property management function is currently
39
undertaken internally by the EPP group. EPP has an experienced asset and
property management team with proven real estate track records, the majority of
which joined the company from Echo from 1 June 2016 and who therefore
benefit from long term relationships with portfolio tenants. EPP currently
employs c.100 employees.
3.
2.6.2.
The entire EPP executive team brings extensive international and domestic
leasing experience and are widely regarded as being specialised in understanding
occupier needs, alternatives and motivations. The EPP team also maintains
positive relationships with the leading agencies and advisors who generally
represent important occupiers in the market.
2.6.3.
The salient terms of the agreement in terms of which EPP’s asset and property
management function was internalised are set out in Annexure 7.
2.6.4.
EPP has also contracted Griffin and East Management to render advisory
services to both Griffin and Camas Investments LLC, a subsidiary of EPP, in
respect of the conduct of the EPP group’s real estate business and projects. Such
advisory services will include advisory services related to extensions to Galaxy
Shopping Centre and Outlet Park Shopping Centre, as well as services related to
the EPP equity raising, including the private placement. The appointment of
Griffin and East Management commenced on 1 June 2016 and will be for an
initial period of five years. EPP is liable for the obligations of Camas
Investments LLC under the advisory agreements as a joint and several debtor.
2.6.5.
The salient terms of the advisory agreements are set out in Annexure 7.
GROWTH OPPORTUNITIES AND PROSPECTS
Already the largest Polish listed yielding property company, EPP’s goal is to become the dominant retail
landlord in Poland while targeting sustainable double digit annual growth in dividends per share in the
short and medium term through a combination of organic and acquisitive growth.
Organic growth represents growth opportunities that are already built into the EPP portfolio and include
(i) filling of vacancies in newly developed properties; (ii) 22,000m2 of retail extensions to two of EPP’s
existing retail centres that are currently underway; (iii) the 25% stake in ten ROFO assets acquired by
EPP (which entitles EPP to a 25% share in development proceeds as well as a first right of offer to
acquire the ROFO assets); (iv) EPP’s 70% stake in the Warsaw retail development one of the last and
best sites for retail development in Warsaw with a planned 110,000m2 retail development.
The organic growth opportunities already built into the EPP portfolio are in addition to the potential for
increasing retail rentals through a combination of the current high levels of retail sales growth in Poland
(at 6.5% year on year in June 2016) and the active asset management of EPP’s portfolio of dominant
regional shopping centres by a strongly incentivised, dedicated and proven executive management team
who intend leveraging EPP’s platform with retail tenants to achieve higher rentals - a strategy that will be
further enhanced by the development of the Warsaw retail development site.
In addition to organic growth, EPP’s executive management team has access to numerous earnings
accretive acquisitive opportunities, including through its strategic relationships with Echo, a recognised
market leader in Polish commercial and residential property development and investment, and Griffin, a
leading, dynamically developing investor operating in the CEE real estate market. These relationships
provide the company with a significant advantage in the identification and sourcing of high quality real
estate assets.
EPP’s acquisition strategy will be focused on acquiring retail assets in strategic locations, allowing the
company to further leverage its portfolio and platform with retail tenants. In the office sector, EPP may
selectively acquire high quality, well located office assets in major Polish cities, let to strong
international and domestic tenants where the management team believes there is scope for further value
uplift. EPP will pro-actively trade office assets to ensure that its portfolio remains balanced and
competitive in the long term while aiming to maintain a weighted average unexpired lease term in excess
40
of four years. EPP will also closely monitor the logistics and fulfilment centre sectors for acquisition
opportunities that meet its strategic criteria.
In addition to the opportunities for growth in distributions per share, the company believes that there are
significant opportunities for growth in underlying net asset value per EPP share. The Warsaw retail
development, the ROFO assets and the extensions to certain existing retail assets all represent the
potential for (in some cases substantial) enhancements in underlying net asset value of EPP given the
costs at which they are being acquired and/or developed relative to the anticipated valuation yields.
Given the strength and growth of the Polish economy (as well as the potential upgrading of Poland by
FTSE from advanced emerging to developed market status in the near future) the company also believes
that there is the potential for further compression in Polish commercial property yields, which would in
turn result in an increase in the value of the EPP portfolio.
EPP’s listing on the JSE and LuxSE is anticipated to provide it with significantly improved access to
expansionary capital and provide existing and future shareholders with an opportunity to invest in a
highly-attractive European economy. In addition to organic growth of its property portfolio, the company
has significant growth opportunities embedded by virtue of the extensions, reduction in vacancy rates and
arrangements regarding the ROFO projects. EPP is also well placed to leverage off the development
activities of Echo and Griffin, thereby providing the company with a significant advantage in the
identification and sourcing of high quality real estate assets. In this regard, EPP is contracted to acquire
five additional high quality Polish properties from Echo and Griffin, one of which is the subject of a
dominant retail redevelopment (the acquisition portfolio).
EPP is not established for the main purpose of generating return for its investors by means of divestment
of its subsidiaries or associated companies.
3.1.
Acquisition portfolio
3.1.1.
EPP has contracted to purchase the acquisition portfolio from Griffin and Echo.
3.1.2.
EPP will acquire a 70% share in a special purpose vehicle established to hold the
Warsaw retail development site (“Warsaw retail development NewCo”), for a
total consideration of EUR 84 000 000. A 110 000m2 dominant retail
development of the site is in the advanced stage of planning.
3.1.3.
EPP will acquire a 100% share of the remainder of the acquisition portfolio for a
total consideration calculated as the annual net operating income of each
property divided by an agreed yield.
3.1.4.
Ownership of Tryton Business Park, A4 Business Park Phase III, O3 Business
Campus Phase I and Symetris Business Park Phase I is expected to transfer to
EPP, via its subsidiaries. The completion of each sale will take place on the
earlier of the listing of EPP on the JSE or 1 December 2016 subject to fulfilment
of conditions precedent.
3.1.5.
Transfer of ownership of each of the remaining properties within the acquisition
portfolio to EPP is subject to the fulfilment of the following conditions
precedent:
3.1.5.1.
3.1.5.2.
3.1.5.3.
3.1.5.4.
3.1.5.5.
3.1.5.6.
receipt of a final occupancy permit;
the lease or pre-lease of at least 60% of the leasing space of the
relevant property;
the execution of a master lease agreement;
the execution of a new credit facility agreement in relation to the
relevant property on conditions not less favourable (or otherwise
satisfactory to EPP) than the existing credit facility agreement in
respect of such property;
receipt of an antitrust clearance (if required); and
receipt of any requisite tax ruling.
41
3.2.
3.3.
3.1.6.
As the four office properties in the acquisition portfolio are ROFO projects, and
by virtue of the loan facility arrangements detailed in paragraph 3.4 below, EPP
will receive 25% of Echo’s proceeds of the sale thereof to EPP, net of debt and
costs.
3.1.7.
The accretive purchase of the acquisition portfolio is in line with the company’s
growth strategy and is an example of how EPP is able to leverage off the
development activities of Echo.
3.1.8.
The salient terms of the acquisition agreements are set out in Annexure 7. Full
details of the acquisition portfolio are set out in Section Two and Annexure 9.
Extensions to initial properties
3.2.1.
EPP plans to expand its presence in the Polish real estate market through the
extensions, collectively valued at EUR 50 million and budgeted at an initial yield
of 8.5% (after all costs).
3.2.2.
EPP has contracted Echo to render development services in respect of each
extension. The development services will encompass all advisory and
management services in connection with the administrative proceedings related
to the extensions, project and cost management services, supervisory services,
review working drawings for construction and overall co-ordination and
management of various technical, construction and design matters, as well as
leasing services. Echo’s appointment commenced on 1 June 2016 and will
continue until the relevant extension receives a final occupancy permit.
3.2.3.
Master lease agreements have been concluded in respect of the Galaxy Shopping
Centre and Outlet Park Phase III, with Echo as tenant, with standard re-let
covenants. As at the last practicable date, Outlet Park Phase IV is fully let, and is
therefore not subject to a master lease agreement.
3.2.4.
The salient terms of both the development services agreements and the master
lease agreements are set out in Annexure 7.
Vacancies converging with norms
Since some of the initial properties are new, they have not yet been fully let, particularly the
Park Rozwoju office which is the largest office property by GLA and has a vacancy rate of
27%. The reduction in vacancy rates is expected to lead to quick gains in net operating income.
3.4.
ROFO projects and loan facility agreements
3.4.1.
In terms of the loan facility agreements, Camas Investments LP (in respect of
retail ROFO projects) and Minster Investments (in respect of office ROFO
projects), have transferred a cash contribution to each ROFO SPV in connection
with the ROFO projects. The cash contributions represent 25% of the aggregate
amount of the equity so far invested in the specified ROFO project at an agreed
return.
3.4.2.
Each cash contribution entitles EPP (via its subsidiaries, Camas Investments LP
or Minster Investments, as the case may be) to participate in the profits of the
relevant ROFO SPV. More specifically, in the event that a ROFO SPV sells the
property on which a given ROFO project is being developed on the market to
either a third party purchaser or to EPP (or its designee), whether pursuant to the
ROFO agreements or otherwise, EPP will receive 25% of the proceeds of such
sale, net of debt and costs. EPP will also receive 25% of all distributions made by
that ROFO SPV and is required to contribute its proportion of funding in respect
of any negative cash flows of that ROFO SPV. However, if it fails to do so, Echo
will be obliged to fund it via a loan of 10% per annum.
42
4.
3.4.3.
In addition, in terms of the ROFO agreements, EPP has a right of first offer to
acquire the ROFO projects from Echo.
3.4.4.
The salient terms of the loan facility agreements and the ROFO agreements are
set out in Annexure 7.
DIRECTORS, OFFICE HOLDERS AND MATERIAL THIRD PARTIES
4.1.
Directors of the company
4.1.1.
The board currently comprises 11 directors of whom 9 are non-executive (5 of
whom are independent) and 2 are executive.
4.1.2.
The positions of chairperson of the board and that of chief executive officer are
separate, with the chairperson being an independent non-executive director. The
chairperson oversees the board’s functioning, and the chief executive officer
leads the executive team and attends to the day-to-day functions of the business.
4.1.3.
Maciej Drozd has been appointed as the chief financial officer. The board of
directors has considered and satisfied itself of the appropriateness of the
expertise and experience of the chief financial officer.
4.1.4.
The full names, ages, nationalities, business addresses, qualifications, and
capacities of the directors of the company are set out below:
Name and age
Hadley James Tyzack Dean (44)
Business address
Plac Unii, 3rd floor, Building B, 2 Pulawska str.,
02-566 Warsaw
Qualification
BSc (University of Newcastle-upon-Tyne), Property
valuation and management (Sheffield Hallam
University)
Position
Chief executive officer
Nationality
British
Experience
Hadley has over 20 years of real estate experience,
most recently as the CEO of Compass Offices in
Europe, Middle East and Africa. Opened in 2009 in
Hong Kong, Compass Offices had grown into Hong
Kong’s largest serviced office provider with a
network that extends to Australia, Japan,
Kazakhstan, Singapore and the United Arab
Emirates.
Prior to that, Hadley was the EMEA Management
Board Member at Colliers International whilst
running Eastern Europe as Managing Partner, where
he was responsible for leading the business in 12
countries, 16 offices and 750 employees. Hadley
has extensive experience in Poland, having spent 9
years in the Colliers office in Poland. Colliers
International is an industry leading global real estate
services company operating in 66 countries.
Name and age
Maciej Adam Drozd (51)
Business address
02-673 Warsaw, Konstruktorska 12
43
c/o Echo Polska Properties
Qualification
Master’s degree in Philosophy and Management
(University of Warsaw), MBA (University of
Illinois)
Position
Chief financial officer
Nationality
Polish
Experience
Maciej has been deputy CEO at Echo, one of the
largest investment and development companies in
Poland listed on the Warsaw Stock Exchange, in
charge of the company’s finance. Maciej started his
professional career in 1995 at Eastbridge Group, a
Luxembourg private investment fund managing
over €2.5 billion in assets related to retail, consumer
goods and real estate, overseeing financial
operations of selected subsidiaries within the group.
He was promoted to CFO and managing partner of
the group in 2009.
Name and age
Robert Weisz (66)
Business address
Rubensstraat 66, 1077 MZ Amsterdam
Qualification
MBA, CA, Fellow of the RICS (Royal Institute of
Chartered Surveyors)
Position
Independent non-executive chairman
Nationality
Dutch
Experience
Robert Weisz serves as Partner and Managing
Director of Timevest, a European commercial
property investment company. Its portfolio includes
high street shopping and commercial retail locations
in Germany, the Czech Republic, and the
Netherlands. Previously, Mr. Weisz was Partner and
Managing Director of DBN Group, a commercial
property company operating in the Netherlands and
the US. Mr. Weisz has been visiting professor at the
Technical University of Eindhoven's Urban
Planning Design Group since 2004 and was
formerly a guest lecturer in property finance and
valuation at the Amsterdam School of Real Estate
and University of Groningen. Mr. Weisz is the coauthor of three textbooks on property investment.
Name and age
Marek Marian Belka (64)
Business address
17, Ciechocinska, 93-459 Lodz, Poland
Qualification
Ph.D (Economics); Professor (scientific title
conferred by the President of the Republic of
Poland)
Position
Independent non-executive director
Nationality
Polish
44
Experience
Marek Belka is a former Prime Minister of Poland
(2004-2005) and President of Narodowy Bank
Polski (Polish Central Bank) (2010-2016). He
qualified as an economist with an M.A., Ph.D. and
Habilitacja (higher degree common in continental
Europe). He has held various political positions
since 1996, including Advisor to the President of
Poland, Minister of Finance and Deputy Prime
Minister. He has also held positions in international
organizations, serving as Executive Secretary of the
Economic Commission for Europe (in the rank of
Undersecretary General of the U.N.) and Director of
the European Department in the International
Monetary Fund (2008-2010). Marek worked in
Albania as advisor to three consecutive PMs of the
country and in the Coalition Provisional Authority
in Iraq (2003-2004). He was a member of the Board
of Directors of two commercial banks in Poland (at
different times) and served as Chairman of LOT
Polish Airlines in 2002-2003.
Name and age
Marc Wainer (67)
Business address
Redefine Place, 2 Arnold
Johannesburg, South Africa
Position
Non-executive director
Nationality
South African
Experience
Until August 2014, Marc was Chief Executive
Officer of Redefine Properties Limited, thereafter
moving to the Executive Chairman role. He has 40
years' experience in all aspects of real estate. Marc’s
primary focus is on acquisitions and disposals,
international investments and investor relations, as
well as playing a role on the conceptual
development at Redefine.
Name and age
Andrew Joseph König (48)
Business address
Redefine Place, 2 Arnold
Johannesburg, South Africa
Qualification
BCom, B Acc CA(SA)
Position
Non-executive director
Nationality
South African
Experience
A qualified Chartered Accountant with 22 years of
commercial and financial experience, Andrew was
previously group Financial Director of Independent
News and Media. He is responsible for the
management of Redefine and for ensuring the
Board’s strategy is implemented, as well as all
aspects of regulatory compliance, corporate activity
and communications.
Road,
Road,
Rosebank,
Rosebank,
45
Name and age
Maciej Dyjas (52)
Business address
Al. Jana Christiana Szucha 6, 00-582 Warszawa
Qualification
Degrees in Mathematics, IT and Management from
University of Warsaw and University of Stuttgart
Position
Non-executive director
Nationality
German
Experience
Maciej Dyjas is a Co-Managing Partner and CoCEO of Griffin Real Estate, a leading and a
dynamically growing investment group operating in
the commercial real estate market in Central &
Eastern Europe. He also holds a position of
Managing Partner of Cornerstone Partners – a
private equity investment firm, active in the CEE
region, with an impressive track-record of
transactions.
Before
joining
Griffin
and
Cornerstone, he was a Managing Partner and CEO
of Eastbridge Group a Luxembourg private
investment fund managing over €2.5 billion in
assets related to retail, consumer goods and real
estate.
Name and age
Nebil Senman (44)
Business address
Al. Jana Christiana Szucha 6, 00-582 Warszawa
Qualification
Nebil is a graduate of universities in Berlin (TU
Berlin), Paris (ESCP-EAP) and London (LSE) and
holds an MBA and a degree in civil engineering. He
also holds a post-graduate diploma in real estate
management (EBS). He is a member of the Royal
Institution of Chartered Surveyors, MRICS
Position
Non-executive director
Nationality
German/Turkish
Experience
Nebil Senman is a Co-Managing Partner of Griffin
Real Estate, a leading and a dynamically growing
investment group operating in the commercial real
estate market in Central & Eastern Europe. Prior to
that, Nebil Senman held the position of Senior Vice
President and as Supervisory Board Member of
German and Polish real estate operations and
companies worth several billion Euro for Oaktree’s
real estate funds for 9 years. Before joining Oaktree
he spent 8 years within the real estate advisory and
corporate finance division at Ernst & Young Real
Estate (previously Arthur Andersen), holding
different managerial positions.
Name and age
Dionne Traci Hirschowitz (48)
Business address
51 West Street, Houghton Estate, Houghton,
Johannesburg
46
Qualification
B Com LLB
Position
Independent non-executive director
Nationality
South African
Experience
Dionne has a B Com LLB from Wits and thereafter
was admitted as an Attorney of the Supreme Court
of South Africa. She lived in London for 11 years
where she worked at Stenham Property managing
commercial property investments for offshore
clients. On return to South Africa she was appointed
as a director of Ellerine Bros. Proprietary Limited,
which is involved in equities and property
investments.
Name and age
Andrea Philippa Steer (45)
Business address
Diemermere 25, 1112 TC Diemen, the Netherlands
Qualification
B Com; LLB, Attorney of the High Court of South
Africa, Solicitor of England and Wales
Position
Independent non-executive director
Nationality
South African / Irish
Experience
Andrea is International Legal Counsel at Randstad
Holding N.V., an HR services company with
operations in 39 countries, headquartered in
Amsterdam and listed on the Amsterdam Stock
Exchange (AEX). She has previously held roles as
legal consultant at the SBS Broadcasting Group
(Amsterdam) and as an associate at Clifford Chance
LLP (Amsterdam). Andrea is a Solicitor of England
and Wales, an Attorney of the High Court of South
Africa and is registered with the Dutch Law Society
(Nederlandse Orde van Advocaten) as a foreign
lawyer practising within the EU). Andrea is a Dutch
resident.
Name and age
Peter Joost Rudolf Driessen (69)
Business address
Nieuweweg 2, 1251 LJ Laren, the Netherlands
Qualification
MSc in Law
Position
Independent non-executive director
Nationality
Dutch
Experience
Until 1 July 2016, Peter served as European
Director Capital Markets with CB Richard Ellis in
Amsterdam, where he was focused primarily on
providing strategic and property specific investment
advice to both Dutch and international investors
across all property sectors. Previously, Peter served
as Co-Founder and Managing Director of Colliers
BDR / Insignia BDR, as a board member of BCD
Holdings and as Director Real Estate Investments at
47
Centraal Beheer Pensioenverzekeringen N.V.
(Achmea Group). He currently serves as a member
of the supervisory board of three international real
estate investment funds of Syntrus Achmea Real
Estate & Finance. Peter is a Dutch resident.
4.2.
Additional information related to the directors
4.2.1.
4.3.
4.4.
Annexure 3 contains the following information:
4.2.1.1.
interests in shares and transactions;
4.2.1.2.
interests of directors;
4.2.1.3.
directors’emoluments;
4.2.1.4.
borrowing powers of directors; and
4.2.1.5.
directors’declarations.
4.2.2.
Annexure 4 contains details of directors’other directorships and partnerships in
the previous five years.
4.2.3.
The salient terms of service contracts of the executive directors are set out in
Annexure 5.
4.2.4.
The provisions of the articles of association with regard to the following are set
out in Annexure 6:
4.2.4.1.
qualification of directors;
4.2.4.2.
remuneration of directors;
4.2.4.3.
any power enabling the directors to vote remuneration to
themselves or any member of the board;
4.2.4.4.
the borrowing powers exercisable by the directors and how such
borrowing powers can be varied; and
4.2.4.5.
retirement or non-retirement of directors under an age limit.
Managers of the major subsidiaries
4.3.1.
The company has two major subsidiaries, the FIZs, further details of which are
set out in Annexure 2.
4.3.2.
The FIZs are managed by Forum, a private investment fund company.
Asset and property management
4.4.1.
The asset and property management function of the group will be undertaken by
its executive management, further details of whom are set out in paragraph 4.1
above, together with an appropriately skilled and experienced staff complement
that is familiar with the company’s portfolio of properties.
4.4.2.
The company’s internal management team boasts an average tenure of over a
decade and a high degree of familiarity with the company’s portfolio of
properties. As the former Managing Director of one of the largest agencies in
Eastern Europe, the CEO has extensive experience in building and leading award
winning property management, asset management and leasing service lines
across CEE and comes with the executive capacity, market knowledge and
operational experience to lead the EPP team forward.
48
4.4.3.
4.5.
4.6.
The salient terms of the agreement in terms of which EPP’s property
management function was internalised are set out in Annexure 7.
Founders
4.5.1.
EPP was founded by Echo.
4.5.2.
The business address of Echo is at al. Solidarnosci 36, Kielce, Poland.
Promoters
The company does not have, and has at no point since its incorporation had, any promoters.
4.7.
4.8.
5.
6.
Advisors and company secretary
4.7.1.
The names and business addresses of the company’s advisors are set out in the
“Corporate Information”section.
4.7.2.
Rafal Kwiatkowski, whose qualification and business address is set out in the
“Corporate Information”section, fulfils the role of company secretary.
4.7.3.
The company’s advisors and the company secretary do not have any material
interests in EPP shares.
Relationship information
4.8.1.
Save for the interests set out in Annexure 3, no director of EPP or director of
any subsidiary of EPP has any beneficial interest, direct or indirect, in relation to
any property held or property to be acquired by the group nor are they contracted
to become a tenant of any part of the property of the group.
4.8.2.
Save for the interests set out in Annexure 3, there is no relationship between any
director of EPP or and director of any subsidiary of EPP and any other person
that may conflict with a duty to the group.
4.8.3.
Save as disclosed in Annexure 11, no vendor has any beneficial interest, direct
or indirect, in any securities or participatory interests issued or to be issued by
the company in order to finance the acquisition of any properties.
4.8.4.
Save for the interests disclosed in Annexure 3, no director of the company has
had a material beneficial interest in the acquisition or disposal of any properties
by the company during the two years preceding the date of the valuation of such
properties, being 30 June 2016.
SHARE INCENTIVE SCHEME
5.1.
The company intends to introduce a share incentive scheme, for the benefit of EPP group
employees and executive directors (a “share incentive scheme”), in due course.
5.2.
The adoption of a share incentive scheme will be subject to receipt of all requisite shareholder
and regulatory approvals. The company has been advised that Redefine and Echo will support
the adoption of a share incentive scheme.
MAJOR AND CONTROLLING SHAREHOLDERS
6.1.
Set out below are the names of shareholders, other than directors, that are directly or indirectly
beneficially interested in 5% or more of the issued shares of EPP as at the last practicable date.
Where these are associates of directors of the company, this has been indicated.
Ordinary shares
49
Name of shareholder
Redefine
Echo Prime Assets B.V.
Caporia
Blackview
Pivotal Global
Total
Number
of
ordinary shares
257 014 566
128 507 281
33 100 361
31 153 281
31 153 281
480 928 770
% of ordinary
shares in issue
49.95*
24.98#
6.43
6.06
6.06
93.48
Number of
preference
shares
1
% of ordinary
preference
shares in issue
100
Preference shares
Name of shareholder
Echo Prime Assets B.V.
6.2.
There is no relationship between the shareholders of Caporia and Blackview and such
shareholders do not act in concert with Echo Prime Assets B.V. and Redefine or among
themselves. Pivotal Global is a wholly-owned subsidiary of The Pivotal Fund Limited
(Registration number 2005/030215/06), a public company incorporated in accordance with the
laws of South Africa, the issued share capital of which is listed on the JSE.
6.3.
After the listing on the LuxSE, EPP intends to undertake a private placement with investors who
are independent of EPP and which will result in the company achieving at least a 25% free float.
6.4.
Set out below are the names of shareholders, other than directors, that it is anticipated will,
directly or indirectly, be beneficially interested in 5% or more of the issued shares of EPP
immediately following the private placement and the listing on the JSE. Where these are
associates of directors of the company, this has been indicated.
Ordinary shares
Name of shareholder
Redefine
Echo Prime Assets B.V.
Caporia
Blackview
Pivotal Global
Total
Number
of
ordinary shares
257 014 566
128 507 281
33 100 361
31 153 281
31 153 281
480 928 770
% of ordinary
shares in issue
43.86*
21.93#
5.65
5.32
5.32
82.08
Number of
preference
shares
1
% of ordinary
preference
shares in issue
100
Preference shares
Name of shareholder
Echo Prime Assets B.V.
* Redefine has agreed to sell 5% of the EPP shares in issue (prior to the private placement) to certain key
executives of Redefine and/or to an entity nominated by them, which transaction has not yet been
implemented. Redefine’s beneficial interest in ordinary shares as reflected in this paragraph 6 will
decrease accordingly.
#
Echo Prime Assets B.V. has agreed to sell 5% of the total ordinary shares in issue to an entity in which
certain key executives of Redefine have a beneficial interest, and 2.5% of the total ordinary shares in issue
to any entity in which certain key executives of Griffin have a beneficial interest, at or about the listing on
the JSE. Echo Prime Assets B.V.’s beneficial interest in ordinary shares as reflected in this paragraph 6
will decrease accordingly.
6.5.
As at the last practicable date, the company does not have a controlling shareholder. It is not
anticipated that EPP will have a controlling shareholder following the private placement and
listing on the JSE.
50
6.6.
7.
The preference share held by Echo through Echo Prime Assets B.V. entitles Echo Prime Assets
B.V. to receive a preferred distribution in respect of the extensions. The preference share was
issued as a legal instrument to give effect to a committed obligation on EPP to effect the
adjustment payment payable to Echo Prime Assets B.V. as referenced off the net operating
income generated by the extensions as determined post their completion. A summary of the
agreement between Echo, Redefine, Echo Prime Assets B.V. and EPP in respect of this
preferred distribution is set out in Annexure 7. Further details of arrangement regarding the
preferred distribution are set out in Annexure 19.
TAX CONSIDERATIONS
A summary of the tax considerations of the company, including the tax treatment of foreign dividends
paid by EPP to South African shareholders, is set out in Annexure 22.
51
SECTION TWO –DETAILS OF THE PROPERTY PORTFOLIO
8.
9.
SUMMARY OF THE INITIAL PROPERTY PORTFOLIO
8.1.
As at the last practicable date, EPP, through its subsidiaries, owns 10 retail and 6 office
properties with a combined market value, as at 30 June 2016, of EUR 1 209 600 000 and with a
GLA of approximately 424 216 m2 excluding extensions.
8.2.
Full details of the initial properties are set out in Annexure 8.
OVERVIEW OF THE INITIAL PROPERTY PORTFOLIO
9.1.
The initial portfolio includes the following 10 shopping centres:
9.1.1.
Pasaż Grunwaldzki in Wrocław
Pasaż Grunwaldzki is a modern shopping centre with 185 retail units and an
approximate 48 300 m² rentable retail area. It was opened in April 2007. The
centre is situated at Plac Grunwaldzki in Śródmieście district, a central part of
Wrocław, and is one of the major retail schemes in the city.
9.1.2.
Galeria Echo located in Kielce
Galeria Echo Kielce is a modern shopping centre with 229 retail units and an
approximate 71 600 m² rentable retail area. It was originally opened in
November 2002 and redeveloped in August 2011. The centre is located outside
the Kielce city centre, close to universities and residential dwellings, and is the
dominant retail scheme in the region.
9.1.3.
Galaxy in Szczecin
Galaxy shopping centre is a modern shopping centre with 132 retail units and an
approximate 41 200 m² rentable retail area. It was opened in 2003 and is
currently being extended. Ultimately, the centre will include 176 retail units and
an approximate 56 300 m2 rentable retail area. The opening of the extension is
scheduled for October 2017. The centre is located in the central part of Szczecin,
in Śródmieście district, near one of the busiest junctions in the city. It is one of
two dominant retail schemes in the region.
9.1.4.
Galeria Amber in Kalisz
Galeria Amber is a modern shopping centre with 117 retail units and an
approximate 33 250 m² rentable retail area. It was opened in March 2014. The
centre is situated outside the Kalisz city centre, close to the city’s railway station
and main bus terminal.
9.1.5.
Galeria Veneda in Łomża
Galeria Veneda is a modern shopping centre with 55 retail units and an
approximate 15 073 m² rentable retail area. It was opened in 2013. The centre is
located in southern part of Łomża, with convenient access to the town’s centre
and outskirts.
9.1.6.
Outlet Park located in Szczecin
Outlet Park Szczecin is a modern retail scheme with 93 retail units and an
approximate 24 400 m² rentable retail area in Phase I&II and Phase IV. Phase III,
which is currently under development, will offer an additional 21 retail units and
an approximate 3 800 m² rentable area. The centre was originally opened in
52
November 2012. Phase IV (a stand-alone building currently under development)
is scheduled to be finished in December 2016 with and Phase III (an extension of
the existing building) is scheduled to be finished in September 2017. The centre
is a local retail scheme located in eastern part Szczecin, surrounded by
commercial schemes and residential areas.
9.1.7.
Galeria Sudecka in Jelenia Góra
Galeria Sudecka is a modern shopping centre with 79 retail units and a total
rentable area of approximately 31 200 m2. Phase I of the centre was opened in
2000 and redeveloped in April 2015 (Phase II). The centre is located on the
outskirts of Jelenia Góra, about 3 kilometres from the city centre. It is one of the
major retail schemes in the city.
9.1.8.
Galeria Olimpia in Bełchatów
Galeria Olimpia is a modern shopping centre with 66 retail units and an
approximate 21 300 m² rentable retail area. It was opened in February 2013. The
centre lies within the area of the city administration borders in the Edwardów
district, about 2 kilometres from the city centre.
9.1.9.
Centrum Echo in Bełchatów
Centrum Echo Bełchatów is a shopping centre with 5 retail units and an
approximate 11 420 m² rentable retail area. It was opened in May 2000. The
centre lies within the area of the city administration borders in the Edwardów
district, about 2 kilometres from the city centre.
9.1.10.
Echo Centrum in Przemyśl
Echo Centrum Przemyśl is a shopping centre with 2 retail units and a 5 760 m²
rentable retail area. It was opened in 2000 and redeveloped in 2012. The centre in
the northern part of Przemyśl, about 2.5 kilometres from the city centre, with
convenient visibility.
9.2.
The initial portfolio includes the following 6 office buildings:
9.2.1.
Malta Park located in Poznań
Malta Office Park is a modern office complex consisting of six buildings and
with an approximate 28 300 m² rentable office area. The complex was completed
in December 2011. The complex is located in the eastern part of Poznań, with
convenient access to central Poland and to Germany.
9.2.2.
Park Rozwoju (Phase I-II) in Warsaw
Park Rozwoju is a modern complex of two office buildings and an approximate
32 900 m² rentable office and retail/services area. The complex was opened in
2014 (Phase I) and 2015 (Phase II). It is located in the largest office market in
Warsaw.
Echo, Redefine and EPP have agreed to co-operate to amend the perpetual
usufruct in respect the of Park Rozwoju office such that it is coherent with the
key use of the property and to ensure that there is no basis for challenging such
perpetual usufruct. Insofar as this is not achieved by 30 May 2021, Echo has
granted EPP (or its designated affiliate) the irrevocable right to sell Park
Rozwoju to Echo for EUR 73 080 000.
53
9.2.3.
A4 Business Park (Phase I-II) in Katowice
A4 Business Park is a modern office building with an approximate 18 000 m²
rentable office and retail/services area. The building was opened in February
2014 (Phase I) and January 2015 (Phase II). Katowice is the fourth largest office
market in Poland.
9.2.4.
West Gate in Wrocław
West Gate is a modern office building with an approximate 16 500 m² rentable
office area. The building was opened in April 2015. It is located in the northwestern part of the Wrocław, one of the main regional office markets in Poland,
with a very good access to the city bypass and the city centre.
9.2.5.
Astra Park in Kielce
Astra Park is an office complex with an approximate 14 300 m² rentable office
and retail/services area. The complex was opened in September 2007. It is
located outside the city center, close to universities and residential dwellings.
Kielce is a secondary regional city in Poland with a small but growing office
market.
Astra Park is the subject of an option to purchase by FTF Columbus S.A., which
option may be exercised at any time between 10 June 2020 and 10 August 2020.
The purchase price payable for the property will be based on a total net operating
income generated by the property and a yield of 8.25%.
9.2.6.
Oxygen in Szczecin
Oxygen is a modern office building with an approximate 13 800 m² rentable
office and retail/services area. It was opened in 2010. The building is located in
the core city centre of Szczecin and lies in the immediate vicinity of the
intersection of two main arteries, very close to the Galaxy shopping centre.
10.
ANALYSIS OF THE INITIAL PROPERTY PORTFOLIO
An analysis of the initial property portfolio in respect of geographic, sectoral, tenant, vacancy and lease
expiry profiles forecast for the 12 months to 31 December 2017 is provided in the tables below.
10.1.
Geographic profile
Szczecin
Wrocław
Kielce
Kalisz
Poznań
Warszawa
Jelenia Góra
Bełchatów
Katowice
Łomża
Przemyśl
Total
10.2.
By GLA
(%)
22.04
14.53
19.24
7.45
6.33
7.37
7.00
7.33
4.05
3.38
1.29
100%
By rental income
(%)
23.85
21.37
21.35
6.60
6.44
5.92
5.06
5.02
2.87
3.22
0.53
100%
By GLA
(%)
19.20
70.80
100%
By rental income
(%)
24.87
75.13
100%
Sectoral profile
Office
Retail
Total
54
10.3.
Retail tenant profile
A
B
C
Total
Based on GLA
(%)
70.3
25.3
4.4
100.0
Based
on
income (%)
65.2
28.8
6.0
100.0
rental
For the tenant profile table, the following key is applicable:
A.
B.
C.
10.4.
Large international and national tenants, large listed tenants and government or smaller
tenants in respect of which rental guarantees are issued. These include, inter alia, Auchan,
Tesco, Carrefour, H&M, Inditex Group, Saturn, Deichmann and TK Maxx.
Smaller international and national tenants, smaller listed tenants, major franchisees and
medium to large professional firms. These include, inter alia, Reserved, House, Cropp,
Sinsay, Empik, Smyk, Helios, RTV Euro Agd and CCC.
Smaller national tenants. There are 145 tenants included in the C category in the retail
sector
Office tenant profile
A
B
C
Total
Based on GLA
(%)
93.6
5.8
0.6
100.0
Based
on
income (%)
92.8
6.6
0.6
100.0
rental
For the tenant profile table, the following key is applicable:
A. Large international and national tenants, large listed tenants and government or smaller
tenants in respect of which rental guarantees are issued. These include, inter alia, Nokia,
IBM, Schneider, Samsung, LG, Aviva, Ikea and McKinsey.
B. Smaller international and national tenants, smaller listed tenants, major franchisees and
medium to large professional firms. These include, inter alia, Enel-Med, K&D Foods and
PKO Bank.
C. Smaller national tenants.
There are 4 tenants included in the C category in the office sector
10.5.
Vacancy profile
The vacancy profile indicated below reflects the vacancy percentage in terms of current GLA by
sector.
Sector
Office
Retail
Portfolio vacancy
Vacancy % based on total GLA*
9.7
1.7
4.0
* Based on existing leases at 30 June 2016
* The vacancy profile reflects a high vacancy rate in the office portfolio, on account of new properties that have not
been fully let. In particular, the Park Rozwuju office (being the largest office property in the initial portfolio by GLA)
is not fully let and has a vacancy rate of 25% (42% Phase II)
10.6.
Retail lease expiry profile
55
Vacant
31 December 2016
31 December 2017
31 December 2018
31 December 2019
31 December 2020
After 31 December 2020
Total
10.7.
11.
12.
Based on
income
(%)
0
6.1
7.9
7.9
7.0
11.0
60.1
100.0
100.0
Based on
GLA
(%)
9.7
5.2
6.5
12.3
7.6
28.6
30.1
Based on
income
(%)
0
6.5
7.6
14.5
8.5
31.1
31.8
100.0
100.0
rental
Office lease expiry profile
Vacant
31 December 2016
31 December 2017
31 December 2018
31 December 2019
31 December 2020
After 31 December 2020
Total
10.8.
Based on
GLA
(%)
1.7
3.7
6.9
5.0
5.8
10.5
66.3
rental
Rental per square metre and rental escalation
10.8.1.
The weighted average rental per square metre of the properties as at 30 June
2016 is EUR 15.49 per square metre per month for retail and EUR 12.27 per
square metre per month for office.
10.8.2.
The weighted average rental escalation, based on existing leases by GLA, for the
properties is 0.6 %.
SUMMARY OF THE ENLARGED
ACQUISITION PORTFOLIO)
PROPERTY
PORTFOLIO
(INCLUDING
THE
11.1.
The acquisition portfolio comprises the Warsaw retail development site and 4 office properties,
with a combined market value, as at 30 June 2016, of EUR 185 900 000. Full details of the
acquisition portfolio are set out in Annexure 9.
11.2.
The purchase of the acquisition portfolio will see EPP’s expanded portfolio comprise 21 retail
and office properties located in leading Polish cities, with a combined market value, as at 30
June 2016, of EUR 1 395 500 000.
11.3.
The above aggregate valuations include a 70% stake in the Warsaw retail development site, at
an acquisition price of EUR 84 000 000. The site, initially a land acquisition that is one of the
last and best sites for retail development in central Warsaw, is the subject of an intended
110,000m2 dominant retail development that will significantly alter its use and increase its
value.
OVERVIEW OF THE ACQUISITION PORTFOLIO
12.1.
The acquisition portfolio includes the Warsaw retail development site, a 70% stake in which
will be acquired by EPP in 2016 and which is designated for a retail redevelopment. The
56
property comprises a development site of 64 869 m², located on the fringes of Warsaw’s Central
Business District. The site currently comprises two commercial buildings and a number of
auxiliary buildings (mainly storage and garages).
12.2.
The acquisition portfolio also includes the following 4 office properties, 2 of which are
currently the subject of ongoing extensions:
12.2.1.
Symetris in Łódź
Symetris comprises two office buildings. Phase I will be completed in August
2016 with an approximate 9 449 m² rentable office area, and will be transferred
to EPP in 2016.
Construction of Phase II started in June 2016 and is planned to be completed in
August 2017. Phase II will add a further 9.548 m² of rentable office space. The
building lies within the suburban area of Łódź. The acquisition of Phase II is
subject to certain conditions precedent being fulfilled, as detailed in paragraph
3.1 and Annexure 7.
12.2.2.
O3 (Opolska) Business Campus in Kraków
O3 (Opolska) Business Campus comprises three independent buildings. Phase I
was completed in January 2016 and has an approximate lettable area of 19 095
m². Phase I will be transferred to EPP in 2016.
Construction of Phase II started in March 2016 and is planned to be completed in
May 2017. Construction of Phase III will start in May 2017 and completed in
October 2018. The building lies within the suburban are of Kraków, about 3.5
km north of the city centre. The acquisition of Phase II and III is subject to
certain conditions precedent being fulfilled, as detailed in paragraph 3.1 and
Annexure 7.
12.2.3.
A4 Business Park Phase III in Katowice
A4 Business Park Phase III is a modern office building with an approximate
11 975 m² rentable office and retail / services area. The property occupies a
22 474 m² site and will be opened in Q3 2016. Katowice is the fourth largest
office market in Poland. A4 Business Park Phase III will be transferred to EPP in
2016.
12.2.4.
Tryton office building in Gdańsk
Tryton is a modern office building with an approximate 23 676 m² rentable office
and retail / services area. The property occupies an 8 141 m² site and was opened
in January 2016. Gdańsk is the third largest office market in Poland. Tryton will
be transferred to EPP in 2016.
13.
ANALYSIS OF THE ENLARGED
ACQUISITION PORTFOLIO)
PROPERTY
PORTFOLIO
(INCLUDING
THE
An analysis of the enlarged property portfolio (including the acquisition of Tryton Business Park, A4
Business Park Phase III, O3 Business Campus Phase I and Symetris Business Park Phase I which are
expected to be complete by October 2016) in respect of geographic and sectoral profiles forecast for the
12 months to 31 August 2017 is provided in the tables below.
57
13.1.
Geographic profile
Warszawa
Szczecin
Wrocław
Kielce
Poznań
Katowice
Kalisz
Jelenia Góra
Bełchatów
Gdańsk
Kraków
Łomża
Łódź
Przemyśl
Total
13.2.
15.
By rental income
(%)
5.55
21.28
18.72
16.70
5.69
4.74
5.79
4.40
4.36
4.19
3.57
2.80
1.73
0.47
100%
By GLA
(%)
36.8%
63.2%
100%
By rental income
(%)
34.0%
66.0%
100%
Sectoral profile
Office
Retail
Total
14.
By GLA
(%)
6.45
19.27
12.70
16.82
5.54
5.88
6.51
6.12
6.40
4.64
3.74
2.95
1.85
1.13
100%
VALUATION REPORTS
14.1.
The enlarged property portfolio (comprising the initial portfolio and acquisition portfolio) was
valued by Kamil Kowa and Karina Szafranska of Savills, both independent external registered
professional valuers and members of The Royal Institution of Chartered Surveyors, a
recognised property valuers regulatory body.
14.2.
Detailed valuation reports have been prepared in respect of each of the properties and are
available for inspection in terms of paragraph 43. A summary of the valuation reports in respect
of each of the properties has been included in Annexure 10.
PROPERTY, ASSETS AND BUSINESS UNDERTAKINGS ACQUIRED OR TO BE ACQUIRED
Save for the acquisitions referred to in Annexure 11 (which includes the acquisition of the initial
property portfolio and the acquisition portfolio) and the ROFO projects, no other immovable property
and/or fixed assets and/or business undertakings have been acquired by the group since incorporation of
the company or are in the process of being or are proposed to be acquired by the group (or which the
company has an option to acquire).
16.
VENDORS
16.1.
Details relating to vendors are set out in Annexure 11.
16.2.
No vendor has guaranteed the book debts of the letting enterprises acquired or to be acquired by
the group. The agreements in respect of the initial portfolio was acquired, and in respect of
which the acquisition portfolio is to be acquired (together, the “vendor agreements”), contain
warranties that are usual for transactions of their nature.
16.3.
The vendor agreements do not preclude the vendors from carrying on business in competition
with the company nor do the agreements impose any other restrictions on the vendors, and
therefore no payment in cash or otherwise has been made in this regard.
58
16.4.
There are no liabilities for accrued taxation that will be settled in terms of the vendor
agreements.
16.5.
Save as disclosed in Annexure 11, EPP has not purchased any other securities in any company
or other entity.
16.6.
Save as disclosed in Annexure 3, no director (or any partnership, syndicate or other association
in which a director had an interest) had any beneficial interest, direct or indirect in the
acquisition of the initial portfolio and/or acquisition portfolio.
16.7.
All of the initial properties were transferred into the name of the group on 17 February 2016.
The acquisition portfolio will be transferred into the name of the group in accordance with the
terms of the acquisition agreements, as detailed in paragraph 3.1 above and paragraph 11 of
Annexure 7. No property within either the initial portfolio or the acquisition portfolio has not
been ceded or pledged to any party.
16.8.
The salient terms of the FIZ acquisition agreements (in terms of which EPP acquired the initial
portfolio) and the acquisition agreements are set out in Annexure 7.
16.9.
In addition to the information provided in Annexure 7 in relation to the FIZ acquisition
agreements, the following must be noted in respect of the FIZs:
16.9.1.
Rights attached to the investment certificates:
16.9.1.1.
Each certificate gives the right to one vote at a meeting of
shareholders.
16.9.1.2.
Shareholders holding at least 10% of certificates issued by the
FIZs may request the convening of a meeting of shareholders by
submitting such a request in writing to Forum.
16.9.1.3.
Certificates issued by the FIZs are personal registered securities.
16.9.1.4.
Forum keeps a register of the certificates in electronic form.
16.9.1.5.
The rights arising from certificates are generated upon making an
entry in the records and are granted to the person indicated in the
records as the holder of the certificate.
16.9.1.6.
The certificates are transferable without the prior unanimous
consent of all shareholders.
16.9.1.7.
The FIZs pay out the proceeds from investments to the
shareholders through:
16.9.1.7.1.
payment of revenues from the investment closure,
pursuant to art. 198.1 of the Polish Act of May 27,
2004 on Investment Funds;
16.9.1.7.2.
buyout of investment certificates.
16.9.2.
Both FIZs have been incorporated for an indefinite period.
16.9.3.
The FIZs operate under the Polish Act of May 27, 2004 on Investment Funds.
16.9.4.
Close-end investment funds are supervised by the Polish Financial Supervision
Authority.
16.9.5.
The registered address of the FIZs is: 30-701 Krakow, ul. Zabłocie 25/20.
16.9.6.
The FIZs are managed by Forum, a private investment fund company. The board
of the said company is Mateusz Sarapata (president of the board), Artur Rawski
(vice president of the board) and Anna Rojek (member of the board).
59
17.
16.9.7.
The FIZs evaluate their assets in PLN. The FIZs’NAV and the FIZs’NAVPS
are determined on the last business day of each calendar quarter.
16.9.8.
The FIZs’valuations are published on the FIZs’website at www.forumtfi.pl.
Access to the data is restricted to the authorized representatives of the
shareholders of the FIZs.
PROPERTY, ASSETS AND BUSINESS UNDERTAKINGS DISPOSED OF OR TO BE
DISPOSED OF
17.1.
No material immovable properties and/or fixed assets and/or business undertakings have been
disposed of since incorporation of the company or are intended to be disposed of within six
months of listing on the JSE.
17.2.
Astra Park is the subject of an option to purchase by FTF Columbus S.A., which option may be
exercised at any time between 10 June 2020 and 10 August 2020. The salient terms of the
agreement in terms of which such option was granted are set out in Annexure 7.
60
SECTION THREE –DETAILS OF THE PRIVATE PLACEMENT
18.
PURPOSE OF THE PRIVATE PLACEMENT
The private placement will be undertaken prior to the JSE listing in order to afford invited investors the
ability to participate in the equity of EPP.
19.
SALIENT DATES AND TIMES
Prospectus released on the LuxSE website on
Listing of the ordinary shares and commencement of trading on the
LuxSE
2016
Tuesday, 30 August
Tuesday, 30 August
Opening of the private placement at 09:00 on
Wednesday, 31 August
Closing of the private placement at 12:00 on
Tuesday, 6 September
Results of the private placement released on SENS and on the LuxSE
website on
Wednesday, 7 September
Notification of allotments to successful invited investors from
Wednesday, 7 September
Results of private placement published in the press on
Thursday, 8 September
Listing of ordinary shares and the commencement of trading on the
JSE at 09:00 on
Tuesday, 13 September
Listing of ordinary shares issued pursuant to the private placement on
the LuxSE and the commencement of trading at 09:00 on
Tuesday, 13 September
Accounts at CSDP or broker updated and debited in respect of
dematerialised shareholders on
Tuesday, 13 September
Notes
20.
1
All references are to local dates and times in Luxembourg. These dates and times are subject to
amendment. Any such amendment will be released on the LuxSE website and SENS.
2
Invited investors must advise their CSDP or broker of their acceptance of the private placement
shares in the manner and cut-off time stipulated by their CSDP or broker.
3
CSDPs effect payment on a delivery-versus-payment basis.
PARTICULARS OF THE PRIVATE PLACEMENT
20.1.
Details of the private placement
A private placement will be undertaken by way of an offer, to invited investors only, for
subscription for approximately 71.5 million ordinary shares in the share capital of the company,
at an issue price, payable in Rand, to be determined by demand and at a EUR:ZAR exchange
rate to be hedged by the company and as notified by the company to investors following the
close of the offer for subscription on Tuesday, 6 September 2016, and for which an indicative
issue price of EUR1.45 per ordinary share has been used in this prospectus. Subject to investor
61
demand, the company may increase the amount of capital raised pursuant to this private
placement.
20.2.
20.3.
20.4.
Conditions precedent
20.2.1.
The listing on the JSE is subject to the company having satisfied the
requirements of the JSE Listing Requirements regarding the spread of
shareholders, being public shareholders holding not less than 20% of the issued
ordinary share capital of the company at the point of listing on the JSE.
20.2.2.
If the above condition is not met, the private placement and any acceptance
thereof shall not be of any force or effect and no person shall have claim
whatsoever against EPP or any other person as a result of the failure of such
condition.
Procedures for participating in the private placement
20.3.1.
The private placement is open to invited investors only.
20.3.2.
Invited investors may apply to subscribe for private placement shares that will be
listed in either the European market or the South African market.
20.3.3.
Invited investors who wish to apply for private placement shares to be listed in
the South African market are to provide the bookrunner, Java Capital, with their
completed application form by 12:00 on Tuesday, 6 September 2016. No
applications will be accepted after 12:00 on Tuesday, 6 September 2016.
20.3.4.
Invited investors who wish to apply for private placement shares to be listed in
the European market are advised to contact the bookrunner for further
instructions.
20.3.5.
The following parties may not participate in the private placement:
20.3.5.1.
any person who may not lawfully participate in the private
placement;
20.3.5.2.
any investor who has not been invited to participate; and/or
20.3.5.3.
any person acting on behalf of a minor or deceased estate.
20.3.6.
Applications in terms of the private placement must be for a minimum
subscription of R1 000 000 per investor acting as principal.
20.3.7.
Applications are irrevocable and may not be withdrawn once submitted to the
bookrunner.
20.3.8.
Receipts will not be issued for applications, application monies or supporting
documents received.
20.3.9.
Each application will be regarded as a single application.
20.3.10.
The directors of the company reserve the right to accept or refuse any
applications, either in whole or in part, or to abate any or all applications
(whether or not received timeously) in such manner as they may, in their sole and
absolute discretion, determine.
The private placement shares
62
20.5.
20.6.
20.7.
20.4.1.
The private placement shares will be allotted subject to the provisions of the
articles of association and will rank pari passu in all respects, including
dividends, with all existing issued ordinary shares in the company.
20.4.2.
There are no convertibility or redemption provisions relating to any private
placement shares.
20.4.3.
No fractions of private placement shares are offered.
Issue and allocation of private placement shares
20.5.1.
Invited investors will be informed of their allocated private placement shares, if
any, on or from Wednesday, 7 September 2016. Invited investors must make the
necessary arrangements to enable their CSDP or broker, as the case may be, to
make payment for the allocated private placement shares on the settlement date.
The allocated private placement shares will be transferred, on a delivery-versuspayment basis, to successful applicants on the settlement date, which is expected
to be Tuesday, 13 September 2016.
20.5.2.
All private placement shares subscribed for in terms of the JSE pre-listing
statement will be issued at the expense of EPP.
20.5.3.
The private placement shares will only be issued in dematerialised form. No
certificated private placement shares will be issued.
Payment for and delivery of the private placement shares
20.6.1.
No payment should be submitted with the application form delivered to the
bookrunner. Applicants must make the necessary arrangements to enable their
CSDP or broker to make payment for the allocated private placement shares on
the settlement date, which is expected to be Tuesday, 13 September 2016, in
accordance with each applicant’s agreement with their CSDP or broker.
20.6.2.
The allocated private placement shares will be transferred, on a delivery-versuspayment basis, to successful applicants on the settlement date, which is expected
to be Tuesday, 13 September 2016.
20.6.3.
The applicant’s CSDP or broker must commit to Strate to the receipt of the
applicant’s allocation of private placement shares against payment on Tuesday,
13 September 2016.
20.6.4.
On the settlement date, the applicant’s allocation of private placement shares will
be credited to the applicant’s CSDP or broker against payment during the Strate
settlement runs, prior to the opening of the market.
20.6.5.
The CSDP or broker concerned will receive and hold the dematerialised private
placement shares on the applicants’behalf.
20.6.6.
In the event that the JSE listing does not proceed, the private placement shares
will not be issued to investors and no funds will be transferred to the company.
Representation
Any invited investor applying for or accepting the private placement shares in the private
placement shall be deemed to have represented to EPP that such investor was in possession of a
copy of the JSE pre-listing statement at that time. Any party applying for or accepting private
63
placement shares on behalf of another investor shall be deemed to have represented to EPP that
they are duly authorised to do so and warrants that they and the purchaser for whom they are
acting as agent is duly authorised to do so in accordance with all relevant laws and such investor
guarantees the payment of the issue price and that a copy of the JSE pre-listing statement was in
the possession of such investor for whom they are acting as agent.
20.8.
Applicable law
Notwithstanding paragraph 20.4.1 above, the private placement, applications, allocations and
acceptances will be exclusively governed by the laws of South Africa and each invited investor
will be deemed, by applying for private placement shares, to have consented and submitted to
the jurisdiction of the courts of South Africa in relation to all matters arising out of or in
connection with the private placement.
20.9.
20.10.
Over subscription
20.9.1.
There is no maximum number of ordinary shares that can be subscribed for
and/or purchased in terms of the private placement per applicant.
20.9.2.
In the event of an oversubscription, the board shall, in its sole discretion,
determine an appropriate allocation mechanism, such that the private placement
shares will be allocated on an equitable basis, as far as reasonably possible,
taking into account the spread requirements of the LuxSE and JSE, the liquidity
of the ordinary shares and considering the potential shareholder base that the
board wishes to achieve and whether or not the board considers it appropriate to
grant preferential allocation to any applicant or group of applicants.
20.9.3.
Depending upon the level of demand, invited investors may receive no private
placement shares or fewer than the number of private placement shares applied
for. Any dealing in ordinary shares prior to delivery of the private placement
shares is entirely at the invited investor’s own risk.
Simultaneous issues
No ordinary shares are to be issued simultaneously with the issue of private placement shares
for which application is being made.
20.11.
Underwriting and pre-commitments
20.11.1.
20.11.2.
In terms of the underwriting agreement, the private placement has been
underwritten up to an aggregate maximum amount of EUR 100 million at
EUR1.45 per share, by the following underwriters and in the following amounts:
20.11.1.1.
Redefine - EUR 50 000 000;
20.11.1.2.
CV Cinque Limited - EUR 11 194 030;
20.11.1.3.
Anchor Capital Proprietary Limited - EUR 13 805 970;
20.11.1.4.
Oxiana Limited - EUR 17 666 667;
20.11.1.5.
Argon Holding Inc. - EUR 7 333 333.
Each underwriter has undertaken to subscribe for its pro rata portion of the
applicable shares offered but not subscribed for in terms of the private
placement, subject to the above maximum commitment. The underwriters will
subscribe for the applicable available shares in proportion to their respective
commitments.
64
21.
20.11.3.
Each underwriter has submitted a sworn affidavit to EPP confirming that it has
the financial resources to meet its commitments in terms of the underwriting
agreement, and the directors have made due and careful enquiry to confirm that
each underwriter is able to meet its commitments in terms of the underwriting
agreement.
20.11.4.
The bookrunner will, solely on behalf of the company, be mandated to offer
certain potential investors that meet minimum pre-commitment requirements a
“pre-commitment fee”, provided that the aggregate amount of all precommitment fees paid to all qualifying investors shall not exceed an amount of
EUR 835 000 (the “pre-investment commitments”).
20.11.5.
As at the last practicable date, no pre-investment commitments have been
received.
20.11.6.
The salient features of the underwriting agreement, including details of the
underwriting fee payable to the underwriters, are set out in Annexure 7.
APPLICATION OF PROCEEDS
The proceeds of the private placement will be used by EPP to settle the costs associated with the private
placement and the listings on the LuxSE and the JSE, as well as to pay advisory fees and partially fund
the purchase of five additional properties that form part of the acquisition portfolio.
22.
MINIMUM SUBSCRIPTION
The JSE listing is not conditional on raising a minimum amount in terms of the private placement, but is
subject to the company having satisfied the requirements of the JSE Listing Requirements regarding the
spread of shareholders, being public shareholders holding not less than 20% of the issued ordinary share
capital of the company at the point of listing on the JSE. In the event that the private placement raises
less than the maximum amount that could be raised in terms of the private placement, the balance that
may be required to settle the preliminary and issue expenses that the company, or that may be required to
fund the purchase of the acquisition portfolio, will be funded out of facilities available to it.
23.
LISTING STATEMENT
23.1.
LuxSE approval
Application will be made to the LuxSE for admission of the private placement shares on the
official list of the LuxSE and to trading on the Euro MTF market after the closing date of the
private placement, with effect from the commencement of trade on Tuesday, 13 September
2016 or as soon as practicable thereafter.
23.2.
JSE approval
Application will be made to the JSE for the approval of the listing of up to approximately 71.5
million ordinary shares (subject to any upsize of the offer) after the closing date of the private
placement, with effect from the commencement of trade on Tuesday, 13 September 2016 or as
soon as practicable thereafter.
23.3.
Trading EPP shares on the LuxSE and the JSE
Shareholders are advised that their EPP shares will only be traded on the Euro MTF market and
the JSE in demateralised form. Accordingly all shareholders who hold their shares in either the
European market or the South African market in certificated form will have to dematerialise
their share certificates, at their own expense, in order to trade their shares. Such shareholders
must make arrangements with their CSDP, bank or broker in terms of the custody agreement
with their CSDP, bank or broker.
65
SECTION FOUR –FINANCIAL INFORMATION
24.
25.
26.
27.
FORECAST STATEMENTS OF COMPREHENSIVE INCOME
24.1.
The forecast statements of comprehensive income of the EPP group (“forecasts”) for the period
from incorporation to 31 December 2016 and year ending 31 December 2017 are presented in
Annexure 13.
24.2.
The forecasts, including the assumptions on which they are based and the financial information
from which they are prepared, are the responsibility of the directors. The forecasts must be read
in conjunction with the independent reporting accountants’limited assurance report extracted
from the JSE pre-listing statement and which is included in this prospectus as Annexure 14.
Please note that references to page numbers and paragraph numbers in Annexure 14 are
references to the JSE pre-listing statement and are subject to change.
24.3.
The forecasts have been prepared in compliance with IFRS and in accordance with the group’s
accounting policies as set out in Annexure 18.
CONSOLIDATED PRO FORMA STATEMENT OF FINANCIAL POSITION
25.1.
The consolidated pro forma statement of financial position of the EPP group is presented in
Annexure 15.
25.2.
The consolidated pro forma statement of financial position, including the assumptions on which
it is based is the responsibility of the directors.
HISTORICAL FINANCIAL INFORMATION
26.1.
The company received from the LuxSE a waiver of the requirement to supply historical
financial information for the three years preceding this prospectus. In accordance with such
waiver, the audited historical financial information for the EPP group as at 4 January 2016,
being the date of incorporation of the company, is presented in Annexure 16.
26.2.
The compilation, contents and presentation of the historical financial information is the
responsibility of the directors. The independent reporting accountant’s report on the historical
financial information is presented in Annexure 17.
SHARE CAPITAL
Upon the listing on the LuxSE:
27.1.
the authorised share capital of the company comprises 2 572 645 659 ordinary shares of
EUR 0.81 each and 1 preference share of EUR 0.81;
27.2.
the issued share capital of the company comprises 514 529 131 ordinary shares of EUR 0.81
each (all of which are listed on the LuxSE) and 1 preference share of EUR 0.81 (not listed on
any stock exchange); and
27.3.
there are no treasury shares in issue.
Assuming that the private placement is fully subscribed, immediately after the private placement and the
listing on the JSE:
27.4.
the authorised share capital of the company comprises 2 572 645 659 ordinary shares of
EUR 0.81 each and 1 preference share of EUR 0.81;
13.4(d)
8.1
66
28.
27.5.
the issued share capital of the company will comprise approximately 585 999 168 ordinary
shares of EUR 0.81each (all of which will be listed on the LuxSE and the JSE) and 1 preference
share of EUR 0.81 (not listed on any stock exchange); and
27.6.
there will be no treasury shares in issue.
27.7.
Annexure 19 contains the following salient information relating to the authorised and issued
share capital of the company:
27.7.1.
authorisations;
27.7.2.
rights attaching to shares;
27.7.3.
options and preferential rights in respect of shares;
27.7.4.
alterations to share capital;
27.7.5.
issues and repurchases of shares; and
27.7.6.
statement as to listing on stock exchange.
ADEQUACY OF CAPITAL
The directors are of the opinion that the working capital available to the EPP group is sufficient for the
group’s present requirements, that is, for at least the next 12 months from the date of issue of this
prospectus.
29.
DIVIDENDS
29.1.
On 11 August 2016, the general meeting resolved to distribute, as an interim distribution, to
shareholders of the company reflected in the original shareholders register of the company at
17h00 (CET) on 11 August 2016, an amount equal to 100% of the company’s cash available
and deriving from the profits from operations attributable to the shareholders for the period
commencing 4 January 2016 and ending on 31 August 2016 (the “clean-out dividend”). The
clean-out dividend shall be calculated with reference to the company’s management accounts
and shall be finally determined by the board (or any nominated sub-committee of the board) and
shall be payable to the shareholders qualifying for the clean-out dividend within 45 days from
the date of the board confirmation (the “payable date”). No shareholder qualifying for the
clean-out dividend shall have a claim against the company with respect to the clean-out
dividend until the payable date as determined by the board. As per Annexure 13, the estimated
dividend amount is EUR 12 482 478 that shall be finally determined by the board (or any
nominated sub-committee of the board). For the avoidance of doubt, the private placement
shares will be issued ex entitlement to the clean-out dividend.
29.2.
Following the JSE listing, EPP intends distributing 100% of its distributable income to
shareholders. If declared by the directors, the company’s first dividend will be for the period
from 1 September 2016 to 31 December 2016.
29.3.
Thereafter, the company intends declaring half-yearly dividends, which are expected to be
declared for the periods ended 30 June and 31 December.
29.4.
Any dividend by the company, that will be declared as annual dividend, i.e. upon adoption of
the company’s annual accounts, requires a resolution of the general meeting. Pursuant to the
company’s articles of association, the board of directors has the authority to determine which
part of the distributable income of EPP shall be reserved. The general meeting may resolve to
distribute any remaining dividend after such reservation.
29.5.
Any distributions that are not declared upon the adoption of the annual accounts are considered
interim dividends, which can be declared by the board of directors at any time and require an
interim statement of assets and liabilities to be prepared and signed by the board of directors.
67
30.
31.
32.
29.6.
All distributions declared by the company will be declared in accordance with the company’s
articles of association and the applicable principles of Dutch corporate law.
29.7.
All unclaimed distributions will be held by EPP in trust. A claim of a shareholder for payment
of a distribution will be time barred by an elapse of five years.
29.8.
There are no arrangements in terms of which future dividends are waived or agreed to be
waived.
MATERIAL COMMITMENTS, LEASE PAYMENTS AND CONTINGENT LIABILITIES
30.1.
The company has concluded the acquisition agreements, in terms of which it will purchase the
acquisition portfolio from Griffin and Echo.
30.2.
The aggregate purchase price payable by EPP for its 70% stake in Warsaw retail development
NewCo (being the special purpose vehicle that will own the Warsaw retail development site) is
EUR 84 000 000, payable in the following four instalments
30.2.1.
EUR 5 000 000 when the relevant transaction documents are signed;
30.2.2.
EUR 37 000 000 on the JSE listing, but no later than 1 December 2016;
30.2.3.
EUR 21 000 000 when the City of Warsaw authorities approve the zoning plan
allowing for the development of the Warsaw retail development site project; and
30.2.4.
EUR 21 000 000 on receipt of a positive decision on the Warsaw retail
development site project’s impact on the environment.
30.3.
The purchase price payable by EPP for its 100% stake of the remainder of the properties
comprising the acquisition portfolio will only be determined on completion of the relevant
acquisition, and will be calculated as the product of the annual net operating income of the
relevant property divided by an agreed yield.
30.4.
The salient terms of the acquisition agreements are set out in Annexure 7.
30.5.
EPP has granted a suretyship up to an amount of EUR 3 500 000 in order to secure Camas
Investments LLC’s obligation to introduce a long-term incentive scheme in terms of the
management contract entered into between Hadley Dean, Chief Executive Officer of the
company, and Camas Investments LLC. The salient terms of such management contract are set
out in Annexure 5.
30.6.
Save as set out above, and save for the material borrowings set out in Annexure 20, the
company has no material commitments, lease payments or contingent liabilities.
MATERIAL BORROWINGS
31.1.
Details of material borrowings advanced to the group as at the last practicable date are set out in
Annexure 20.
31.2.
None of the material borrowings set out in Annexure 20 have any redemption or conversion
rights attaching to them.
31.3.
The company has no loan capital outstanding.
31.4.
The group has not entered into any inter-company financial or other transactions.
31.5.
As at the last practicable date, the group has not undertaken any off-balance sheet financing.
LOANS RECEIVABLE
32.1.
No material loans were made by the group as at the last practicable date.
68
32.2.
33.
No loans have been made or security furnished by the group for the benefit of any director,
manager or associate of any director or manager of the group.
MATERIAL CHANGES
Save for the acquisitions set out in Annexure 11, the Redefine transaction and the listing on the LuxSE:
33.1.
there have been no material changes in the financial or trading position of the group since
incorporation of the company; and
33.2.
there have been no changes in the business or trading objects of the company since
incorporation.
69
SECTION FIVE –ADDITIONAL MATERIAL INFORMATION
34.
RISKS
In carrying on its business, the company will contemplate investment and extension opportunities that
will yield satisfactory returns at acceptable levels of risk. The risks of the company are all of the risks
that would typically be associated with investing in commercial real estate in Poland. The board of the
company understands and will take appropriate steps to mitigate such risks.
34.1
Capital and portfolio risk
The acquisition of assets carries investment risk of the loss of capital and there can be no assurance that
the company will not incur losses. Returns generated from the investments of the company may not
adequately compensate shareholders for the relevant risks assumed. An investor should be aware that it
could lose all or part of its investment in the company. Many unforeseeable events, including actions by
various government agencies and domestic and international economic and political developments may
cause market fluctuations that could adversely affect the company’s property portfolio and performance
in the future.
34.2
Currency risk
The properties that the company has acquired and will acquire are all located in Poland and will therefore
be denominated in PLN, whereas the company’s reporting currency is in Euro. EPP will therefore have
to convert the values of its assets, liabilities, revenue and expenses to Euro in order to prepare its
financial statements at exchange rates applicable in the relevant time period. Accordingly, significant
movements in currency rates between Euro and PLN may have a material adverse effect on the
company’s financial condition. In addition, for those investors whose base currency is not Euro, there is a
risk of currency loss if such currencies depreciate against any such investor’s base currency.
34.3
Stock market risk
Investments in the company could decrease in value as a result of a decline in global stock markets.
34.4
Liquidity risk
Property by its nature is a relatively illiquid investment and it may take time for the company to divest
itself of certain property investments. Under certain market conditions, market prices, if any, for such
assets may not be readily ascertainable and the company may not be able to sell them when it desires to
do so or to realise what it perceives to be their fair value in the event of a sale. This may affect the
liquidity of the company and its ability to repay borrowings and its ability to provide investors with
regular income distributions.
34.5
Leverage and financing risk
The capital of the company will be leveraged so as to achieve a higher rate of return. The company may
be obliged to pledge its assets in order to borrow funds for investment purposes, which may have the
effect that such assets will have to be transferred to a lender under the terms of the borrowing agreement,
in the event of default. While leverage may enhance shareholder returns, it may also increase potential
losses. As such, any event which adversely affects the value of an investment would be magnified to the
extent the company was leveraged, and could result in the company experiencing substantial losses.
34.6
Regulatory change may affect the company
70
Legal or regulatory change in Poland or the Netherlands, where the company is incorporated, may affect
the company and could limit its ability to respond to changes in the market. Changes to landlord and
tenant regulations, planning, trust, tax (including stamp duty and land tax) or other laws and regulations
relating to the sectors in which the company operates may have an adverse effect on the company.
The company is subject to the tax authorities of the Netherlands and tax dispensations accorded the
company may change from time to time. Similarly, companies in the EPP group are subject to the tax
authorities of Poland and tax dispensations accorded to group companies may change from time to time.
Any change in the tax laws or practice may increase the amount of tax payable by the company or a
group company and could affect the value of the investments held by the company or affect its ability to
achieve its investment objectives and alter the post-tax returns to shareholders. The level of dividends the
company is able to pay could also be adversely affected.
34.7
Qualification as an alternative investment fund within the meaning of the AIFMD
The reference in this paragraph 34.7 to EPP or any other member of the group operating in the EU does
not include the FIZs. The FIZs have been qualified as AIFs under the Polish implementation of the
AIFMD.
Competent authorities may deem EPP or any other member of the group operating in the EU to be, or
EPP or any other member of the group operating in the EU may in the future be qualified as, an
alternative investment fund (AIF) within the meaning of the AIFMD.
The AIFMD entered into force on 21 July 2013. Its objective is to create a framework for the direct
regulation and supervision of alternative investment fund managers at an EU level. EPP believes that
neither it nor any other member of the group operating in the EU qualify as an alternative investment
fund with a defined investment policy which is regulated under the AIFMD, because, among other
things, they are business undertakings. However, there exists uncertainty regarding the scope of the
AIFMD and competent authorities may take a different view. If this position is not accepted by the
competent supervisory authorities in the EU, EPP and any other member of the group operating in the
EU could be exposed to material fines, judicial penalties for non-compliance or other sanctions imposed
by such competent authorities. In the Netherlands, these sanctions include an administrative fine
(bestuurlijke boete) and a judicial penalty for non-compliance (last onder dwangsom) and publication
thereof. Any such sanctions could have a material adverse effect on the business, financial condition and
results of operations of the group.
Further, if EPP or any other member of the group operating in the EU is subject to the AIFMD or in the
future changes its strategy, organisation, business policy or activities, EPP or any other member of the
group, as the case may be, may have to implement additional measures to comply with the requirements
applicable to alternative investment funds. In the event that any such company operating in the EU
becomes an alternative investment fund within the meaning the AIFMD, either at the order of a
competent authority or through choice at its free will, this could materially affect their regulatory
position and could subject them to a licence requirement and requirements relating to, among other
things, liquidity management, remuneration, transparency, valuation and leverage. In addition, EPP or
any other member of the group operating in the EU could be required to appoint a depositary. Such
requirements are likely to result in material additional operating costs for the relevant entity.
Furthermore, qualification as an alternative investment fund may significantly limit the ability of EPP or
any other member of the group operating in the EU to raise additional capital from investors in some or
all EU jurisdictions in the future, which may limit the capacity of the relevant entity to fund its
development, operations or obligations. This may also create additional compliance costs. Such
requirements could have a material adverse effect on EPP’s business, financial condition and results of
operations or the ability of EPP to pay dividend (as the case may be). Failure to obtain a licence or
authorisation may result in EPP or any other member of the group operating in the EU having to cease its
operations.
71
34.8
Development risk
The company does not intend to expose itself to development risk, save in respect of the development of
the Warsaw retail development site and the participation in the profits derived from the sale of the ROFO
projects. In particular circumstances, however, the company may be obliged or willing to take on a
limited amount of development risk in order to protect or enhance the value of its portfolio. In such
circumstance, the company may be subject to development related risk, which could include increased
costs of construction, lack of availability of quality service providers, difficulties regarding planning and
environmental permissions, raising finance, long lead times between investment and returns on
investments, and fluctuations in demand for the completed asset. As detailed in paragraph 3.4 above, the
EPP group has a 25% profit participation right in respect of the ROFO projects and is contracted to buy
the Warsaw retail development site.
34.9
Specific property risks
While over the long term property is considered a lower risk asset, shareholders must be aware that
significant short and medium term risk factors are inherent in the asset class.
Property and property related assets are inherently difficult to value due to the individual nature of each
property and the characteristics of the local, regional and national real estate markets. As a result,
valuations are subject to uncertainty. There is no assurance that the estimates resulting from the
valuations process will reflect the actual sales prices in the event of a sale occurring shortly after the
valuation date. The performance of an investment property could be adversely affected by a downturn in
property markets, both in terms of property values and rental yields. In the event of a default by a tenant,
the investment may suffer a rental shortfall and the company may incur additional costs, including legal
expenses, in maintaining, insuring and re-letting the property.
Property, in line with all investment assets, is affected by economic cycles. In a downturn, sentiment may
limit the number of potential purchasers even at reduced prices.
Rental income and property market values are generally affected by overall conditions in the economy,
employment trends, inflation and changes in interest rates, which in turn may impact upon the demand
for premises. Furthermore, movements in interest rates may negatively affect the company’s cost of
finance.
As property yields are closely correlated to long bond rates, interest rate cycles play an extremely
important role in the calculation of property prices. Shareholders should be aware that capital values
could be at risk if interest rates rise.
Rental yields and property values may also be affected by other factors specific to the real estate market,
including competition from other property owners, the physical location of assets as regards potential
exposure to crime, pollution, flooding, etc., the inability to collect rental because of the bankruptcy or
insolvency of tenants or otherwise, and the periodic need to renovate, repair and maintain assets, with all
the related cost associated therewith.
The company intends to selectively acquire additional real estate assets in the future, which requires an
analysis of a wide variety of factors, including subjective assessments and assumptions.
Investments in real estate are relatively illiquid, compared to listed equities or bonds, due in the main to:

high transaction costs;

high capital values;

the specialized nature of buildings; and
72

35.
MATERIAL CONTRACTS
35.1.
35.2.
36.
37.
reliance on property brokers to distribute information in an efficient manner in order to match
a willing buyer with a willing seller, without the use of a regulated, public market place.
Save for the material contracts set out in Annexure 7 and the loan agreements set out in
Annexure 20, the group has not entered into any other material contracts, being:
35.1.1.
restrictive funding arrangements and/or contracts entered into otherwise than in
the ordinary course of business, either within the two years prior to the date of
this prospectus or at any other time and containing an obligation or settlement
that is or may be material to the company or its subsidiaries at the last practicable
date; or
35.1.2.
contracts that are otherwise considered material by the company.
A summary of the service contracts of the executive directors is set out in Annexure 5.
COMMISSIONS PAID OR PAYABLE
36.1.
Save for the capital raising fee payable to Java Capital in respect of the private placement and
an aggregate underwriting fee of 3.5% payable to the underwriters (which will be reduced to the
extent that EPP pays any pre-commitment fees to any investors) and/or the investors from
which binding subsription undertakings have been received, as further detailed in paragraph 0
and Annexure 7, no amount has been paid, or accrued as payable, since incorporation of the
company, as commission to any person, including commission so paid or payable to any subunderwriter that is the holding company or a director or officer of the applicant, for subscribing
or agreeing to subscribe, or procuring, or agreeing to procure, subscriptions for any securities of
the company.
36.2.
No other commissions, discounts or brokerages have been paid nor have any other special terms
been granted in connection with the issue or sale of any shares in the share capital of the
company, since incorporation of the company.
36.3.
The group is not subject to any royalty agreements and no royalties are payable by the
company.
36.4.
The group is not subject to any management agreements.
GOVERNMENT PROTECTION AND INVESTMENT ENCOURAGEMENT LAW
There is no government protection or any investment encouragement law pertaining to any of the
businesses operated by the group.
38.
CORPORATE GOVERNANCE
The company’s corporate governance statement is presented in Annexure 21. The Company will adhere
to the South African 75 King III principles.
39.
LITIGATION STATEMENT
39.1.
There are no legal or arbitration proceedings, including any proceedings that are pending or
threatened, of which the EPP group is aware, that may have or have had in the recent past, being
the previous 12 months, a material effect on the group’s financial position.
39.2.
In respect of the properties acquired from Echo and the properties to be acquired from Echo and
Griffin, there are no legal or arbitration proceedings, including any proceedings that are pending
or threatened, of which the EPP group is aware, that may have or have had in the recent past,
being the previous 12 months, a material effect on the group’s financial position.
73
40.
DIRECTORS’RESPONSIBILITY STATEMENT
The directors, whose names are given on page 22 of this prospectus, collectively and individually, accept
full responsibility for the accuracy of the information given herein and certify that, to the best of their
knowledge and belief, no facts have been omitted which would make any statement false or misleading,
and that all reasonable enquiries to ascertain such facts have been made and that this prospectus contains
all information required by law, the LuxSE Rules and Regulations and the JSE Listings Requirements.
41.
INCORPORATION BY REFERENCE
41.1.
The following information is incorporated in this prospectus by reference:
Prospectus
reference
Paragraph
1
Annexure 21
Annexure 16
41.2.
42.
of
Nature of information
Accessible at
A register of all 75
King III principles and
the extent of EPP’s
compliance therewith
Copies are available for inspection at the registered
office of EPP and the offices of the JSE sponsor and
LuxSE listing agent, at no charge and at any time
during normal business hours on business days from
Tuesday, 30 August 2016 for as long as the ordinary
shares are listed on the LuxSE. Copies can also be
viewed on the EPP website at http://www.echopp.com/pobierz,file,9_cg.pdf.
The audited financial statements as at 4 January
2016 are available for inspection on the company’s
website
at
http://www.echopp.com/pobierz,file,7_2016-08-22-epp-financialstatement-jan-16.pdf.
The audited historical
financial statements of
EPP
Where information has materially changed since publication and the last practicable date, any
changes have been disclosed.
PRELIMINARY EXPENSES AND ISSUE EXPENSES
The preliminary and issue expenses (excluding VAT) relating to the LuxSE listing, the JSE listing and
the private placement which have been incurred or that are expected to be incurred by the group in
relation to the LuxSE and JSE listing are presented in the table below.
Expense
Corporate advisory fees
Bookrunner fees*
Documentation inspection fee
Listing fees
Listing fees
Printing, publication and distribution costs
Transfer secretarial fees
Dutch legal fees
LuxSE listing advisor
South African legal fees
Valuation fees
Independent reporting accountant fees
Audit fees
Settlement fees
Contingency
Sub-total
Recipient
Java Capital
Java Capital
JSE
JSE
LuxSE
Ince
Computershare
Loyens & Loeff
MPartners
CDH
Savills
EY Inc.
EY
Standard Chartered Bank
EUR
500 000
600 000
8 535
40 000
7 500
20 000
2 000
250 000
150 000
10 200
50 000
62 500
488 000
93 333.33
410 000
2 692 068.33
74
75
Annexure 1
GROUP STRUCTURE
Set out below is the structure of the EPP group as at the last practicable date
Echo Polska Properties N.V.
100%
100%
100%
Forum 34 FIZ
GP Retail
Sarl
General partner 0.01%
SPV Retail
–1SCSp
SPV Retail
–2SCSp
Forum 29 FIZ
Limited partner 99.99%
SPV Retail
–3SCSp
100%
SPV Retail
–4SCSp
Limited partner 99.99%
SPV Retail
–5SCSp
SPV Office
–1SCSp
Camas
Investments
Sp. z o.o. S.K.
3 Polish General
Partnerships
SPV Office
–2SCSp
General partner 0.01%
SPV Office
–3SCSp
SPV Office
–4SCSp
Minster
Investments
Sp. z o.o. S.K.
10 Polish Limited Partnerships
6 Polish Limited Partnerships
3 Polish SPVS
Camas
Investments
Sp. z o.o.
(PolCo)
10 Polish SPVs
Limited Partner
99.99%
EPP Facility
Management Minster
Investments Sp. z o.o.
S.K.
10 retail properties
SPV Office
–5SCSp
Minster
Investments
Sp. z o.o.
6 Polish SPVs
EPP Property
Management Minster
Investments Sp. z o.o.
S.K.
General Partner
0.01%
6 office properties
GP Office
Sarl
76
Annexure 2
DETAILS OF MAJOR SUBSIDIARIES
Set out below are details of all major subsidiaries of the company as at the last practicable date. The company has two major subsidiaries, being the FIZs.
No.
Name of subsidiary
Date and place of incorporation
% held by
EPP
Nature of business
Date of becoming a subsidiary
1.
Forum XXIX
25 May 2010, Poland
100
A close-end investment fund company
17 February 2016
2.
Form XXXIV
25 November 2010, Poland
100
A close-end investment fund company
17 February 2016
Notes:
1.
The company’s major subsidiaries are not listed on any other stock exchange.
2.
There are no inter-company loans owed to EPP by any major subsidiary, or owed by EPP to any major subsidiary, as at the last practicable date.
3.
Ventra, Emfold and Flaxton Investments are subsidiaries of EPP that are not classified as major subsidiaries. These are dormant entities as at 26 August 2016.
77
Annexure 3
INFORMATION ON THE DIRECTORS, MANAGEMENT AND MATERIAL THIRD PARTIES
1.
DIRECTORS’INTERESTS
1.1.
Directors’interests in EPP ordinary shares
1.1.1.
Set out below are the direct and indirect beneficial interests of directors and their
associates (including directors who have resigned in the last 18 months) in EPP
ordinary shares, as at the last practicable date:
Directors
Beneficially held
Directly
500 000
Hadley Dean
1.1.2.
%
0.10
On 12 August 2016, EPP issued 500 000 ordinary shares to
Hadley Dean for an aggregate consideration of EUR 500 000.
Assuming the private placement is fully subscribed, set out below are the direct
and indirect beneficial interest of directors and their associates (including
directors who have resigned in the last 18 months) in EPP ordinary shares
immatediately following the private placement and the JSE listing:
Directors
Beneficially held
Directly
500 000
Hadley Dean
1.2.
Total
500 000
Since incorporation of the company, the following ordinary shares were acquired
by or issued to directors:
1.1.2.1.
1.1.3.
Indirectly
-
Indirectly
-
Total
500 000
%
0.09
Directors’interests in transactions
Set out below are details of the directors (including directors who resigned during the last 18
months) who have or had a material beneficial interest, direct or indirect, in transactions
effected by the company since incorporation:
Name of director
Hadley Dean
Particulars of contract
Suretyship, the salient terms
of which are set out in
Annexure 5.
Maciej Dyjas
Griffin advisory agreement,
the salient terms of which are
set out in Annexure 7.
Griffin advisory agreement,
the salient terms of which are
set out in Annexure 7.
ROFO project acquisition
agreements, the salient terms
of which are set out in
Annexure 7.
ROFO project acquisition
agreements, the salient terms
of which are set out in
Nebil Senman
Maciej Dyjas
Nebil Senman
Nature/Extent of interest
EPP has granted a suretyship
up to an amount of
EUR3 500 000 in order to
secure Camas Investments
LLC’s obligation to introduce
a long-term incentive scheme
in Hadley Dean’s favour.
Maciej Dyjas is an indirect
beneficial
shareholder
of
Griffin.
Nebil Senman is an indirect
beneficial
shareholder
of
Griffin.
Maciej Dyjas is an indirect
beneficial shareholder of Echo
(vendor).
Nebil Senman is an indirect
beneficial shareholder of Echo
(vendor).
78
Name of director
Maciej Dyjas
Nebil Senman
1.3.
2.
Particulars of contract
Annexure 7.
Warsaw retail development
site acquisition agreement,
the salient terms of which are
set out in Annexure 7.
Warsaw retail development
site acquisition agreement,
the salient terms of which are
set out in Annexure 7.
Nature/Extent of interest
Maciej Dyjas is an indirect
beneficial
shareholder
of
Griffin.
Nebil Senman is an indirect
beneficial
shareholder
of
Griffin.
General disclosures
1.3.1.
No amount has been paid, or accrued as payable, since the incorporation of the
company, or is proposed to be paid to any promoter or to any partnership,
syndicate or other association of which such promoter is or was a member and no
other benefit has been given or is proposed to be given to such promoter,
partnership, syndicate or other association within the said period.
1.3.2.
Save as disclosed in paragraph 1.2 above, none of the directors or any promoter
has any material beneficial interest, direct or indirect, in the promotion of the
company and/or in the initial or acquisition portfolios. This includes a
partnership, company, syndicate or other association.
1.3.3.
No amount has been paid, or agreed to be paid, since incorporation of the
company, to any director of EPP or to any company in which such director is
beneficially interested, directly or indirectly, or of which he is a director (“the
associate company”) or to any partnership, syndicate or other association of
which he is a member (“the associate entity”), in cash, securities or otherwise,
by any person, either to induce him to become, or to qualify him as a director or
otherwise for services rendered by him or by the associate company or the
associate entity in connection with the promotion or formation of the EPP group.
DIRECTORS’EMOLUMENTS
2.1.
The emoluments of the directors anticipated to be paid for the period to 31 December 2016 are
set out in the table below:
Director
Executive directors
Hadley Dean
Maciej Drozd
Bonuses and other
performance
Basic salaries Directors’fees
payments
EUR
EUR
EUR
Total
EUR
160 500
87 500
248 000
-
292 000
25 000
317 000
452 500
112 500
565 000
Non-executive directors
Robert Weisz
Marc Wainer
Marek Belka
Andrew Konig
Maciej Dyjas
Nebil Senman
Dionne Ellerine
Andrea Steer
Peter Driessen
-
45 000
25 000
31 000
25 000
25 000
25 000
30 000
40 000
37 000
-
45 000
25 000
31 000
25 000
25 000
25 000
30 000
40 000
37 000
Total
-
283 000
-
283 000
79
3.
2.2.
The executive directors are each remunerated by Camas Investments LLC, in terms of the
agreements concluded by each of them and Camas Investments LLC, the salient terms of which
are set out in Annexure 5. The non-executive directors are remunerated by EPP.
2.3.
Save as set out above, no director has received or will receive emoluments for the period from
incorporation to 31 December 2016, in the form of:
2.3.1.
fees for services as a director;
2.3.2.
management, consulting, technical or other fees paid for such services rendered,
directly or indirectly, including payments to management companies, a part of
which is then paid to a director of the company;
2.3.3.
basic salaries;
2.3.4.
bonuses and performance-related payments;
2.3.5.
sums paid by way of expense allowance;
2.3.6.
any other material benefits received;
2.3.7.
contributions paid under any pension scheme; or
2.3.8.
any commission, gain or profit-sharing arrangements.
2.4.
It has been agreed that either Camas Investments LLC or EPP will introduce a long-term
incentive program for the first five consecutive years of Hadley Dean’s appointment, under
which he will be allocated share options or similar instruments in respect of EPP ordinary
shares (“LTI”). The proposed terms of the LTI are set out in Annexure 5. The adoption of any
LTI will be subject to approval as required by the LuxSE and in terms of the JSE Listings
Requirements.
2.5.
Save as set out above, no share options or any other right has been given to a director of the
company in respect of providing a right to subscribe for ordinary shares in EPP.
2.6.
No ordinary shares have been issued and allotted in terms of a share purchase or share option
scheme for any of the company’s employees.
2.7.
Save as set out in Annexure 5, the directors have not and do not receive any remuneration or
benefit in any form from any subsidiary, joint venture or third party management or advisory
company.
2.8.
EPP has not paid any other fees or incurred any fees payable to a third party in lieu of
directors’fees.
2.9.
The remuneration received by any of the directors will not be varied as a consequence of the
private placement or JSE listing.
2.10.
The business of EPP, or any part thereof, is not managed or proposed to be managed by any
third party under contract or arrangement.
2.11.
Save for as set out in Annexure 5, the company has not entered into any contracts relating to
the directors’ and managerial remuneration, secretarial and technical fees and restraint
payments.
BORROWING POWERS
3.1.
The borrowing powers of the group exercisable by the directors are unlimited. The borrowing
powers of the group may not be varied unless the articles of association are amended by way of
a resolution passed by shareholders with the support of 75% of voting rights exercised.
80
3.2.
4.
The borrowing powers have not been exceeded during the previous three years. There are no
exchange control or other restrictions on the borrowing powers of EPP. Further information
related to the borrowing powers of directors are set out in Annexure 6.
DIRECTORS’DECLARATIONS
No director has:
4.1.
been a director of a company that has been put into liquidation or been placed under business
rescue proceedings or had an administrator or other executor appointed during the period when
he was (or within the preceding 12 months had been) one of its directors, or alternate directors
or equivalent position;
4.2.
either himself or any company of which he was a director or an alternate director or officer at
the time of the offence, been convicted in any jurisdiction of any criminal offence, or an offence
under legislation relating to the South African Companies Act 71 of 2008 (the “SA Companies
Act”) or equivalent legislation;
4.3.
been removed from an office of trust, on grounds of misconduct, involving dishonesty;
4.4.
been disqualified by a court from acting as a director of the company, or from acting in
management or conduct of the affairs of any company;
4.5.
been convicted of an offence resulting from dishonesty, fraud, theft, perjury, misrepresentation
or embezzlement;
4.6.
been adjudged bankrupt or sequestrated in any jurisdiction;
4.7.
been a party to a scheme of arrangement or made any other form of compromise with his
creditors;
4.8.
been found guilty in disciplinary proceedings, by an employer or regulatory body, due to
dishonest activities;
4.9.
had any court grant an order declaring him to be a delinquent or placed such director under
probation in terms of section 162 of the SA Companies Act and/or 47 of the South African
Close Corporations Act 69 of 1984 or equivalent legislation;
4.10.
been barred from entry into any profession or occupation;
4.11.
been convicted in any jurisdiction of any criminal offence, or an offence under legislation
relating to the SA Companies Act or equivalent legislation;
4.12.
received any official public criticisms by any statutory or regulatory authorities (including
recognised professional bodies);
4.13.
entered into any compulsory liquidations, administrations or partnership voluntary arrangements
of any partnerships where such person is or was a partner at the time of or within the 12 months
preceding such event;
4.14.
entered into receiverships in respect of any of his asset(s) or the assets of a partnership of which
he is or was a partner at the time of, or within the 12 months preceding, such event; or
4.15.
been involved in any offence involving dishonesty committed.
81
Annexure 4
CURRENT AND PAST DIRECTORSHIPS AND PARTNERSHIPS
Set out below are details of the companies and partnerships of which each director of the company or major
subsidiary is currently a director or partner as well as the companies and partnerships of which each director of
the company or major subsidiary was a director or partner over the five years preceding this prospectus:
Director
Hadley Dean
Current
directorships
partnerships
Echo Polska Properties
Express Couriers
and
N.V.,
Directorships and partnerships
held in the last five years
Compass
Offices,
Colliers
International
Maciej Drozd
Echo Polska Properties N.V., Echo
Investment S.A., GP Development
Sarl, GP Retail Sarl, GP Office
Sarl, Projekt Echo 138 Sp. z o.o.
DTC SPV 1 Sp. z o.o., SO SPV 16
Sp. z o.o. , Cedet Sp. z o.o. ,
Cimiento Investments Sp. z o.o. ,
DH Renoma Sp. z o.o. , DH
Supersam Katowice Sp. z o.o. ,
DTC Real Estate Finance Sp. z
o.o., DTC Renoma, DTC Renoma
Sp. z o.o. , Okraglak Sp. z o.o. ,
Residential Real Estate Sp. z o.o. ,
MDR Inwestycje Maciej Drozed
Marzena Mendza-Drozd Sp. j.,
MDR Inwestycje Maciej Drozd
Marzena Mendza-Drozd Sp. j.,
Empik Media & Fashion SA,
Global Asset Management Sp. z
o.o. , Mayra Investments Sp. z o.o.
, Nunca Investments Sp. z o.o. ,
Posejdon Development Sp. z o.o. ,
Prime Properties Sp. z o.o. , Prime
Real Estate Sp. z o.o. , CDI Polska
Sp. z o.o. , DTC Real Estate S.A.
CZG Development Sp. z o.o. ,
Development Finance Sp. z o.o. ,
Eastbridge Sarl, Empik Centrum
Investments Sarl, ECI Holdings,
Sarl, Westbridge Sarl, Cresida
Investment
Sarl,
Eastbridge
Belgium SA, Matrox Professional
Inc., MDR Inwestycje Sp. z o.o. ,
Immobel SA, DTH Partners LLC
Robert Weisz
Echo Polska Properties N.V.,
Timevest B.V., Alzheimer/VU
Institute,
Profound
Asset
Management
Multidevelopment
Corporation,
Dutch
Foundation
for
Transparency of non quoted
property investment companies
Marc Wainer
Echo Polska Properties N.V.,
Redefine Properties Limited, High
Com Property Holdings Proprietary
Limited, Kalmark Investments
Proprietary Limited, Marc Wainer
and
Associates
Proprietary
Limited, High Com Property
Holdings Proprietary Limited,
Drawood
First
Investments
Hyprop Management Company
Proprietary Limited, Spearhead
Property Holdings Proprietary
Limited, Redefine Properties Opco
Proprietary
Limited,
ApexHi
Properties
Limited,
Ambit
Properties
Limited,
Redefine
Properties International Limited,
Insite
Properties
Proprietary
82
Director
Andrew Konig
Current
directorships
and
partnerships
Proprietary
Limited,
Ellwain
Investments Proprietary Limited,
Fluxrab Investments No. 53
Proprietary Limited, Redefine
International plc, Redefine BDL
Hotel Group Limited, Cromwell
Property
Group,
Redefine
Properties Australia Proprietary
Limited
Directorships and partnerships
held in the last five years
Limited,
Insite
Properties
Proprietary Limited, Barringer
Investment Holdings Proprietary
Limited, Lason Trading 12
Proprietary Limited, Redefine
Property Management Proprietary
Limited,
Redefine
Retail
Proprietary Limited, Redefine
Global
Proprietary
Limited,
Madison Property Fund Managers
Holdings
Limited,
Madison
Property Fund Managers Limited,
Cape Gannet Properties 261
Proprietary Limited, The Pivotal
Fund
Limited,
Redefine
International Holdings Limited,
Redefine
International
Fund
Managers
Europe
Limited,
Newpark
Towers
Proprietary
Limited
Echo Polska Properties N.V.,
Redefine
Properties
Limited,
Redefine Property Management
Proprietary Limited, Redefine
Retail
Proprietary
Limited,
Redefine
Global
Proprietary
Limited, Fountainhead Property
Trust
Management
Limited,
Fountainhead
Property
Administration
Proprietary
Limited, Madison Property Fund
Managers
Holdings
Limited,
Madison Property Fund Managers
Limited, Cape Gannet Properties
261 Proprietary Limited, Erf 2/49
Bryanston Proprietary Limited,
Redefine Commercial Proprietary
Limited,
Any
Name
621
Proprietary Limited, Observatory
Business Park Proprietary Limited,
The Property Management Team
Proprietary Limited, Black River
Park
Investments
Proprietary
Limited,
Annuity
Properties
Limited, Annuity Asset Managers
Proprietary Limited, S and J Land
Investments Proprietary Limited,
Simmer
and
Jack
Land
Development Company Proprietary
Limited,
Simmer
Extensions
Proprietary Limited, Micawber 185
Proprietary Limited, Delta Property
Fund
Limited,
Redefine
International
plc,
Partridge
Investments Limited, Cromwell
Property
Group,
Redefine
Properties Australia Proprietary
Hyprop Management Company
Proprietary Limited, Spearhead
Property Holdings Proprietary
Limited, Redefine Properties Opco
Proprietary
Limited,
ApexHi
Properties
Limited,
Worth
Publishing Proprietary Limited,
Ambit Properties Limited, Park
Road Trading 7 Proprietary
Limited, Upper East Side Hotel
Proprietary Limited, Newspaper
Association of South Africa, Oryx
Properties Limited
83
and
Directorships and partnerships
held in the last five years
Maciej Dyjas
Echo Polska Properties N.V.,
Griffin Real Estate Sp. z o. o.,
Cornerstone Partners Sp. z o.o.
fund, OCM Cornerstone Finteco
SARL, Echo Investment S.A.
Eastbridge Sarl, Chairman of
Supervisory Board of Empik
Media and Fashion S.A., DTH
Capital LLC, Immobel Belgium
SA, Centrum Development &
Investment Sp. z o.o.
Nebil Senman
Supervisory Board Member Echo
Investment SA, Griffin Real Estate
Sp. z o. o.
Marek Belka
Dionne Ellerine
Echo Polska Properties N.V.
Echo Polska Properties N.V.,
Newpark REIT Limited, Ellerine
Bros Proprietary Limited, Sidney
Ellerine Trust Proprietary Limited,
Eric Ellerine Trust Proprietary
Limited,
Citizen
Corporation
Proprietary
Limited,
Javelin
Holdings Proprietary Limited,
Boma
Properties
(Venda)
Proprietary Limited, Stand 1276
Carltonville Proprietary Limited,
Lucysat Investments Proprietary
Limited,
Nirelle
Proprietary
Limited, Shotput Investments
Proprietary
Limited,
Ellwain
Investments Proprietary Limited,
Stuttafords Stores Proprietary
Limited, Stuttafords International
Fashion Company Proprietary
Limited, Loringwood Investments
Proprietary Limited, Redefine BDL
Hotel Group Limited
Echo Polska Properties N.V.
Supervisory
Board
Member
German Office AG
Supervisory Board OCM German
Real Estate Holding AG
WBS
Holdings
Proprietary
Limited, Weldcom Investment
Holdings Proprietary Limited,
Roadspan Holdings Proprietary
Limited
Director
Andrea Steer
Peter Driessen
Current
directorships
partnerships
Limited, Redefine Pacific
Echo Polska Properties N.V.,
member of the supervisory board
of Achmea Realty Master Fund,
Achmea Realty Fund Asia,
Achmea Realry Fund Europa,
Achmea Realty Fund America
European director Capital Markets
CBRE bv
84
Annexure 5
SALIENT FEATURES OF THE SERVICE CONTRACTS OF EXECUTIVE DIRECTORS
1.
HADLEY DEAN (CHIEF EXECUTIVE OFFICER)
1.1.
Management services agreement
Set out below are the salient features of the management contract entered into between Hadley
Dean, Chief Executive Officer of the company, and Camas Investments (the “CEO
management contract”).
Appointment
Mr Dean will render management services to the EPP group and has been appointed Chief
Executive Officer of EPP and president of the management board of Camas Investments LLC
on and with effect from 1 June 2016.
The appointment will endure for an indefinite term, unless terminated.
Remuneration
In consideration for his services, Mr Dean is entitled to receive gross annual remuneration of
EUR 275 000. Commencing from the 2017 financial year, Mr Dean is entitled to receive a
conditional annual performance bonus in the gross amount of up to EUR 300 000 for each full
financial year in which he was engaged; provided that the key performance indicators set out in
the annual budget of the EPP group outlining the financial and other targets for the group and its
management have been met. For the 2016 financial year, Mr Dean is entitled to receive a
conditional annual performance bonus in the gross amount of up to EUR 175 000.
Long-term incentive
Camas Investments LLC or EPP will introduce a long-term incentive program for the first five
consecutive years of Mr Dean’s appointment, under which he will be allocated EPP share
options or similar instruments. The entry strike price will be equal to the price at which
Redefine acquired its ordinary shares in EPP pursuant to the Redefine transaction. Mr Dean will
be allocated such number of options such that if EPP achieves the targets specified in an agreed
business plan, the profit on the options will be at least EUR 3 500 000.
If Mr Dean terminates the CEO management contract within the first three years, his options
will be forfeited. If he terminates the CEO management contract in the fourth year or fifth year,
he will be entitled to receive 60% or 80% of the shares resulting from the options, respectively.
The detailed parameters of the long term incentive scheme will be agreed in good faith between
the parties by the end of 2016. If the scheme is not put in place, Mr Dean’s entitlement to an
annual performance bonus will be increased to EUR 750 000 and he will be paid an additional
amount of EUR 262 500 by the end of January 2017.
As part of the long term incentive scheme, Mr Dean will be entitled to co-invest up to
EUR500 000 in EPP on the same terms at which Redefine acquired its ordinary shares in EPP
pursuant to the Redefine transaction. As set out in paragraph 1.1.2.1 of Annexure 3, this
investment was effected on 12 August 2016.
EPP has granted a suretyship up to an amount of EUR 3 500 000 in order to secure Camas
Investments LLC’s obligation to introduce a long-term incentive scheme in terms of the CEO
management contract.
85
1.2.
Consulting services
Appointment
In terms of a letter of intent signed by EPP and Hadley Dean on 1 June 2016, it is envisaged that
Mr Dean will, by 31 December 2016 and through a Czech company to be established, enter into
a consulting services agreement with a subsidiary of EPP.
The services provided in terms of such contract will include advising on investment plans for
the expansion of the group’s activities in Poland, analysis of real estate trends and
developments, research of commercial opportunities to leverage the group’s assets, assessment
of the group’s performance as compared to international standards, and providing other
advisory services.
The appointment will endure for an indefinite term, unless terminated.
Remuneration
In consideration for such services, Mr Dean will be paid a net annual fee of EUR 200 000. On
conclusion of the consulting services agreement, he will be paid a sign-up bonus equivalent to a
pro rata portion of such annual fee, calculated from 1 June 2016 to the date of conclusion of the
consulting services agreement.
2.
MACIEJ DROZD (CHIEF FINANCIAL OFFICER)
2.1.
Management services agreement
Set out below are the salient features of the management contract entered into between Maciej
Drozd, Chief Financial Officer of the company, and EPP (the “CFO management contract”).
Appointment
Mr Drozd will render management services to the EPP group and has been appointed Chief
Financial Officer of EPP from 12 August 2016.
The appointment will endure for an indefinite term, unless terminated.
Remuneration
In consideration for his services, Mr Drozd is entitled to receive gross annual remuneration of
EUR 175 000. Mr Drozd is entitled to receive a conditional annual performance bonus in the
gross amount of up to EUR 50 000 for each full financial year in which he was engaged;
provided that the key performance indicators set out in the annual budget of the EPP group
outlining the financial and other targets for the group and its management have been met.
86
Annexure 6
EXTRACTS FROM THE ARTICLES OF ASSOCIATION
The articles of association of EPP make provision for, inter alia, the appointment, qualification, remuneration
and borrowing powers of directors, as well as the declaration and payment of dividends. Extracts from the
articles of association are set out below:
1
Definitions
1.1
In these Articles of Association the following words shall have the following meanings:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
Annual Accounts: the annual accounts of the Company as referred to in Section 2:361 of the
Dutch Civil Code, consisting of a balance sheet and profit and loss account with explanatory
notes, and the consolidated annual accounts if the Company prepares consolidated annual
accounts;
Applicable Listing Authority: any exchange on which the issued Share capital of the Company
may be listed from time to time;
Applicable Listing Rules: the rules and/or regulations issued and enforced by any Applicable
Listing Authority from time to time;
Articles of Association: these articles of association;
Auditor: an auditor as referred to in Section 2:393 of the Dutch Civil Code, or an organisation in
which such auditors work together;
Board of Directors: the board of directors of the Company;
Chairperson: the chairperson of the Board of Directors;
Class Meeting Preference Share: the Company Body consisting of the holder of the preference
Share or the meeting of the holder of the preference Share (as the case may be);
Company: Echo Polska Properties N.V. (formerly named Echo Polska Properties B.V.);
Company Body: the Board of Directors, the General Meeting or the Class Meeting Preference
Share;
Company Secretary: has the meaning attributed thereto in Article 18;
DA: that certain development agreement entered into or to be entered into by Echo in relation to
an Extension (as amended from time to time);
Depositary Receipts: depositary receipts issued in respect of Shares;
Distributable Equity: the part of the Company's equity which exceeds the aggregate of the paid
in and called up part of the capital and the reserves which must be maintained pursuant to the law;
DRH rights: the rights conferred by law upon holders of depositary receipts issued with a
company's cooperation for shares in its capital;
Echo: Echo Prime Assets B.V., a private limited liability company (besloten vennootschap met
beperkte aansprakelijkheid), having its official seat (statutaire zetel) in Amsterdam, the
Netherlands, and its registered office address at Prins Bernhardplein 200, 1097 JB Amsterdam, the
Netherlands, registered with the Dutch trade register under number 66260701;
Executive Director: a member of the Board of Directors appointed by the General Meeting as
executive director of the Board of Directors;
Extension: the development of that certain extension, including:
i.
the development for the extension of the shopping and entertainment centre named
"Galaxy Centrum" located in Szczecin, Poland, at Aleja Wyzwolenia street and Jacka
Malczewskiego street, comprising land plot numbers 9/4, 9/16, 12/13 and 12/26 for which
the District Court Szczecin-Prawobrzeże i Zachód in Szczecin, Poland, Tenth Land and
87
Mortgage Registry Division, maintains the land and mortgage register numbers
SZ1S/00082806/0, SZ1S/00088056/9 and SZ1S/00207182/2, including the reconstruction
of parts of the existing building with the roads and utilities infrastructure, as well as land
development on adjacent plots of land;
ii.
the development for stage two of the extension, reconstruction and adaptation of the
shopping centre named "Outlet Park Szczecin", located in Szczecin-Dąbie, Poland, at 42
Andrzeja Struga street, within cadastral district 4070, registration unit: Szczecin-Dąbie,
Poland, for which the District Court Szczecin-Prawobrzeże i Zachód in Szczecin, Poland,
Tenth Land and Mortgage Registry Division, maintains the land and mortgage register
number SZ1S/00090596/3, including the development of the building on part of land plot
number 89/1 and 91, the development of the parking on part of land plot number 89/2 and
the development of the sanitary connection on part of the land plot number 83dr;
iii.
the development for stage three of the extension, reconstruction and adaptation of the
shopping centre named "Outlet Park Szczecin", including the former storage building for
the supermarket chain with business name "Społem Powszechna Spółdzielnia
Spożywców", located in Szczecin-Dąbie, Poland, at 42 Andrzeja Struga street, on part of
land plot number 89/2, within cadastral district 4070, registration unit: Szczecin-Dąbie,
Poland, for which the District Court Szczecin-Prawobrzeże i Zachód in Szczecin, Poland,
Tenth Land and Mortgage Registry Division, maintains the land and mortgage register
number SZ1S/00090596/3, as well as land development on adjacent plots of land; and
iv.
the development for stage four of the extension (including but not limited to a clinic, a
gym, a consumer electronics store, parking, green areas and utility installations),
reconstruction and adaptation of the shopping centre named "Outlet Park Szczecin",
located in Szczecin-Dąbie, Poland, at 42 Andrzeja Struga street, on part of land plot
number 89/2, within cadastral district 4070, registration unit: Szczecin-Dąbie, Poland, for
which the District Court Szczecin-Prawobrzeże i Zachód in Szczecin, Poland, Tenth Land
and Mortgage Registry Division, maintains the land and mortgage register number
SZ1S/00090596/3, as well as land development on adjacent plots of land;
(s)
Extension Completion: has the meaning assigned thereto in Article 29.5;
(t)
General Meeting: a meeting of Shareholders and other persons entitled to attend meetings of
Shareholders or the corporate body of the Company consisting of Shareholders entitled to vote,
together with pledgees and usufructuaries to whom voting rights attributable to Shares accrue, as
the case may be;
(u)
in writing: by letter, by telecopier, by e-mail, or by a legible and reproducible message otherwise
electronically sent, provided that the identity of the sender can be sufficiently established;
(v)
Master Lease: that certain master lease agreement entered into or to be entered into in relation to
an Extension (as amended from time to time);
(w) Non-Executive Director: a member of the Board of Directors appointed by the General Meeting
as non-executive director of the Board of Directors;
(x)
Preferred Distribution: has the meaning assigned thereto in Article 29.5;
(y)
Semi-Annual Figures: the semi-annual figures (halfjaarlijkse financiële verslaggeving) within
the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht);
(z)
Share: a share in the capital of the Company; unless the contrary is apparent, this shall include
each ordinary Share and the preference Share;
(aa) Shareholder: a holder of one or more Shares; unless the contrary is apparent, this shall include
each holder of ordinary Shares, as well the holder of the preference Share;
(bb) Subsidiary: a subsidiary of the Company as referred to in Section 2:24a of the Dutch Civil Code;
(cc) Vice-Chairperson: the vice-chairperson of the Board of Directors.
88
2
Name and official seat
2.1
The Company's name is:
Echo Polska Properties N.V.
2.2
The official seat of the Company is in Amsterdam, the Netherlands.
3
Objects
3.1
The objects of the Company are:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
to incorporate, to participate in any way whatsoever in, to manage, to supervise businesses and
companies;
to finance businesses and companies;
to borrow, to lend and to raise funds, including through the issue of bonds, debt instruments or
other securities or evidence of indebtedness as well as to enter into agreements in connection with
aforementioned activities;
to render advice and services to businesses and companies with which the Company forms a
group and to third parties;
to grant guarantees, to bind the Company and to pledge its assets for obligations of the Company,
its group companies and/or third parties;
to acquire, alienate, manage and exploit registered property and items of property in general;
to trade in currencies, securities and items of property in general;
to develop and trade in patents, trademarks, licenses, know-how and other intellectual and
industrial property rights;
to perform any and all activities of an industrial, financial or commercial nature,
and to do all that is connected therewith or may be conducive thereto, all to be interpreted in the broadest
sense.
3.2
The confirmation of any action taken by the Company which transgresses its objects is prohibited to the
extent that such confirmation is contrary to any Applicable Listing Rules.
4
Authorised capital
4.1
The authorised capital of the Company is two billion eighty-three million eight hundred forty-two
thousand nine hundred eighty-four euro and sixty eurocent (EUR 2,083,842,984.60).
4.2
The authorised capital of the Company is divided into:
(a)
(b)
two billion five hundred seventy-two million six hundred forty-five thousand six hundred fiftynine (2,572,645,659) ordinary Shares, with a nominal value of eighty-one eurocent (EUR 0.81)
and each of which ranks pari passu (as contemplated by any Applicable Listing Authority) in
respect of all rights; and
one (1) preference Share, with a nominal value of eighty-one eurocent (EUR 0.81).
4.3
All Shares are to be registered. The ordinary Shares are to trade in dematerialised (uncertificated) form.
No share certificates (aandeelbewijzen) shall be issued for the Shares.
4.4
The authorised capital of the Company, including all preferences, rights, limitations and other terms
attaching to Shares, may only be amended by way of an amendment to these Articles of Association, as
provided for in Article 41, provided that any such amendment is subject to Applicable Listing Rules and
89
approved by any Applicable Listing Authority to the extent required.
6
Issuance of Shares
6.1
Shares may be issued pursuant to a resolution of the General Meeting or of the Board of Directors
designated for that purpose by a resolution of the General Meeting or these Articles of Association,
which designation shall be valid until the company’s next annual General Meeting or for a period of
fifteen (15) months, whichever period is shorter, provided that any such issue of Shares is subject to
Applicable Listing Rules and approved by any Applicable Listing Authority to the extent required. On
such designation, the number of Shares which may be issued (or a maximum percentage of the
Company’s issued share capital at the time of the designation that may be issued pursuant to such
authority) must be specified. Unless otherwise stipulated at its grant, the authorisation cannot be
withdrawn. The General Meeting shall, for as long as any such designation of the Board of Directors for
this purpose is in force, remain authorised to resolve upon the issuance of Shares.
6.2
Within eight days after each resolution of the General Meeting to issue Shares or to designate the Board
of Directors as the competent body to issue Shares, the full wording of the resolution involved shall be
deposited at the office of the Dutch trade register.
6.3
The provisions of Articles 6.1 and 6.2 shall apply by analogy to the granting of rights to subscribe for
shares and the issue of securities convertible to Shares, but shall not be applicable to the issue of Shares
to persons exercising a right to subscribe for Shares previously granted or pursuant to the conversion of a
convertible security to Shares.
6.5
A resolution to issue Shares shall stipulate the issue price and the other conditions of issue. The issue
price shall not be less than par, without prejudice to the provisions laid down in Section 2:80 paragraph 2
of the Dutch Civil Code.
7
Pre-emptive rights
7.1
Without prejudice to the statutory provisions, each holder of ordinary Shares shall have a pre-emptive
right on any issue of ordinary Shares pro rata to the aggregate amount of its ordinary Shares. A holder of
a preference Share shall have no pre-emptive right on any issue of Shares, nor shall Shareholders have a
pre-emptive right on an issuance of preference Shares. No Shareholder shall, however, have a preemptive right on Shares issued for a non-cash contribution, including the acquisition of assets.
Shareholders shall not have a pre-emptive right on Shares issued to employees of the Company or a
group company of the Company.
7.2
Subject to Applicable Listing Rules, pre-emptive rights in respect of ordinary Shares may be limited or
excluded by a resolution of the General Meeting, or the Board of Directors, if by resolution of the
General Meeting, the Board of Directors has been designated thereto for a specific period not exceeding
five (5) years, provided the Board of Directors has also been authorised to issue Shares in accordance
with Article 6. The authorisation may from time to time be extended for a period not exceeding fifteen
(15) months. Unless otherwise stipulated at its grant, the authorisation cannot be withdrawn.
7.3
Resolutions put to the General Meeting to limit or exclude pre-emptive rights shall include an
explanation in writing of the reasons for the resolution and the choice of the proposed issue price. If less
than one half of the issued capital of the Company is represented at the General Meeting, a majority of at
least two-thirds of the votes cast shall be required for a resolution of the General Meeting to limit or
90
exclude a pre-emptive right or to designate this authority to the Board of Directors.
7.4
15
When rights are granted to subscribe for ordinary Shares the holders of ordinary Shares shall also have a
pre-emptive right with respect to such rights. The provisions of Article 7.1 shall apply by analogy.
Shareholders shall not have pre-emptive rights in respect of Shares that are issued to persons exercising a
previously granted right to subscribe for Shares.
Board of Directors: appointment and remuneration
15.1
The Company shall be managed by the Board of Directors.
15.2
The Board of Directors shall consist of at least one (1) Executive Director and three (3) Non-Executive
Directors, provided that the Board of Directors shall be comprised of a maximum of fifteen (15) directors
and that the majority of the Board of Directors consists of Non-Executive Directors. With due
observance of the foregoing, the General Meeting shall determine the number of Executive Directors and
Non-Executive Directors. Only individuals can be Non-Executive Directors.
15.3
The Executive Directors and Non-Executive Directors shall be appointed as such by the General
Meeting. If a member of the Board of Directors is to be appointed, the Board of Directors shall make a
binding nomination of at least the number of persons prescribed by law. The General Meeting may at all
times overrule the binding nomination by a majority of at least two-thirds of the votes cast representing
more than half of the issued capital of the Company. If the General Meeting overruled the binding
nomination, the Board of Directors shall make a new binding nomination. The nomination shall be
included in the notice of the General Meeting at which the appointment shall be considered. If a
nomination has not been made or has not been made in due time, this shall be stated in the notice and the
General Meeting shall be free to appoint a member of the Board of Directors at its discretion. A
resolution to appoint a member of the Board of Directors that was not nominated by the Board of
Directors, may only be appointed by a simple majority representing more than one third of the issued
capital of the Company. With regard to subjects referred to in this paragraph, a second General Meeting
may not be convened pursuant to Section 2:120 paragraph 3 of the Dutch Civil Code.
15.4
The Company must establish a policy in respect of the remuneration of the Board of Directors. The
remuneration policy shall at a minimum address the matters referred to in the Sections 2:383c through
2:383e of the Dutch Civil Code, to the extent they relate to the Board of Directors. The policy is adopted
by the General Meeting upon the proposal of the Board of Directors.
The remuneration of the Executive Directors shall be determined by the Board of Directors with due
observance of the remuneration policy adopted by the General Meeting. The Executive Directors shall
not participate in the deliberations and decision-making regarding the determination of the remuneration
of the Executive Directors.
The remuneration of the Non-Executive Directors shall be determined by the General Meeting with due
observance of the remuneration policy adopted by the General Meeting.
16
Board of Directors: term of office, suspension and dismissal
16.1
Each member of the Board of Directors shall be appointed for a term to be determined by the General
Meeting, provided that no Director shall be appointed for life or for an indefinite period.
16.2
All the Directors shall retire per the end of the first annual General Meeting. At each annual General
Meeting thereafter, one third (1/3) of the Directors then in office, or if their number is not three or a
multiple of three, the number nearest to one third (1/3), but not less than one third (1/3), shall resign from
91
office, provided that at least one third (1/3) of the non-executive Directors then in office, or if their
number is not three or a multiple of three, the number nearest to one third (1/3), but not less than one
third (1/3), shall resign from office. A retiring Director may be reappointed, provided he is eligible for
appointment.
16.3
The General Meeting may at any time dismiss or suspend any member of the Board of Directors, by
resolution adopted by a simple majority of the votes cast. An Executive Director may also be suspended
by the Board of Directors. An Executive Director shall not participate in the deliberations and decisionmaking on his suspension. A suspension may be discontinued at any time by the General Meeting.
17
Board of Directors: Chairperson and titles
17.1
The Board of Directors shall appoint a Non-Executive Director to be Chairperson of the Board of
Directors for such period as the Board of Directors may decide, with due observance of the term referred
to in Article 16.1.
17.2
The Board of Directors may grant titles to an Executive Director.
20
Board of Directors: decision-making
20.3
Each member of the Board of Directors shall have one (1) vote in the Board of Directors.
20.4
Unless these Articles of Association or the regulations as referred to in Article 19 provide otherwise,
resolutions of the Board of Directors shall require a simple majority.
25
Financial year and Annual Accounts
25.1
The Company's financial year shall be the calendar year.
25.2
Annually, within the term set by law, the Board of Directors shall prepare Annual Accounts, and shall
deposit the same for inspection at the Company's office.
29
Profits and distributions
29.1
Each year the Board of Directors may determine which part of the profits shall be reserved.
29.2
The General Meeting may resolve to distribute any part of the profits remaining after reservation in
accordance with Article 29.1. If the General Meeting does not resolve to distribute these profits in whole
or in part, such profits (or any profits remaining after distribution) shall also be reserved.
29.3
Distributions may be made only up to an amount which does not exceed the amount of the Distributable
Equity.
29.5
The Board of Directors may resolve to distribute interim dividend on the Shares. The holder of the
preference Share shall be solely entitled to receive from the Company an interim dividend with priority
over any other distributions made by the Company (Preferred Distribution). No other distribution shall be
made on the preference Share. The Preferred Distribution shall be payable to holder of the preference
Share, if:
92
(a)
(b)
(c)
an occupancy permit (ostateczne pozwolenie na użytkowanie) in relation to a given Extension has
been granted by the relevant authority irrespective of whether such permit contains any conditions
or post-issuance obligations; and
at least sixty percent (60%) of the extended space of a given Extension has been leased or preleased to third parties on arm’s length terms pursuant to the applicable DA; and
Echo has executed the Master Lease for a period of three (3) years in relation to the space which
has not been leased or pre-leased (at a rate per square meter no less than the average rate
concluded with third parties in (b) above);
satisfaction of the conditions (a) through (c) of this Article 29.5 is referred to as the Extension
Completion.
29.6
The Preferred Distribution shall be paid by the Company to the holder of the preference Share separately
in relation to each Extension and regardless of whether the Extension Completion relating to the other
Extensions has taken place or not.
29.7
In calculating the amount of any distribution on Shares, Shares held by the Company, or Shares for
which the Company holds the Depositary Receipts shall be disregarded, unless such Shares or Depositary
Receipts are encumbered with a right of usufruct or pledge.
29.8
Any and all distributions on the ordinary Shares shall be made in such a way that on each ordinary Share
an equal amount or value will be distributed.
29.11 The General Meeting may resolve that a distribution on Shares shall not be paid in whole or in part in
cash but in Shares or in any other form.
31
31.1
33
Annual General Meeting
The annual General Meeting shall be held each year, within six (6) months after the end of the financial
year.
Convening and agenda
33.1
General Meetings shall be convened by the Board of Directors.
33.2
The notice of the meeting shall be given no less than 15 business days’before the date of the meeting by
means of an announcement in accordance with the relevant statutory provisions.
38
Decision-making
38.1
To the extent the law or these Articles of Association or Applicable Listing Rules do not require a
qualified majority, all resolutions of the General Meeting shall be adopted by a simple majority of the
votes cast.
38.2
Notwithstanding any other provisions of these Articles of Association, resolutions of the General
Meeting in relation to the application for bankruptcy, suspension of payments, legal merger or legal
demerger, can only be adopted at the proposal of the Board of Directors.
38.3
With respect to resolutions of the General Meeting which can only be adopted if part of the issued capital
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is represented, a second General Meeting may not be convened pursuant to Section 2:120, paragraph 3 of
the Dutch Civil Code.
40
Class Meeting Preference Share
40.1
Resolutions of the Class Meeting Preference Share may be adopted in a meeting of the holder of the
preference Share, or in a manner other than at a meeting, provided that in the latter case the votes shall be
cast in writing and such resolutions are adopted unanimously.
40.2
Class Meetings Preference Share are held as often as the Management Board or the holder of the
preference Share deems such necessary.
40.3
The members of the Board of Directors shall not have the right to give advice in Class Meetings
Preference Share.
40.4
The provisions in these Articles of Association with respect to General Meetings shall apply by analogy
to Class Meetings Preference Share, to the extent that the Articles 40.2 and 40.3 do not provide otherwise
and provided that the applicable meeting shall appoint its own chairman.
40.5
If and as long as no Shares of a specific class have been issued or all issued Shares of a specific class are
held by the Company, all powers vested in the Class Meeting Preference Share under these Articles of
Association shall be vested in the General Meeting.
41
Amendment of the Articles of Association
41.1
The General Meeting may resolve to amend these Articles of Association with the support of at least
seventy-five percent (75%) of the voting rights exercised by Shareholders present or represented in that
meeting.
42
Dissolution and liquidation
42.1
The General Meeting may resolve to dissolve the Company.
42.4
The balance remaining after payment of the debts of the dissolved Company shall be transferred to the
Shareholders as follows and in the following order:
(a)
(b)
to the holder of the preference Share: an amount of eighty-one eurocent (EUR 0.81); and
to the holders of ordinary Shares: the balance remaining after full payment of the amount under
Article 42.4 (a) above, such in proportion to the aggregate nominal value of the ordinary Shares
held by each.
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Annexure 7
MATERIAL CONTRACTS
In addition to the service contracts of executive directors detailed in Annexure 5 and the loan agreements
detailed in Annexure 20, set out below are the salient terms of all material contracts concluded by the company
or its subsidiaries, being:
(i)
contracts entered into otherwise than in the ordinary course of business, either within the two years
prior to the date of this prospectus or at any other time and containing an obligation or settlement that
is or may be material to the company or its subsidiaries at the last practicable date; and
(ii)
contracts that are otherwise considered material by the company.
Reference to an “agreement”shall be reference to the specific agreement in respect of which the terms are
detailed, as the context may require.
1.
FIZ ACQUISITION AGREEMENTS
Set out below are the salient features of the investment certificates transfer agreements entered into
between Echo and EPP on 17 February 2016, in terms of which Echo transferred all investment certificates
in Forum XXIX and Forum XXXIV closed-end investment funds to EPP.
1.1. Forum XXIX investment certificates transfer agreement
1.1.1.
Echo was the sole participant of Forum XXIX closed-end investment fund, holding 1 510
registered investment certificates (collectively, the “Forum XXIX certificates”).
1.1.2.
With effect from 17 February 2016, Echo transferred ownership of the Forum XXIX certificates
to EPP. In consideration for the transfer of the Forum XXIX certificates, Echo subscribed for
46 458 998 ordinary shares in the share capital of EPP.
1.2. Forum XXXIV investment certificates transfer agreement
2.
1.2.1.
Echo was the sole participant of Forum XXXIV closed-end investment fund, holding 7 023
registered investment certificates (collectively, the “Forum XXXIV certificates”).
1.2.2.
With effect from 17 February 2016, Echo transferred ownership of the Forum XXXIV
certificates to EPP. In consideration for the transfer of the Forum XXXIV certificates, Echo
subscribed for 165 511 404 ordinary shares in the share capital of EPP.
REDEFINE TRANSACTION AGREEMENT
Set out below are the salient features of the share purchase and subscription agreement concluded between
Echo, Redefine and the company on 1 March 2016, and amended in terms of a deed of amendment dated 31
May 2016, relating to, inter alia, the Redefine transaction.
2.1.
With effect from 1 June 2016 (the “Completion Date”), Echo sold and transferred such number
of EPP ordinary shares to Redefine (the “Transfer Shares”), and Redefine subscribed for such
number of EPP ordinary shares (the “New Shares”), as together represented on a fully diluted
basis, upon completion, 75% of EPP’s ordinary share capital plus one ordinary share and the same
number of votes.
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2.2.
The total consideration payable by Redefine for the Transfer Shares was equal to:
2.2.1. EUR 1,188,000,000 (one billion, one hundred and eighty-eight million); plus
2.2.2. the amount of working capital held by EPP and each of its subsidiaries (the “Group”)
immediately prior to the Completion Date, expressed in EUR; plus
2.2.3. the amount of cash held by the Group immediately prior to the Completion Date, expressed
in EUR; minus
2.2.4. the amount of debt held by the Group immediately prior to the Completion Date, expressed
in EUR.
2.3.
The total consideration payable by Redefine for the Transfer Shares and the New Shares was
composed of, together:
2.3.1. the subscription price for the New Shares, equal to the EUR amount, as notified by Echo to
Redefine, required by the Group to repay the portion of the financial debt pursuant to the
group’s existing debt repayment scheme, as a result of which the Group financial debt shall
be reduced to EUR 712,000,000 (the “Share Subscription Price”) (for the avoidance of
doubt, the Share Subscription Price shall not be subject to any adjustments); and
2.3.2. the initial purchase price for the Transfer Shares, equal to the amount equal to 75%
multiplied by (Pre-Money Valuation plus Share Subscription Price) less the Share
Subscription Price.
3.
STRATEGIC INVESTORS AGREEMENT
Set out below are the salient terms of the agreement entered into between Echo Prime Assets B.V., Echo,
Redefine and EPP on 12 August 2016, in terms of which a put option is granted in respect of the Park
Rozwoju property and also governing the payment of preferred distributions to Echo, as the sole holder of
the preference share.
3.1.
Park Rozwoju
3.1.1. Echo Prime Assets B.V., Echo, Redefine and EPP will co-operate to amend the perpetual
usufruct in respect of Park Rozwoju (being the property numbered 12 in Annexure 8) such
that it is coherent with the key use of the property and to ensure that there is no basis for
challenging such perpetual usufruct.
3.1.2. Insofar as the above is not achieved by 31 May 2021, Echo Prime Assets B.V. grants EPP
or its affiliate the irrevocable right to sell Park Rozwoju to Echo for EUR 73 080 000.
3.2.
Preferred distributions
3.2.1. In relation to each planned extension to the Galaxy Shopping Centre, Outlet Park Phase III
and Outlet Park Phase IV, Echo Prime Assets B.V. is entitled to receive a distribution in
respect of its preference share (the “Preferred Distribution”).
3.2.2. The Preferred Distribution is payable to Echo Prime Assets B.V. provided that:
3.2.2.1.
3.2.2.2.
3.2.2.3.
an occupancy permit (ostateczne pozwolenie na uzytkowsnie) in relation to a
given extension has been granted by the relevant authority, irrespective of
whether such permit contains any conditions or post-issuance obligations;
at least 60% of the extended space of a given extension has been leased or preleased to third parties on arm’s length terms as contemplated in the applicable
development agreement; and
Echo has executed a relevant master lease agreement for a period of three years
in relation to the extended space of a given extension that has not been leased or
pre-leased,
(together, the “Extension Completion”).
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3.2.3. The Preferred Distribution shall be calculated separately for each extension and will be
equal to:
(Extension NOI / 0.085) –Extension Costs –Extension Rent Discounts
Where:
Extension NOI
means the total aggregate monthly headline rents attributable
to the relevant extension, including that derived from the
relevant master lease agreement (unless otherwise agreed, the
master lease agreement rentals to be taken into account will
not be higher than the average of the actual leases signed up),
calculated as of the Extension Completion and multiplied by
12;
Extension costs
means the aggregate (net of VAT) of (a) all costs incurred or
still to be incurred post- 1 June 2016 associated with the
development of the relevant extension, net of tenant and other
reimbursements, and (b) any remuneration and cost, including
the development fee, paid or payable under the development
services agreement associated with the relevant extension; and
Extension Rent Discounts
means the total value of any rent discounts attributable to a
relevant extension’s tenants, including rent free periods
calculated based on the monthly difference between the
headline rent and temporarily reduced rent payable by a tenant
multiplied by the number of months such reduction applies.
3.2.4. The Parties may in writing agree that any Preferred Distribution will be paid at a different
time, in a different amount, or not at all.
3.2.5. Insofar as the completion of any of the extensions contemplated in this agreement requires
additional funding that EPP is not able to secure from independent third party financing
institutions, Echo Prime Assets B.V. will extend such funding to EPP on arm’s length
terms. Such funding will be due and payable when the associated Preferred Distribution is
paid.
3.2.6. The preference share will be redeemed or cancelled at a price equal to its nominal value,
once all Preferred Distributions have been paid.
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4.
PROPERTY AND FACILITY MANAGEMENT INTERNALISATION AGREEMENTS
Set out below are the salient terms of the agreements on transfer of all General Partner’s rights and
obligations entered into between Grupa Echo sp. z o.o. (“Grupa Echo”) and Minster Investments Sp.z o.o.
(“Minster Investments LLC”) on 1 July 2016 and the agreements on transfer of all Limited Partner’s
rights and obligations entered into between Echo and Camas Investments LLC, in terms of which EPP
internalised its property and facility management functions.
4.1.
Echo Investment Property Management – “Grupa Echo Spolka z ograniczona
odpowiedzialnoscia”spolka komandytowa (subsequently renamed EPP Property Management Minster Investments Spolka z ograniczona odpoiwiedzialnocią spolka komandytowa) provides
property management services in respect of EPP’s portfolio of properties. The initial general
partner of the Limited Partnership was Grupa Echo. The initial limited partner of the Limited
Partnership was Echo.
4.2.
Echo Investment Facility Management –“Grupa Echo Spolka z ograniczona odpowiedzialnoscia”
spolka komandytowa (subsequently renamed EPP Facility Management - Minster Investments
Spolka z ograniczona odpoiwiedzialnocią spolka komandytowa) provides facility management
services in respect of part of EPP’s portfolio of properties. The initial general partner of the
limited partnership was Grupa Echo. The initial limited partner of the limited partnership was
Echo.
4.3.
With effect from 1 July 2016:
4.3.1. Minster Investments LLC acquired all the rights and obligations of Grupa Echo (as
General Partner) in respect of EPP Property Management, for an aggregate consideration
of PLN 100.00;
4.3.2. Camas Investments LLC acquired all the rights and obligations of Echo (as Limited
Partner) in respect of EPP Property Management for an aggregate consideration of PLN 9
900.00;
4.3.3. Minster Investments LLC acquired all the rights and obligations of Grupa Echo (as
General Partner) in respect of EPP Facility Management for an aggregate consideration of
PLN 300.00; and
4.3.4. Camas Investments LLC acquired all the rights and obligations of Echo (as Limited
Partner) in respect of EPP Facility Management for an aggregate consideration of PLN 27
200.00;
4.4.
5.
The above transactions effectively resulted in the internalisation of EPP’s property and facility
management functions.
GRIFFIN ADVISORY AGREEMENT
Set out below are the salient features of the advisory agreement concluded between EPP, Griffin and
Camas Investments LLC on 1 June 2016, as amended on 1 August 2016, in terms of which Griffin renders
certain advisory services to Camas Investments LLC.
5.1.
Appointment
5.1.1. Griffin will render advisory services in relation to the management of Camas Investments
LLC and the initial property portfolio, as well as any real estate investments acquired by
subsidiaries of EPP, within the scope set out below (the “Services”).
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5.1.2. For the avoidance of doubt, Griffin has no power or authority to make any decision on
behalf of or bind Camas Investments LLC, and Camas Investments LLC is not bound to
act in accordance with any recommendation made by Griffin.
5.1.3. The appointment of Griffin took effect on 1 June 2016 and will continue for a period of
five years (whereafter it may be extended by agreement) or until it is terminated or expires
as set out below.
5.2.
Services
Griffin shall:
5.2.1. provide Camas Investments LLC with advisory and monitoring services regarding
conducting real estate business activity comprising:
5.2.1.1.
support in developing commercial real estate projects, in particular in relation to
the planned GLA extensions of (i) Galaxy Shopping Centre in Szczecin, (ii)
Outlet Park Phase II, (iii) Outlet Park Phase III, and (iv) Outlet Park Phase IV
(jointly, the “Extensions”) and other future extensions of office parks or retail
centres, as the case may be;
5.2.1.2.
support in managing income generating commercial real estate projects;
5.2.1.3.
support in developing and implementing letting strategies (for new leases to be
signed as well as renewals) of the commercial real estate projects;
5.2.2. provide Camas Investments LLC with strategic advisory services and monitoring the
improvement of the overall effectiveness of Camas Investments LLC and its projects
comprising:
5.2.2.1.
support in optimising cost structures; and
5.2.2.2.
support in negotiating, in particular with suppliers, tenants and local authorities;
5.2.3. provide Camas Investments LLC with strategic advisory services and monitoring the
optimisation of the financing and balance sheet structuring comprising:
5.2.3.1.
financing and refinancing recommendations;
5.2.3.2.
support in negotiations on potential terms of financing;
5.2.3.3.
advice on cash and liquidity management; and
5.2.3.4.
advice on hedging currency and interest rate risk in relation to Camas
Investments LLC and EPP’s portfolio of properties;
5.2.4. provide Camas Investments LLC with advisory services regarding evaluating possible
divestments for Camas Investments LLC comprising:
5.2.4.1.
support in connecting with negotiations regarding the potential terms of any
sale; and
5.2.4.2.
support in connection with the execution of potential transactions;
5.2.5. provide Camas Investments LLC with advisory services regarding evaluating possible
investments comprising:
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5.2.5.1.
support in connection with negotiations regarding the potential terms of any
acquisition; and
5.2.5.2.
support in connection with the execution of potential transactions,
(for the avoidance of doubt this point does not refer to the matters related to the agreement
in respect of ROFO projects);
5.2.6. support Camas Investments LLC in connection with the execution of potential transactions
where it appears to Griffin that it would be desirable for Camas Investments LLC to take,
or to refrain from taking, any action in relation to any asset, make recommendations to
Camas Investments LLC accordingly;
5.2.7. support Camas Investments LLC in connection with the selection of candidates to serve as
members of the board of directors of Camas Investments LLC without any additional
compensation to be paid by Camas Investments LLC;
5.2.8. support EPP in connection with the preparation of the annual budgets of EPP and its assets
and in presenting such budgets to EPP’s board; and
5.2.9. support EPP in relation to the share capital increase including the share capital increase
effected in June 2016 and any further share capital increases made in connection with the
private placement, in particular recommending the most appropriate corporate structure,
timing and method for the share capital increase, and provide assistance, in conjunction
with EPP and its other professional advisers, in connection with the preparation of
appropriate presentations, time schedules (including analyst presentations, investor
presentations and other materials to be used in the road show etc), negotiations relating to
the share capital increase.
For the avoidance of doubt, Griffin has no power or authority to make any decision on behalf of
or bind Camas Investments LLC, and Camas Investments LLC is not bound to act in accordance
with any recommendation made by Griffin.
5.3.
Fees
In exchange for the Services:
5.3.1. Camas Investments LLC shall pay Griffin the following fees:
5.3.1.1.
subject to:
5.3.1.1.1. an occupancy permit having been granted by the relevant authority in respect of the
planned GLA extensions of (i) Galaxy Shopping Centre in Szczecin, (ii) Outlet Park
Phase III and (iv) Outlet Park Phase IV;
5.3.1.1.2. at least 60% of the extended space of the above Extensions having been leased or
pre-leased to third parties on arm’s length terms; and
5.3.1.1.3. Echo having executed master lease agreements for a period of three years in relation
to the space which has not been leased or pre-leased,
(together, the “Extension Completions”), a total fee capped at EUR 500 000 for Services
provided in connection with the Extensions, payable separately for each Extension as
follows:
5.3.1.2. EUR 350 000 for the extension of Galaxy Shopping Centre;
5.3.1.3. EUR 50 000 for the extension of each of the three new phases of Outlet Park; and
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5.3.1.4.
EUR 500 000, in instalments of EUR 100 000 per annum payable quarterly in
arrears from the date of the JSE listing; and
5.3.2. EPP shall pay Griffin EUR 4 147 789, within 14 calendar days of the completion of the
JSE listing.
5.4.
Termination
The agreement may only be terminated by Camas Investments LLC in the following
circumstances:
5.4.1. fraud or wilful misconduct of Griffin;
5.4.2. where:
5.4.2.1.
5.4.2.2.
at least two key persons (being Przemyslaw Krych, Maciej Dyjas and Nebil
Senman) have given notice that they will no longer be significantly involved in
the delivery of the Services by Griffin, and Griffin has not replaced them with
persons of materially similar experience with the appropriate level of
qualification within six months of receiving notice as such; or
none of the above named key persons are significantly involved in the delivery
of the Services by Griffin; or
5.4.3. a material breach of a material term of the agreement by Griffin.
5.5.
EPP liability
EPP is liable for any of Camas Investments LLC’s obligations as a joint and several debtor, in
particular with regard to the obligation to pay the relevant remuneration for rendering the
Services.
6.
EAST MANAGEMENT ADVISORY AGREEMENT
Set out below are the salient features of the advisory agreement concluded between EPP, East Management
and Camas Investments LLC on 1 June 2016, as amended on 1 August 2016, in terms of which East
Management renders certain advisory services to Camas Investments LLC.
6.1.
Appointment and Services
6.1.1. East Management will act in co-operation and together with Griffin (in accordance with
the terms of the Griffin advisory agreement, as set out above) to render the management
services to Camas Investments LLC and in respect real estate investment assets as well as
any real estate investments acquired by subsidiaries of EPP (the “Services”).
6.1.2. For the avoidance of doubt, East Management has no power or authority to make any
decision on behalf of or bind Camas Investments LLC, and Camas Investments LLC is not
bound to act in accordance with any recommendation made by East Management.
6.1.3. The appointment of East Management took effect from 1 June 2016 and will continue for a
period of five years (whereafter it may be extended by agreement) or until it is terminated
in accordance with the provisions below.
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6.2.
Services
6.2.1. East Management, acting at all times together and in co-operation with Griffin (i.e. hand in
hand), shall:
with respect to the planned GLA extensions of (i) Galaxy Shopping Centre in Szczecin, (ii)
Outlet Park Phase II, (iii) Outlet Park Phase III, and (iv) Outlet Park Phase IV (jointly, the
“Extensions”) and other future extensions of office parks or retail centres, as the case may
be:
6.2.1.1.
6.2.1.2.
6.2.1.3.
support in developing commercial real estate projects;
support in managing income generating commercial real estate
projects; and
support in developing and implementing letting strategies (for new
leases to be signed as well as renewals) of the commercial real estate
projects; and
6.2.2. support EPP in relation to the share capital increase including the share capital increase
effected in June 2016 and any further share capital increases made in connection with the
private placement, in particular recommending the most appropriate corporate structure,
timing and method for the share capital increase, and provide assistance, in conjunction
with EPP and its other professional advisers, in connection with the preparation of
appropriate presentations, time schedules (including analyst presentations, investor
presentations and other materials to be used in the road show etc), negotiations relating to
the share capital increase.
6.3.
Fees
In exchange for the Services:
6.3.1. Camas Investments LLC shall pay East Management the following fees:
6.3.1.1. subject to the Extension Completions (as defined in the Griffin advisory agreement), a
total fee capped at EUR 2 500 000 for Services provided in connection with the Extensions
(as defined in the Griffin advisory agreement), payable separately for each Extension as
follows:
6.3.1.1.1. EUR 1 750 000 for the extension of Galaxy Shopping Centre;
6.3.1.1.2. EUR 250 000 for the extension of each phase of Outlet Park; and
6.3.2. EPP shall pay East Management EUR 4 608 644, within 14 calendar days of the
completion of the JSE listing.
The fee contemplated in paragraph 6.3.1.1 above is due to East Management only if the fees set
out in the Griffin advisory agreement become due to Griffin and only in such proportion as Griffin
is entitled pursuant to the Griffin advisory agreement.
6.4.
Termination
6.4.1. The agreement shall automatically expire upon termination or expiry of the Griffin
advisory agreement.
6.4.2. The agreement may only be terminated by Camas Investments LLC in the following
circumstances:
6.4.2.1.
fraud or wilful misconduct of East Management; or
6.4.2.2.
a material breach of a material term of the agreement by East Management.
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6.5.
EPP liability
EPP is liable for any of Camas Investments LLC’s obligations as a joint and several debtor, in
particular with regard to the obligation to pay the relevant remuneration for rendering the
Services.
7.
DEVELOPMENT SERVICES AGREEMENTS
7.1.
Development Services Agreement –Galaxy
Set out below are the salient features of the development services agreement concluded between
Echo and Galaxy –Projekt Echo –106 sp. z o.o. sp.k. (“Galaxy Projekt Echo”) (a wholly-owned
subsidiary of EPP) on 1 June 2016, in terms of which Echo renders development and leasing
services to Galaxy Projekt Echo in respect of the extension of the Galaxy Shopping Centre.
7.1.1. Appointment and services
7.1.1.1.
Whereas Galaxy Projekt Echo is carrying out the development of an extension
of the Galaxy Shopping Centre (the “Galaxy Extension”), Echo will render
certain development services to Galaxy Projekt Echo in respect of the Galaxy
Extension. In particular, Echo shall provide advisory and management services
in connection with the administrative proceedings related to the Galaxy
Extension, project and cost management services, supervisory services, review
working drawings for construction and overall co-ordination and management of
various technical, construction and design matters, including:
7.1.1.1.1. pre-construction services, rendered before Galaxy Projekt Echo
commences construction works;
7.1.1.1.2. development management services;
7.1.1.1.3. final completion services, rendered after Galaxy Projekt Echo finishes
construction works,
(the “Development Management Services”), as well as leasing services,
including seeking tenants for the Galaxy Extension and assisting in negotiating
lease agreements (the “Leasing Services”).
7.1.1.2.
Echo may, with the prior written consent of Galaxy Projekt Echo, employ or
subcontract adequately qualified architects, engineers or other specialists in
order to facilitate the proper performance of the above services.
7.1.1.3.
The agreement commenced on 1 June 2016 and will continue until the Galaxy
Extension receives a final occupancy permit, or until it is terminated in
accordance with the below provisions.
7.1.2. Fees
7.1.2.1.
In consideration for the Development Management Services, Echo will be paid a
net fee equal to 6% of the budget of costs related to the development of the
Galaxy Extension (“Development Fee”), to be paid in monthly instalments.
7.1.2.2.
In consideration for the Leasing Services, Echo shall receive a once-off net fee
calculated net of VAT of 12.5% of the contracted average annual rental income
under any lease agreements signed in respect of the Galaxy Extension (“Leasing
Fee”). The Leasing Fee will become due in respect of any lease agreement that
is signed during the term of the agreement (excluding the master lease
agreement) and also thereafter in respect of lease agreements signed after the
end of such term, until such time as 100% of the Galaxy Extension is leased.
No Leasing Fee will be due in respect of lease agreements concluded between
owner and tenant, the signing of which was procured by a third party.
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7.1.2.3.
In the event that the Galaxy Extension:
7.1.2.3.1. is leased in relation to 60% or more of the GLA and in relation to
60% or more of the parking spaces to be leased for the exclusive use
of particular tenants;
7.1.2.3.2. the Galaxy Extension receives a final occupancy permit; and
7.1.2.3.3. the remaining GLA and parking spaces to be leased for the exclusive
use of particular tenants are leased under a master lease,
the entire then outstanding Leasing Fee and the entire Development Fee shall
become immediately payable to Echo.
7.1.3.
Termination
7.1.3.1.
Either party is entitled to terminate the agreement:
7.1.3.1.1. if the other party is in material breach of any of its obligations under
the agreement and has failed to rectify such breach within a specified
time period;
7.1.3.1.2. if Galaxy Projekt Echo stops the development of the Galaxy
Extension for more than 14 consecutive days; or
7.1.3.1.3. with 30 days’written notice.
7.1.3.2.
7.2.
In the event that the agreement is terminated without cause, Galaxy Projekt
Echo shall pay Echo for the services completed up to the date of completion
plus 7.5% of the remaining remuneration due to Echo for the remainder of the
term.
Development Services Agreement –Outlet Park Extension Phase III
Set out below are the salient features of the development services agreement concluded between
Echo and Outlet Park – Projekt Echo – 126 sp. z o.o. sp.k. (“Outlet Park Projekt Echo”) (a
wholly-owned subsidiary of EPP) on 1 June 2016, in terms of which Echo renders development
and leasing services to Outlet Park Projekt Echo in respect of the Phase III extension of the
Outlet Park Shopping Centre.
7.2.1.
Appointment and services
7.2.1.1.
Whereas Outlet Park Projekt Echo is carrying out the development of an
extension of the Outlet Park Szczecin Shopping Centre (the “Outlet Park
Extension Phase III”), Echo will render certain development services to Outlet
Park Projekt Echo in respect of such Outlet Park Extension Phase III. In
particular, Echo shall provide advisory and management services in connection
with the administrative proceedings related to the Outlet Park Extension Phase
III, project and cost management services, supervisory services, review working
drawings for construction and overall co-ordinate and manage various technical,
construction and design matters, including:
7.2.1.1.1. pre-construction services, rendered before Outlet Park Projekt Echo
commences construction works;
7.2.1.1.2. development management services;
7.2.1.1.3. final completion services, rendered after Outlet Park Projekt Echo
finishes construction works,
(the “Development Management Services”), as well as leasing services,
including seeking tenants for the Outlet Park Extension Phase III and assisting
in negotiating lease agreements (the “Leasing Services”).
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7.2.2.
7.2.1.2.
Echo may, with the prior written consent of Outlet Park Projekt Echo, employ or
subcontract adequately qualified architects, engineers or other specialists in
order to facilitate the proper performance of the above services.
7.2.1.3.
The agreement commenced on 1 June 2016 and will continue until the Outlet
Park Extension receives a final occupancy permit, or until it is terminated in
accordance with the provisions below.
Fees
7.2.2.1.
In consideration for the Development Management Services, Echo will be paid a
net fee equal to 6% of the budget of costs related to the development of the
Outlet Park Extension Phase III (“Development Fee”), to be paid in monthly
instalments.
7.2.2.2.
In consideration for the Leasing Services, Echo shall receive a once-off net fee
calculated net of VAT of 12.5% of the contracted average annual rental income
under any lease agreements signed in respect of the Outlet Park Extension Phase
III (“Leasing Fee”). The Leasing Fee will become due in respect of any lease
agreement that is signed during the term of the agreement (excluding the master
lease agreement) and also thereafter in respect of lease agreements signed after
the end of such term, until such time as 100% of the Outlet Park Extension
Phase III is leased. No Leasing Fee will be due in respect of lease agreements
concluded between owner and tenant, the signing of which was procured by a
third party.
7.2.2.3.
In the event that the Outlet Park Extension Phase III:
7.2.2.3.1. is leased in relation to 60% or more of the GLA and in relation to
60% or more of the parking spaces to be leased for the exclusive use
of particular tenants;
7.2.2.3.2. the Outlet Park Extension Phase III receives a final occupancy permit;
and
7.2.2.3.3. the remaining GLA and parking spaces to be leased for the exclusive
use of particular tenants are leased under a master lease,
the entire then outstanding Leasing Fee and the entire Development Fee shall
become immediately payable to Echo.
7.2.3.
Termination
7.2.3.1.
Either party is entitled to terminate the agreement:
7.2.3.1.1. if the other party is in material breach of any of its obligations under
the agreement and has failed to rectify such breach within a specified
time period;
7.2.3.1.2. if Outlet Park Projekt Echo stops the development of the Outlet Park
Extension Phase III for more than 14 consecutive days; or
7.2.3.1.3. with 30 days’written notice.
7.2.3.2.
In the event that the agreement is terminated without cause, Outlet Park Projekt
Echo shall pay Echo for the services completed up to the date of completion
plus 7.5% of the remaining remuneration due to Echo for the remainder of the
term.
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7.3.
Development Services Agreement –Outlet Park Extension Phase IV
Set out below are the salient features of the development services agreement concluded between
Echo and Outlet Park – Projekt Echo – 126 sp. z o.o. sp.k. (“Outlet Park Projekt Echo”) (a
wholly-owned subsidiary of EPP) on 1 June 2016, in terms of which Echo renders development
and leasing services to Outlet Park Projekt Echo in respect of the Phase IV extension of the Outlet
Park Shopping Centre.
7.3.1.
Appointment and services
7.3.1.1.
Whereas Outlet Park Projekt is carrying out the development of an extension of
the Outlet Park Szczecin Shopping Centre (the “Outlet Park Extension
Phase IV”), Echo will render certain development services to Outlet Park
Projekt Echo in respect of such Outlet Park Extension Phase IV. In particular,
Echo shall provide advisory and management services in connection with the
administrative proceedings related to the Outlet Park Extension Phase IV,
project and cost management services, supervisory services, review working
drawings for construction and overall co-ordinate and manage various technical,
construction and design matters, including:
7.3.1.1.1. pre-construction services, rendered before Outlet Park Projekt Echo
commences construction works;
7.3.1.1.2. development management services;
7.3.1.1.3. final completion services, rendered after Outlet Park Projekt Echo
finishes construction works,
(the “Development Management Services”), as well as leasing services,
including seeking tenants for the Outlet Park Extension Phase IV and assisting
in negotiating lease agreements (the “Leasing Services”).
7.3.2.
7.3.1.2.
Echo may, with the prior written consent of Outlet Park Projekt Echo, employ or
subcontract adequately qualified architects, engineers or other specialists in
order to facilitate the proper performance of the above services.
7.3.1.3.
The agreement commenced on 1 June 2016 and will continue until the Outlet
Park Extension receives a final occupancy permit, or until it is terminated in
accordance with the provisions below.
Fees
7.3.2.1.
In consideration for the Development Management Services, Echo will be paid a
net fee equal to 6% of the budget of costs related to the development of the
Outlet Park Extension Phase IV (“Development Fee”), to be paid in monthly
instalments.
7.3.2.2.
In consideration for the Leasing Services, Echo shall receive a once-off net fee
calculated net of VAT of 12.5% of the contracted average annual rental income
under any lease agreements signed in respect of the Outlet Park Extension Phase
IV (“Leasing Fee”). The Leasing Fee will become due in respect of any lease
agreement that is signed during the term of the agreement (excluding any master
lease agreement) and also thereafter in respect of lease agreements signed after
the end of such term. No Leasing Fee will be due in respect of lease agreements
concluded between owner and tenant, the signing of which was procured by a
third party.
7.3.2.3.
In the event that the Outlet Park Extension Phase IV:
106
7.3.2.3.1. is leased in relation to 60% or more of the GLA and in relation to
60% or more of the parking spaces to be leased for the exclusive use
of particular tenants;
7.3.2.3.2. the Outlet Park Extension Phase IV receives a final occupancy
permit; and
7.3.2.3.3. the remaining GLA and parking spaces to be leased for the exclusive
use of particular tenants are leased under any master lease (or if the
development is already leased in relation to 100% of the GLA and in
relation to 100% of the parking spaces, for the exclusive use of
particular tenants),
the entire then outstanding Leasing Fee and the entire Development Fee shall
become immediately payable to Echo.
7.3.3.
Termination
7.3.3.1.
Either party is entitled to terminate the agreement:
7.3.3.1.1. if the other party is in material breach of any of its obligations under
the agreement and has failed to rectify such breach within a specified
time period;
7.3.3.1.2. if Outlet Park Projekt Echo stops the development of the Outlet Park
Extension Phase IV for more than 14 consecutive days; or
7.3.3.1.3. with 30 days’written notice.
7.3.3.2.
8.
In the event that the agreement is terminated without cause, Outlet Park Projekt
Echo shall pay Echo for the services completed up to the date of completion
plus 7.5% of the remaining remuneration due to Echo for the remainder of the
term.
MASTER LEASE AGREEMENTS
As the development of Outlet Park Extension Phase IV is fully leased, no master least agreement will be
concluded.
8.1.
Master Lease Agreement - Galaxy
Set out below are the salient features of the master lease agreement entered into between Galaxy
–Projekt Echo –106 sp. z o.o. sp.k. (a wholly-owned subsidiary of EPP) (as Landlord) and Echo,
on 1 June 2016, relating to the lease of that part of the Galaxy Shopping Centre that will not be
leased to tenants on the date on which such shopping centre is opened to clients.
Any reference to a “Shopping Centre” or “Building” below shall refer to the Galaxy Shopping
Centre.
8.1.1.
Leased premises and lease term
8.1.1.1.
The Landlord leases that premises that will exist in the Shopping Centre and that
will not be leased to tenants on the date on which such Shopping Centre is
opened to clients (the “Opening Day”) (the “Leased Premises”) to Echo.
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8.1.1.2.
8.1.2.
The agreement will commence on the Opening Day and shall remain in force for
a period of three years, unless terminated as set out below.
Re-let covenants
8.1.2.1.
Echo is authorised to re-let the Leased Premises to new tenants that meet
specified criteria (each a “New Tenant”), provided that any New Tenant may
only use the Leased Premises for its intended purpose.
8.1.2.2.
Echo may seek New Tenants at its discretion. Any lease agreement entered into
with a New Tenant is required to comply with a specified template and must be
consistent with the market standard, subject to deviations expected from major
or anchor tenants or deviations agreed with the Landlord in advance.
8.1.2.3.
Once a new lease has been signed in respect of the Leased Premises or any part
thereof, such part shall no longer form a part of the Leased Premise as of the
date on which the area covered by such new lease has been handed over to the
New Tenant and the agreement shall expire in the part pertaining to such area.
8.1.2.4.
The Landlord may object to any potential New Tenant proposed by Echo if:
8.1.2.4.1. such potential New Tenant does not meet the specified criteria;
8.1.2.4.2. such potential New Tenant is known to have not been able to timely
pay its debts as they fall due and such inability is likely to apply
where a new lease is signed, provided however that the Landlord
provides Echo with reasonable evidence thereof;
8.1.2.4.3. the Landlord has justified and reasonable objections to such potential
New Tenant’s market reputation.
8.1.2.5.
8.1.3.
The Landlord is entitled to lease a part or all of the Leased Premises to third
parties without the involvement of Echo. The agreement shall expire as of the
signing of any such third party lease agreement in respect of the area of the
Leased Premises covered thereunder.
Rent and Service Charges
8.1.3.1.
Echo undertakes to pay rent to the Landlord in monthly amounts arising from a
specified rent roll, in respect of the relevant premises constituting the Leased
Premises (the “Rent”).
8.1.3.2.
In addition to the Rent, Echo undertakes to pay the service charges to the
Landlord in the amount and according to the terms and conditions specified
below (“Service Charges”).
8.1.3.3.
The Service Charges consist of the following three elements:
8.1.3.3.1. an individual fee including any charges related to the delivery to the
Leased Premises of energy, water and sewage disposal, heating,
telephone and other charges paid for the purposes of the use of the
Leased Premises;
8.1.3.3.2. a common fee covering any common costs associated with the
operation of the Building (in the part regarding the Leased Premises),
in particular, the cleaning and maintaining of the common area, the
cost of electricity, water, heat, and gas for the common area, the cost
of administration and management of the Building, insurance of the
Building, the cost of security, the cost of taxes, and other public
charges regarding the Building and the real property on which the
Building is located (the “Common Fee”); and
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8.1.3.3.3. a marketing fee including charges related to the activities aimed at
promoting the Building.
8.1.3.4.
The Common Fee shall be borne by Echo on the basis of part of the costs
incurred in the aggregate by the Landlord in respect of the whole Building in the
proportion of the Leased Premises Calculation Area (as defined) to the Building
Calculation Area (as defined).
8.1.3.5.
The Leased Premises Calculation Area shall be calculated by multiplying the
Leased Premises area by the calculation coefficient resulting from the table
below. The Building Calculation Area shall be the sum of the Calculation Areas
of all of the tenants, with the exception of Excluded Tenants (being the tenants
who shall incur the Common Fee in an amount other than the one resulting from
the calculation of the common costs paid in respect of the whole Building in
proportion to the Leased Premises), unless Echo decides to make the calculation
in respect thereof:
Area of the Subject of Lease m2
(0; 20>
(20; 40>
(40; 60>
(60; 150>
(150; 200>
(200; 400>
(400; 700>
(700; 1000>
(1000; 1200>
(1200; 1500>
Above 1500
8.1.3.6.
Clearing Account Indicator
1.50
1.40
1.30
1.20
1.10
1.00
0.85
0.80
0.75
0.70
0
The Common Fee shall be calculated in accordance with the following formula:
(KW - KR) x PRPN
OW = — — — — — — — — — —
PRC
Where:
OW
means the period of the Common Fee due and payable to the Landlord for
the entire settlement period
KW
means the aggregate common costs of the Building during the settlement
period incurred by the Landlord on account of the items specified in
clause 8.1.3.3.2 above
KR
means the aggregate common costs covered by the Excluded Tenants
PRPR means the Leased Premises Calculation Area
PRC means the Building Calculation Area
8.1.3.7.
The Service Charges shall be payable together with the Rent.
8.1.3.8.
The settlement period for the purpose of the Service Charges shall be equal to
12 months, provided that the first settlement period shall be the period from the
Opening Day until the end of the first calendar year of the agreement.
8.1.3.9.
In the first settlement period, the Service Charge shall be paid in the following
net amounts:
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8.1.3.9.1. an individual fee of PLN 13.85 per m2 of the Leased Premises;
8.1.3.9.2. the Common Fee of PLN 33.30 per m2 of the Leased Premises;
8.1.3.9.3. a marketing fee of PLN 4.20 per m2 of the Leased Premises,
increased by applicable VAT.
8.1.3.10. In the subsequent settlement periods, the Service Charges will be determined
upon the settlement of the previous period based on the periodic common charge
with due regard for the planned Building maintenance expenses stated in the
budget prepared by the Landlord for the subsequent settlement period.
8.1.4.
Termination
8.1.4.1.
The Landlord may terminate the agreement with immediate effect if Echo:
8.1.4.1.1. is in default in the payment of the Rent for a total of two payment
periods and despite the Landlord giving written advance notice of its
intention to terminate the agreement and setting an additional period
of one month for payment of the due rent, Echo still remains in
default; or
8.1.4.1.2. is in default in the payment of the Service Charges for a total of two
months and despite the Landlord giving written advance notice of its
intention to terminate the agreement and setting an additional sevenday period for payment of the outstanding Service Charges, Echo still
remains in default.
8.1.4.2.
Echo may terminate the agreement with immediate effect if:
8.1.4.2.1. the Leased Premises have a defect that make it impossible or
materially hinder use of the Leased Premises by Echo or in material
way affect the re-letting of the Leased Premises to the New Tenant
and the Landlord did not repair such defect within one month from
the date of delivery of a written notice from Echo to the Landlord in
this regard, provided that such repair is technically possible in the
term of one month (otherwise the Landlord shall endeavour that such
repair will be performed without undue delay in the term technically
possible); or
8.1.4.2.2. the Landlord breaches materially its obligations in terms of the
agreement, other than indicated in clause 8.1.4.2.1 above, and does
not repair such breach within two weeks from the date of delivery of
a relevant written notice from Echo to the Landlord or such other
term as is necessary from technical point of view to repair such
breach, however, in no case longer than one month. In case of
material breach by the Landlord of any of the provisions of clause
8.1.2 (Re-let covenants) above, the only applicable period to repair
the breach by Echo shall be one week from the date of delivery of a
relevant written notice from Echo to the Landlord (such notice to
refer to the specific material breach on the basis of which the
termination occurs).
110
8.1.4.3.
8.2.
If the Landlord terminates the agreement as provided for above then Echo shall
pay the Landlord a contractual penalty in the amount of (i) the aggregate amount
of the Rent which would be due from Echo from the date on which the
agreement is terminated until the end of the lease term had no such termination
have occurred, or (ii) six months’Rent, which is the higher. Such contractual
penalty is repayable in the amount of any rent obtained from a new tenant in
respect of re-let Leased Premises during the remaining part of the term of the
agreement.
Master lease agreement –Outlet Park Phase III
Set out below are the salient features of the master lease agreement entered into between Outlet
Park –Projekt Echo –126 sp. z o.o. sp.k. (a wholly-owned subsidiary of EPP) (as Landlord) and
Echo (as tenant), on 1 June 2016, relating to the lease of that part of the Outlet Park Phase III
Shopping Centre that will not be leased to tenants on the date on which such shopping centre is
opened to clients.
Any reference to a “Shopping Centre”or “Building”below shall refer to the Outlet Park Phase
III Shopping Centre.
8.2.1.
8.2.2.
Leased premises and lease term
8.2.1.1.
The Landlord leases that premises that will exist in the Shopping Centre and that
will not be leased to tenants on the date on which such Shopping Centre is
opened to clients (the “Opening Day”) (the “Leased Premises”) to Echo.
8.2.1.2.
The agreement will commence on the Opening Day and shall remain in force for
a period of three years, unless terminated as set out below.
Re-let covenants
8.2.2.1.
Echo is authorised to re-let the Leased Premises to new tenants that meet
specified criteria (each a “New Tenant”), provided that any New Tenant may
only use the Leased Premises for its intended purpose.
8.2.2.2.
Echo may seek New Tenants at its discretion. Any lease agreement entered into
with a New Tenant is required to comply with a specified template and must be
consistent with the market standard, subject to deviations expected from major
or anchor tenants or deviations agreed with the Landlord in advance.
8.2.2.3.
Once a new lease has been signed in respect of the Leased Premises or any part
thereof, such part shall no longer form a part of the Leased Premise as of the
date on which the area covered by such new lease has been handed over to the
New Tenant and the agreement shall expire in the part pertaining to such area.
8.2.2.4.
The Landlord may object to any potential New Tenant proposed by Echo if:
8.2.2.4.1. such potential New Tenant does not meet the specified criteria;
8.2.2.4.2. such potential New Tenant is known to have not been able to timely
pay its debts as they fall due and such inability is likely to apply
where a new lease is signed, provided however that the Landlord
provides Echo with reasonable evidence thereof;
8.2.2.4.3. the Landlord has justified and reasonable objections to such potential
New Tenant’s market reputation.
8.2.2.5.
The Landlord is entitled to lease a part or all of the Leased Premises to third
parties without the involvement of Echo. The agreement shall expire as of the
signing of any such third party lease agreement in respect of the area of the
Leased Premises covered thereunder.
111
8.2.3.
Rent and Service Charges
8.2.3.1.
Echo undertakes to pay rent to the Landlord in monthly amounts arising from a
specified rent roll, in respect of the relevant premises constituting the Leased
Premises (the “Rent”).
8.2.3.2.
In addition to the Rent, Echo undertakes to pay the service charges to the
Landlord in the amount and according to the terms and conditions specified
below (“Service Charges”).
8.2.3.3.
The Service Charges consist of the following three elements:
8.2.3.3.1. an individual fee including any charges related to the delivery to the
Leased Premises of energy, water and sewage disposal, heating,
telephone and other charges paid for the purposes of the use of the
Leased Premises;
8.2.3.3.2. a common fee covering any common costs associated with the
operation of the Building (in the part regarding the Leased Premises),
in particular, the cleaning and maintaining of the common area, the
cost of electricity, water, heat, and gas for the common area, the cost
of administration and management of the Building, insurance of the
Building, the cost of security, the cost of taxes, and other public
charges regarding the Building and the real property on which the
Building is located; and
8.2.3.3.3. a marketing fee including charges related to the activities aimed at
promoting the Building.
8.2.3.4.
The Service Charges shall be payable together with the Rent.
8.2.3.5.
The settlement period for the purpose of the Service Charges shall be equal to
12 months, provided that the first settlement period shall be the period from the
Opening Day until the end of the first calendar year of the agreement.
8.2.3.6.
In the first settlement period, the Service Charge shall be paid in the following
net amounts:
8.2.3.6.1. an individual fee of PLN 12.37 per m2 of the Leased Premises;
8.2.3.6.2. a common fee of PLN 26.78 per m2 of the Leased Premises;
8.2.3.6.3. a marketing fee of PLN 8.37 per m2 of the Leased Premises,
increased by applicable VAT.
8.2.3.7.
8.2.4.
In the subsequent settlement periods, the Service Charges will be determined
upon the settlement of the previous period based on the periodic common charge
with due regard for the planned Building maintenance expenses stated in the
budget prepared by the Landlord for the subsequent settlement period.
Termination
8.2.4.1.
The Landlord may terminate the agreement with immediate effect if Echo:
8.2.4.1.1. is in default in the payment of the Rent for a total of two payment
periods and despite the Landlord giving written advance notice of its
intention to terminate the agreement and setting an additional period
of one month for payment of the due rent, Echo still remains in
default; or
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8.2.4.1.2. is in default in the payment of the Service Charges for a total of two
months and despite the Landlord giving written advance notice of its
intention to terminate the agreement and setting an additional sevenday period for payment of the outstanding Service Charges, Echo still
remains in default.
8.2.4.2.
Echo may terminate the agreement with immediate effect if:
8.2.4.2.1. the Leased Premises have a defect that make it impossible or
materially hinder use of the Leased Premises by Echo or in material
way affect the re-letting of the Leased Premises to the New Tenant
and the Landlord did not repair such defect within one month from
the date of delivery of a written notice from Echo to the Landlord in
this regard, provided that such repair is technically possible in the
term of one month (otherwise the Landlord shall endeavour that such
repair will be performed without undue delay in the term technically
possible); or
8.2.4.2.2. the Landlord breaches materially its obligations in terms of the
agreement, other than indicated in clause 8.2.4.2.1 above, and does
not repair such breach within two weeks from the date of delivery of
a relevant written notice from Echo to the Landlord or such other
term as is necessary from technical point of view to repair such
breach, however, in no case longer than one month. In case of
material breach by the Landlord of any of the provisions of clause
8.2.2 (Re-let covenants) above, the only applicable period to repair
the breach by Echo shall be one week from the date of delivery of a
relevant written notice from Echo to the Landlord (such notice to
refer to the specific material breach on the basis of which the
termination occurs).
8.2.4.3.
9.
If the Landlord terminates the agreement as provided for above then Echo shall
pay the Landlord a contractual penalty in the amount of (i) the aggregate amount
of the Rent which would be due from Echo from the date on which the
agreement is terminated until the end of the lease term had no such termination
have occurred, or (ii) six months’Rent, which is the higher. Such contractual
penalty is repayable in the amount of any rent obtained from a new tenant in
respect of re-let Leased Premises during the remaining part of the term of the
agreement.
ROFO AGREEMENTS
9.1.
Retail ROFO agreement
Set out below are the salient terms of the ROFO retail agreement concluded between Echo, EPP
and Camas Investments LP on 1 June 2016, in terms of which Echo grants EPP a right of first
offer to acquire the retail ROFO project.
Whereas
(A)
Echo indirectly holds 100% of the shares in the ROFO SPV that is the direct holder of the
real property on which the ROFO retail project is being developed (the “ROFO retail
SPV”).
(B)
EPP indirectly invested, through Camas Investments LP, an amount of 25% of the equity
required by the ROFO retail SPV to complete the development of the ROFO retail project.
(C)
Echo agreed to grant EPP a right of first offer in respect of the ROFO retail project.
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9.1.1.
Loan facilities
9.1.1.1.
After 1 June 2016, Camas Investments LP transferred the following cash
contribution (being 25% of the aggregate amount of the equity so far invested in
the ROFO retail project) to the ROFO retail SPV in connection with the ROFO
retail project, on the basis of the loan facility agreement entered into between
EPP, Camas Investments LP and the ROFO retail SPV acting as borrower (the
“loan facility agreement”):
ROFO retail project
Katowice Kosciuszki
9.1.2.
Contribution (EUR)
1 608 299.13
9.1.1.2.
The general terms and conditions of the loan facility granted by Camas
Investments LP in relation to the ROFO retail project are set out below and are
more specifically set out in the relevant loan facility agreement.
9.1.1.3.
Should Echo directly or indirectly dispose of the shares in the ROFO retail SPV,
Camas Investments LP and/or EPP will be paid the relevant proceeds of such
disposal and all of Camas Investments’ LP rights under the ROFO retail
agreement will be assigned to the new direct or indirect owner of the ROFO
retail SPV.
9.1.1.4.
Each time that ROFO retail SPV makes a distribution, Camas Investments LP
will receive 25%, with 75% payable to Echo or the relevant Echo group entity.
9.1.1.5.
If Camas Investments LP does not provide an ROFO retail SPV with the
Additional Funding (as defined in the loan facility agreement) in the amount
required, Echo shall have the right to cause that Echo or Echo’s group entity
provides such missing amount of Additional Funding by extending a loan to the
ROFO retail SPV with interest rate of 10% p.a..
9.1.1.6.
EPP will be jointly and severally liable with Camas Investments LP for its
obligations under ROFO retail agreement.
9.1.1.7.
In the event that the Borrower (as defined in the loan facility agreement) sells
the real property on which the ROFO retail project will be realised on the
market to a third party purchaser or to EPP and/or EPP’s designee and such
transaction is closed, Echo shall procure that the Borrower pays Camas
Investments LP the relevant proceeds of such sale.
Right of first offer
9.1.2.1.
EPP shall have a right of the first offer to purchase the ROFO retail project.
9.1.2.2.
Such offer and any of its terms shall be irrevocable and may not be conditional.
9.1.2.3.
In the event that both of the following conditions are met:
9.1.2.3.1. a final occupancy permit (ostateczne pozwolenie na użytkowanie) in
relation to a given ROFO project has been granted by the relevant
authority irrespective of whether such permit contains any conditions
or post-issuance obligations; and
9.1.2.3.2. 95% of GLA in respect of such ROFO project has been leased or preleased to third parties,
Echo shall procure that the ROFO retail SPV provides EPP with notice that
Echo intends to sell the ROFO retail project.
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9.2.
Office ROFO agreement
Set out below are the salient terms of the ROFO office agreement concluded between Echo, EPP
and Minster Investments on 1 June 2016, in terms of which Echo grants EPP a right of first offer
to acquire the office ROFO projects.
Whereas
(A)
Echo indirectly holds 100% of the shares in the ROFO SPV that is the direct holder of the
real property on which the ROFO office projects are being developed (the “ROFO office
SPV”).
(B)
EPP indirectly invested, through Minster Investments, an amount of 25% of the equity
required by the ROFO office SPVs to complete the development of the ROFO office
projects.
(C)
Echo agreed to grant EPP a right of first offer in respect of the ROFO office projects.
9.2.1.
Loan facilities
9.2.1.1.
After 1 June 2016, Minster Investments transferred the aggregate of the
following cash contributions (being 25% of the aggregate amount of the equity
so far invested in the ROFO office projects) to the relevant ROFO office SPVs
in connection with the ROFO office projects, on the basis of the loan facility
agreement entered into between EPP, Minster Investments and the ROFO office
SPV acting as borrower (the “loan facility agreement”):
ROFO office project
Tryton Business House
A4 Business Park Phase III
O3 Business Campus Phase I
O3 Business Campus Phase II
O3 Business Campus Phase III
Symetris Phase I
Symetris Phase II
Wroclaw Nobilis
Wroclaw Sagittarius
Contribution (EUR)
3 888 296.47
2 287 360.87
3 486 984.83
1 361 163.22
1 055 715.01
3 001 508.31
1 375 840.86
3 946 988.42
1 400 245.64
9.2.1.2.
The general terms and conditions of the loan facility granted by Minster
Investments in relation to the ROFO office projects are set out below and are
more specifically set out in the relevant loan facility agreement.
9.2.1.3.
Should Echo directly or indirectly dispose of the shares in the ROFO office
SPVs, Minster Investments and/or EPP will be paid the relevant proceeds of
such disposal and all of Minster Investments’rights under the ROFO office
agreement will be assigned to the new direct or indirect owner of the ROFO
office SPVs.
9.2.1.4.
Each time that a ROFO office SPV makes a distribution, Minster Investments
will receive 25%), with 75% payable to Echo or Echo’s group entity.
9.2.1.5.
If Minster Investments does not provide an ROFO office SPVs with the
Additional Funding (as defined in the loan facility agreement) in the amount
required, Echo shall have the right to cause that Echo or its group entity
provides such missing amount of Additional Funding by extending a loan to the
ROFO office SPVs with interest rate of 10% p.a..
115
9.2.2.
9.2.1.6.
EPP will be jointly and severally liable with Minster Investments for its
obligations under ROFO office agreement.
9.2.1.7.
In the event that the Borrower (as defined in the loan facility agreement) sells
the real property on which a ROFO office projects will be realised on the market
to a third party purchaser or to EPP and/or its designee and such transaction is
closed, Echo shall procure that the Borrower pays Minster Investments the
relevant proceeds of such sale.
Right of first offer
9.2.2.1.
EPP shall have a right of the first offer to purchase any ROFO office project.
9.2.2.2.
Such offer and any of its terms shall be irrevocable and may not be conditional.
9.2.2.3.
In the event that both of the following conditions are met:
9.2.2.3.1. a final occupancy permit (ostateczne pozwolenie na użytkowanie) in
relation to a given ROFO office project has been granted by the
relevant authority irrespective of whether such permit contains any
conditions or post-issuance obligations; and
9.2.2.3.2. 95% of GLA in respect of such ROFO office project has been leased
or pre-leased to third parties,
Echo shall procure that the relevant ROFO office SPV provides EPP with notice
that Echo intends to sell the ROFO office project.
10. LOAN FACILITY AGREEMENTS
Set out below are the salient features of the following loan facility agreements entered into on 1 June 2016:
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Projekt
Echo – O3 Business Park sp. z o.o. SKA. (as Borrower) relating to the ROFO project identified as
number 1a in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Projekt
Echo – O3 Business Park sp. z o.o. SKA. (as Borrower) relating to the ROFO project identified as
number 1b in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Projekt
Echo – O3 Business Park sp. z o.o. SKA. (as Borrower) relating to the ROFO project identified as
number 1c in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and
Sagittarius –Projekt Echo –113 sp. z o.o. sp.k. (as Borrower) relating to the ROFO project identified
as number 2 in Annexure 12.
-
The loan facility agreement entered into between EPP, Camas Investments LP (as Lender) and Galeria
Katowice –Projekt Echo 120 sp. z o.o. sp.k. (as Borrower) relating to the ROFO project identified as
number 3 in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Symetris –
Projekt Echo - 131 sp. z o.o. sp.k. (as Borrower) relating to the ROFO project identified as number 4a
in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Symetris –
Projekt Echo - 131 sp. z o.o. sp.k. (as Borrower) relating to the ROFO project identified as number 4b
in Annexure 12..
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Projekt
Echo - 135 sp. z o.o. sp.k. (as Borrower) relating to the ROFO project identified as number 5 in
Annexure 12.
116
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Nobilis –
Projekt Echo –117 sp. z o.o. sp. k. (as Borrower) relating to the ROFO project identified as number 6
in Annexure 12.
-
The loan facility agreement entered into between EPP, Minster Investments (as Lender) and Projekt
Echo - 102 sp. z o.o. (as Borrower) relating to the ROFO project identified as number 7 in Annexure
12.
The salient terms of each of the above loan facility agreements are the same, mutatis mutandis. Any
reference to the “ROFO Project”below shall, in respect of each respective loan facility agreement, refer
to the corresponding ROFO project identified above.
Whereas
(A)
The Borrower holds the title to the real property that is the subject of the ROFO Project (the “Real
Property”). Such Real Property may be sold upon the completion of the ROFO Project, whereupon
the Lender shall be authorised to receive a proportion of the profit generated by such sale as
provided for below.
(B)
The Lender invested in the ROFO Project an amount equivalent to 25% of the monetary equity
required by the Borrower to develop the ROFO Project (the “Initial Funding”).
10.1.
Initial Funding
10.1.1.The Lender agrees to lend to the Borrower, and the Borrower accepts, the following
amounts:
10.1.1.1. in respect of the loan facility agreement relating to the ROFO project identified
as number 1a in Annexure 12, an amount of EUR 3 486 984.83;
10.1.1.2. in respect of the loan facility agreement relating to the ROFO project identified
as number 1b in Annexure 12, an amount of EUR 1 361 163.22;
10.1.1.3. in respect of the loan facility agreement relating to the ROFO project identified
as number 1c in Annexure 12, an amount of EUR 1 055 715.01;
10.1.1.4. in respect of the loan facility agreement relating to the ROFO project identified
as number 2 in Annexure 12, an amount of EUR 1 400 245.64;
10.1.1.5. in respect of the loan facility agreement relating to the ROFO project identified
as number 3 in Annexure 12, an amount of EUR 1 608 299.13;
10.1.1.6. in respect of the loan facility agreement relating to the ROFO project identified
as number 4a in Annexure 12, an amount of EUR 3 001 508.31;
10.1.1.7. in respect of the loan facility agreement relating to the ROFO project identified
as number 4b in Annexure 12, an amount of EUR 1 375 840.86;
10.1.1.8. in respect of the loan facility agreement relating to the ROFO project identified
as number 5 in Annexure 12, an amount of EUR 2 287 360.87;
10.1.1.9. in respect of the loan facility agreement relating to the ROFO project identified
as number 6 in Annexure 12, an amount of EUR 3 946 988.42; and
10.1.1.10. in respect of the loan facility agreement relating to the ROFO project identified
as number 7 in Annexure 12, an amount of EUR 3 888 296.47,
117
(the “Loan Facility”), which amount will represent the amount by which the Lender shall
indirectly participate in the Borrower’s investment into the ROFO Project.
10.1.2.The Loan Facility was paid to the Borrower on or around 1 June 2016.
10.1.3.The Loan Facility may increase as set out below.
10.2.
Term, repayment
10.2.1.The Loan Facility is granted for ten years. If the sale by the Borrower of the Real Property
to a third party purchaser or to EPP and/or EPP’s designee (the “Sale”) does not close
within ten years, the final repayment date of the Loan Facility will be extended by an
additional ten years.
10.2.2.Unless a default (as set out below) has occurred, the only source of funds for the
repayment of the Loan Facility shall be the proceeds from the Sale (the “Proceeds”). The
Proceeds shall be calculated based on the following formula:
Proceeds = (TP –D –TC)/4
Where:
Proceeds
means proceeds payable to the Lender;
TP
means the purchase price of the Real Property, net of VAT and any other
transaction tax, paid to the Borrower pursuant to the Sale, reduced by post
closing liabilities;
D
means the aggregate of: (i) the total amount of any external debt (excluding
any obligations arising from the agreement) raised by the Borrower to
finance the ROFO Project and repaid at the closing of the Sale, including
interest and any other fees payable to the providers of such debt and (ii) the
total amount of the equity loans (advanced as contemplated in 10.3 below)
including accrued and capitalised interest; and
TC
means the aggregate amount of the Sale costs (including, but not limited to,
the costs of advisers, notarial fees and court fees, the Borrower’s income tax
(if applicable) and other taxes if payable in connection with or as a result of
the Sale, but excluding recoverable VAT).
10.2.3.Each such payment to be applied by the Lender as follows:
10.2.3.1. as first priority, against the principal amount of the Loan Facility until the
advances under the Loan Facility are fully reimbursed to the Lender;
10.2.3.2. as second priority, against the Interest accruing as set out below; and
10.2.3.3. lastly, against the Additional Interest accruing as set out below.
10.2.4.Each time that the Borrower receives an amount in exchange of the settlement or
satisfaction of any of post closing liabilities or the Borrower is released from a post closing
liability which actually reduced the TP, it shall pay to the Lender 25% of such received
amount or value of the released post closing liability. Post closing liabilities are the
aggregate amount of the specific Borrower’s liabilities (or obligations) which remain
unsettled or unpaid or are to be performed after or in spite of the execution of means a sale
and purchase agreement between the Borrower and EPP and/or EPP’s designee or a third
party on the basis of which the real property is sold to such entity, reasonably estimated by
the Borrower, including, but not limited to, the total net value of the master lease, any price
reductions or adjustments or price retentions, capex liabilities and other post closing
obligations (if not included in the Real Property purchase price).
118
10.2.5.Within 90 days of the Borrower no longer having any interest in the ROFO Project (the
“Repayment Date”), the parties shall calculate any and all amounts still outstanding under
the agreement (the “Outstanding Amount”). If on the Repayment Date there is no
uncured default and (a) no amount is due to the Borrower, whether directly or not from its
investment into the ROFO Project, and (b) no amount due to the Lender under this clause
10.2 remains unpaid, then parties shall procure that the Outstanding Amount shall be
acquired by / transferred to Echo on the arm’s-length basis and for the market price.
10.2.6.Each time that the Borrower makes a distribution, Echo or an Echo group entity shall be
entitled to receive 75% of the amount which is to be distributed and the Lender shall be
entitled to receive the remaining 25% (each a “Profit Share”).
10.2.7.The Lender’s receivables of the Profit Share shall be subordinated towards any Borrower’s
senior debt as well as towards any debt under the equity loan (advanced as contemplated in
10.3 below).
10.2.8.Yearly interest shall accrue on the advances under the Loan Facility at 2% p.a., noncompounded and calculated on the basis of a 360-day year and the actual number of days
elapsed from the dates such advances are made, if any, until the Repayment Date (the
“Interest”).
10.2.9.In addition, the Borrower shall pay to the Lender a percentage equal to the relevant
proportion of any Proceeds received by the Borrower or any of its affiliates less the
amounts paid to the Lender pursuant to the clauses above (the “Additional Interest”).
10.3.
Additional funding
If the Borrower informs the Lender that it expects its cash flows to be negative (<0) in a given
calendar month, the Lender shall be obliged to provide an equity loan to the Borrower, on the
same terms as the Loan Facility, in the amount equal to 1/3 of the amount which Echo or an Echo
group entity, as applicable, declares to contribute to the Borrower as evidenced in such written
request (the “Additional Funding”). Additional Funding will be regarded as an additional tranche
of the financing provided in terms of the agreement.
10.4.
Default
If:
10.4.1.the Borrower defaults on the payment of any sum due and payable in terms of the
agreement, in particular breach of any of its obligations under clause 10.2 above; or
10.4.2.the Borrower is in breach of its obligations to provide the Lender with reasonable access to
any documentation and information regarding the ROFO Project and the Borrower, subject
to a twenty-one day cure period as of the receipt of a written notice from the Lender; or
10.4.3.the Borrower or Echo is in breach of any of its obligations under clause 3 or clause 4 of the
ROFO office agreement, subject to a twenty-one day cure period as of the receipt of a
written notice from EPP,
each such event shall be treated as a serious violation and in each such case the Lender shall be
entitled to request the immediate repayment of the advances made and the interest accrued.
11. ACQUISITION AGREEMENTS
11.1.
Warsaw retail development acquisition agreement
Set out below are the salient terms of the binding term sheet concluded by the binding term sheet
concluded by EPP, Fidelin Development sp. z o.o. sp.k. (as Seller) and Echo on 5 July 2016, in
terms of which EPP will acquire the Warsaw retail development site.
119
11.1.1.The Seller will sell the Warsaw retail development site to a joint venture to be established
by Echo (“NewCo”). EPP will acquire 70% of the shares in NewCo, with Echo retaining
30%. Although not a condition to the acquisition of Warsaw retail development site,
NewCo will also consider acquiring a perpetual usufruct right to an additional plot of land
adjacent to the Warsaw retail development site from the City of Warsaw.
11.1.2.NewCo will serve as the vehicle for the redevelopment of the Warsaw retail development
site (the “Project”). Echo will serve as the developer of the Project and EPP will be the
asset, property and accounting manager of the Project. Any funding necessary for the
Project shall comply with EPP and Echo’s shareholding ratio in NewCo (70:30).
11.1.3.It is currently intended that the following key documents will be executed in relation to this
acquisition:
11.1.3.1. a preliminary (conditional) purchase agreement between the Seller and NewCo
under which NewCo will acquire the Warsaw retail development site;
11.1.3.2. a preliminary share purchase agreement between Echo and EPP under which
EPP will acquire 70% of shares in NewCo;
11.1.3.3. a shareholders’agreement between EPP and Echo, which will regulate, among
others, the corporate governance of NewCo and which will include an exit
mechanism for Echo;
11.1.3.4. a development management agreement which will regulate the services provided
by Echo to NewCo in respect of the development and leasing of the Project;
11.1.3.5. an asset, property, and accounting management agreement which will regulate
the services provided by EPP to NewCo in respect of the Project;
11.1.3.6. a conditional purchase agreement between the Seller and NewCo;
11.1.3.7. a final purchase agreement between the Seller and NewCo under which the
Warsaw retail development site will be transferred to NewCo; and
11.1.3.8. a final share purchase agreement between Echo and EPP under which EPP will
acquire 70% of shares in NewCo,
(together, the “Transaction Documents”).
11.1.4.Acquisition of 70% of the shares in NewCo by EPP is conditional upon (i) obtaining a
relevant antimonopoly clearance; (ii) obtaining a tax ruling; (iii) the acquisition by NewCo
of the Warsaw retail development site, and (iv)the transfer of all properties comprising the
Warsaw retail development site to NewCo.
11.1.5.The total consideration payable by NewCo for the Warsaw retail development site will be
EUR 78 000 000, increased up to EUR 120 000 000 if the conditions set out below are
satisfied. Echo will pay its 30% share of the consideration on the date of acquisition of
70% of the shares in NewCo by EPP.. EPP will pay its 70% share in the following four
instalments:
11.1.5.1. EUR5 000 000 when the Transaction Documents are signed;
11.1.5.2. EUR37 000 000 on the day of acquisition of the shares in NewCo by EPP;
11.1.5.3. EUR21 000 000 on the City of Warsaw authorities approving the zoning plan
allowing for the development of the Project; and
11.1.5.4. EUR21 000 000 on receipt of a positive decision on the Project’s impact on the
environment.
120
11.1.6.Legal title to the properties comprising the Warsaw retail development site will transfer to
NewCo immediately before signing the final share purchase agreement between Echo and
EPP, simultaneously with which the Seller will receive the payment contemplated in
11.1.5.2 above. Payment of the remaining portion of the consideration by NewCo will be
secured by a first ranking mortgage on the properties comprising the Warsaw retail
development site.
11.1.7. If the requisite zoning for the Project has not been obtained by 1 December 2019, (i) EPP
may agree to sell its stake in NewCo to Echo, or vice versa, at fair market value, (ii) if both
parties wish to sell their stake in NewCo such sale shall be carried out in the open market,
or (iii) if both Echo and EPP are willing to purchase each other’s stake in NewCo, the joint
venture shall continue.
11.1.8.Echo will be paid a development management fee of 6% of the total development budget
for the Project (which may be split into a development management fee component and a
leasing fee component) in consideration for development services rendered in relation to
the Project. Once an occupancy permit has been issued for the Project, EPP will be paid a
property, asset and accounting management fee equal to 5% of the yearly net operating
income collected by NewCo from tenants, together with an initial lump sum fee of
EUR100 000 in relation to the handover of the Project.
11.1.9.NewCo’s management board shall consist of four members; two appointed by EPP and
two appointed by Echo.
11.2.
ROFO project acquisition agreement
Set out below are the salient terms of the binding term sheet concluded by EPP and Echo on 5
July 2016, in terms of which EPP will acquire the O3 Business Campus, A4 Business Park, Tryton
Business House and Symetris Business Park (the “Properties”), being the properties numbered 1,
4, 5 and 7 in Annexure 12.
11.2.1.Echo, via its subsidiaries, intends to sell the Properties to EPP or its subsidiaries. The
completion of each sale will take place on the earlier of the listing of EPP on the JSE or 1
October 2016 (“Completion”).*
* While the terms of the binding term sheet summarised above relate to all the Properties,
the parties have subsequently agreed that only the sale of O3 Business Campus Phase I, A4
Business Park, Tryton Business House and Symetris Business Park Phase I will be
completed in 2016.
11.2.2.It is currently intended that the following key documents will be executed in relation to this
transaction:
11.2.2.1. a preliminary (conditional) purchase agreement between Echo’s subsidiaries and
EPP or its subsidiaries in relation to each of the Properties;
11.2.2.2. a development management agreement which will regulate the services provided
by Echo or its subsidiary to EPP in respect of the development and leasing of the
Properties;
11.2.2.3. a final purchase agreement between Echo’s subsidiaries and EPP or its
subsidiaries in terms of which the Properties will be transferred to EPP or its
subsidiaries; and
11.2.2.4. a master lease agreement, for a period of three years from completion, between
Echo or its subsidiaries (as tenant) and EPP (as landlord).
(together, the “Transaction Documents”).
121
1.1.1. The consideration payable for each Property will be the product of the annual net operating
income (“NOI”) divided by the agreed yield. The estimated NOI and yield for each
Property is as follows:
Building
Tryton Business
House
A4 Business
Park (Phase III)
O3 Business
Campus (Phase
I)
O3 Business
Campus (Phase
II)
O3 Business
Campus (Phase
III)
Symetris
Business Park
(Phase I)
Symetris
Business Park
(Phase II)
Total
Office NOI
(€m)
Parking NOI
(€m)
Fully let NOI
(€m)
Yield
3.6
0.2
3.8
7.25%
Market Value
pre rent free
periods
(€m)
52.3
1.9
0.1
2.0
7.50%
27.2
3.0
0.2
3.2
6.75%
47.9
3.0
0.2
3.2
6.75%
47.2
3.0
0.2
3.2
6.75%
47.2
1.5
0.1
1.6
7.50%
20.8
1.5
0.1
1.6
7.50%
21.0
17.4
1.2
18.6
7.05%
263.6
11.2.3.The Completion in relation to each Property will be conditional upon the satisfaction of the
following conditions precedent within a period of three years:
11.2.3.1.
11.2.3.2.
11.2.3.3.
11.2.3.4.
the obtainment of an occupancy permit in relation to a given Property;
the lease or pre-lease of at least 60% of the leasing space of a given Property;
the execution of the master lease agreement;
the execution of a new credit facility agreement in relation to a given Property
on conditions not worse (i.e. not less favourable) than the existing credit facility
agreement; and
11.2.3.5. the obtainment of antitrust clearance (if required).
12. UNDERWRITING AGREEMENT
Set out below are the salient features of the underwriting agreement entered into between Redefine, CV
Cinque Limited, Anchor Capital Proprietary Limited, Oxiana Limited, Argon Holding Inc. and EPP
(together, the “underwriters”) and EPP, in terms of which the underwriters have agreed to co-underwrite
the private placement.
12.1. Each underwriter agrees to underwrite the private placement in respect of the following amounts:
12.1.1.
12.1.2.
12.1.3.
12.1.4.
12.1.5.
Redefine –EUR 50 000 000 (34 482 759 ordinary shares at EUR 1.45 per share);
CV Cinque Limited –EUR 11 194 030 (7 720 021 ordinary shares at EUR 1.45 per share);
Anchor Capital Proprietary Limited –EUR 13 805 970 (9 521 359 ordinary shares at EUR
1.45 per share);
Oxiana Limited –EUR 17 666 667 (12 183 908 ordinary shares at EUR 1.45 per share);
Argon Holding Inc. –EUR 7 333 333 (5 057 471 ordinary shares at EUR 1.45 per share);
(in aggregate, the “total underwritten amount”) and to subscribe for its pro rata portion of the
applicable shares offered but not subscribed for in terms of the private placement (the “available
shares”), subject to the above maximum commitment. The underwriters will subscribe for the
applicable available shares in proportion to their respective commitments.
12.2. Insofar as the company determines that the total amount raised in terms of the private placement
exceeds the total underwritten amount as set out in clause 12.1 above, the aggregate amount
underwritten by the underwriters shall remain limited to the total underwritten amount.
122
12.3. The bookrunner will, solely on behalf of the company, be mandated to offer certain potential investors
that meet minimum pre-commitment requirements a “pre-commitment fee”, provided that the
aggregate amount of all pre-commitment fees paid to all qualifying investors shall not exceed an
amount of EUR 835 000 (the “pre-investment commitments”).
12.4. In consideration for the underwriters agreeing to underwrite the private placement as set out above, the
company shall pay the underwriters an underwriting fee. The underwriting fee will be an aggregate
amount of EUR 3 500 000, less the aggregate pre-commitment fee payable in respect of preinvestment commitments, as contemplated in paragraph 12.3 above, shared amongst the underwriters
in proportion to their underwritten commitment.
13. ASTRA PARK OPTION AGREEMENT
Set out below are the salient terms of the agreement concluded by Astra Park –Projekt Echo –69 sp.z o.o.
s.k. (as Seller) and FTF Columbus S.A. (as Purchaser) on 30 October 2015, in terms of which EPP grants
FTF Columbus S.A. an option to purchase Astra Park.
13.1. The final agreement shall be executed subject to the satisfaction or waiver of all the following
conditions precedent:
13.1.1.
13.1.2.
13.1.3.
13.1.4.
the conforming tax rulings having been obtained;
the pay-off letter having been duly issued by the existing lender;
any consents for the issuance of release letters in relation to the mortgages encumbering
the property other than the mortgages having been issued; and
confirmation from the Tax Office and Social Insurance Agency of no outstanding
payments of the seller having been issued.
13.2. The purchase price for the property will be based on a total Net Operating Income to be generated by
the property (NOI) and the yield of 8.25%. The final NOI to be used for capitalization purposes will
be based (i) for the leased areas at the closing on achieved passing rents and (ii) for vacant areas at the
closing on rents for specific vacant areas calculated as the product of the monthly average net rent per
square metre of all the leasable space in the building under the existing leases. All rent abatements and
rent free periods as of the closing date shall be included in the purchase price calculation. The
purchase price shall take into consideration any non-recoverable expenses incurred annually by the
seller.
13.3. The purchaser will be entitled to serve the call option request during the period from 10 June, 2020
until 10 August, 2020.
13.4. The closing shall take place not later than on 10 December 2020.
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Annexure 8
DETAILS OF THE INITIAL PROPERTY PORTFOLIO
Set out below are the details of the initial property portfolio.
No
Property name
Retail sector
1.
Pasaz
Grunwaldzki
2.
Galaxy
3.
Galeria Echo
Kielce
4.
Galeria Amber
5.
Galeria Veneda
Physical address
Weighted
average rental
per m2
(EUR/m2)
Rentable area
(GLA) m2
Vacancy (% of
rentable area)
Purchase price
(EUR)
Effective date of
acquisition (2016)
Valuation as at 30
June 2016
Difference between
valuation amount
and purchase price
(EUR)3
Wrocław, Pl. Grunwaldzki 22
23.9
48,326
1.75
233 200 000
17 February 2016
239 700 000
(6 500 000)
Szczecin, Al. Wyzwolenia 18-20
18.7
41,231
0.37
200 900 000
17 February 2016
210 400 000
(9 500 000)
Kielce, ul. Świętokrzyska 20
14.5
71,610
2.92
206 400 000
17 February 2016
206 000 000
200 000
Górnośląska 82, Kalisz
13.3
33,256
3.98
74 100 000
17 February 2016
74 700 000
600 000
Zawadzka 38, Łomża
14.0
15,073
-
34 500 000
17 February 2016
35 100 000
(600 000)
6.
Outlet Park
Struga 42, Szczecin
12.7
21,139
-
60 300 000
17 February 2016
69 180 000
(8 880 000)
7.
Galeria Sudecka
Jana Pawła II 51, Jelenia Góra
10.9
31,244
0.78
51 900 000
17 February 2016
52 400 000
(500 000)
8.
Galeria Olimpia
Centrum Echo
Bełchatow
Centrum Echo
Przemysl
Total Retail
Kolejowa 4, Bełchatów
10.8
21,274
1.86
38 700 000
17 February 2016
39 500 000
(800 000)
Kolejowa 4, Bełchatów
5.83
11,426
-
9 620 000
17 February 2016
10 100 000
(480 000)
29 Listopada 4, Przemyśl
6.53
5,759
-
4 560 000
17 February 2016
4 820 000
(260 000)
300,338
1.68
914 180 000
941 900 000
(27 720 000)
9.
10.
Office sector
11.
Malta Office
Park
12.
Park Rozwoju
13.
A4 Business Park
Phase I and II
14.
West Gate
Poznań, Baraniaka 88
14.34
28,271
3.88
63 700 000
17 February 2016
62 400 000
1 300 000
Warsaw, ul. Konstruktorska 10
13.39
32,915
26.77
73 300 000
17 February 2016
69 500 000
3 800 000
Katowice, ul. Francuska 42-44
12.81
18,059
-
37 000 000
17 February 2016
37 600 000
(600 000)
Wrocław, ul. Lotnicza 12
13.05
16,532
-
40 400 000
17 February 2016
39 300 000
1 100 000
15.
Astra Park
Kielce, Al. Solidarności 36
13.06
14,269
-
31 100 000
17 February 2016
30 900 000
200 000
16.
Szczecin Oxygen
Szczecin, Malczewskiego 26
15.39
13,832
14.23
28 300 000
17 February 2016
28 000 000
300 000
Total Office
123,878
9.59
273 800 000
267 700 000
6 100 000
Total
424,216
3.99
1 187 980 000
1 209 600 000
(21 620 000)
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Notes:
1.
2.
3.
4.
5.
6.
The initial properties were valued at 30 June 2016 by Kamil Kowa and Karina Szafranska, both independent, registered professional valuers in terms of The Royal
Institute of Chartered Surveyors.
Figures reflect 100% ownership of property assets.
The difference between the purchase price and the valuation amounts is due to the fact that the values attributed by the independent property valuer are open market
values, while the purchase prices are negotiated values.
Galaxy Shopping Centre (2) and Outlet Park (6) are currently being extended. On completion of the development and letting of extended space, the properties are
expected to be valued at EUR 246 200 000 and EUR 76 280 000, respectively.
The value of Outlet Park includes a market value of excess land of EUR 880 000.
Echo, Redefine and EPP have agreed to co-operate to amend the perpetual usufruct in respect the of Park Rozwoju office such that it is coherent with the key use of
the property and to ensure that there is no basis for challenging such perpetual usufruct. Insofar as this is not achieved by 30 May 2021, Echo has granted EPP (or its
designated affiliate) the irrevocable right to sell Park Rozwoju to Echo for EUR 73 080 000.
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Annexure 9
2016 ACQUISITION PROPERTIES
Set out below are the details of the acquisition portfolio.
No
Property name
Physical address
Sector
Rentable area
(GLA) m2
Fully let NOI
(EUR)
Expected date of
completion
Purchase price
(EUR)
Valuation as at
30 June 20163
Estimated value
after completion
and letting (EUR)
1.
Warsaw retail
development site
Towarowa 22, Warsaw
Retail
110 000
33 700 000
June 2020
84 000 000
71 400 000
n/a
71 400 000
Total development
2
3.
4.
5.
6.
7.
8.
O3 Business Campus
Phase I
Symetris Phase I
A4 Business Park
Phase III
Tryton Business Park
Total ROFO being
acquired in 2016
O3 Business Park
Phase II
O3 Business Park
Phase III
Symetris Phase II
Total ROFO being
acquired post 2016
Opolska 114, Krakow
Office
19 095
3 200 000
Complete
August 2016
-
37 600 000
44 000 000
-
15 700 000
21 000 000
Pilsudskiego 86, Lodz
Office
9 449
1 600 000
Francuska 42-44, Katowice
Office
11 975
2 100 000
October 2016
-
16 400 000
25 800 000
Jana z Kolna 11, Gdansk
Office
23 676
3 800 000
Complete
-
44 800 000
52 200 000
114 500 000
143 000 000
Opolska 114, Krakow
Office
19 095
16 100 000
44 900 000
Opolska 114, Krakow
Office
19 095
10 800 000
44 900 000
Pilsudskiego 86, Lodz
Office
9 548
8 500 000
21 200 000
35 400 000
111 000 000
10 700 000
May 2017
October 2018
August 2017
-
Notes:
1.
2.
3.
4.
The acquisition portfolio was valued at 30 June 2016 by Kamil Kowa and Karina Szafranska, both independent, registered professional valuers in terms of The Royal
Institute of Chartered Surveyors.
Figures reflect 100% ownership of property assets except for Warsaw retail development which will be 70% owned by EPP.
The valuation as at 30 June 2016 includes the effect of rent free periods, which reduces the value of the relevant property. For a market value of the properties prior to
the inclusion of rent free periods, as determined by management, please see paragraph 11.2.3 of Annexure 7.
The difference between the purchase price payable for the Warsaw retail development site and the valuation amount is due to the fact that the values attributed by the
independent property valuer are open market values, while the purchase prices are negotiated values. The purchase price payable by EPP for its 100% stake of the
126
remainder of the properties comprising the acquisition portfolio will only be determined on completion of the relevant acquisition, and will be calculated as the
product of the annual net operating income of the relevant property divided by an agreed yield.
127
Annexure 10
INDEPENDENT VALUER'S SUMMARY VALUATION REPORT
22 August 2016
The Directors
Echo Polska Properties N.V.
Prins Bernhardplein 200
1097JB
Amsterdam
Netherlands
RE: INDEPENDENT PROPERTY VALUERS’REPORT OF THE PROPERTY PORTFOLIO FOR
ECHO PRIME PROPERTIES B.V. (“EPP”) AS DETAILED IN THE SUMMARY SCHEDULE
ATTACHED AND FOR WHICH THERE ARE DETAILED VALUATION REPORTS HELD BY EPP
In accordance with your instruction of 11 May 2016, we confirm that we have visited and inspected the 21
properties listed in the attached schedule (“the properties”) in May 2016 and have received all necessary details
required to perform a valuation in order to provide you with our opinion of the properties’market values as at
30 June 2016. The properties comprise 16 properties owned by EPP as at the date of this report (the “initial
properties”and 5 properties which EPP is contracted to acquire (the “acquisition portfolio”).
1.
INTRODUCTION
The valuation of the properties has been carried out by the valuers who have carefully considered all
aspects of all the properties. These properties each have a detailed valuation report which has been given
to the management of EPP (the “detailed valuation reports”). The detailed reports include commentary on
the current economy, nature of the properties, location, tenancy, planning and tenure, local market and
risk profile. All these aspects have been considered in the individual valuation reports of the properties.
The detailed reports have further addressed the tenancy income capability and expenditure for each
property and tenant. Historic expenditure profile as well as future expenditure increases have been
considered. The value thus indicates the fair market value for each property which is included in the
detailed report and which has been summarised on a summary schedule, attached hereto, for each
property. There are 21 properties and the important aspects of the detailed valuation report including the
property market value for all of the properties have been summarised in the attached schedule.
2.
BASIS OF VALUATION
The valuation is based on Market Value.
In undertaking the valuations, we have adopted the Royal Institution of Chartered Surveyors (“RICS”)
definitions of Market Value and Market Rent, as detailed in the RICS Valuation –Professional Standards
(the “Red Book”) January 2014:
2.1.
Valuation Practice Statements VPS 4 1.2 of the Red Book defines Market Value 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.”;
2.2.
Valuation Practice Statements VPS 4 1.3 of the Red Book defines Market Rent as: “The
estimated amount for which an interest in real property should be leased on the valuation date
between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length
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transaction, after proper marketing and where the parties had each acted knowledgeably,
prudently and without compulsion.”.
3.
VALUE CALCULATION
We have used a combination of the income approach and discounted cash flow (“DCF”) technique in
order to arrive at a Market Value of the properties.
The income approach provides an indication of value by converting future cash flows to a single current
capital value and is the fundamental basis on which commercial income producing properties are traded
on the market in Poland. This is due to there being strong supporting evidence of open market rental rates
and capitalisation rates which are evidenced by sales in the market.
The DCF technique is used for the investment appraisal where future costs and receipts have to be
estimated and discounted at an appropriate discount rate.
The considerations for the DCF valuations are as follows:
3.1.
Calculations are made on a tenant by tenant basis with deductions made to reflect letting voids,
operating costs relating to vacant units, rent abatements on reletting, letting fees, refreshment of
space prior to reletting and any other costs which are not passed through to tenants but whose
recovery is considered normal market practice. There is no loss of rental due to renovations or
refurbishments currently being carried out on the buildings. In case of buildings being currently
under construction or those recently delivered, capital expenditures have been adopted to cover
outstanding construction costs or fit-out contribution to tenants. There is no loss of rental as
a result of these activities. According to the market practice contractual rental payments
commence after the area’s hand-over by a tenant.
3.2.
The discount rate reflects rate of return that adequately compensates the investor for the risks
taken. Discount rate (the target rate on return) is usually derived by reference to the return on an
alternative form of perceived low-risk or riskless asset (frequently the benchmark is the gross
redemption yield on government gilts or cash) plus appropriate additions for risk.
3.3.
Our assessment of the Exit Capitalisation Rate is based on the recent property transactions, our
general knowledge of the market and investment funds’expectations. This yield is considered
an ‘all risks yield’and accounts for the investors view of the specifics of the property, its
leasing status, e.g. anticipated future rental value changes, vacancies and void periods as well as
potential fluctuations in the property market, having regard to current market conditions and
trends.
3.4.
The vacancy levels in the properties vary between 0% - 39%, however the majority of
properties are fully or nearly fully let. In particular, in ten properties the vacancy level does not
exceed 3%. In addition there are only two properties where the vacancy level is higher than 6%,
in particular: Park Rozwoju office building (39%) and Oxygen office building. For the purpose
of our valuations we have assumed a fluctuation vacancy arising from a few months letting
voids applied for currently vacant units or on reletting of let units. For details please refer to the
detailed valuation reports.
3.5.
Irrecoverable costs have been assumed according to the historical data and maintenance budgets
for 2016. The costs are assumed to run in perpetuity, subject to the Polish Consumer Price Index
(“Polish CPI”).
3.6.
Capital expenditures and one-off marketing costs not recovered from tenants are applied
according to the budgets provided to us. Such costs were available only for 2016 and 2017. Fitout contributions to tenants, which is a local market practice, have been assumed for units
exceeding 500 m2 (but excluding supermarkets and DIYs) at EUR 200 / m² for the top three
centres (Pasaż Grunwaldzki, Galaxy and Galeria Echo) and EUR 150 / m2 for the smaller
centres, for currently vacant units or for the reletting of presently let units. In the case of office
buildings, we have made an allowance of EUR 200 / m² for Park Rozwoju in Warszawa and
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between EUR 80 / m² and EUR 140 / m² on average for the remaining regional offices, for
currently vacant office area or where reletting presently let units. Please note, however, that
when an exact contribution has been recently agreed with a tenant, we have adopted the agreed
rate for this particular tenant.
3.7.
Our valuation incorporates indexation to rents in line with tenancy schedules, with costs also
indexed according to the Polish CPI index recorded by the Central Statistical Office of Poland
(“GUS”). 12 out of the 21 properties are rack-rented (which means the difference between the
current headline rent and estimated rental value does not exceed 5%), whereas eight properties
(three office buildings and five shopping centres) are over-rented. The only under-rented
property is Galeria Echo in Kielce. In developing our opinion of Market Rent in the office
buildings we have had regard to recent lettings as well as looking at rents in comparable office
buildings. In developing our opinion of Market Rent in shopping centres we have had regard to
recent lettings and renewals, rents in comparable shopping centres and our rent-to-sales
analysis. Additionally individual rents have been applied for recently signed leases and for units
with relatively good or better than average sale results reflecting their potential and assuming that
these types of uses will continue to operate in centre. The table below shows our opinion as for the
level of over rent in particular properties:
3.8.
Shopping centres
Galeria Echo
Pasaż Grunwaldzki
Galaxy
Galeria Veneda
Echo Przemyśl
Echo Bełchatów
Office buildings
Oxygen
Astra Park
Malta Office Park
1)
Under rent
WAULT 1
6.1%
7.8%
25.7%3
9.8%
19.5%4
12.8%5
5.5
5.0
8.1
5.2
6.3
5.5
% of initial
portfolio’s
NOI2
15.8%
18.3%
17.2%
3.4%
0.5%
1.1%
6.7%
20.6%
6.1%
3.2
6.8
2.2
2.6%
3.6%
5.8%
Over rent
Weighted (by income) Average Unexpired Lease Term in years
2)
Annualised Net Operating Income (income from already signed leases less non-recoverable
costs) of the initial portfolio of 16 assets, i.e. excluding the acquisition portfolio of 5 properties
3)
The over-rent results from two leases with WAULT of 12.42 years (Auchan for 11,950 m²
and Multikino for 3,718 m²).
4)
The over-rent results from one lease with Carrefour for 2,033 m2 with WAULT of 4.25 years.
5)
The over-rent results from one lease with Carrefour for 3,620 m2 with WAULT of 3.70 years.
Please note, each time we refer to the main rentable area in the building (retail and services area
for shopping centres and office area for office buildings) and existing lettings or already
confirmed pre-lettings.
3.9.
Our DCF is calculated over a 5 year period, calculated from 1 July 2016, with income from
each tenant or unit reverting to our opinion of Market Rent on expiry or termination of the lease.
Adjustments are made as appropriate to reflect contractual rent steps or abatements.
3.10.
In determining Market Value we have had regard to recent sales and ongoing sales of shopping
centres and office buildings located in Poland, as well as regional and current investment
market sentiment for this class of assets. In developing an appropriate Exit Capitalisation Rate
for the properties, we have considered both rates being achieved by similar competing
properties, as well as the perception of investors as to the direction yields will take in the future.
130
3.11.
According to the rent-rolls provided to us, there are currently several tenants who have
contractual break options. Please note we have not included them in the valuation models nor in
our analysis of lease expiry profiles.
We confirm that we have sufficient current local and national knowledge of the particular market and the
skills and understanding to undertake the valuation competently.
4.
SPARE LAND
There are 2 properties which have a spare land which could potentially be developed:
5.
4.1.
The land next to Astra Park office complex is currently used for parking purposes to service the
existing buildings. We have been informed that there are currently no plans to develop this land.
Therefore, we have assumed the current use of land as parking will continue in the future, and
have assumed that the Market Value of this land is included in the Market Value of Astra Park
valued on an income basis.
4.2.
There are two pieces of land located within the Outlet Park estate in Szczecin. One such piece
of land adjoins existing building and is currently used for parking purposes to service the
existing buildings. We have been informed that there are currently no plans to develop this land.
We have therefore assumed the current use of land as parking will continue in the future, and
assumed that the Market Value of this land is included in the Market Value of Outlet Park
valued on an income basis. of the other piece of land is situated east from the Outlet Park and is
currently undeveloped. We have assumed that this land can be either developed or sold to an
external party and we have therefore valued this property using a comparable method of
valuation.
BRIEF DESCRIPTION
The initial portfolio of 16 properties
The initial portfolio includes 10 shopping centres, description of which is presented below:
5.1.
Pasaż Grunwaldzki located in Wrocław
Pasaż Grunwaldzki is a 185 retail unit modern shopping centre of ca. 48,300 m² rentable retail
area. The property occupies a 27,932 m2 site and was opened in April 2007. The property is
owned freehold.
The property is situated at Plac Grunwaldzki in Śródmieście district –central part of Wrocław,
on the corner of ul. Piastowska and ul. Szczytnicka. The property comprises one of the major
retail schemes in the city.
The shopping centre is arranged over a single underground floor, a ground and three upper
levels. In total the centre has some 1,270 car parking spaces giving a ratio of one space for
every 38 m2 of retail area, which is acceptable for a city centre location.
The property is 97% let with an average remaining lease term, weighted by income, of 4.92
years. The rent-to-sale ratio is 10.6%, which is in-line with the market average. The property is
8% over-rented. The leases are of a general contractual rental nature with the majority of leases
making provision for an additional rent calculated as the positive difference between a stated
percentage of a tenant’s net sales and their base rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.2.
Galeria Echo located in Kielce
131
Galeria Echo Kielce is a 229 retail unit modern shopping centre of ca. 71,600 m² rentable retail
area. The property occupies a 57,856 m2 site and was originally opened in November 2002 and
later redeveloped in August 2011.
The majority of the property is owned freehold with the perpetual usufruct right expiring on 11
May 2090 and 3 April 2096 over the remainder. Galeria Echo Kielce is partly situated on a land
held under a leasehold from Kielce University of Technology. The leasehold expires in August
2037 and covers land with an area of ca. 13,000 m2 currently developed with a multi-storey car
park. We understand, however, that Echo Investments S.A. is in advanced negotiation process
with Kielce University of Technology Swietokrzyska Polytechnic and intends to acquire this
land in the following year. We have been informed that the intention is to acquire the land on
behalf of EPP.
The property is located outside the City Centre, close to universities and residential dwellings,
ca three km north –east of the City Centre and is the dominant retail scheme in the region.
The shopping centre building has an irregular shape, with two upper floors organized on a
rectangular layout. The ground floor is arranged along four corridors and accommodates a large
retail unit located at the end of original part of shopping centre. Two upper floors and -1 level
are arranged in a rectangular shape, with two longitudinal passageways, composed of small
retail units on floor -1 and +1. Floor +2 accommodates large units with fitness, bowling and
home decoration retailers.
The multi-level car park offers 1,420 spaces, while the underground parking offers 541 spaces,
giving a ratio of one space for every 37 m2 of retail area, which is good.
The property is 95% let with an average remaining lease term, weighted by income, of 5.47
years. The rent-to-sale ratio is 8.2% which is below the market average. The property is ca. 6%
under-rented. The leases tend to be of a general contractual rental nature with the majority of
leases making provision for an additional rent calculated as the positive difference between a
stated percentage of a tenant’s net sales and their base rent. Six tenants pay turnover rent only.
Tesco has already paid the entire rent and therefore no rental income is generated from the
current lease. There is also one tenant (Answear) that does not pay any rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.3.
Galaxy located in Szczecin
Galaxy shopping centre is currently a 132 retail unit modern shopping centre of ca. 41,200 m²
rentable retail area. The property currently occupies a 26,192 m2 site and was opened in 2003.
In March 2016 a building permit was issued for an extension of the property. Ultimately the
shopping centre will include 176 retail units of ca. 56,300 m2 rentable retail area. The extended
property will occupy a 36,193 m2. The opening of the extended part of the centre is scheduled
for October 2017.
The majority of the property is held under the perpetual usufruct right expiring on 6 October
2098 or 5 December 2089 with the ownership right over the remainder.
The property is located in the central part of Szczecin, in Śródmieście district, near one of the
busiest junctions in the city –Plac Rodła connecting Al. Wyzwolenia and ul. Piłsudskiego. It is
one of two dominant retail schemes in the region.
The property currently comprises two buildings: a shopping centre and a 5-storey car park
connected to the main building by a bridge above the internal road and on ground level via a
pedestrian crossing. The shopping centre building is currently arranged over a single
underground parking level, a ground and two upper retail levels. In total the centre offers some
1,270 car parking spaces, 701 of which are located in the multi-storey car park. It gives a ratio
of one space for every 33 m2 of retail area, which is acceptable for a city centre location.
132
The extended part of the property will comprise a retail area arranged over ground and two
upper levels with a single underground parking level and will be connected with existing
shopping centre on the underground floor and via retail passage on levels 0 and 1. In addition,
the centre will offer 180 car parking spaces with a targeted ratio of 39 m2 of retail area.
The existing part of the centre is 99.6% let with an average remaining lease term, weighted by
income, of 8.37 years. The rent-to-sale ratio is 12.4% which is above the market average. The
property is 26% over-rented. The over-rent results from two leases with WAULT of 12.42 years
(Auchan for 11,950 m2 and Multikino for 3,718 m2). The leases tend to be of a general
contractual rental nature with the majority of leases making provision for an additional rent
calculated as the positive difference between a stated percentage of a tenant’s net sales and their
base rent. One tenant (H&M) pays turnover rent only.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.4.
Galeria Amber
Galeria Amber is a 117 retail unit modern shopping centre of ca. 33,250 m² rentable retail area.
The property occupies a 33,906 m2 site and was opened in March 2014.
The property is held under the perpetual usufruct right expiring on 5 December 2089 with the
ownership right to the building.
The property lies outside the City Centre, in the close surroundings of the city’s railway station
(PKP Kalisz) and main bus terminal, ca. 2,5 km south –west of the City Centre.
The shopping centre building has a trapezoidal shape. The ground floor and the first floor are
arranged along two longitudinal passageways with two islands, each of them composed of small
retail units. The second floor is occupied by a cinema and café.
In total the centre has some 1,002 car parking spaces giving a ratio of one space for every 33 m2
of retail area, which is acceptable for a city centre location next to public transport hubs.
The property is 96% let with an average remaining lease term, weighted by income, of 5.86
years. The rent-to-sale ratio is 10% which is in line with the market average. The property is
rack-rented. The leases tend to be of a general contractual rental nature with the majority of
leases making provision for an additional rent calculated as the positive difference between a
stated percentage of a tenant’s net sales and their base rent. Two tenants pay turnover rent only
(H&M and Terranova).
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.5.
Galeria Veneda located in Łomża
Galeria Veneda is a 55 retail unit modern shopping centre of ca. 15,073 m² rentable retail area.
The property occupies a 30,197 m2 site and was opened in 2013. The property is owned
freehold.
The property is located in southern part of Łomża, at ul. Zawadzka. National road no. 63 is
situated ca 200 m to the north from the property, providing a convenient access to the town’s
centre as well as outside the town.
The shopping centre is arranged over the ground floor with a single underground parking level.
In total the centre has 580 car parking spaces giving a ratio of one space for every 26 m2 of
retail area, which is acceptable for the subject location.
The property is 100% let with an average remaining lease term, weighted by income, of 5.20
years. The rent-to-sale ratio is 9.3% which is below the market average. The property is 10%
133
over-rented. The leases tend to be of a general contractual rental nature with the majority of
leases making provision for an additional rent calculated as the positive difference between a
stated percentage of a tenant’s net sales and their base rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.6.
Outlet Park located in Szczecin
Outlet Park Szczecin is a 93 retail unit modern retail scheme of ca. 24,400 m² rentable retail
area in phase I&II and phase IV. Phase III will offer additional 21 retail units and ca. 3,800 m²
rentable area. The property occupies a 99,611 m2 site and was opened in November 2012. Phase
IV (a stand-alone building) is scheduled to be finished in December 2016, and Phase III
(extension of the existing building) is scheduled to be finished in September 2017.
The property is held under the perpetual usufruct right expiring on 10 July 2095 and 6
December 2095 with the ownership right to the building.
The property is located in eastern part Szczecin, surrounded by commercial schemes and
residential areas and is considered to be a local retail scheme.
The centre is arranged over a single floor. In total the centre has some 1000 car parking spaces
giving a ratio of one space for every 24.4 m2 of existing retail area, and one space for every 28.2
m2 of total retail area, which is acceptable for this location.
Including the planned extension, the property is 75% let with an average remaining lease term,
weighted by income, of 5.48 years. The rent-to-sale ratio is 8.3% which is below the market
average. The property is rack-rented. The leases tend to be of a general contractual rental nature
with the majority of leases making provision for an additional rent calculated as the positive
difference between a stated percentage of a tenant’s net sales and their base rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.7.
Galeria Sudecka located in Jelenia Góra
Galeria Sudecka is a 79 retail unit modern shopping centre with a total rentable area of ca.
31,200 m2. The property occupies a 59,233 m2 site. The property was originally opened in 2000
(Phase I) and redeveloped in April 2015 (Phase II).
The property is held under the perpetual usufruct right expiring on 2 October 2096 (plot no 162)
and on 27 December 2106 (plot no 16/16) with the ownership right to the building. Some
additional part of the land has been under lease agreement, obligatory since 1 January 2013 and
signed for an indefinite period of time.
The shopping centre is located on the outskirts of Jelenia Góra within Zabobrze district, ca 3 km
north –east of the City Centre at the crossroad of ul. Jana Pawła II (which states a national road
no. 3) and ul. Legnicka (voivodeship road no. 365). The property is one of the major retail
schemes in the city.
Phase I of the shopping centre (the hypermarket) is a single storey. The redeveloped part has an
additional mezzanine level occupied by a cinema and two other units.
The centre has a surface car park located in the western and southern part of the site as well
underground parking. In total the centre has some 562 underground and 1,147 surface car
parking spaces giving a ratio of one space for every 18 m2 of retail area which is very good.
The property is 99% let with an average remaining lease term, weighted by income, of 5.63
years. The rent-to-sale ratio is 12% which is above the market average. The property is rackrented. The leases tend to be of a general contractual rental nature with the majority of leases
134
making provision for an additional rent calculated as the positive difference between a stated
percentage of a tenant’s net sales and their base rent. LPP Group in Galeria Sudecka (Reserved,
Mohito, Sinsay, House and Cropp) has an affordability clause cap, in terms of which the total
occupancy costs (annual rent (including turnover rent), annual common service charge
(including reconciliation) and annual marketing fee shall not exceed 13% of annual turnover.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.8.
Galeria Olimpia located in Bełchatów
Galeria Olimpia is a 66 retail unit modern shopping centre of ca. 21,300 m² rentable retail area.
The property occupies a 44,483 m2 site and was opened in February 2013. The property is
owned freehold with the ownership right to the building.
The property lies within the area of the city administration borders in the Edwardów district, ca.
2 km south–east of the City Centre.
The shopping centre building is arranged over a single floor and has a rectangular shape,
arrange along a circular corridor, with a hypermarket situated in the norther part. Smaller
tenants are located in the central location of the gallery, while major tenants occupy boundary
areas.
In total the centre has some 773 car parking spaces giving a ratio of one space for every 27 m2
of retail area which is acceptable for a property on the outskirts of the city.
The property is 98% let with an average remaining lease term, weighted by income, of 4.67
years. The rent-to-sale ratio is 8.8% which is below the market average. The property is rackrented. The leases tend to be of a general contractual rental nature with the majority of leases
making provision for an additional rent calculated as the positive difference between a stated
percentage of a tenant’s net sales and their base rent. H&M pays turnover rent only. LPP Group
in Galeria Olimpia (Reserved, Mohito, Sinsay, House and Cropp) has affordability clause cap,
according to which the total occupancy costs (annual rent (including turnover rent), annual
common service charge (including reconciliation) and annual marketing fee shall not exceed
15% of annual turnover.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.9.
Centrum Echo located in Bełchatów
Centrum Echo Bełchatów is a 5 retail unit shopping centre of ca. 11,420 m² rentable retail area.
The property occupies a 30,108 m2 site and was opened in May 2000. The property is owned
freehold.
The property lies within the area of the city administration borders in the Edwardów district, ca.
2 km south–east of the City Centre.
The shopping centre encompasses the entire site and is ‘S’shaped. There are two ground floor
entrances, both located from Kolejowa Street (east side). The ground floor is arranged along one
external pedestrian path with two large retail units located in the building’s corners (south and
north) and 3 smaller retail units situated between them. There are no inside crossing entries
between retail units.
In total the centre has some 256 car parking spaces giving a ratio of one space for every 45 m2
of retail area, which is acceptable for a property on the outskirts of the city.
The property is fully let with an average remaining lease term, weighted by income, of 5.47
years. The property is 13% over-rented. The over-rent results from one lease with Carrefour for
3,620 m2 with WAULT of 3.70 years. The leases are of a general contractual rental nature with
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the DIY lease making provision for an additional rent calculated as the positive difference
between a stated percentage of a tenant’s net sales and their base rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for selected tenants create a service charge shortfall not recovered from tenants.
5.10.
Echo Centrum located in Przemyśl
Echo Centrum Przemyśl is a two retail unit shopping centre of 5,760 m² rentable retail area. The
property occupies a 12,267 m2 site. The property was originally opened in 2000 and
redeveloped in 2012.
The property is owned freehold. Part of the land is held under a lease agreement, which has
been obligatory since 1 January 2013 and is signed for indefinite period of time.
The property lies within northern part of the city in the Zasanie district, ca 2.5 km north of the
City Centre. The scheme benefits from convenient visibility as it is situated at the corner of ul.
Pułkownika Marcina Borelowskiego and ul. 29 Listopada.
The centre is arranged over a single storey. The centre has a surface car park located within
western part of the site. In total the centre has some 156 car parking spaces (including 2 spaces
for disabled) giving a ratio of one space for every 37 m2 of retail area, which is acceptable for
this location.
The property is 100% let with an average remaining lease term, weighted by income, of 6.29
years. The property is ca. 20% over-rented. The over-rent results from one lease with Carrefour
for 2,033 m2 with WAULT of 4.25 years. The leases are of a general contractual rental nature
with a DIY lease making provision for an additional rent calculated as the positive difference
between a stated percentage of a tenant’s net sales and their base rent.
The majority of operational costs are covered via service charge, however service charge caps
agreed for both tenants create a service charge shortfall.
The initial portfolio includes 6 office buildings, a description of which is presented below:
5.11.
Malta Park located in Poznań
Malta Office Park is a modern office complex consisting of six buildings (buildings A, B, C, D,
E or F) of ca. 28,300 m² rentable office area. The complex occupies a 26,115 m2 site and was
completed in December 2011.
The property is held under the perpetual usufruct right expiring on 5 December 2089 with the
ownership right to the buildings.
The property is located in the eastern part of Poznań, at ul. Abpa Baraniaka. Highway A2 is
situated ca 8 km to the south, providing a convenient access to central Poland and to Germany.
In total the property offers some 587 car parking spaces giving a ratio of one space for every
48 m2 of office area which is acceptable for the subject location.
The property is 96% let with an average remaining lease term, weighted by income, of 2.20
years. The property is 6% over-rented. The leases tend to be of a general contractual rental
nature. The operational costs are fully recovered via service charge.
5.12.
Park Rozwoju (Phase I-II) located in Warsaw
Park Rozwoju is a modern complex of two office buildings of ca. 32,900 m² rentable office and
retail / services area. The property occupies a 22,338 m2 site and was opened in 2014 (Phase I)
and 2015 (Phase II).
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The property is held under the perpetual usufruct right expiring on 5 December 2089 with the
ownership right to the buildings.
Administratively the property lies in the Mokotów district (southern Warsaw) but in terms of
the office market lies in the second largest office market in Warsaw.
Both of the buildings consist of 7 above-ground storeys and 2 underground storeys. In total the
property offers some 797 car parking spaces giving a ratio of one space for every 41 m2 of
office area which is acceptable for the subject location.
The property is 61% let with an average remaining lease term, weighted by income, of 3.94
years. The property is rack-rented. The leases tend to be of a general contractual rental nature.
The operational costs are fully recovered via service charge.
5.13.
A4 Business Park (Phase I-II) located in Katowice
A4 Business Park is a modern office building of ca. 18,000 m² rentable office and retail /
services area. The property occupies a 22,474 m2 site. The property was originally opened in
February 2014 (Phase I) and January 2015 (Phase II).
The majority of the property is held under a perpetual usufruct right expiring on 5 December
2089 with the ownership right with a perpetual usufruct right expiring on 5 December 2089
over the remainder.
Administratively the property lies in Katowice, which in terms of the office market is in the
fourth largest office market in Poland.
Phase I of the complex is arranged over seven storeys and Phase II over ten storeys.
Additionally, the property incorporates a ten storey parking building. In total the property has
some 624 car parking spaces giving a ratio of one space for every 29 m2 of office area, which is
good.
The property is 94% let with an average remaining lease term, weighted by income, of 4.93
years. The property is rack-rented. The leases tend to be of a general contractual rental nature.
The operational costs are fully recovered via service charge.
5.14.
West Gate located in Wrocław
West Gate is a modern office building of ca. 16,500 m² rentable office area. The property
occupies a 5,704 m2 site and was opened in April 2015.
The property is held under the perpetual usufruct right expiring on 25 May 2099 with the
ownership right to the building.
The property is situated in the north-western part of the Wrocław, with a very good access to the
city bypass and the City Centre. In terms of the office market, Wrocław is in one of the main
regional office market in Poland.
The property comprises of office building, with L-shaped layout of the each floor. The typical
floor plate is approximately 2,700 m2. The property has 2-storey underground parking.
In total the property has some 320 car parking spaces giving a ratio of one space for every 52
m2 of leasable area, which is acceptable for a property close to the periphery of the city.
The property is fully let with an average remaining lease term, weighted by income, of 4.76
years. The property is rack-rented. The leases tend to be of a general contractual rental nature.
The operational costs are fully recovered via service charge.
5.15.
Astra Park located in Kielce
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Astra Park is an office complex of ca. 14,300 m² rentable office and retail / services area. The
property occupies a 35,285 m2 site and was opened in September 2007.
The majority of the property is held under the perpetual usufruct right expiring on 24 August
2091 with the ownership right and perpetual usufruct rights expiring on 5 December 2089 and
19 November 2091 over the remainder.
The property is the subject of an option to purchase by FTF Columbus S.A., which option may
be exercised at any time between 10 June 2020 and 10 August 2020. The purchase price
payable for the property will be based on a total net operating income generated by the property
and a yield of 8.25%.
The property lies outside the city center area, close to universities, and residential dwellings, ca
three km north –east of the Kielce City Centre. Kielce is a secondary regional city in Poland
with an office market in an early stage comparing to other regional cities.
The complex comprises three office buildings which are arranged over a ground and five upper
levels. In total the property has some 397 surface car parking spaces giving a ratio of one space
for every 89 m2 of office area, which is acceptable for a regional city office building.
Since February 2016, there has been a temporary additional car park with 60 spaces in a
location primarily designated for the fourth building of the complex.
The property is 100% let with an average remaining lease term, weighted by income, of 6.79
years. The property is 20% over-rented. The leases tend to be of a general contractual rental
nature. The operational costs are fully recovered via service charge.
5.16.
Oxygen located in Szczecin
Oxygen is a modern office building of ca. 13,800 m² rentable office and retail / services area.
The property occupies a 5,242 m2 site and was opened in 2010.
The property is held under the perpetual usufruct right expiring on 18 November 2097 with the
ownership right to the building.
The property is situated in the core City Centre of Szczecin, at Malczewskiego Street. The
property lies in the immediate vicinity of intersection of two main arteries very close to the
Galaxy shopping centre.
The property has a rectangular layout of each floor. The typical floor plate is approximately
1,760 m2. The property has single storey underground parking.
In total the property has some 181 car parking spaces giving a ratio of one space for every 76
m2 of office area, which is which is relatively high for a City Centre.
The property is 85% let with an average remaining lease term, weighted by income, of 3.18
years. The property is 7% over-rented. The leases tend to be of a general contractual rental
nature. The operational costs are fully recovered via service charge.
The acquisition portfolio of 5 properties
The acquisition portfolio includes one site designated for redevelopment, a description of which is
presented below:
5.17.
Warsaw retail development site in Warsaw
The property comprises a development site of 64,869 m², located on the fringes of Warsaw’s
Central Business District. The site is currently developed with two commercial buildings
located at ul. Towarowa 22 and ul. Miedziana 11 and a number of auxiliary buildings, mainly
storages and garages. The entire property consists a former national printing house originally
developed in 1950 and redeveloped in 1973 –1977.
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The property is designated for redevelopment. Despite the fact that the outline planning decision
has been issued for part of the site allowing for commercial (office and residential
development), a new master plan is currently in preparation. We understand, once the
redevelopment is ready to commence, that all existing lease agreements will be terminated. In
addition to the above, we have been informed that a demolition of several unused buildings
(mainly garages and storages) has already started.
According to the current zoning, we believe at least 250,600 m2 of lettable / saleable area can be
developed on the site, assuming a mix of commercial (office and associated services) and
residential uses. The intention of EPP, however, is to change the designation of the site to build
a large-scale retail scheme of ca. 110,000 m2 of GLA.
The acquisition portfolio includes 1 completed office building and 3 office developments, a
description of which is presented below:
5.18.
Symetris located in Łódź
Symetris in Łódź comprises two office buildings. Phase I will be completed in August 2016
with a 9,449 m² of total lettable area, which is designated for office space. Construction of
Phase II started in June 2016 and is planned to be completed in August 2017. Phase II will add
9,548 m² of lettable area to the scheme.
The site is held under the perpetual usufruct right expiring on 5 December 2089 with the
ownership right to the building.
The project is being developed within the suburban area of the city, on al. Piłsudskiego –the
main traffic route in the city (which is called the East –West route of Łodź) and which connects
the city centre with two largest districts –Widzew and Retkinia.
Both phases are 9 storeys above ground with one underground floor with parking area.
In total the projects have some 390 car parking spaces. The Phase I building has an underground
parking with 121 parking spaces as well surface parking area with 73 parking places. Phase II
has 140 underground and 56 surface parking spaces. Both Phases are characterised by a ratio of
one space for every 49 m² of leasable area.
Phase I is 31.1% let with an average remaining lease term, weighted by income, of 6.87 years.
The property is rack-rented. The leases tend to be of a general contractual rental nature.
5.19.
O3 (Opolska) Business Campus in Kraków
O3 (Opolska) Business Campus comprises three independent buildings. Phase I was completed
in January 2016 and provides a total lettable area of 19,095 m². The existing building is
regarded as A class space. Construction of Phase II started in March 2016 and is planned to be
completed in May 2017. The construction start date for Phase III is May 2017 with completion
scheduled for October 2018.
The site is held under the perpetual usufruct right expiring on 5 December 2089 with the
ownership right to the building.
The property lies within the suburban area of the city on the border of two districts, Prądnik
Czerwony and Prądnik Biały, and at the intersection of national roads no 7 and 79, ca 3.5 km
north of the City Centre.
All phases are arranged over 12 storeys above ground and one underground floor used as
parking.
In total the Phases have some 1,196 car parking spaces.
Phase I is 34.4% let with an average remaining lease term, weighted by income, of 5.23 years.
The property is rack-rented. The leases tend to be of a general contractual rental nature.
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5.20.
A4 Business Park Phase III in Katowice
A4 Business Park Phase III is a modern office building of ca. 11,975 m² rentable office and
retail / services area. The property occupies a 22,474 m2 site and will be opened in the 4th
quarter of 2016.
The majority of site (71%) is held under the perpetual usufruct right expiring on 5 December
2089 with the ownership right of the remainder.
Administratively the property lies in Katowice, which in terms of the office market is in the
fourth largest office market in Poland.
Phase III of the complex is a 10-storey building with one underground level. In total the
property has some 267 car parking spaces giving a ratio of one space for every 45 m2 of office
area, which is good.
One lease has been signed for some 62% of the total rentable area of the building. The lease is
of a general contractual rental nature.
5.21.
Tryton office building in Gdańsk
Tryton is a modern office building of ca. 23,676 m² rentable office and retail / services area.
The property occupies an 8,141 m2 site and was opened in January 2016.
The majority of site (84%) is held under the perpetual usufruct right expiring on 5 December
2089 with the ownership right of the remainder.
Administratively the property lies in Gdańsk, which in terms of the office market is in the third
largest office market in Poland.
The subject property is divided into 2 parts: a 6-storey one situated by the street and an 11storey one situated in the middle of the plot. They are connected by a 1-storey entry hall. The
building comprises also one underground floor.
The property is 28.6% let to 7 tenants with weighted average remaining lease term of 5.33 years
The property is rack-rented. The leases tend to be of a general contractual rental nature. The
operational costs will be fully recovered via service charge.
6.
VALUATION QUALIFICATIONS
Qualifications are usually detailed as a consequence of: leases under negotiation that have not yet been
formalised; leases of a large nature where the premises are difficult to re-let; specialised properties; large
exposure to a single tenant; potential tenant failure due to over-rent; expenses required for major repairs;
maintenance or other exposure to maintain the lettability of the building; contingent expropriations or
servitudes that may be enforced; poor lease recordals whereby the lease may be disputed or rendered
invalid.
We have, to the best of our knowledge, considered all of these aspects in the valuation of all the
properties. There are no properties that are prejudiced in value by the influence of the above factors.
The valuer is however not responsible for the competent daily management of these properties that will
ensure that this status is maintained, or for the change of any laws, services by local authority or
economic circumstances that may adversely impact on the integrity of the buildings or the tenant profile.
7.
OPTIONS OR BENEFIT / DETRIMENT OF CONTRACTUAL ARRANGEMENTS
To our knowledge there are no contractual arrangements on the properties other than the leases as set out
in the detailed valuation reports that have a major benefit or are detrimental to the fundamental value
base of the properties
140
To the best of our knowledge, there are no options in favour of any parties for any purchase of any of the
properties.
8.
INTRA-GROUP OR RELATED PARTY LEASES
Having inspected all the tenancy schedules we understand that there are two properties, namely Astra
Park office building in Kielce and Galeria Echo in Kielce that are let to several related party tenants as
follows:
8.1.
Astra Park office building in Kielce:
a) Echo Investment S.A., a direct beneficial shareholder of EPP.
b) Echo Investment Property Management-Grupa Echo Spółka z ograniczoną
odpowiedzialnością sp.k., a company fully owned by Echo Investment S.A., to be transferred
in July 2016 to EPP.
c) Echo Investment ACC Grupa Echo Sp z o.o. spółka komandytowa, a company fully owned
by Echo Investment S.A.
8.2.
Park Rozwoju office complex in Warsaw:
a) Park Rozwoju III Sp. z o.o. spółka komandytowa, a company fully owned by Echo
Investment S.A.
8.3.
9.
In respect of the other properties, related party leases include only leases with the property
management company, which occupies the office area for the purposes of the property
managers.
CURRENT STATE OF DEVELOPMENT
There are five properties currently in the process of development, namely Galaxy Shopping Centre in
Szczecin and Outlet Park in Szczecin (which form part of the initial portfolio) and A4 Business Park
(Phase III), Symetris and O3 (Opolska) Business Campus (which form part of the acquisition portfolio).
Details of each development are summarised below.
9.1.
Galaxy shopping centre in Szczecin:
a) The development covers an extension of the existing centre and will add some 15,113 m2 of
retail rentable area on two floors. The development is processed under the following
administrative decision:
 Building permit no 250/16 dated 3 March 2016.
b) The development started in March 2013 and the opening is planned for September 2017. At
the date of this report, the extended part of the centre is 37.5% let, however the lettings
include some relocations from the existing centre.
c) In terms of the information provided to us, the total development costs are estimated at EUR
28,911,719.48, of which some 19% has been already spent.
9.2.
Outlet Park in Szczecin:
a) The development covers an extension of the existing centre and will add some 3,804.04 m2
of retail rentable area in Phase III and 3,260.45 m2 in Phase IV. The development is
processed under the following administrative decision:
 Building permit of Phase IV no 404/16 dated 4 April 2016.
b) A building permit for Phase III will be applied for in July 2016.
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c) The development of Phase III started in December 2012 and the opening is planned for
September 2017. At the date of this report the extended part of the centre is 0% let, however
the lettings include some relocations from the older part.
d) The development of Phase IV started in March 2016 and the opening is planned for
December 2016. At the date of this report the extended part of the centre is 100% let,
however the lettings include some relocations from the existing centre.
e) In terms of the information provided to us, the total development costs of Phase III are
estimated at EUR 4,013,483, of which some 0.3% has been already spent.
f) In terms of the information provided to us, the total development costs of Phase IV are
estimated at EUR 3,076,589, of which some 16.6% has been already spent.
9.3.
A4 Business Park (Phase III) in Katowice:
a) The development covers the construction of a new building which will be a part of a 3building office complex. The building will have ca 11,975 m2 thereby increasing the entire
complex to ca 30,000 m2. The development is processed under the following administrative
decision:
 Building permit no. 1703/13 dated 30 December 2013.
b) The development started in 2014 and the opening is planned in the 4th quarter of 2016. At
the date of this report, the extended part of the centre is 62% let and the letting includes one
tenant.
c) The construction of the building is nearly finished. The construction costs that still remain to
be spent amount to EUR 6,770,693 and include mainly construction & fit-out costs,
development finance and professional fees, but exclude developer’s profit which has been
assumed in the valuation.
9.4.
Symetris office building in Łódź:
a) The development covers an extension of the existing office building and will add some 9,548
m2 of office rentable area in Phase II. The development is processed under the following
administrative decision:
 Building permit of both Phase I and Phase II no WA.IV/255/10 dated 11 June 2010.
b) A building permit for Phase III will be applied for in June 2016.
c) The development of Phase I started in 2011 and the opening is planned for August 2016. At
the date of this report the extended part of the centre is 31% let.
d) The development of Phase II will started in June 2016 and the opening is planned for August
2017.
e) In terms of the information provided to us, the total development costs of Phase I that still
remain to be spent amount to EUR 3,588,270 and of Phase II amount to EUR 9,334,969, and
include mainly construction & fit-out costs, development finance and professional fees, but
exclude developer’s profit which has been assumed in the valuation.
9.5.
O3 (Opolska) Business Campus in Kraków:
a) The development covers a construction of three office buildings, one of which was
completed in January 2016. Phase II and Phase III are similar office buildings, which will
add some 19,050 m2 of office rentable area in each Phase. The development is processed
under the following administrative decision:
 Building permit of whole no 102/2014 dated 16 January 2014.
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b) The development of Phase II started in March 2016 with the opening planned for May 2017.
At the date of this report the extended part of the complex is vacant.
c) The development of Phase III will start in May 2016 with the opening planned for October
2018. At the date of this report the extended part of the complex is vacant.
d) In terms of the information provided to us, the total budgeted costs of carrying out
development of Phase I for Q3 2016 are estimated at EUR 4,389,438.
e) In terms of the information provided to us, the total development costs of carrying out
development of Phase II are estimated at EUR 20,994,194.
f) In terms of the information provided to us, the total development costs of carrying out
development of Phase III are estimated at EUR 24,452,320.
g) All the costs above include mainly construction & fit-out costs, development finance and
professional fees, but exclude developer’s profit which has been assumed in the valuation.
In addition to the above, a redevelopment of the 2nd floor in Galeria Echo in Kielce is planned for the
beginning of 2017. The scope of work is to re-arrange part of the area to enlarge the food court area that
is currently situated on the 1st floor only.
10.
RENTALS USED IN VALUATIONS
Note that all these properties are all generally rented out. The majority of rents are also adjusted annually
in line with either the Monetary Union Index of Consumer Prices (“MUICP”) or the European Index of
Consumer Prices (“EICP”) for rents denominated in euro (“EUR”) or Polish CPI for rents denominated in
local currency –Polish zloty (“PLN”). A number of tenants have minimum indexation of 2%. It is noted
that there are no material rental reversions. The following table presents the indexation applied:
Index
Polish CPI
MUICP
EICP
MUICP/EICP min. 2%
11.
Year 1
1.30%
0.30%
0.40%
2.00%
Year 2
2.00%
1.40%
1.34%
2.00%
Year 3
1.90%
1.50%
1.55%
2.00%
Year 4
2.10%
1.60%
1.70%
2.00%
Year 5
From Year 5
2.40%
2.40%
1.80%
1.80%
1.78%
1.80%
2.00%
2.00%
EXTERNAL PROPERTY
All of the properties are situated outside the Republic of South Africa.
12.
OTHER GENERAL MATTERS AND VALUATION SUMMARY
A full valuation report is available on a property by property basis detailing tenancy, town planning,
valuer’s commentary, expenditure and other details. This has been given to the directors of EPP.
13.
ALTERNATIVE USE FOR A PROPERTY
The properties have been valued in accordance with their existing use which represents their market
value. No alternative use for the properties have been considered in determining their value.
14.
OTHER COMMENTS
Our valuation excludes any amounts of Value-added Tax, transfer duty, or securities transfer duty. No
deductions have been made for the cost of acquisition.
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15.
CAVEATS
15.1.
Source of information and verification
Information on the properties regarding rental income, recoveries, turnovers and other income
detail, operating costs budgets, capex plans as well as the schedule of irrecoverable costs has
been provided to us by the current owners and managers.
We have received and reviewed copies of leases constituting ca. 55% of total GLA of the
portfolio, to cover the leases with anchor tenants and selected smaller tenants. The leases have
been read to check against management detail, in order to ensure that management has correctly
captured tenant information as per contractual agreement. This has been done to test
management information against the underlying agreements.
We have further compared certain expenditures provided to us, to the market norms of similar
properties. The operational budget for 2016 have been also compared with historic costs from
2015.
We have been provided with hand-over protocols as well as measurement protocols for selected
let units and we have compared them with the rentable areas included in rent-rolls. In total we
have checked some 40% of total rentable area of the entire portfolio. In the majority of cases the
areas provided in the rent-rolls are an exact match of those presented in the hand-over protocols.
15.2.
Full disclosure
This valuation has been prepared on the basis of documentation and information delivered to us
by Echo Investment S.A., a shareholder of EPP, upon which we have relied as being correct and
complete. We do not accept responsibility for any errors or omissions in information and
documentation provided to us.
Our valuations have been undertaken with our best market knowledge and skills upon the
conditions listed in paragraph 15.3 below.
15.3.
Leases
Our valuations have been based on a review of tenancy schedules (which includes the material
terms such as current rents and service charge levels, lease term and break options, step rents
and rent-free-periods, rentable areas as well as turnover rent percentage index for retail
properties) cross-checked against selected tenants’leases and other pertinent details supplied to
us.
We have also analysed the shopping centres’performance including sales, rent-to-sales ratio,
sales density and footfall, as well as other income arising from short-term leases, operational
budgets and the level of costs not recovered from tenants.
15.4.
Covenant strength
We are not qualified to carry out a detailed analysis of the security offered by tenants. We
understand all tenants are required to provide a bank guarantee, mother company guarantee or
security deposit. The net value of deposits or guarantees equates to several month’s rent plus
service charge.
In our valuations we have made an assumption that tenants are in a financial position to meet
their obligations and that, unless otherwise stated, there are no material arrears or breaches of
covenant. Our valuation does, however, reflect the type of tenants in occupation and the
market’s general perception of their creditworthiness.
15.5.
Interest valued
The assets are held on a mixture of freehold, perpetual usufruct (long-term leasehold in Poland)
and leasehold title.
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The perpetual books include a number of recorded encumbrances, easements and mortgages.
Unless otherwise noted in a particular valuation report, we have assumed there is a good
marketable title and that there are no encumbrances or unduly onerous or unusual easements,
restrictions, outgoings or conditions likely to have an adverse effect on value.
Please note our valuation does not take into account any mortgage to which the properties may
be subject.
15.6.
Structural condition
The properties have been valued in their existing state. We have not carried out any structural
surveys, nor inspected those areas that are unexposed or inaccessible, neither have we arranged
for the testing of any electrical or other services.
15.7.
Contamination
The valuation assumes that a formal environmental assessment is not required and further that
none of the properties are environmentally impaired or contaminated, unless otherwise stated in
our report.
15.8.
Town planning
We have not made formal searches with local planning authorities, but we have relied on the
information provided informally by the local planning authority or its officers or those available
on the official website of the cities’authorities. Full town planning details and title deeds have
been supplied in the detailed valuation reports, including conditions.
We have not identified any contravention of any statutory regulation, or town planning or
contravention of title deed relating to any of the properties which infringement could decrease
the value of the properties.
16.
MARKET VALUE
We are of the opinion that the aggregate market value of the properties as at 30 June 2016 is
EUR 1,461,500,000 (excluding VAT). This comprises an aggregate market value of the initial portfolio
as at 30 June 2016 of EUR 1,209,600,000 (excluding VAT) and an aggregate market value of the
acquisition portfolio as at 30 June 2016 of EUR 251,900,000 (excluding VAT). This valuation includes
the Warsaw retail development site, valued at EUR 102,000,000 and which is subject to substantial
redevelopment, and properties within the acquisition portfolio that are in the process of development and
not yet fully let. A summary of the individual valuations and details of each of the properties is attached.
To the best of our knowledge and belief there have been no material changes in circumstances between
the date of the valuation and the date of the valuation report which would affect the valuation.
Each of us has more than 10 years of experience in the valuation of all nature of property and we are
qualified to express an opinion on the fair market value of the properties.
145
We trust that we have carried out all instructions to your satisfaction and thank you for the opportunity of
undertaking this valuation on your behalf.
Yours faithfully,
on behalf of Savills Advisory Services Limited
Kamil Kowa MRICS no. 1291664
RICS Registered Valuer
Złota 59, 00-120 Warsaw, Poland
Karina Szafrańska MRICS no. 1286930
RICS Registered Valuer
Złota 59, 00-120 Warsaw, Poland
146
SCHEDULE OF PROPERTIES
No
1
Income projection
(EUR) for the
period 1 July 2016
to 30 June 2017
Valuation as at
30 June 2016 (EUR)
13 484 383
239 700 000
0.0%
12 015 409
206 000 000
Master Plan: Commercial
0.0%
5 134 470
74 700 000
3
Master Plan: Commercial
0.0%
2 525 239
35 100 000
31243.54
15/1
Master Plan: Commercial
0.0%
3 965 639
52 400 000
N/A
21274.23
4
Master Plan: Commercial
0.0%
2 770 366
39 500 000
Freehold
N/A
11425.79
16
Master Plan: Commercial
0.0%
770 291
10 100 000
2016/05/16
Freehold /
Leasehold
Until 31/12/2016
5759.05
16
Development study: Commercial
0.0%
397 690
4 820 000
Office
building
2016/05/20
RPU / freehold
N/A
28271.04
5
Master Plan: Services / Multi-family
residential
0.0%
4 285 571
62 400 000
WA2M/00498431/8
WA2M/00504684/2
Office
building
2016/05/17
RPU
N/A
32914.4735
2
Master Plan: Commercial / Office
0.0%
3 191 502
69 500 000
Katowice, ul.
Francuska 42-44
KA1K/00039091/8
KA1K/00079732/6
KA1K/00127049/3
Office
building
2016/05/24
Freehold /RPU
N/A
18058.85157
1
Master Plan: the site is designated
for services and public street area
under symbols: U and KDZ,
respectively
0.0%
2 229 995
37 600 000
Wrocław , ul.
Lotnicza 12
WR1K/00135530/9
Office
building
2016/05/27
RPU
N/A
16532.36
1
Master Plan: Commercial / Office
0.0%
2 533 708
39 300 000
Astra Park
Kielce, Al.
Solidarności 36
KI1L/00060070/6
KI1L/00078741/0
KI1L/00100919/3
KI1L/00101764/8
KI1L/00105863/0
KI1L/00106204/0
KI1L/00106205/7
KI1L/00109516/1
Office
building
2016/05/25
RPU
N/A
14269.36895
9
Development study: mainly for
urban metropolitan service functions
located outside of the city centre and
partly for green areas
0.0%
2 604 881
30 900 000
Szczecin
Oxygen
Szczecin,
Malczewskiego 26
SZ1S/00108733/6
Office
building
2016/05/23
RPU
N/A
13823.01
6
Master Plan: Services
0.0%
1 981 775
28 000 000
57 890 920
930 020 000
Property
name
Physical address
Registered legal
description (Erf
number) 1
Property
description
and use
Valuer’s
inspection
date
Freehold /
Leasehold
Tenure of leasehold
Rentable area
(GLA)
(m²)
Approximate
age of building
(years)
Zoning, town planning and
statutory contravention (if any)
Assumed
perpetual
void/vacancy 2
Pasaż
Grunwaldzki
Wrocław, Pl.
Grunwaldzki 22
WR1K/00112000/8
Shopping
centre
2016/05/27
Freehold
N/A
48326.4
9
Master Plan: Commercial
0.0%
Galeria Echo
Kielce
Kielce, ul.
Świętokrzyska 20
KI1L/00088343/3
KI1L/00064462/9
KI1L/00042310/9
KI1L/00047566/3
KI1L/00118756/1
KI1L/00093649/6
KI1L/00093074/4
Shopping
centre
2016/05/25
RPU / Leasehold
71610.12
14
Development study: service and
residential zone with existing retail
building of above 2,000 m2
Galeria
Amber
Kalisz, ul.
Górnośląska 82
KZ1A/0067773/4
KZ1A/00055015/6
Shopping
centre
2016/05/23
RPU
N/A
33255.51
2
Galeria
Veneda
Łomża, ul. Zawadzka
38
LM1L/00041429/2
LM1L/00055385/2
LM1L/00064430/9
Shopping
centre
2016/05/19
Freehold
N/A
15072.87
Galeria
Sudecka
Jelenia Góra, ul. Jana
Pawła II 51
JG1J/00043790/5
JG1J/00075676/3
Shopping
centre
2016/05/27
RPU/Leasehold
Indefinite
Galeria
Olimpia
Bełchatów, ul.
Kolejowa 4
PT1B/00034471/1,
PT1B/00067089/6
Shopping
centre
2016/05/24
Freehold
Bełchatów, ul.
Kolejowa 4
PT1B/00044028/4
Shopping
centre
2016/05/24
Przemyśl, ul. 29
Listopada 4
PR1P/00055955/9
Supermarket
/ DIY
Malta Office
Park
Poznań, Baraniaka 88
PO2P/00231302/6
PO2P/00114682/7
PO2P/00190301/9
PO2P/00258795/3
Park
Rozwoju
I&II
Warsaw, ul.
Konstruktorska 10
A4 Business
Park
West Gate
2
3
Until:
30/9/2038 for part of the
land (10.577 m2);
31/5/2041 for the
remaining part of the
land (2130 m2)
4
5
6
7
8
Crentrum
Echo
Bełchatów
Centrum
Echo
Przemyśl
9
10
11
12
13
14
Total
147
1
2
Perpetual book number
No perpetual vacancy has been assumed, in line with market practice and evidence in Poland
PROPERTIES IN THE PROCESS OF DEVELOPMENT
No
Property
Name
Physical
Address
Registered legal
description (Erf
number) 1
Property
description
and use
Valuer’s
inspection
date
Freehold /
Leasehold
Tenure
of
leasehold
Rentable
area (GLA)
(m²)
1
Galaxy
Szczecin, Al.
Wyzwolenia
18-20
SZ11/00082806/0
SZ11/00224511/3
SZ11/00088056/9
SZ1S/00125980/7
SZ11/00108740/8
SZ11/00207182/2
SZ11/00161082/6
Shopping
centre
2016/05/23
Freehold/RPU
N/A
56334.12
2
Outlet
Park2
Szczecin, ul.
Struga 42
SZ1S/00090596/3
SZ1S/00109877/4
SZ1S/00210846/9
SZ1S/00210859/3
Shopping
centre outlet
2016/05/23
RPU
N/A
28205.98
Zoning, town
planning and
statutory
contravention
(if any)
Estimated cost
of carrying out
development
Income
projection for
the period
1 July 2016 to
30 June 2017
(EUR)
Valuation as
at 30 June
2016 (EUR)
Estimated
value after
development
completed
Estimated value
after completion
and letting of
property
Planning
permission
obtained
(Y/N) and date
permission
received
Expected date
of completion
Master Plan:
service area
including
commerce
service of the
sales area
above 2,000 m2
EUR 28 911
719
12 057 355
210 400 000
245 900 000
246 200 000
Y, 2016-03-03
2017
September
Master plan:
commercial
uses
supplemented
by warehouse
and industrial,
on part allowed
commercial
schemes with
sales area
above 2,000 m²
Phase III - EUR
4 013 483
phase IV- EUR
3 076 589
4 453 550
69 180 000
76 280 000
76 280 000
phase III - N
phase IV- Y,
2016-04-04
phase III - 2017
September
phase IV- 2016
December
9448.8
Currently
predominantly
office and
services.
Master plan
being prepared.
EUR 3,588,270
164 606
15 700 000
19 600 000
21 000 000
2010-06-11
August 2016
9548.1
Currently
predominantly
office and
services.
Master plan
being prepared.
EUR 9,334,969
-
8 500 000
19 700 000
21 200 000
2010-06-11
August 2017
3a
Symetris
Łódź Phase I
Łódź,
Piłsudskiego 86
LD1M/00096129/3
Office
building
2016/05/23
RPU
3b
Symetris
Łódź Phase II
Łódź,
Piłsudskiego 86
LD1M/00096129/3
Office
building
2016/05/23
RPU
148
No
Property
Name
Physical
Address
Registered legal
description (Erf
number) 1
Property
description
and use
Valuer’s
inspection
date
Freehold /
Leasehold
Tenure
of
leasehold
4
A4
Business
Park Phase III
Katowice, ul.
Francuska 4244
KA1K/00039091/8;
KA1K/00079732/6;
KA1K/00127049/3
Office
building
2016/06/31
Freehold /RPU
N/A
11975
5
Warsaw
retail
developme
nt site
Warsaw, ul.
Towarowa 22
WA4M/00347185/9
WA4M/00386387/0
WA4M/00390231/3
WA4M/00441922/7
WA4M/00441923/4
WA4M/00227454/9
WA4M/00192534/9
WA4M/00192535/6
WA4M/00192537/0
WA4M/00444300/2
WA4M/00444301/9
WA4M/00345613/5
WA4M/00448077/7
Developmen
t site commercial/
residential
use - zoning
being
changed for
retail
2016/04/07
RPU
N/A
at least
250.600 m²
of
commercial/
residential
space
6a
6b
6c
Rentable
area (GLA)
(m²)
O3
(Opolska)
Business
Campus Phase I
Kraków, ul.
Opolska 114
KR1P/00210151/3
KR1P/00236239/2
Office
building
2016-06-31
RPU
19095.0
O3
(Opolska)
Business
Campus Phase II
Kraków, ul.
Opolska 114
KR1P/00210151/3
KR1P/00236239/2
Office
building
2016-06-31
RPU
19095.0
O3
(Opolska)
Business
Campus Phase III
Kraków, ul.
Opolska 114
KR1P/00210151/3
KR1P/00236239/2
Office
building
2016-06-31
RPU
19095.0
Tryton
Business
House
Gdańsk, Jana z
Kolna 11
GD1G/00061885/5,
GD1G/00174451/9
Office
building
2016/06/27
Freehold/RPU
23676.2
7
Zoning, town
planning and
statutory
contravention
(if any)
Estimated cost
of carrying out
development
Income
projection for
the period
1 July 2016 to
30 June 2017
(EUR)
Valuation as
at 30 June
2016 (EUR)
Estimated
value after
development
completed
Estimated value
after completion
and letting of
property
Planning
permission
obtained
(Y/N) and date
permission
received
Master
plan: the site is
designated for
services and
public street
area under
symbols: U and
KDZ,
respectively
EUR 6,770,693
192 746
16 400 000
25 100 000
25 800 000
Y, 2013-12-30
N/A - valued
via sales
comparison
approach
N/A - valued
as development
site
102 000 000
N/A - site
valued
according to
current zoning,
as the planned
date of
adoption of the
new master
plan is
uncertain
N/A - valued via
sales comparison
approach as a
development site
(office/residential
use)
N
N/A - as the
date of
adoption of the
new master
plan is
uncertain
Phase I - EUR
4,389,438
498 010
37 600 000
37 600 000
44 000 000
Y, 2014-01-16
-
Phase II - EUR
20,994,194
-
16 100 000
41 500 000
44 900 000
Y, 2014-01-16
Phase II - May
2017
Phase III - EUR
24,452,320
-
10 800 000
41 500 000
44 900 000
Y, 2014-01-16
17 413
44 800 000
44 800 000
52 200 000
17 383 680
531 480 000
653 980 000
678 480 000
Currently
predominantly
office and
residential.
Master plan
being prepared
- planned
change to
shopping
centre.
Master plan:
commercial
uses, including
offices, car
parks and retail
development
Master plan:
commercial
uses, including
offices, car
parks and retail
development
Master plan:
commercial
uses, including
offices, car
parks and retail
development
Master Plan: it
is designated
for services
under symbol
001-U33 as
well as road
infrastructure
(under symbol
005-KD83)
supporting the
main
designation
Total
Expected date
of completion
Phase III October 2018
149
1
Perpetual book number
2
According to the current zoning, we believe at least 250,600 m2 of lettable / saleable area can be developed on the site, assuming a mix of commercial (office and associated services) and residential uses. The intention of EPP,
however, is to change the designation of the site to build a large-scale retail scheme of ca. 110,000 m2 of GLA
Note: Values of Outlet Park include Market Value of excess land of EUR 880,000
150
Annexure 11
DETAILS OF ACQUISITIONS AND VENDORS
The immovable properties, subsidiaries and investments acquired by the group since incorporation of the company and immovable properties, subsidiaries and investments to
be acquired are detailed in the table below, including the names and addresses of the vendors of the immovable properties and/or securities purchased by EPP and/or its
subsidiaries and the consideration paid to the vendors.
THE INITIAL PROPERTY PORTFOLIO
Name and nature of the
asset acquired
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Entity which acquired the asset
Name of vendor
Address of vendor
Date of
acquisition
(2016)
Loans incurred to
finance acquisition
Malta Office Park
Park Rozwoju
A4 Business Park
West Gate
Astra Kielce
SPV controlled by Forum XXIX
SPV controlled by Forum XXIX
SPV controlled by Forum XXIX
SPV controlled by Forum XXIX
SPV controlled by Forum XXIX
Echo
Echo
Echo
Echo
Echo
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
17 February
17 February
17 February
17 February
17 February
65 338 343
53 389 553
35 365 992
26 700 347
16 727 000
Oxygen
Pasaz Grunwaldzki
Galaxy
Galeria Echo Kielce
Galeria Amber Kalisz
Galeria Veneda
Outlet Park
Galeria Sudecka
Galeria Olimpia
Centrum Echo Bełchatow
Centrum Echo Przemysl
SPV controlled by Forum XXIX
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
SPV controlled by Forum XXXIV
Echo
Echo
Echo
Echo
Echo
Echo
Echo
Echo
Echo
Echo
Echo
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
25-323 Kielce, al. Solidarnosci 36, Poland
17 February
17 February
17 February
17 February
17 February
17 February
17 February
17 February
17 February
17 February
17 February
33 587 339
205 653 564
165 787 791
163 761 869
65 406 937
26 908 363
40 204 55
29 769 917
23 979 749
10 616 713
1 014 485
151
Notes:
1.
2.
3.
4.
Echo’s beneficial shareholders are Pacific Investment Management Company LLC (PIMCO), Oaktree and Griffin.
As the initial property portfolio was acquired by EPP through its acquisition of 100% of the investment certificates in each of Forum XXIX and Forum XXXIV, no
purchase price per property has been ascribed. EPP issued 46 458 998 ordinary shares to Echo in consideration for the investment certificates in Forum XXIX and
165 511 404 ordinary shares to Echo in consideration for the investment certificates in Forum XXXIV.
No goodwill or intangible assets were acquired in acquiring the initial property portfolio.
All of the properties comprising the initial property portfolio were developed by Echo.
THE ACQUISITION PORTFOLIO
Name and nature of Entity which will
the asset to be
acquire the asset
acquired
Name of
vendor
Address of vendor
Anticipated date of
acquisition (2016)
1
Warsaw retail
development site
NewCo
Griffin
00-582 Warsaw, al Jana
Christiana Szucha 6
Conditional
2
Tryton Business
House
O3 Business Park
Phase I - III
A4 Business Park
Phase III
Symetris Business
Park Phase I and II
SPV controlled by
Forum XXIX
SPV controlled by
Forum XXIX
SPV controlled by
Forum XXIX
SPV controlled by
Forum XXIX
Echo
25-323 Kielce, al.
Solidarnosci 36, Poland
25-323 Kielce, al.
Solidarnosci 36, Poland
25-323 Kielce, al.
Solidarnosci 36, Poland
25-323 Kielce, al.
Solidarnosci 36, Poland
No.
3
4
5
Notes:
1.
2.
3.
4.
Echo
Echo
Echo
Consideration (R)
Loans incurred to
finance acquisition
Issue of securities Cash portion (EUR)
84 000 000
-
-
1 December 2016
52 310 000
34 000 000
1 December 2016
47 860 000
29 000 000
1 December 2016
27 210 000
13 000 000
1 December 2016
20 820 000
13 100 000
Echo’s beneficial shareholders are PIMCO, Oaktree and Griffin. Details of the beneficial shareholders of Griffin are not available, although it is noted that Maciej
Dyjas and Nebil Senman are indirect beneficial shareholders.
EPP will effectively acquire 70% of the Warsaw retail development site, through the acquisition of 70% of the issued share capital of NewCo. NewCo will acquire
the Warsaw retail development site from Griffin. The purchase price reflected for the Warsaw retail development site accordingly reflects 70% ownership only.
No goodwill or intangible assets will be acquired in acquiring the acquisition portfolio.
Properties number 2-5 in the above table were developed by Echo. Echo will establish NewCo by 1 December 2016, with NewCo intending to acquire the Warsaw
retail development site on 1 December 2016 for EUR 120 000 000. The amount of EUR 84 000 000 mentioned at 1 in the table above represents 70% of the
purchase price payable by EPP.
152
Annexure 12
ROFO PROJECTS
Expected date
of completion
Complete
GLA
(m2)
19 095
Fully let NOI
(EUR ‘000)
3.2
Krakow
May-17
19 095
3.2
Office
Krakow
Oct-18
19 095
3.2
Office
Wroclaw
Oct-17
24 900
4.4
Kosciuszki
Retail
Katowice
Mar-18
44 700
9.0
4a
Symetris Business Park I
Office
Lodz
Aug-16
9 449
1.6
4b
Symetris Business Park II
Office
Lodz
Aug-17
9 548
1.6
5
A4 Business Park III
Office
Katowice
Oct-16
11 975
2.0
6
Nobilis Business House
Office
Wroclaw
Mar-16
16 900
2.9
7
Tryton Business House
Office
Gdansk
Complete
23 676
3.8
198 443
34.9
1a
Property name
O3 Business Campus I
Sector
Office
Location
Krakow
1b
O3 Business Campus II
Office
1c
O3 Business Campus III
2
Sagittarius
3
Total
153
Annexure 13
FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE EPP GROUP
Set out below are the forecast statements of comprehensive income of the EPP group (“forecasts”) for the
period from incorporation to 31 December 2016 and the year ending 31 December 2017 (“forecast periods”).
The forecasts include actual figures from incorporation to 31 May 2016 and forecast figures for the remainder of
the forecast periods.
The forecasts, including the assumptions on which they are based and the financial information from which they
are prepared, are the responsibility of the directors of EPP. The forecasts must be read in conjunction with the
independent reporting accountants’limited assurance report extracted from the JSE Pre-Listing Statement and
which is included in this Prospectus as Annexure 14. Please note that references to page numbers and
paragraph numbers in Annexure 14 are references to the JSE Pre-Listing Statement and are subject to change.
The forecasts have been prepared in compliance with IFRS and in accordance with EPP’s accounting policies as
set out in Annexure 18.
EUR'000
Property portfolio
Rental income and recoveries
Straight-line lease income adjustments
Property operating expenses
Net rental and related income
Other income
Other expenses
Administrative expenses
Profit from operations
Finance income
Accelerated amortisation of debt fee
Finance costs
Foreign exchange losses
Profit before fair value adjustments
Fair value adjustments
Profit before taxation
Taxation
Net profit
Attributable to:
Equity holders of EPP
Non-controlling interests
Forecast for the
period from
incorporation to
31 Dec 2016
95 199
94 007
1 192
(29 911)
65 288
1 239
(1 484)
(9 614)
55 428
334
(5 860)
(19 704)
(8 545)
21 653
5 216
26 869
40 422
67 291
Forecast for
the year
ending
31 Dec 2017
126 375
125 791
584
(36 897)
89 478
327
(455)
(8 143)
81 207
135
(17 418)
67 291
-
60 540
-
Forecast for the
period from
incorporation to
31 Dec 2016
67 291
(5 216)
Forecast for
the year
ending
31 Dec 2017
60 540
3 284
63 924
(3 284)
60 640
(100)
60 540
Reconciliation between earnings and headline
earnings and distributable earnings
EUR'000
Profit for the year attributable to shareholders
Change in fair values of investment properties
154
Headline earnings
Straight-line lease income adjustments
Amortisation of debt structuring fee (net of taxation)
Prepaid rental income
Deferred tax on restructuring
Accelerated amortisation of debt fee
Foreign exchange losses
Distributable earnings
Estimated distributable earnings for the period to 31
August 2016*
Estimated distributable earnings for the period 1
September to 31 December 2016
Forecast dividend for the period to 31 August 2016
(cents)
Forecast dividend for the period 1 September to 31
December 2016 (cents)
62 075
(1 192)
335
(168)
(41 180)
5 860
8 545
34 275
63 824
(584)
555
(287)
63 507
16 282
17 993
2.43*
3.07
*As per paragraph 29.1 of the prospectus, on 11August 2016, the general meeting of shareholders declared as a
dividend, from the distributable earnings, an amount equivalent to 100% of the Company’s cash available and deriving
from the profits from operations attributable to the shareholders for the period commencing 4 January 2016 and
ending on 31 August 2016 (the “clean-out dividend”), payable as soon as reasonably possible following the
determination of the quantum thereof and pro rata to only those shareholders as at the date immediately prior to the
JSE listing. The estimated dividend amount is EUR 12 482 478 that shall be finally determined by the board (or any
nominated sub-committee of the board). For the avoidance of doubt, the private placement shares will be issued ex
entitlement to the clean-out dividend.
Number of shares in issue
Weighted average number of shares in issue
Basic and diluted earnings per share (cents)
Headline earnings per share (cents)
Distributable income per share (before withholding tax
of 5%) (cents)
Distributable income per share (after withholding tax of
5%) (cents)
585 999 169
468 298 631
585 999 169
585 999 169
14.37
13.26
10.33
10.89
5.85
10.84
5.56
10.30
Annualised yield on shares based on EUR 1.45 per price
placement share (before withholding tax)
Annualised yield on shares based on EUR 1.45 per price
placement share (after withholding tax of 5%)
An analysis of rental income is set out below:
Contractual/uncontractual revenue split by rental income:
% contracted rental revenue
% short-term rental revenue
% near-contracted rental revenue
% uncontracted rental revenue
7.5%
7.1%
Forecast for the
period from
incorporation to
31 December
2016
(%)
Forecast for
the year
ending 31
December
2017
(%)
96.2
0.7
3.1
100.0
88.6
7.3
4.1
100.0
The forecasts incorporate the following material assumptions in respect of revenue and expenses that can be
influenced by the directors:
155
1.
EPP’s management forecasts for the period ending 31 December 2016 and the year ended 31 December
2017 are based on information derived from the previous property managers, historical information and
work performed by the independent property valuer.
2.
EPP will not acquire or dispose of any properties during the period of the forecasts other than those being
acquired or disposed of in terms of the transactions.
3.
Contracted revenue is based on existing lease agreements.
4.
All existing lease agreements are valid.
5.
Turnover rental (rental income based on the actual turnover of the tenant) has only been forecast for
those tenants who have previously been subject to turnover rental clauses.
6.
Current vacant space has been forecast on a property-by-property basis and has been assumed to remain
vacant unless it is deemed probable that such space will be let.
7.
Leases expiring during the forecast periods have been forecast on a lease-by-lease basis, and in
circumstances where discussion with the lessee has proven positive, are forecast to be let at current
market rates. Income is only recognised to the extent that the discussions support the level of rental
income.
8.
EPP management’s forecast property operating expenditure has been determined based on their review of
historical expenditure, where available, and discussion with the property managers. There are no
changes of 15% or more between the historical and forecast property operating expenditure for each
material property operating expenditure item.
9.
As per the ROFO agreement in Annexure 7, should Echo directly or indirectly dispose of the shares in
the ROFO SPV’s EPP will be paid 25% of the proceeds of such disposal and all of EPP’s rights under the
ROFO agreements will be assigned to the new direct or indirect owner of the ROFO. Since EPP
exercised its right to acquire 4 of the ROFO assets, EPP’s purchase price effectively comprised 75% of
the value of the ROFO assets.
10.
Distributable earnings and the reconciliation of earnings and headline earnings to distributable earnings is
not an IFRS measure, but rather a best practice of the property industry.
11.
Revenue from the Warsaw retail development relating to a shopping centre on the site that will be
demolished within the next few months has not been included in the forecast. The leases are short term in
nature and tenants are rapidly vacating in preparation for the impending demolition.
12.
Any loans maturing in the forecast period will be assumed to be refinanced at similar rates.
13.
EPP will introduce a long-term incentive program for the first five consecutive years of Hadley Dean’s
appointment, under which he will be allocated EPP share options or similar instruments as further
detailed in Annexure 5. The cost of this program has not been included in the forecast as the details of
the programme are yet to be finalised.
The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be
influenced by the directors:
1.
Total borrowings of EUR 795 750 327 of which 100% is assumed to be fixed from 1 September 2016 at
an average cost of debt of 1.9%.
2.
There will be no unforeseen economic factors that will affect the lessees’liabilities to meet their
commitments in terms of existing lease agreements.
156
3.
Recoveries are based on current lease agreements.
The forecasts have been prepared on an aggregated basis.
Since this is a new portfolio, there is no historical information available to provide an indication of any change
of 15% or more between the historical and forecast expenditure for each material expenditure item.
157
Annexure 14
INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE
FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE EPP GROUP
The Directors
Echo Polska Properties N.V.
Prins Bernhardplein 200
1097 JB Amsterdam
The Netherlands
INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE FORECAST STATEMENT OF
COMPREHENSIVE INCOME OF THE ECHO POLSKA PROPERTIES N.V. GROUP
Report on the identified property forecast information
We have undertaken a reasonable assurance engagement in respect of the accompanying property forecast of
Echo Polska Properties N.V. for the years ending 31 December 2016 and 31 December 2017 as set out in
Annexure 13 on pages 173 to 175 of the pre-listing statement, comprising the forecast statement of
comprehensive income (the “Forecast Information”), as required by paragraph 13.15 of the JSE Limited
(“JSE”) Listings Requirements.
We have also undertaken a limited assurance engagement in respect of the Directors’assumptions used to
prepare and present the Forecast Information, disclosed in the notes to the Forecast Information, as required by
paragraph 13.15 of the JSE Listings Requirements.
Directors’responsibility for the forecast information and for the assumptions used to prepare the forecast
information
The Directors are responsible for the preparation and presentation of the Forecast Information and for the
reasonableness of the assumptions used to prepare the Forecast Information as set out in the notes to the
Forecast Information in accordance with paragraphs 13.12-13.14 of the JSE Listings Requirements (“JSE
Listings Requirements for Forecast Information”). This responsibility includes the design, implementation and
maintenance of internal control relevant to the preparation and presentation of the Forecast Information on the
basis of those assumptions that is free from material misstatement, whether due to fraud or error.
Inherent Limitations
Actual results are likely to be different from the Forecast Information since anticipated events frequently do not
occur as expected and the variation may be material. Consequently, readers are cautioned that this forecast may
not be appropriate for purposes other than described in the purpose of the report paragraph below.
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of Professional Conduct
for Registered Auditors issued by the Independent Regulatory Board for Auditors (“IRBA Code”), which is
founded on fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour. The IRBA Code is consistent with the International Ethics Standards
Board for Accountants Code of Ethics for Professional Accountants (Part A and B).
The firm applies International Standard on Quality Control 1 and, accordingly, maintains a comprehensive
system of quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
158
Limited assurance engagement on the reasonableness of the Directors’assumptions
Reporting accountant’s responsibility
Our responsibility is to express a limited assurance conclusion on whether anything has come to our attention
that causes us to believe that the assumptions do not provide a reasonable basis for the preparation and
presentation of the Forecast Information in accordance with the JSE Listings Requirements for Forecast
Information, based on the procedures we have performed and the evidence we have obtained. We conducted our
limited assurance engagement in accordance with International Standard on Assurance Engagements (“ISAE”)
3400, The Examination of Prospective Financial Information (“ISAE 3400”), issued by the International
Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to
obtain limited assurance about whether the Directors’assumptions provide a reasonable basis for the preparation
and presentation of the Forecast Information.
A limited assurance engagement undertaken in accordance with ISAE 3400 involves assessing the source and
reliability of the evidence supporting the Directors’assumptions. Sufficient appropriate evidence supporting
such assumptions would be obtained from internal and external sources including consideration of the
assumptions in the light of historical information and an evaluation of whether they are based on plans that are
within the entity’s capacity. A limited assurance engagement is substantially less in scope than a reasonable
assurance engagement in relation to both the risk assessment procedures, including an understanding of internal
control, and the procedures performed in response to the assessed risks.
The procedures we performed were based on our professional judgement and included inquiries, observations of
processes performed, inspection of documents, analytical procedures, evaluating the reasonableness of bestestimate assumptions and agreeing or reconciling with underlying records.
Our procedures included evaluating the Directors’best-estimate assumptions on which the Forecast Information
is based for reasonableness.
The procedures performed in a limited assurance engagement vary in nature from, and are less in extent than
for, a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance
engagement is substantially lower than the assurance that would have been obtained had we performed a
reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about
whether the Directors’assumptions provide a reasonable basis for the preparation and presentation of the
Forecast Information.
Limited assurance conclusion on the reasonableness of the Directors’assumptions
Based on the procedures we have performed and evidence we have obtained, nothing has come to our attention
that causes us to believe that the Directors’assumptions do not provide a reasonable basis for the preparation
and presentation of the Forecast Information for the years ending 31 December 2016 and 31 December 2017.
Reasonable assurance engagement on the Forecast Information
Reporting accountant’s responsibility
Our responsibility is to express an opinion based on the evidence we have obtained about whether the Forecast
Information is properly prepared and presented on the basis of the Directors’assumptions disclosed in the notes
to the Forecast Information (the “Assumptions”) and in accordance with the JSE Listings Requirements for
Forecast Information. We conducted our reasonable assurance engagement in accordance with International
Standard on Assurance Engagements (“ISAE”) 3400, The Examination of Prospective Financial Information
(“ISAE 3400”), issued by the International Auditing and Assurance Standards Board. That standard requires that
we plan and perform this engagement to obtain reasonable assurance about whether such Forecast Information is
properly prepared and presented on the basis of the Directors’assumptions disclosed in the notes to the Forecast
Information and in accordance with the JSE Listings Requirements for Forecast Information.
A reasonable assurance engagement in accordance with ISAE 3400 involves performing procedures to obtain
evidence that the Forecast Information is properly prepared and presented on the basis of the Assumptions and
in accordance with the JSE Listings Requirements for Forecast Information. The nature, timing and extent of
procedures selected depend on the reporting accountant’s judgement, including the assessment of the risks of
material misstatement, whether due to fraud or error, of the Forecast Information. In making those risk
159
assessments, we considered internal control relevant to Echo Polska Properties N.V.s preparation and
presentation of the Forecast Information.
Our procedures included:
•
•
•
Inspecting whether the Forecast Information is properly prepared on the basis of the assumptions;
Inspecting whether the Forecast Information is properly presented and all material assumptions are
adequately disclosed, including a clear indication as to whether they are best-estimate assumptions; and
Inspecting whether the forecast statement of comprehensive income is prepared on a consistent basis
with the historical financial statements, using appropriate accounting policies.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion on the Forecast Information
In our opinion, the Forecast Information is properly prepared and presented on the basis of the assumptions and
in accordance with the JSE Listings Requirements for Forecast Information for the years ending 31 December
2016 and 31 December 2017.
Purpose of the report
This report has been prepared for the purpose of satisfying the requirements of paragraph 13.15 of the JSE
Listings Requirements and for no other purpose.
Report on other legal and regulatory requirements
In accordance with our responsibilities set out in the JSE Listings Requirements, paragraph 13.15(b), we have
performed the procedures set out therein. If, based on the procedures performed, we detect any exceptions, we
are required to report those exceptions. We have nothing to report in this regard.
Ernst & Young Inc.
Director: Rohan Mahendra Adhar Baboolal
Reporting Accountant Specialist
Registered Auditor
Chartered Accountant (SA)
29 August 2016
160
Annexure 15
CONSOLIDATED PRO FORMA STATEMENT OF FINANCIAL POSITION OF THE EPP GROUP
Set out below is the consolidated pro forma statement of financial position of the EPP group based on the
audited statement of financial position of EPP as at 4 January 2016 (the date of incorporation of the company).
The consolidated pro forma statement of financial position has been prepared to reflect the financial position of
the EPP group after adjusting for the acquisition of the FIZ entities, the debt refinancing, the Redefine
transaction and subsequent revaluation of the property assets, the acquisition of EPP Property Management and
EPP Facility Management and related holding structures, the ROFO acquisition, issuance of shares to Hadley
Dean and subsequent fair value adjustments, the prepayment for the Warsaw retail development, the JSE listing
and the private placement (collectively, “the adjustments”), on the assumption that the adjustments took place
on 4 January 2016 and on the basis set out in the notes to the consolidated pro forma statement of financial
position below.
The consolidated pro forma statement of financial position is the responsibility of the directors of EPP and has
been prepared for illustrative purposes to illustrate the effects of the adjustments on EPP’s financial position at 4
January 2016. Due to the nature of the consolidated pro forma statement of financial position, it may not give a
fair reflection of the financial position, changes in equity, results of operations or cash flows of EPP after the
adjustments.
The statements of financial position of the FIZs, as at 31 December 2015 and reported on in terms of ISA 805
are available for inspection as detailed in paragraph 43 of the prospectus.
The consolidated pro forma financial information has been prepared in terms of IFRS, The Guide on Pro forma
Financial Information issued by SAICA and the accounting policies of the company set out in Annexure 18.
161
ECHO POLSKA PROPERTIES N.V.
Pro forma statement of financial position as at 4 January 2016
Acquisition of
Forum XXIX FIZ4
Acquisition of
Forum XXXIV
FIZ5
Consolidation
adjustment on
acquisition of FIZ
XXIX and FIZ
XXXIV6
EUR'000
EUR'000
EUR'000
EUR'000
948 355
46 459
165 511
-
-
-
266 874
926 312
-
Combined Balance
Forum XXIX FIZ
31 Dec. 20152
Combined Balance
Forum XXXIV
FIZ
31 Dec. 20153
EUR'000
EUR'000
Non-current assets
-
280 623
Property, plant and equipment
-
Investment property
-
Investment property under
construction
Investment in subsidiary
-
6 575
9 164
-
-
-
Other financial assets
-
5 025
11 467
Derivative financial
instruments
Deferred tax asset
-
-
-
Before
1
Adjustment for the
sale of 75% stake
to Redefine
Properties Ltd 8
Revaluation of
investment
property 9
EUR'000
EUR'000
EUR'000
(215 532)
(16 141)
-
675
-
-
-
-
-
-
-
-
-
16 413
-
-
-
-
-
(15 739)
4b
5b
(211 970)
-
-
-
-
-
-
(16 141)
-
-
-
-
-
-
-
-
6d
Debt refinancing
7
ASSETS
46 459
165 511
-
2 149
1 412
-
-
(3 561)
-
-
-
20
13 502
29 016
-
-
(215 532)
(259 902)
252 503
2 960
Inventory
-
19
119
-
-
-
-
-
-
Income tax receivable
-
-
607
-
-
-
-
-
-
Other tax receivables
-
701
626
-
-
-
-
-
-
Current assets
Trade and other receivables
20
1 578
3 526
-
-
-
-
-
-
Financial assets
-
33
752
-
-
-
(716)
23 4128c
-
Derivative financial
instruments
Restricted cash
-
-
-
-
-
-
-
-
-
-
3 398
9 548
-
-
-
(12 946)
-
-
Cash and cash equivalents
-
7 773
13 838
-
-
-
(246 241)
229 090
2 960
20
294 125
977 371
46 459
165 511
(215 532)
(276 043)
252 503
3 635
20
37 824
177 570
46 459
165 511
(166 960)
(1 928)
252 503
2 609
56 779
4a
5a
-
8a
-
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
20
25 544
46 459
165 511
(82 323)
262 278
162
Share premium/Capital
reserves
Accumulated profit /(loss)
-
11 024
118 964
-
-
Foreign currency translation
reserve
Non-controlling-interest
-
(1)
(1)
-
20
37 824
177 570
Non-current liabilities
-
218 990
Bank borrowings
-
112 440
Related party financial
liabilities
Derivative financial
instruments
Other liabilities
-
Total equity
1 257
1 828
-
-
(3 085)
-
-
-
(81 553)
(1 928)
8b
2 609
-
2
-
-
-
46 459
165 511
(166 960)
(1 928)
252 503
2609
648 179
-
-
(48 572)
(116 708)
-
-
508 760
-
-
-
68 838
-
-
94 123
91 423
-
-
-
(185 546)
-
-
-
-
220
-
-
-
-
-
-
-
3 619
8 011
-
-
-
-
-
-
6d
-
-
-
(157 407)
-
1 025
Deferred tax liability
-
8 808
39 764
-
-
Current liabilities
-
37 311
151 621
-
-
-
Bank borrowings
-
3 461
12 356
-
-
-
(1 228)
-
-
Related party financial
liabilities
Derivative financial
instruments
Income tax payables
-
29 085
130 636
-
-
-
(157 700)
-
-
-
3
18
-
-
-
-
-
-
-
114
439
-
-
-
-
-
-
Other tax payables
-
25
165
-
-
-
-
-
-
Trade payables
-
2 998
5 786
-
-
-
1 520
-
1 025
Other payables
-
5
362
-
-
-
-
-
-
Advances received
-
1 620
1 859
-
-
-
-
-
-
20
294 125
977 371
46 459
165 511
(215 532)
(276 043)
252 503
3 635
46 458 998
165 511 404
Total equity and liabilities
Number of shares in issue
Net asset value per share
(EUR)
Net tangible asset value per
share (EUR
20 000
1.00
1.00
(48 572)
(9 775)
302 038 730
163
EPP Property
Management10
EPP Property
Management
acquisition 11
Consolidation
adjustment on
EPP Property
Management
acquisition 12
EPP Facility
Management 13
EPP Facility
Management.
acquisition 14
Consolidation
adjustment on
EPP Facility
Management
acquisition 15
Warsaw retail
development
advance16
EUR'000
EUR'000
EUR'000
EUR'000
EUR'000
EUR'000
EUR'000
Non-current assets
112
Property, plant and equipment
112
2
(2)
-
6
(6)
42 000
-
-
1 252 063
-
-
-
-
-
-
-
-
112
Investment property
-
-
-
-
-
-
-
-
-
Investment property under
construction
Investment in subsidiary
-
-
-
-
-
-
-
-
2
(2)
-
6
(6)
-
-
Other financial assets
-
-
-
-
-
-
42 000
Derivative financial instruments
-
-
-
-
-
-
Deferred tax asset
-
-
-
-
-
-
Fair value
adjustments
Pro forma
after
adjustments
21
22
EUR'000
EUR'000
143 711
7 089
1 402 863
-
-
112
1 209 600
143 711
7 089
1 360 400
-
-
-
-
-
-
-
-
-
-
-
-
42 351
-
-
42 351
-
-
-
-
-
-
-
-
-
-
-
-
-
37 000
Issue of shares
to Hadley
Dean17
Private
placement18
Pro forma
subtotal19
ROFO
acquisition20
EUR'000
ASSETS
693
-
-
505
-
(411)
(42 840)
500
95 066
91 611
(54 611)
-
Inventory
1
-
-
-
-
-
-
-
-
138
-
-
138
Income tax receivable
-
-
-
-
-
-
-
-
-
607
-
-
607
Current assets
Other tax receivables
-
-
-
-
-
-
-
-
-
1 327
-
-
1 327
394
-
-
128
-
-
-
-
-
5 646
-
-
5 646
Financial assets
-
-
-
306
-
(306)
-
-
-
23 481
(12 664)
-
10 817
Derivative financial instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
298
-
-
71
-
(105)
(42 840)
500
95 066
60 411
(41 947)
-
18 464
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total assets
805
2
(2)
505
6
(417)
(840)
500
EQUITY AND LIABILITIES
Equity
Share capital
95 066
1 343 675
89 100
7 089
1 439 863
523
-
(336)
416
-
(602)
(840)
500
95 066
608 337
-
7 089
615 426
12
-
(12)
2
-
(2)
-
500
95 066
569 834
-
-
569 834
Share premium/Capital reserves
226
-
(226)
4
-
(4)
-
-
-
-
-
-
-
Accumulated profit /(loss)
285
-
(98)
410
-
(596)
(840)
-
-
38 503
-
7 089
45 592
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign currency translation
reserve
164
Non controlling-interest
523
-
(336)
416
-
(602)
(840)
500
95 066
608 337
-
7 089
615 426
Non-current liabilities
-
-
-
-
-
-
-
-
-
701 889
89 100
-
790 989
Bank borrowings
-
-
-
-
-
-
-
-
-
690 039
89 100
-
779 139
Related party financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivative financial instruments
-
-
-
-
-
-
-
-
-
220
-
-
220
Other liabilities
-
-
-
-
-
-
-
-
-
11 630
-
-
11 630
Deferred tax liability
-
-
-
-
-
-
-
-
-
-
-
-
-
282
2
333
89
6
185
-
-
-
33 449
-
-
33 449
Bank borrowings
-
-
-
-
-
-
-
-
-
14 590
-
-
14 590
Related party financial liabilities
-
-
-
-
-
-
-
-
-
2 022
-
-
2 022
Derivative financial instruments
-
-
-
-
-
-
-
-
-
21
-
-
21
51
-
-
-
-
-
-
-
-
604
-
-
604
Total equity
Current liabilities
Income tax payables
Other tax payables
-
-
-
-
-
-
-
-
-
189
-
-
189
Trade payables
205
2
333
89
6
185
-
-
-
10 631
-
-
10 631
Other payables
26
-
-
-
-
-
-
-
-
1 913
-
-
1 913
-
-
-
-
-
-
-
-
-
3 479
-
-
3 479
805
2
(2)
505
6
(417)
(840)
500
95 066
1 343 675
89 100
7 089
1 439 863
500 000
71 470 037
585 999 169
585 999 169
1.04
1.05
1.04
1.05
56.4%
56.7%
Advances received
Total equity and liabilities
Number of shares in issue
Net asset value per share
(EUR)
Net tangible asset value per
share (EUR
LTV
1
2
3
The "Before" financial information has been extracted without adjustment from the audited financial statements of EPP as at incorporation which is set out in Annexure
18. The financial statements of EPP as at incorporation was audited by EY Inc. who issued an ISA 700 report on the financial statements.
The financial information has been extracted without adjustment from the audited special purpose combined financial statements of Forum XXIX FIZ as at 31
December 2015 and translated into EUR at an exchange rate of EUR 1.00:PLN 4.2615. The special purpose combined financial statements of Forum XXIX FIZ as at 31
December 2015 was audited by EY Inc who issued a qualified ISA 805 opinion only in respect of the opening balances of these special purpose combined financial
statements.
The financial information has been extracted without adjustment from the audited special purpose combined financial statements of Forum XXXIV FIZ as at 31
December 2015 and translated into EUR at an exchange rate of EUR 1.00:PLN 4.2615. The special purpose combined financial statements of Forum XXXIV FIZ as at
165
4
5
6
7
8
9
10
11
12
13
31 December 2015 was audited by EY Inc. who issued a qualified ISA 805 opinion only in respect of the opening balances of these special purpose combined financial
statements.
These adjustments comprise:
a) the issue of 46 458 998 shares by EPP at EUR 1 per share thereby increasing share capital by EUR 46 458 998; and
b) the acquisition of Forum XXIX FIZ which indirectly owns an office property portfolio.
These adjustments comprise:
a) the issue of 165 511 404 shares by EPP at EUR 1 per share thereby increasing share capital by EUR 165 511 404; and
b) the acquisition of Forum XXXIV FIZ which indirectly owns a retail property portfolio.
These consolidation adjustments (a to c) represent the consolidation of Forum XXIX FIZ and Forum XXXIV FIZ in terms of IFRS 3 Business Combinations and the
subsequent tax organisation of the entities (d)
a) the elimination of the investment in Forum XXIX FIZ and Forum XXXIV FIZ;
b) the elimination of the share capital;
c) the elimination of pre-acquisition earnings; and
d) the elimination of the deferred tax assets and liabilities previously recognised following tax reorganisation of the subsidiary entities holding real estate becoming
tax transparent.
These adjustments comprise:
a) the refinancing of the existing bank loan in amount of EUR 637 017 000 and draw down of the new bank debt of EUR 709 990 000 (less amortised cost adjustment
of EUR 5 363 000); and
b) the repayment of the existing intra-group loans payable in amount of EUR 343 246 000 and receipt of the existing intra-group loans receivable in amount of EUR
16 857 000.
These adjustments comprise:
a) the issue of 302 038 402 shares by Echo Polska Properties N.V. at EUR 1.00 per share thereby increasing share capital by EUR 268 659 000 less transaction costs
of EUR 6 381 000;
b) the payment of the preferred dividend to Echo Investment SA of EUR 9 775 000; and
c) the granting the intra-group loans to subsidiaries of Echo Investment S.A. of EUR 23 412 000 as an advance for the purpose of ROFO transaction (see Annexure
7).
Represents the revaluation of the investment property owned by Echo Polska Properties B.V. Group based on the independent property appraiser's valuation, a summary
of which is presented in Annexure 10.
The financial information has been extracted without adjustment from the audited special purpose financial statements of EPP Property Management and audited special
purpose financial statements of related dormant holding structures as at 31 December 2015 and translated into EUR at an exchange rate of EUR 1.00:PLN 4.2615. These
special purpose financial statements of EPP Property Management and related dormant holding structures as at 31 December 2015 were audited by EY Inc. who issued a
qualified ISA 805 opinion only in respect of the opening balances of these special purpose financial statements.
This adjustment comprises the acquisition of 100% of the issued share capital of EPP Property Management and of related holding structures.
These adjustments comprise:
a) the elimination of the investment in EPP Property Management; and
b) elimination of the share capital and pre-acquisition result of EPP Property Management.
The financial information has been extracted without adjustment from the audited special purpose financial statements of EPP Facility Management and audited
special purpose financial statements of related dormant holding structures as at 31 December 2015 and translated into EUR at an exchange rate of EUR 1.00:PLN
166
14
15
16
17
18
19
20
21
22
4.2615. These special purpose financial statements of EPP Facility Management and related dormant holding structures as at 31 December 2015 were audited by EY
Inc. who issued a qualified ISA 805 opinion only in respect of the opening balances of these special purpose financial statements.
This adjustment comprises the acquisition of 100% share capital of EPP Facility Management and of related holding structures.
These adjustments comprise:
a) elimination of the investment in EPP Facility Management; and
b) elimination of the share capital and pre-acquisition result of EPP Facility Management.
These adjustment represents the advance payment of consideration for the shares in the Warsaw retail development NewCo holding the land plot for development as
described in Annexure 7.
This adjustment comprises the issue of 500 000 shares to Hadley Dean, the CEO of EPP who paid EUR 1.00 per share resulting in additional share capital of EUR
500 000.
These adjustments comprise the issue of 71 470 037 new shares at EUR 1.45 per share thereby raising capital net of underwriting and pre-commitment fees of EUR
100 127 104 (gross proceeds raised of EUR 103 631 553 less underwriting and pre-commitment fees of 3.5% less transaction costs of EUR 5 060 751).
The pro forma subtotal reflects the portfolio that the company holds at listing.
These adjustments comprise the acquisition of 4 ROFO investment properties with a 25% discount to the fair market value as described in Annexure 7.
The adjustment reflects the increase in fair value of the ROFO investment properties acquired below their market value.
The pro forma after adjustments reflects the portfolio the company will hold post the ROFO acquisition.
167
Annexure 16
HISTORICAL FINANCIAL INFORMATION OF EPP
Set out below are the audited financial statements of EPP as at the date of incorporation of the company, being 4
January 2016. These financial statements are the responsibility of the directors.
The financial statements as at 4 January 2016 were prepared in accordance with the International Financial
Reporting Standards and interpretations adopted by the International Accounting Standards Board and were
audited by EY South Africa, who issued an unqualified audit opinion thereon.
The audited financial statements as at 4 January 2016 are available for inspection on the company’s website at
www.echo-pp.com.
The independent reporting accountants’ report on the historical financial information is presented in
Annexure 17.
INTRODUCTION
Incorporation, name, address and subsidiaries
The Company was incorporated under the legal name Echo Prime Properties B.V. as a private company with
limited liability in the Netherlands on 4 January 2016 in accordance with the applicable laws of the Netherlands.
On 1 August 2016, the Company changed its legal name to Echo Polska Properties B.V.
On 12 August 2016 the Company was transformed into a joint stock company and changed its legal name to
Echo Polska Properties N.V.
The Company’s registered address is at Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands. The
Company is registered with the Dutch trade register under number 64965945.
Nature of business
The Company has been established in the Netherlands with the primary objective of acquiring good quality
income generating property assets (predominantly in Europe), in order to offer investors a yielding property
investment.
Results of operations
The results of operations are set out in the financial statements.
Board of directors
Hadley James Tyzack Dean (executive director);
Maciej Adam Drozd (executive director)
Marek Marian Belka (non-executive director)
Peter Joost Rudolf Driessen (non-executive director)
Maciej Wojciech Dyjas (non-executive director);
Dionne Traci Hirschowitz (non-executive director));
Andrew Joseph König (non-executive director)
Nebil Senman ((non-executive director)).
Andrea Philippa Steer (non-executive director)
Marc Wainer ( non-executive director);
Robert Weisz (non-executive director)
168
Statement of Financial Position as at 4 January 2016
4 January 2016
EUR
ASSETS
Current assets
Due from Echo Investment S.A.
20,000
Total assets
20,000
January 4, 2016
EUR
SHAREHOLDER'S EQUITY AND LIABILITIES
Shareholder's equity
Issued Share Capital
20,000
Total equity and liabilities
20,000
Net asset value per share
1.00
NOTES TO THE FINANCIAL STATEMENTS
1.
GENERAL INFORMATION
Echo Prime Properties B.V. (the “Company”) was incorporated as a private company with limited
liability (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law on 4 January 2016 in
accordance with the applicable laws of the Netherlands. The Company’s official seat (statutaire zetel) is
in Amsterdam, The Netherlands, and its registered address is at Prins Bernhardplein 200, 1097 JB
Amsterdam, the Netherlands.
On 1 August 2016, the Company changed its legal name to Echo Polska Properties B.V.
On 12 August 2016 the Company was transformed into a joint stock company (“naamloze
vennootschap”) and changed its legal name to Echo Polska Properties N.V.The Company has been
incorporated in the Netherlands with the primary objective of acquiring good quality income generating
property assets (predominantly in Europe), in order to offer investors a yielding property investment.
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income
and expenses. Actual results may differ marginally from these estimates. In preparing these financial
statements, the significant judgments made by management in applying the company’s accounting
policies and the key sources of estimation are discussed further in Note 2.2 Basis of preparation.
169
2.
SIGNIFICANT ACCOUNTING POLICIES
2.1.
Statement of compliance
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)
and incorporate the principal accounting standards as set out below.
2.2.
Basis of preparation
The financial statements have been prepared on the historical cost basis and are presented in
EUR (€), which is the functional and presentational currency of the Company.
Critical judgements and estimates
The preparation of financial statements in conformity with IFRS requires the use of accounting
estimates. It also requires management to exercise its judgement in the process of applying the
company’s accounting policies.
The principal areas where such judgements and estimates have been made are:
2.3.
Going concern
The Company’s financial statements have been prepared on a going concern basis.
2.4.
Share capital
Ordinary share capital
Ordinary shares are classified as equity.
3.
SHARE CAPITAL AND RESERVES
Share capital and share premium
4 January 2016
EUR
Issued
20,000 ordinary shares of 1€ each
4.
20,000
SUBSEQUENT EVENTS
On 3 February 2016, Echo Investment S.A. (the Company’s sole shareholder as per the date of
incorporation) paid an amount of EUR 20,000 to fully pay up the issued shares of the Company.
On 17 February 2016 the Company issued 211,970,402 new ordinary shares with a nominal value of 1€
each acquired and paid up by Echo Investment S.A. by means of non-cash contributions of:
- 1,510 investment certificates in Forum XXIX Fundusz Inwestycyjny Zamkniety („Fund I”),
a closed-end investment fund under the laws of Poland, representing the entire capital of the
Fund I, with a fair market value of EUR 46,458,998;
- 7,023 investment certificates in Forum XXXIV Fundusz Inwestycyjny Zamkniety („Fund
II”), a closed-end investment fund under the laws of Poland, representing the entire capital of
the Fund II, with a fair market value of EUR 165,511,404.
On 1 June 2016, the Company issued 202,910,878 new ordinary shares with a nominal value of 1€ each
of which 194,987,826 shares were acquired and paid up by Redefine Properties Limited and 7,923,052
shares were acquired and paid up by Echo Investment S.A by means of cash contributions of:
170
- EUR 260 735 795.28 made by Redefine; and
- EUR 7 923 052 made by Echo.
On 1 June 2016, the Company issued a preferred dividend distribution to Echo Investment S.A for the
amount of EUR 9,775,000.
On 1 August 2016, the Company changed its legal name to Echo Polska Properties B.V.
On 12 August 2016, the Company issued 500,000 new ordinary shares with a nominal value of 0.81€
each acquired and paid up by Hadley James Tyzack Dean by means of a cash contribution of 1.00€ per
share for the aggregate amount of EUR 500,000.
On 12 August 2016 the Company was transformed into a joint stock company (“naamloze
vennootschap”) and changed its legal name to Echo Polska Properties N.V.
Save for the acquisitions, further details of which are set out in Annexure 7, and issues and repurchases
of shares, as more fully set out in 7.1 of Annexure 19 below, the Directors are not aware of any other
events subsequent to 4 January, not arising in the normal course of business, which are likely to have a
material effect on the financial information contained in these financial statements.
5.
APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board on 22 August 2016.
171
Annexure 17
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL
INFORMATION OF EPP
Independent auditor’s report
To the Shareholders of Echo Polska Properties N.V.
We have audited the financial statements of Echo Polska Properties N.V. set out in Annexure 16 on pages 165
to 168, which comprise the statement of financial position as at 4 January 2016 and the notes, comprising a
summary of significant accounting policies and other explanatory information.
Directors’Responsibility for the Financial Statements
The company’s directors are responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Echo
Polska Properties N.V. as at 4 January 2016 in accordance with International Financial Reporting Standards.
Ernst & Young Inc.
Director –Rohan Mahendra Adhar Baboolal
Registered Auditor
Chartered Accountant (SA)
22 August 2016
172
Annexure 18
GROUP ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with the International Financial
Reporting Standards as issued by the IASB ("IFRS").
BASIS OF PREPARATION
The consolidated financial statements are presented in Euro ("EUR") which is the functional and presentation
currency of the parent company.
The financial statements have been prepared on the historical cost basis, except for investment properties and
financial instruments measured at fair value. The financial statements have been prepared on a going concern
basis, bearing in mind the fact that there are no circumstances implying a threat to going concern.
INFORMATION ON THE ACCOUNTING STANDARDS AND INTERPRETATIONS OF THE IFRIC
COMMITTEE ENTERING INTO FORCE AS OF THE YEAR 2015
While developing the statements, the group applied new standards, amendments thereto and interpretations
issued by the IFRIC Committee applicable to the group's reporting period starting on 1 January 2015. The
applied changes have had no material impact on the financial result.
In these financial statements, the following new and revised standards and interpretations, which came into force
on 1 January 2015, have been applied for the first time:
1.
2.
3.
IFRIC 21 Interpretation Public Fees;
Amendments following the IFRS review 2010-2012 (issued on 12 December 2013);
Amendments following the IFRS review 2011-2013 (issued on 12 December 2013).
The applied amendments had no significant impact on the presentation of the data and measurement in the
financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Foreign currencies
(i)
Transactions and balances
Transactions denominated in foreign currencies are translated into the functional currency at the
exchange rate prevailing at the date of each transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the exchange rate (the average rate published by the National Bank of
Poland) prevailing at the reporting date. Foreign exchange gains and losses resulting from the settlement
of such transactions and from translation of monetary assets and liabilities denominated in foreign
currencies at period end exchange rates are recognised in the profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of non-monetary items measured at fair value is
treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively).
(ii)
Group companies
173
The results and financial position of all group entities that have a functional currency other than EUR are
translated into EUR in accordance with IAS 21. Assets and liabilities for each statement of financial
position presented are translated at the closing foreign exchange rate as at the date of that financial
position and income and expenses for each statement of comprehensive income are translated at the
average exchange rate for that period (unless this average exchange rate is not a reasonable
approximation of cumulative effect of the exchange rates effective on the transaction days - in which
case income and expenses are translated at the exchange rates prevailing at the date of each transaction).
The resulting exchange differences are recognised in other comprehensive income and the cumulative
amounts are recognised in a separate component of equity. On disposal of a foreign operation, the
component of OCI relating to that particular foreign operation is recognised in profit or loss.
Investment property
Investment property comprises completed property that is held to earn rentals or for capital appreciation or both.
Investment properties are initially recognised at cost, including related transaction costs. Transaction costs
include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property
to the condition necessary for it to be capable of operating. Land held under operating leases is classified and
accounted for as investment property when the rest of the definition of investment property is met. The
operating lease is accounted for as if it were a finance lease.
During construction period the properties developed by the Group are classified as investment property under
construction and recognised as investment property once they are available for use.
Subsequent to initial recognition, investment property is stated at fair value, which reflects market conditions at
the reporting date. Gains or losses arising from changes in the fair values of investment properties are included
in profit or loss in the period in which they arise.
At least once a year the fair value of underlying investment properties is being verified by external real estate
appraisers.
Gains and losses from the measurement of investment property and profits on the sale of investment property
are recognised in the profit and loss account as gain (loss) from on revaluation of investment properties.
All other repair and maintenance costs of investment property are recognised as an expense in the profit and loss
account when incurred.
Investment property under construction is a property being constructed/developed by the Group for future use as
investment property. Investment property under construction is measured at fair value when a significant part of
the risks associated with the construction process has been eliminated and fair value is reliably determinable.
In order to evaluate whether the fair value of an investment property under construction can be determined
reliably, management considers the following factors, among others:
obtaining a building permit,
contracted construction works with a value of at least 30% of the investment budget,
leasing level at least 20%.
Risk analysis is also to a large extent determined by the project financing terms.
Each investment property under construction is analysed individually for reliable measurement of fair value,
taking into account the overall economic situation, the availability of comparable data for similar properties and
volatility of factors underlying the valuation. Once the above conditions have been fulfilled, as long as
according to Group's estimates, the significant risks relating to the implementation of investment property under
construction have been eliminated, the property is measured at fair value.
If the fair value cannot be reliably determined, investment properties under construction are measured at cost
less any impairment losses.
174
Transfers are made to (or from) investment property only when there is a change in use. For a transfer from
investment property to property, plant and equipment the deemed cost for subsequent accounting is the fair
value at the date of change in use.
Investment property is derecognised either when it has been disposed of or when it is permanently withdrawn
from use and no future economic benefit is expected from its disposal. The difference between the net disposal
proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
Financial assets
The following categories of financial assets are included in financial statements:
•
Financial assets at fair value through profit or loss (derivatives);
•
Loans and receivables - financial assets other than derivatives with fixed or determinable payments that
are not quoted on an active market.
The classification of financial assets is determined at initial recognition. When financial assets are recognised
initially, they are measured at fair value.
Financial assets are recognised on the transaction date, and derecognised only when the contractual rights to
cash flows from the financial asset expire or the Group transfers substantially all risks and rewards of
ownership.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value
with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income
(positive net changes in fair value) in the statement of profit or loss.
(ii)
Bonds, loans, trade and other receivables
Bonds, loans, trade and other receivables are financial assets classified as "Loans and receivables". They are
subsequently measured at amortised cost, less the accumulated impairment losses.
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group
of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial
recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may
include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default
or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation and observable data indicating that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Inventory
Inventory comprises goods for resale and advances on deliveries measured at lower of cost and net realisable
value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to make the sale.
175
Cash and cash equivalents
Cash at bank and in hand and short-term investments held to maturity and other financial assets (highly liquid
debt instruments readily convertible to cash) are measured at nominal value plus accrued interest.
Restricted cash, including: cash in rent accounts, securing the payments under loan agreements, securing the
refund of security deposit and for reimbursement of tax on goods and services is presented separately in the
consolidated statement of financial position.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above, excluding restricted cash.
Derivatives
Derivatives are recognised when the Group becomes a party to a binding agreement. The derivatives are used by
the Group to mitigate the risks associated with changes in foreign exchange rates or interest rates.
The Group does not apply hedge accounting in accordance with IAS 39.
Derivatives are measured initially and subsequently at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
Derivatives in the form of IRS directly related to the signed bank loan agreements and as a result converting
loan variable interest rate into fixed interest rate ones for contracted loan volume are jointly measured with loan
liabilities at amortised cost (i.e. the loan is considered a loan with a fixed rate). Derivatives in the form of IRS
beyond that volume and not related to the specific loan agreement are treated as a separate derivative and
measured separately at fair value through profit or loss.
Financial liabilities
Financial liabilities include loans, borrowings, debt securities, trade payables and other financial liabilities.
Financial liabilities (including trade payables) are initially measured at fair value less transaction costs and
thereafter stated at amortised cost. In cases where the difference between that value and the amount due has no
significant impact on the Group's financial results, such liabilities are stated at the amount due.
(i)
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method.
(ii)
Received deposits and advances
Deposits liabilities are initially recognised at fair value and subsequently measured at amortised cost.
Any difference between the initial fair value and the nominal amount is included as a component of rental
income and recognised on a straight-line basis over the rental term.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit or loss
account, except to the extent that it relates to items recognised directly in other comprehensive income – in
which case, the tax is also recognised in other comprehensive income, or to items recognised directly in equity –
in which case, the tax is also recognised in equity.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
taxation authorities. Deferred income tax is provided in full, using the liability method, on temporary
differences arising from the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
176
Deferred income tax assets are recognised for all deductible temporary differences, except:
•
When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither accounting
profit nor taxable profit or loss;
•
In respect of taxable temporary differences associated with investments in subsidiaries and interests in
joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which deductible temporary differences, carried forward of unused tax
credits or unused tax losses can be utilised, except:
•
When the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
•
In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax
assets against current income tax liabilities and are levied by the same taxing authority on the same entity or
different entities that intend to realise the asset and settle the liability at the same time.
Equity
The company’s ordinary shares are classified as equity. External costs directly attributable to the issue of new
shares are shown as a deduction in equity, net of tax, from the proceeds.
Provisions
Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, for
which it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Leases - Group as a lessor
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the
asset or assets, even if that right is not explicitly specified in the arrangement.
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are
classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.
Revenue recognition
177
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured, regardless of when the payment is being received. Revenue is measured at the
fair value of the consideration received or receivable, taking into account contractually defined terms of
payment and excluding taxes or duty.
(i)
Rental income
Rental income arising from operating leases on investment property is accounted for on a straight-line basis over
the lease terms and is included in revenue in the statement of profit or loss due to its operating nature, except for
contingent rental income which is recognised when it arises. The Group is the lessor in operating leases. Rental
income arising from operating leases on investment property is accounted for on a straight-line basis over the
lease terms, i.e. the invoiced amount from rental income adjusted for any lease incentives, and is included in
revenue in the statement of profit or loss due to its operating nature, except for contingent rental income which
is recognised when it arises.
Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the
lease term on the same basis as the lease income.
Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of
the lease. The lease term is the non-cancellable period of the lease together with any further term for which the
tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably
certain that the tenant will exercise that option.
Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the
statement of profit or loss when the right to receive them arises.
In negotiating a new or renewed operating lease, the tenant may be given a rent-free period as incentive. The
aggregate cost of incentives is recognized –according to interpretation SIC-15 –as a reduction of rental income
over the lease term on a straight-line basis.
(ii)
Service charge and similar revenue
Income arising from expenses recharged to tenants is recognised in the period in which the compensation
becomes receivable. Service and management charges and other such receipts are included in net rental income
gross of the related costs, as the directors consider that the Group acts as principal in this respect.
Other operating income and expenses
Other operating income and expenses comprise costs and revenue not related directly to the Group’s principal
business, in particular they result from revaluation of receivable, damages and contractual penalty. Other
operating income and expenses for the current period are recognised in the profit or loss in the period in which
they are incurred (on an accrual basis).
Finance income and cost
Finance income comprises income from interest on investing activities, dividends received, profit on disposal of
investments, income from revaluation of financial instruments, profit on FX derivatives and foreign exchange
gains. Finance cost comprises interest expense, commissions and costs, loss on disposal of investments, costs of
revaluation of interest in associates, loss on FX derivatives and foreign exchange losses.
Interest income/cost is recognised as it accrues using the effective interest rate (EIR) method. The EIR is the rate
that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a
shorter period, where appropriate, to the net carrying amount of the financial instrument.
Finance income and costs for the current period are recognised in the profit or loss in the period in which they
are incurred (on an accrual basis), except for borrowing costs which are capitalised in accordance with IAS 23.
Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset.
178
All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing of funds.
Fair value measurements
The Group measures derivatives and investment properties at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
•
in the principal market for the asset or liability
or
•
in the absence of a principal market, in the most advantageous market for the asset or liability.
The Group must be able to access the principal or the most advantageous market at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities, for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy (described as follows), based on the lowest level input that is significant to the
fair value measurement as a whole:
•
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
•
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable;
•
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable;
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the
Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries.
Subsidiaries are entities over which the Company has control. Specifically, the Group controls an investee if,
and only if, it has:
power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities
of the investee),
exposure, or rights, to variable returns from its involvement with the investee,
the ability to use its power over the investee to affect its returns.
The consolidated financial statements incorporate the assets, liabilities, income, expenses and cashflows or the
Group and all entities controlled by the Group. Consolidation of a subsidiary begins when the Group obtains
179
control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial
statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Intercompany transactions, balances and unrealised profits or losses between the Group companies are eliminated on
consolidation.
180
Annexure 19
CAPITAL STRUCTURE
1.
SHARE CAPITAL
1.1.
Immediately prior to the private placement and the listing on the JSE:
1.1.1.
1.1.2.
the issued share capital of the company comprises 514 529 131 ordinary shares
of EUR 0.81 each (all of which are listed on the LuxSE and have a total value of
EUR 416 768 596) and 1 preference share of EUR 0.81 (not listed on any stock
exchange and has a total value of EUR 0.81);
1.1.3.
there are no treasury shares in issue ;
1.1.4.
1.2.
2.
the authorised share capital of the company comprises 2 572 645 659 ordinary
shares of EUR 0.81 (total value of EUR 2 083 842 984) each and 1 preference
share of EUR 0.81 (total value EUR 0.81);
the share premium account reflects a value of EUR 64 380 653.
Assuming that the private placement is fully subscribed, immediately after the private
placement and the listing on the JSE:
1.2.1.
the authorised share capital of the company comprises 2 572 645 659 ordinary
shares of EUR 0.81 each and 1 preference share of EUR 0.81;
1.2.2.
the issued share capital of the company will comprise 585 999 168 ordinary
shares of EUR 0.81 each (all of which will be listed on the LuxSE and the JSE)
and 1 preference share of EUR 0.81 (not listed on any stock exchange); and
1.2.3.
there will be no treasury shares in issue.
UNLISTED NON-CONVERTIBLE PREFERENCE SHARE HELD BY ECHO PRIME ASSETS
B.V.
2.1.
In terms of the Redefine transaction, the following arrangements were concluded in relation to
the extensions, namely:
2.1.1.
to the extent that the completion of any of the extensions requires additional
financing and the group is not able to secure such financing from independent
third party financing institutions, EPA is obliged to provide the amount equal to
the shortage in the financing by way of loan extended to it to the group on arm’s
length terms;
2.1.2.
to compensate the group for any unleased spaces within the extensions, EPA will
pay the group an amount of EUR 125 000, on a monthly basis for the
twelve consecutive month period commencing in June 2016; and
2.1.3.
subject to meeting the following key milestones, EPA will be entitled to receive
a preferred distribution from the company, in relation to each extension (and
regardless of whether any of the other extensions have been completed) in an
amount equal to the total monthly headline rents attributable to the extension on
completion (including under any market related head lease with EPA as tenant)
multiplied by 12 and divided by 0.085, and reduced by the extension costs and
any extension rent discounts calculated for the period commencing one month
after the completion of the extension. The payment of such preferred distribution
is to be effected by way of a preferred distribution (the “extension
compensation preferred distribution”).
181
2.2.
3.
In order for EPA to qualify for the extension compensation preferred distribution, in relation
to the relevant extension:
2.2.1.
an occupancy permit must have been granted by the relevant authority;
2.2.2.
at least 60% of the extended space of a given extension must be leased or preleased to third parties on arm’s length terms; and
2.2.3.
EPA must have executed a master lease agreement for a period of 3 years in
relation to the space which has not been leased or pre-leased (at a rate per square
meter no less than the average rate concluded with third party tenants).
2.3.
The preference share has been created and issued to EPA in order to effect payment of the
extension compensation preferred distribution in accordance with the Redefine transaction
terms, which require the payment to EPA to be in the form of a preferred distribution.
2.4.
The preference share shall not be transferred without the consent of the company. The
company´s authorized capital does not allow for the issuance of additional preference shares.
The JSE will also not permit the issue of additional preference shares.
2.5.
On discharge of all extension compensation preferred distributions or once the company no
longer has any liability to effect any further payments to Echo pursuant to the extension
compensation preferred distribution arrangements, the preference share will be redeemed or
cancelled, for a nominal amount of EUR 0.81.
2.6.
Save for the rights to any extension compensation preferred distribution amount, the
preference share does not rank for participation in any other distributions (of capital or
income) of the company. As required in terms of Dutch law, the preference share confers the
right to cast one vote at meetings of shareholders.
2.7.
The preference share will not be listed.
2.8.
A summary of the agreement between EPA, Echo, Redefine and EPP in respect of the
extension compensation preferred distribution is set out in Annexure 7. The terms and
conditions of the preference share are set out in Annexure 6.
AUTHORISATIONS
Since incorporation of the company, the following resolutions have been duly passed by the requisite
majority of shareholders:
3.1.
Issue of shares to Echo, dated 16 February 2016
The general meeting resolves to issue to the sole shareholder (Echo) 211 970 402 new
ordinary shares in the capital of the company with a nominal value of EUR1.00 each,
numbered 20 001 up to and including 211 990 402, on the terms set out below:
3.1.1.
Pre-emption rights of existing shareholders of the company are excluded with
respect to the issuance;
3.1.2.
The new shares numbered 20 001 up to and including 46 478 998 are issued in
exchange for an obligation to pay expressed in cash of EUR 46 458 998 in the
aggregate and must be fulfilled by making a non-cash contribution of:
3.1.2.1.
20 investment certificates series A, numbered 1 through 20
(Contribution Certificates I);
3.1.2.2.
559 investment certificates series D, numbered 1 through 559
(Contribution Certificates II);
182
3.1.2.3.
931 investment certificates series E, numbered 1 through 931
(Contribution Certificates III, and together with the Contribution
Certificate I and Contribution Certificates II; Fund I Certificates),
in the capital of Forum XXIX;
3.1.3.
The new shares numbered 46 478 999 up to and including 211 990 402 are
issued in exchange for an obligation to pay expressed in cash of EUR
165 511 404 in the aggregate and must be fulfilled by making a non-cash
contribution of:
3.1.3.1.
20 investment certificates series A, numbered 1 through 20
(Contribution Certificates IV),
3.1.3.2.
3409 investment certificates series C, numbered 1 through 3409
(Contribution Certificates V); and
3.1.3.3.
3594 investment certificates series D, numbered 1 through 3594
(Contribution Certificates VI, and together with the Contribution
Certificates IV and the contribution Certificates V: Fund II
Certificates, and together with the Fund I Certificates;
Contribution Certificates),
in the capital of Forum XXXIV;
3.2.
3.1.4.
if the fair market value of the contribution certificates exceeds the amount of the
obligation to pay, the balance will be recorded in the books of the company as
share premium; and
3.1.5.
if, after the adoption of this resolution, it is resolved to make distributions on
shares in the capital of the company, each new share will have the same
entitlement to such distributions as each existing share.
Issue of shares to Redefine and Echo, dated 1 June 2016
The general meeting resolves to issue Redefine 202 910 878 shares in the capital of the
company with a nominal value of EUR 1.00 each, as follows and on the terms set out below:
3.3.
3.2.1.
to Redefine: an issuance of 194 987 826 shares in the capital of the company,
numbered 211 990 403 up to and including 406 978 228;
3.2.2.
the new Redefine shares are issued at an aggregate issue price of
EUR260 735 795.28;
3.2.3.
to the shareholder (Echo): an issuance of 7 923 052 shares in the capital of the
company, numbered 406 978 229 up to and including 414 901 280;
3.2.4.
the new Echo shares are issued at an aggregate issue price of EUR 7 923 052;
3.2.5.
pre-emption rights of existing shareholders of the company are excluded with
respect to issuance; and
3.2.6.
the full amount of the aggregate issue prices must be paid in euro’s.
Amendment of the articles of association, dated 1 June 2016
3.3.1.
The general meeting resolves to amend the articles of association of the company
in conformity with the draft deed of amendment to the articles prepared by
Loyens & Loeff N.V..
3.3.2.
The general meeting resolves to authorise each member of the board of the
company and also each lawyer, deputy civil law notary and employee of Loyens
183
& Loeff N.V., severally, to have the deed of amendment to the articles executed
(the “deed”).
3.4.
3.5.
Board composition, dated 1 June 2016
3.4.1.
The general meeting resolves to dismiss Johan Antoon Broekhuis as a member of
the Board, and to grant him a full and final discharge for his management of the
company, all as per the moment the deed comes in full force and effect.
3.4.2.
The general meeting resolves to dismiss Maciej Adam Drozd as a member of the
Board, and to grant him a full and final discharge for his management of the
company, all as per the moment the deed comes in full force and effect.
3.4.3.
The general meeting resolves that the title of Intertrust (Netherlands) B.V.,
having its official seat in Amsterdam, the Netherlands, currently a member B of
the Board, is changed into management board member A, as per the moment the
deed comes in full force and effect.
3.4.4.
The general meeting resolves to appoint Marc Wainer as a member of the Board,
with the title of management board member B, as per the moment the deed
comes in full force and effect.
3.4.5.
The general meeting resolves to appoint Andrew Joseph König as a member of
the Board, with the title of management board member B, as per the moment the
deed comes in full force and effect.
3.4.6.
The general meeting resolves to appoint Dionne Traci Hirschowitz (neé Ellerine)
as a member of the Board, with the title of management board member B, as per
the moment the deed comes in full force and effect.
3.4.7.
The general meeting resolves to appoint Hadley Dean as a member of the Board,
with the title of management board member B, as per the moment the deed
comes in full force and effect.
3.4.8.
The general meeting resolves to appoint Maciej Dyjas as a member of the Board,
with the title of management board member C, as per the moment the deed
comes in full force and effect.
Distribution to Echo, dated 1 June 2016
The general meeting resolves to make the following distributions to Echo, subject to the
condition precedent of the execution of the deed and as per the moment the deed comes in full
force and effect:
3.6.
3.5.1.
an interim dividend with priority over any other distributions made by the
company.
3.5.2.
a distribution in an amount in cash of EUR 9,775,000, by way of an interim
preferred distribution at the charge of the company’s 2016 profits, provided that
in the event that after adoption of the 2016 annual accounts the company’s 2016
profits shall appear to be less than the amount of the profit distribution, the
balance shall be deemed to have been a distribution from the company's freely
distributable reserves.
Transfer of shares from Echo to Redefine pursuant to the Redefine transaction, dated 1
June 2016
The general meeting approves the transaction to transfer 116 188 135 shares in the capital of
the company, with a nominal value of EUR 1.00, by Echo to Redefine. This approval is
granted pursuant to the share transfer restrictions included in the articles of association of the
company.
184
3.7.
Interim profit distribution, dated 11 August 2016
The general meeting resolves to distribute, as an interim distribution, to shareholders of the
company reflected in the original shareholders register of the company at 17h00 (CET) on 11
August 2016, an amount equal to 100% of the company’s cash available and deriving from
the profits from operations attributable to the shareholders for the period commencing 4
January 2016 and ending on 31 August 2016 (the “interim profit distribution”). The
interim profit distribution shall be calculated with reference to the company’s management
accounts and shall be finally determined by the board (or any nominated sub-committee of
the board) and shall be payable to the shareholders qualifying for the interim profit
distribution within 45 days from the date of the board confirmation (the “payable date”). No
shareholder qualifying for the interim profit distribution shall have a claim against the
company with respect to the interim profit distribution until the payable date as determined
by the board.
3.8.
Transfer of shares from Echo to Echo Prime Assets B.V., dated 13 July 2016
The general meeting approves the transaction to contribute and transfer of 103 725 319 shares
in the capital of Echo Prime Properties B.V. by Echo to Echo Prime Assets B.V..
3.9.
Admissions, dated 8 August 2016
The general meeting approves–inter alia:
3.10.
3.9.1.
the admission of all issued ordinary shares in the share capital of the company to
listing on the Euro MTF market of the LuxSE, and the admission of all issued
ordinary shares in the share capital of the Company to listing and trading on the
Main Board of the JSE;
3.9.2.
the entering into, execution, delivery, ratification and performance by the
company of the documents and the transactions as shall be agreed between the
respective parties thereto and the company;
3.9.3.
the ratification of any document already executed, delivered or entered into by
the company and any transactions contemplated thereby; and
3.9.4.
all such other acts and documents as any member of the Board may deem
necessary or useful for the proper preparation and implementation of the
admissions and the performance of the documents.
Issue of shares, amendment of the articles of association and change the board
composition, dated 8 August 2016
The general meeting resolves to amend the articles of association of the company, in
accordance with the conversion deed, as a result of which inter alia (i) the company will be
converted into a public company with limited liability (naamloze vennootschap) and (ii) the
company's name is changed into Echo Polska Properties N.V. (the “conversion”).
3.11.
Delegation of authority to issue shares to the Board, dated 8 August 2016
The general meeting designates the board, subject to and effective as per the conversion, until
the next annual general meeting of the company or for a period of 15 months calculated as of
the date hereof, whichever period is shorter, to:
3.11.1.
resolve to issue shares (either in the form of stock dividend or otherwise) and/or
grant rights to acquire shares and/or issue securities convertible to shares in
order:
3.11.1.1.
to effect and implement the private placement of the private
placement shares; and, in addition;
185
3.11.1.2.
to issue a maximum of 15% of the total number of shares issued
as at the date of the admission of all issued ordinary shares in the
share capital of the Company to listing and trading on the Main
Board of the Johannesburg Stock Exchange (JSE),
all within the limits laid down in the articles of association of the company and subject at all
times to the LuxSE rules and regulations and JSE listings requirements; and
3.11.2.
3.12.
3.13.
resolve to restrict and/or exclude the pre-emptive rights accruing to holders of
ordinary shares in respect of an issuance of ordinary shares or granting rights to
acquire ordinary shares or issuance of securities convertible to ordinary shares in
relation to any issuance as referred to under 3.11.1, all within the limits laid
down in the articles of association of the company and subject at all times to the
LuxSE rules and regulations and JSE Listings Requirements.
Private placement Johannesburg Stock Exchange: issuance of new shares, dated 8
August 2016
3.12.1.
The general meeting resolves, subject to and effective as per the conversion, to
agree with the issuance of the JSE private placement shares to those invited
investors identified by the board pursuant to the private placement, in exchange
for an obligation to pay the issue price per share, payable in Rand, to be
determined by demand and at a EUR:ZAR exchange rate to be hedged following
the close of the offer for subscription and at a price not lower than EUR 1.00 per
share. This issuance shall be effected and implemented pursuant to a separate
resolution of the board as the designated corporate body to resolve on this
issuance of the private placement shares.
3.12.2.
Accordingly, the general meeting agrees to exclude all pre-emptive rights in
relation to the issuance of the private placement shares, which exclusion shall be
resolved upon by the board as the designated authorized corporate body to do so.
3.12.3.
The general meeting resolves to approve the private placement to raise the Rand
equivalent of up to approximately EUR 100 million (with the Company’s ability
to upscale the size of the capital raised to EUR 135 million, depending on
demand) by way of an offer for subscription to invited investors only, for an
issue price of not less than EUR 1.00 each, payable in Rand, to be determined by
demand and at a EUR:ZAR exchange rate to be hedged following the close of
the offer for subscription and the listing of the Company’s issued ordinary share
capital (including the JSE Private Placement Shares) on the Euro MTF market of
the LuxSE and on the Main Board of the JSE.
Composition Board, dated 8 August 2016
3.13.1.
The general meeting resolves, and to the extent required (b) Echo Prime Assets
B.V. resolves, subject to and effective as per the conversion, to accept the
resignation of Intertrust (Netherlands) B.V., as a member A of the board. The
general meeting furthermore resolves, subject to and effective as per the
conversion, to grant it full and final discharge for its management of the
company.
3.13.2.
The general meeting resolves, and to the extent required, Redefine resolves,
subject to and effective as per the conversion, that the title of each of (i) M.
Wainer, (ii) A.J. König, and (iii) D.T. Hirschowitz –each currently a member B
of the board - is changed into non-executive director.
3.13.3.
The general meeting resolves, and to the extent required, the class meeting
investor share resolves, subject to and effective as per the conversion, that the
title of H.J.T. Dean, currently a member B of the board, is changed into
executive director.
186
4.
3.13.4.
The general meeting resolves, subject to and effective as per the conversion, that
the title of M.W. Dyjas, currently a member C of the board, is changed into nonexecutive director.
3.13.5.
The Board has nominated the following individuals for appointment by the
general meeting as non-executive directors of the board, and the general meeting
resolves, subject to and effective as per the conversion, to appoint these
individuals as non-executive directors of the board:
3.13.5.1.
Robert Weisz;
3.13.5.2.
Marek Marian Belka;
3.13.5.3.
Nebil Senman;
3.13.5.4.
Andrea Philippa Steer; and
3.13.5.5.
Peter Joost Rudolf Driessen.
3.13.6.
The board has nominated Maciej Adam Drozd for appointment by the general
meeting as executive director of the board and the general meeting resolves, such
subject to and effective as per the conversion, to appoint him as executive
director of the board.
3.13.7.
It is proposed that the term of office for the members of the board is established
as follows:
Name
Term of Office
H.J.T. Dean (executive director)
Until AGM in 2017
M.A. Drozd (executive director)
Until AGM in 2017
R. Weisz (non-executive director)
Until AGM in 2017
M.M. Belka (non-executive director)
Until AGM in 2017
M. Wainer (non-executive director)
Until AGM in 2017
A.J. König (non-executive director)
Until AGM in 2017
M.W. Dyjas (non-executive director)
Until AGM in 2017
N. Senman (non-executive director)
Until AGM in 2017
D.T.
Hirschowitz
director)
Until AGM in 2017
(non-executive
A.P. Steer (non-executive director
Until AGM in 2017
P.J.R.
Driessen
director)
Until AGM in 2017
(non-executive
RIGHTS ATTACHING TO SHARES
4.1.
Extracts of the articles of association, including those provisions relating to rights attaching to
ordinary shares and preference share, are set out in Annexure 6.
4.2.
In addition to what is provided for in Annexure 6 as well as paragraph 3.11 and 7.4 of this
Annexure 19 in relation to the pre-emptive rights of shareholders, the following shall also
apply:
187
5.
6.
7.
4.2.1.
The pre-emption right may also be restricted or excluded by the corporate body
designated pursuant to Section 2:96 paragraph 1 of the Dutch Civil Code. In the
case of EPP, the board has been designated to do so.
4.2.2.
Shareholders shall have no pre-emption right in respect of shares issued to a
person who exercises a previously-acquired right to subscribe for shares.
4.2.3.
If a third party does not exercise its right to subscribe for shares, no shares will
be issued to such party.
4.3.
During any vote at any general meeting every shareholder (namely, both ordinary
shareholders and the preference shareholder) present and entitled to exercise voting rights
shall be entitled to one vote, whether exercised in person or by proxy.
4.4.
Ordinary shareholders are entitled to participate proportionally in any distribution made by the
company and to receive proportionally the net assets of the company upon its liquidation.
Preference shareholders are only entitled to those distributions detailed in paragraph 2 above
and an amount of EUR0.81 on liquidation of the company.
4.5.
Any variation in rights attaching to ordinary shares will require the consent of at least 75% of
ordinary shareholders in a general meeting. In addition, consent of the individual shareholder
is required to the extent that its rights are deprived.
4.6.
Only shareholders that are registered in the company’s register on the day when a distribution
is declared or on such other day as may be determined by the board as the last date for
registration for the distribution, will be entitled to receive the distribution so declared.
OPTIONS AND PREFERENTIAL RIGHTS IN RESPECT OF SHARES
5.1.
Save as set out in paragraph 2.4 of Annexure 3, there are no contracts or arrangements, either
actual or proposed, whereby any option or preferential right of any kind has been or will be
given to any person to subscribe for any shares in the company.
5.2.
There are no preferential conversion and/or exchange rights in respect of any shares.
ALTERATIONS TO SHARE CAPITAL
6.1.
The company was incorporated on 4 January 2016 with 20 000 ordinary shares in issue.
6.2.
On 1 August 2016, the ordinary share capital was subdivided into 514 529 131 issued
ordinary shares from 414 901 280 issued ordinary shares. The subdivision was effected in
order to achieve a net asset value per ordinary share of exactly EUR 1.00.
6.3.
On 12 August 2016, pursuant to the conversion of EPP from a B.V. to an N.V. company, the
authorised share capital was created to comprise 2 572 645 659 ordinary shares and 1
preference share. In addition, pursuant to the said conversion the issued share capital was
amended in such a way that 1 ordinary share was converted to 1 preference share.
6.4.
No share repurchases have been undertaken by the company since its incorporation.
6.5.
Save for the conversion of shares mentioned in 6.2 above, there have been no sub-divisions or
consolidations of shares since incorporation of the company.
6.6.
Save as provided in this paragraph 6, there have been no alterations to the share capital of the
company since incorporation of the company.
ISSUES AND REPURCHASES OF SHARES
7.1.
Save as set out below and in respect of the private placement, there have been no issues,
repurchases or offers of securities of the company or its major subsidiaries from the date of
incorporation of the company to the last practicable date.
188
Date
EPP
4 January 2016
Nature
Issue of ordinary shares by
EPP
17 February 2016 Issue of ordinary shares by
EPP
1 June 2016
Issue of ordinary shares by
EPP
1 June 2016
Issue of ordinary shares by
EPP
1 August 2016
Issue of ordinary shares by
EPP
Counterparty
Number of
securities
Echo
20 000
Price per
security
(EUR)
1.00
Echo
211 970 402
1.00
Acquisition of FIZs
Redefine
194 987 826
1.34*
Echo
7 923 052
1.00#
Redefine
1,353,996
0.81
Implementation of Redefine
transaction
Implementation of Redefine
transaction
Implementation pre-listing steps
(application share premium
reserve)
Implementation pre-listing steps
(application share premium
reserve)
Implementation pre-listing steps
Reason
Incorporation of the company
1 August 2016
Issue of ordinary shares by EPA
EPP
451,332
0.81
12 August 2016
Issue of ordinary shares by Mr Dean
EPP
Conversion of one ordinary Echo
share into one preference
share
500,000
1.00
1
0.81
Issue of A series
certificates
Issue of B series
certificates
Echo
2
(PLN)
250 000
Acquisition of properties
Barconsel
Holdings
Limited
(“Barconsel”)^
Barconsel^
6 672
24 997
Acquisition of properties
5 018
50 000
Acquisition of properties
11 502
41 800
Acquisition of properties
931
91 202
Acquisition of properties
376 693
Acquisition of properties
2
1 370
(PLN)
250 000
26 079
25 000
Acquisition of properties
11 764
25 182
Acquisition of properties
3 594
42 286
Acquisition of properties
590 013
1 052
Acquisition of properties
12 August 2016
Forum XXIX
14 May 2010
14 June 2010
7 October 2010
Issue of C series
certificates
7 January 2011
Issue of D series
Barconsel^
certificates
5 December 2014 Issue of E series
Barconsel^
certificates
26 May 2016
Issue of F series certificates EPP
Forum XXXIV
10 November
Issue of A series
Echo
2010
certificates
7 January 2011
Issue of B series
Barconsel^
certificates
14 October 2011 Issue of C series
Barconsel^
certificates
5 December 2014 Issue of D series
Barconsel^
certificates
26 May 2016
Issue of E series
EPP
certificates
Facilitation of extension
compensation preferred
distribution
Acquisition of properties
* The aggregate consideration paid to EPP by Redefine for the ordinary shares issued on 1 June 2016 was
EUR 260 735 795.28.
#
The aggregate consideration paid to EPP by Echo for the ordinary shares issued on 1 June 2016 was EUR 7 923 052.
^
Barconsel is a subsidiary of Echo. All investment certificates held by Barconsel were transferred to Echo on 18
November 2015.
7.2.
There were no assets acquired or to be acquired out of the proceeds of any issues.
7.3.
The ordinary shares issued to Echo on 17 February 2016 were issued at a price equal to the
company’s net asset value per share, which was considered to represent the fair value for the
company’s shares.
7.4.
Ordinary shares may be issued pursuant to a resolution of the general meeting or of the board
of directors designated for that purpose by a resolution of the general meeting or the articles of
association, which designation shall be valid until the company’s next annual general meeting
or for a period of fifteen (15) months, whichever period is shorter, provided that any such
issue of shares is subject to applicable listing rules (including the JSE Listings Requirements)
and approved by any applicable listing authority (including the JSE) to the extent required.
The board of directors shall be designated by the general meeting, and upon such designation
the number of (ordinary) shares which may be issued (or a maximum percentage of the
company’s issued share capital at the time of the designation that may be issued pursuant to
such authority) will be specified. For details of the general authority to issue shares that is in
place as at the last practicable date, please see paragraph 3.11 of this Annexure 19.
189
8.
9.
STATEMENT AS TO LISTING ON STOCK EXCHANGE
8.1.
The issued ordinary share capital of the company will be listed on the Euro MTF market of
the LuxSE on Tuesday, 30 August 2016.
8.2.
The issued preference share is not listed on any stock exchange and will not be listed on the
LuxSE, JSE or otherwise.
CONVERTIBLE DEBT SECURITIES, EXCHANGEABLE DEBT SECURITIES OR DEBT
SECURITIES WITH WARRANTS ATTACHED
There are no convertible debt securities, exchangeable debt securities or debt securities with warrants
attached in respect of the company.
190
Annexure 20
MATERIAL BORROWINGS
4.
MATERIAL LOANS PAYABLE BY THE GROUP
4.1.
Subsidiary to
which loan has
been advanced
Echo Pasaż
Grunwaldzki Magellan West
spółka z
ograniczoną
odpowiedzialnoś
cią spółka
komandytowa
Galaxy - Projekt
Echo - 106
Spółka z
ograniczoną
odpowiedzialnoś
cią - Spółka
komandytowa
Galeria Kielce Projekt Echo 109 spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
As at the last practicable date, the following material loans made to the company and its subsidiaries remain outstanding:
Type
Lender
Origination
date
Investment loan
in respect of
Pasaż
Grunwaldzki,
Wrocław
BZ WBK SA /
Erste Bank
Investment loan
in respect of
Galaxy, Szczecin
BZ WBK SA /
Erste Bank
2015/12/04
Investment loan
in respect of
Galeria Echo,
Kielce
HSBC
2014/12/22
2015/12/04
Security
1) The joint mortgage over the
properties
2) The registered pledge over all
shares in Borrower and General
Partner
3) The registered pledge over the
set of movables and rights of
Borrower
4) The financial and registered
pledge over all bank accounts
5) The power of attorney to all
bank accounts
6) The assignment of insurance,
lease agreements, property
management agreement, building
contracts (together with any
security interest connected with
them)
7) The subordination of payments
by the subordinated creditors
8) The voluntary submission to
execution
1) The joint mortgage over the
properties
2) The registered pledge over all
shares in General Partner
3) The registered pledge over the
set of movables and rights of
Borrower
4) The financial and registered
pledge over all bank accounts
Interest
3M
EURIBOR,
IRS
Final
repayment
date
2022/12/05
Outstanding
balance of loan
as at the last
practicable
date
(EUR)
Fixed rate
(IRS)
Termination date
of IRS
% of
loan
secured
by IRS
Outstanding
balance of loan
as at the last
practicable
date
(Fixed Rate)
(EUR)
Outstanding
balance of
loan as at
the last
practicable
date
(Floating
Rate) (EUR)
163 528 200
-0.47%
2022/12/05
50%
81 764 100
81 764 100
2016/12/30 (IRS
1, IRS 2, IRS 3)
Between
2016/12/30 and
2022/12/5 (IRS 4)
82%
110 107 825
23 363 975
2019/12/30
72%
70 000 000
27 500 000
3M
EURIBOR,
IRS
2022/12/05
133 471 800
3.5% (IRS 1)
0.7% (IRS 2)
-0.16% (IRS 3)
0.56% (IRS 4)
3M
EURIBOR,
IRS
2019/12/30
97 500 000
0.24%
191
Echo - Galeria
Amber Spółka z
ograniczoną
odpowiedzialnoś
cią - Spółka
komandytowa
Galeria Sudecka
- "Projekt Echo 43" Spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
Galeria Olimpia
- "Projekt Echo 98 " Spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
Veneda "Projekt Echo 97" Spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
Outlet Park Projekt Echo 126 Spółka z
ograniczoną
odpowiedzialnoś
cią spółka
komandytowa
"Centrum
Przemyśl Projekt Echo
118 Spółka z
ograniczoną
odpowiedzialnoś
Investment loan
in respect of
Galeria Amber,
Kalisz
Landesbank
hessen
2016/05/13
Investment loan
in respect of
Galeria Sudecka,
Jelenia Góra
Landesbank
hessen
2016/05/13
Investment loan
in respect of
Galeria Olimpia,
Bełchatów
Landesbank
hessen
2016/05/13
Investment loan
in respect of
Veneda, Łomża
Landesbank
hessen
Investment loan
in respect of
Outlet Park,
Szczecin
Investment loan
in respect of CH
Przemyśl
5) The power of attorney to all
bank accounts
6) The voluntary submission to
execution
7) The assignment of insurance,
lease agreements, property
management agreement, building
contracts (together with any
security interest connected with
them), intra-group loan
agreements
1) The joint mortgage over the
properties
2)The duty of care agreement
3) The financial and registered
pledge over all bank accounts
4)The registered and ordinary
pledge over participation interests
held by General Partner and
Limited Partner in Borrower
5) The registered pledge over all
shares in General Partner
6) The power of attorney to all
bank accounts
7) The assignment of insurance,
lease agreements, property
management agreement (together
with any security interest
connected with them)
8) The subordination of payments
by the subordinated creditors
9) The voluntary submission to
execution
3M
EURIBOR,
IRS
2023/05/15
52 688 004
0.21%
2023/05/15
50%
26 344 002
26 344 002
3M
EURIBOR,
IRS
2023/05/15
33 539 103
0.21%
2023/05/15
50%
16 769 552
16 769 552
3M
EURIBOR,
IRS
2023/05/15
27 518 575
0.21%
2023/05/15
50%
13 759 288
13 759 288
2016/05/13
3M
EURIBOR,
IRS
2023/05/15
22 081 979
0.21%
2023/05/15
50%
11 040 990
11 040 990
Landesbank
hessen
2016/05/13
3M
EURIBOR,
IRS
2023/05/15
39 593 189
0.21%
2023/05/15
50%
19 796 595
19 796 594
Landesbank
hessen
2016/05/13
3M
EURIBOR,
IRS
2023/05/15
3 174 704
0.21%
2023/05/15
50%
1 587 352
1 587 352
192
cią" spółka
komandytowa
"Vousoka
Polska" spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
Farrina
Investments Projekt Echo 124 spółka z
ograniczoną
odpowiedzialnoś
cią spółka
komandytowa
"Echo - Park
Rozwoju"
spółka z
ograniczoną
odpowiedzialnoś
cią spółka
komandytowa
Echo - West
Gate spółka z
ograniczoną
odpowiedzialnoś
cią - spółka
komandytowa
A4 - Business
Park - "Iris
Capital" Spółka
z ograniczoną
odpowiedzialnoś
cią - Spółka
komandytowa
Investment loan
in respect of CH
Bełchatów
Landesbank
hessen
2016/05/13
Investment loan
in respect of
Malta Office
Park, Poznań
Berlin Hyp / ING
2016/05/13
Investment loan
in respect of Park
Rozwoju phase I
and II, Warsaw
Berlin Hyp / ING
2016/05/13
Investment loan
in respect of West
Gate
Berlin Hyp / ING
2016/05/13
Investment loan
in respect of A4
Business Park
phase I-II,
Katowice
Berlin Hyp / ING
2016/05/13
2013/11/27
Oxygen Projekt Echo 125 spółka z
ograniczoną
odpowiedzialnoś
cią spółka
komandytowa
Investment loan
in respect of
Oxygen, Szczecin
Nordea Bank
Polska SA
1) The joint mortgage over the
properties
2) The registered pledge over the
rights of Limited Partner in any
Borrower
3) The registered pledge over all
shares in General Partner
4) The financial and registered
pledge over all bank accounts
5) The power of attorney to all
bank accounts
6) The assignment of insurance,
lease agreements, property
management agreement, building
contracts (together with any
security interest connected with
them)
7) The subordination of payments
by the subordinated creditors
8) The voluntary submission to
execution
9)The pledge of claims of the
Borrowers under the hedging
agreement
1) The joint mortgage over the
properties
2) The registered pledge over all
shares in Borrower and General
Partner
3) The registered pledge over the
set of movables and rights of
Borrower and General Partner
4) The financial and registered
pledge over all bank accounts
5) The power of attorney to all
bank accounts
3M
EURIBOR,
IRS
2023/05/15
6 404 445
0.21%
2023/05/15
50%
3 202 223
3 202 223
3M
EURIBOR,
IRS
2021/06/01
34 200 000
0.21%
2021/06/01
50%
17 100 000
17 100 000
3M
EURIBOR,
IRS
2021/06/01
42 400 000
0.21%
2021/06/01
50%
21 200 000
21 200 000
3M
EURIBOR,
IRS
2021/06/01
21 000 000
0.21%
2021/06/01
50%
10 500 000
10 500 000
3M
EURIBOR,
IRS
2021/06/01
21 600 000
0.21%
2021/06/01
50%
10 800 000
10 800 000
3M
EURIBOR,
IRS
2017/03/27
11 491 724
1.2100%
2017/03/27
91%
10 472 000
1 019 724
193
6) The assignment of insurance,
lease agreements, property
management agreement, building
contracts (together with any
security interest connected with
them)
7) The subordination of payments
by the subordinated creditors
9) The voluntary submission to
execution
ASTRA PARK "Projekt Echo
69" Spółka z
ograniczoną
odpowiedzialnoś
cią - Spółka
komandytowa
Investment loan
in respect of
Astra Park,
Kielce
Echo
2016/05/27
n/a
2021/05/27
Total
5.
2 000 000
n/a
n/a
698 699 9
n/a
n/a
424 443 925
4.2.
The investment loan in respect of Oxygen, Szczecin will be financed by debt at an estimated margin of 2.25% per annum, plus 3 month EURIBOR. At least
50% of the debt will be fixed. The term of the loan will be 3 years.
4.3.
No loans arose from the purchase of assets by EPP or its subsidiaries.
MATERIAL LOANS RECEIVABLE BY THE GROUP
As at the last practicable date:
5.1.
neither EPP nor its subsidiaries have made any loans or other advances to any person;
5.2.
there are no interest and/capital redemption payments in arrears; and
5.3.
there have been no loans furnished to or for the benefit of any director or manager or any associate of any director of manager of the group.
2 000 000
285 747 798
194
Annexure 21
CORPORATE GOVERNANCE STATEMENT
1.
BOARD OF DIRECTORS
EPP’s board considers sound corporate governance practices to be a critical element in delivering
sustainable growth for the benefit of all stakeholders. In conducting the affairs of the company, the board
endorses the principles of fairness, responsibility, transparency and accountability advocated by the
principles of the Code of Corporate Practices and Conduct set out in the King Report on Corporate
Governance (“King III”).
In regularly reviewing the company’s governance structures, the board exercises and ensures effective
and ethical leadership, always acting in the best interests of the company and at the same time concerning
itself with the sustainability of its business operations.
A register of all 75 King III principles and the extent of EPP’s compliance therewith is available on the
company’s website at www.echo-pp.com.
The board of directors consists of 2 executive directors and 9 non-executive directors, 5 of whom are
considered independent according to King III. The chairman, Robert Weisz, is an independent nonexecutive director whose role is separate from that of the chief executive officer (“CEO”).
The non-executive directors are individuals of calibre, credibility and have the necessary skills and
experience to provide judgment that is independent of management on issues of strategy, performance,
resources, transformation, diversity and employment equity, standards of conduct and evaluation of
performance.
The current board’s diversity of professional expertise and demographics make it a highly effective board
with regards to EPP’s current strategies. The board, through the nomination and remuneration
committees, shall ensure that in nominating successive directors for appointment by the general meeting,
the board as a whole will continue to reflect, whenever possible, a diverse set of professional and
personal backgrounds ensuring a clear balance of power and authority so that no one director has
unfettered powers of decision making. The information needs of the board are reviewed annually and
directors have unrestricted access to all company information, records and documents to enable them to
conduct their responsibilities sufficiently.
In terms of the articles of association, one-third of the non-executive directors must be re-elected
annually.
Board meetings will be held at least quarterly, with additional meetings convened when circumstances
necessitate. The board sets the strategic objectives of EPP and determines the company’s investment and
performance criteria, and is in addition responsible for the company’s sustainability, proper management,
control and, compliance, and the ethical behaviour of the businesses under its direction. The board has
established specific committees to give detailed attention to certain of its responsibilities, which operate
within defined, written terms of reference that are capable of amendment by the board from time to time
as the need arises.
The board will establish a formal orientation programme to familiarise incoming directors with the
company’s operations, senior management and business environment, and to induct them in their
fiduciary duties and responsibilities. New directors with no or limited board experience will receive
development and education to inform them of their duties, responsibilities, powers and potential
liabilities.
Directors will ensure that they have a working understanding of applicable laws. The board will ensure
that the company complies with applicable laws and considers adherence to non-binding industry rules
and codes and standards. In deciding whether or not non-binding rules shall be complied with, the board
will factor the appropriate and ethical considerations that must be taken into account.
195
The board will appraise the chairperson’s performance and ability to add value on an annual or such
other basis as the board may determine. The nomination and remuneration committee will appraise the
performance of the CEO and other senior executives, at least annually.
The board as a whole, as well as individual directors, will have their overall performance reviewed on an
annual basis in order to identify areas of concern or improvement in the discharge of its/their functions.
This review will be undertaken by the chairperson and, if so determined by the board, an independent
service provider. An overview of the appraisal process, results and action plan will be disclosed in the
group’s integrated report. Nominations for the re-appointment of a director will only occur after the
evaluation of the performance and attendance of the director.
The board will determine a policy for detailing the procedures for appointments to the board. Such
appointments are to be formal and transparent and a matter for the board as a whole assisted where
appropriate by the nomination and remuneration committee.
The board has approved a charter setting out its responsibilities for the adoption of strategic plans,
monitoring of operational performance and management, determination of policy and processes to ensure
the integrity of the company’s risk management and internal controls, communication policy and director
selection, orientation and evaluation. The group member companies shall adopt the governance
framework, policies, processes and procedures as set by the board in consultation with the directors of its
various subsidiaries.
The board has delegated certain functions to the audit and risk committee, the nomination and
remuneration committee and the investment committee. The board is conscious of the fact that such
delegation of duties is not an abdication of the board members’responsibilities.
2.
AUDIT AND RISK COMMITTEE
The board has established an audit and risk committee comprising Peter Driessen (chairperson), Robert
Weisz and Andrea Steer, all of whom are independent non-executive directors. All of the members are
financially literate.
The committee’s primary objective is to provide the board with additional assurance regarding the
efficacy and reliability of the financial information used by the directors to assist them in the discharge of
their duties. The committee monitors the existence of adequate and appropriate financial and operating
controls and ensures that significant business, financial and other risks have been identified and are being
suitably managed, and satisfactory standards of governance, reporting and compliance are in operation.
In compliance with its oversight role in relation to the preparation of this report, the audit and risk
committee has had due regard to all factors and risks that may impact on the integrity of the integrated
report.
Within this context, the committee is responsible for the company’s systems of internal, financial and
operational control.
The executive directors are charged with the responsibility of determining the adequacy, extent and
operation of these systems. Comprehensive reviews and testing of the effectiveness of the internal control
systems in operation will be performed by management and the property manager and accompanied by
external audits conducted by external practitioners whose work will be overseen by, and reported to, the
audit and risk committee. These systems are designed to provide reasonable, but not absolute, assurance
as to the integrity and reliability of the financial statements, to safeguard, verify and maintain
accountability of the company’s assets, and to identify and minimise significant fraud, potential liability,
loss and material misstatement while complying with applicable laws and regulations. The audit and risk
committee is governed by a charter which was approved by the board.
Due to the size of the company, the board does not consider it to be cost effective to maintain a full-time
internal audit function. The company’s situation and needs in terms of internal audit function will be
reassessed on a yearly basis. The board has mandated the audit and risk committee to initiate internal
audit investigations as and when deemed necessary.
196
The audit and risk committee meets at least three times a year. Executives and managers responsible for
finance and the external auditors attend the audit and risk committee meetings. The audit and risk
committee is responsible for reviewing the finance function of the company on an annual basis.
The audit and risk committee may authorise engaging for non-audit services with the appointed external
auditors or any other practising firm of auditors, after consideration of the following:

the essence of the work to be performed may not be of a nature that any reasonable and informed
observer would construe as being detrimental to good corporate governance or in conflict with that
normally undertaken by the accountancy profession;

the nature of the work being performed will not affect the independence of the appointed external
auditors in undertaking the normal audit assignments;

the work being done may not conflict with any requirement of generally accepted accounting
practice or principles of good corporate governance;

consideration to the operational structure, internal standards and processes that were adopted by the
audit firm in order to ensure that audit independence is maintained in the event that such audit firm
is engaged to perform accounting or other non-audit services to its client base. Specifically:

of these services to the company;

the company may not appoint a firm of auditors to EPP’s systems or processes where such
firm of auditors will later be required to express a view as to the functionality or
effectiveness of such systems or processes; and

the company may not appoint a firm of auditors to provide services where such firm of auditors will
later be required to express a view on the fair representation of information based on the result the
total fee earned by an audit firm for non-audit services in any financial year of the company,
expressed as a percentage of the total fee for audit services, may not exceed 35% without the
approval of the board; and

a firm of auditors will not be engaged to perform any management functions (e.g. acting as curator)
without the express prior approval of the board. A firm of auditors may be engaged to perform
operational functions, including that of bookkeeping, when such firm of auditors are not the
appointed external auditors of the company and work is being performed under management
supervision.
The audit and risk committee may delegate the approval of the appointment of a firm of auditors for nonaudit services to management. Management shall report back on the use of the appointed external
auditors or any other practising firm of auditors for non-audit services at meetings of the audit and risk
committee.
Information relating to the use of non-audit services from the appointed external auditors of the company
shall be disclosed in the notes to the annual financial statements. Separate disclosure of the amounts paid
to the appointed external auditors for non-audit services as opposed to audit services, shall be made in the
annual financial statements.
The audit and risk committee must consider on an annual basis and satisfy itself of the appropriateness of
the expertise and experience of the financial director and the company must confirm this by reporting to
shareholders in its annual report that the audit and risk committee has executed this responsibility. The
audit and risk committee has satisfied itself of the appropriateness of the expertise and experience of the
financial director.
The risk management policy is in accordance with industry practice and specifically prohibits EPP from
entering into any derivative transactions that are not in the normal course of the company’s business.
197
3.
NOMINATION AND REMUNERATION COMMITTEE
The nomination and remuneration committee is comprised of Marek Belka (chairperson), Andrea Steer
and Dionne Hirschowitz, all of whom are independent non-executive directors. The nomination and
remuneration committee’s primary responsibilities are:

to assess, nominate, recruit, nominate for appointment and approve new directors; and

to monitor the remuneration policy of the company and more specifically the executive directors
and ensure that directors and executives are remunerated fairly and responsibly.
The procedure for appointments to the board is formal and transparent, free from any dominance of any
one particular shareholder. Any new appointees are required to possess the necessary skills to contribute
meaningfully to board deliberations and to enhance board composition in accordance with
recommendation, legislation, regulations and best practice.
The committee considers the mix of regular salary remuneration, annual bonuses and incentive elements
that meet the company’s needs. Incentives are based on targets that are stretching, verifiable and relevant.
Remuneration of non-executive directors, who do not receive incentive awards, is reviewed and set by
the committee for ultimate approval by shareholders. The CEO and financial director attend meetings by
invitation.
The committee is mandated by the board to authorise the remuneration and incentivisation of all
employees, including executive directors. In addition, the committee recommends directors’fees payable
to non-executive directors and members of board sub-committees.
The committee’s responsibilities and duties are governed by a charter. The number of meetings held will
be disclosed in the integrated annual report for 2016.
4.
INVESTMENT COMMITTEE
The board has established an investment committee comprised of Marc Wainer (chairperson), Peter
Driessen, Andrew König, Maciej Dyjas, Nebil Senman and Hadley Dean. All of the members of the
committee are experienced investors who have successfully concluded and realised investments in the
property sector, both in Poland and internationally. The committee’s primary objective will be:
(i)
to consider suitable acquisitions, which fit within the company’s business strategy; and
(ii)
to make final decisions regarding acquisitions and disposals to be made by the company, acting
under a delegated mandate from the board;
The investment committee will meet on an ad hoc basis as may be required in order to fulfil its mandate.
The investment committee will report at the company’s annual general meeting how it has discharged its
duties during the financial year to be reported on.
The board of directors will determine the committee’s authority level.
5.
INTERNAL CONTROLS
To meet the company’s responsibility to provide reliable financial information, the company maintains
financial and operational systems of internal control. These controls are designed to provide reasonable
assurance that transactions are concluded in accordance with management’s authority, that the assets are
adequately protected against material losses, unauthorised acquisition, use or disposal, and those
transactions are properly authorised and recorded.
The systems include a documented organisational structure and division of responsibility, established
policies and procedures which are communicated throughout the group, and the careful selection, training
and development of people.
198
The company monitors the operation of the internal control systems in order to determine if there are
deficiencies. Corrective actions are taken to address control deficiencies as they are identified. The board
of directors, operating through the audit and risk committee, oversees the financial reporting process and
internal control systems. There are inherent limitations on the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or overriding of controls.
Accordingly, an effective internal control system can provide only reasonable assurance with respect to
financial statement preparation and the safeguarding of assets.
6.
THE COMPANY SECRETARY
The board of directors have direct access to the company secretary, Rafał Kwiatkowski, who provides
guidance and assistance in-line with the requirements outlined in King III and the JSE Listings
Requirements.
The company secretary will be subjected to an annual evaluation by the board wherein the board will
satisfy itself as to the competence, qualifications and experience of the company secretary.
The company secretary, where necessary, arranges training on changing regulations and legislation and
could involve the group’s sponsors, auditors or organisations such as the institute of directors. The
company secretary is not a member of the board and an arms-length relationship exists between the board
of directors and the company secretary.
The board is satisfied that an arms-length relationship is maintained between the company and the
company secretary through the provisions of a service agreement entered into between the company and
the company secretary which limits the duties of the company secretary to only those related to the
corporate governance of the company and the administration of company documentation.
7.
DIRECTORS’DEALINGS AND PROFESSIONAL ADVICE
The company will operate a policy of prohibiting dealings by directors, the company secretary and
certain other managers in periods immediately preceding the announcement of its interim and year-end
financial results, any period while the company is trading under cautionary announcement and at any
other time deemed necessary by the board.
The board will determine an insider dealings code and establish a procedure for directors, in furtherance
of their duties, to take independent professional advice, if necessary, at the company’s expense. All
directors have access to the advice and services of the company secretary.
8.
COMMUNICATION
It will be the policy of EPP to meet regularly with institutional shareholders, private investors and
investment analysts, as well as to provide presentations on the company and its performance and shall
promote a stakeholder inclusive approach in operating the company.
The board appreciates that shareholder perceptions affect the company’s reputation and in this regard
will establish a policy for the engagement of the company’s stakeholders. The board will encourage
shareholders to attend annual general meetings.
9.
INTEGRATED REPORTING
The group’s annual report and accounts include detailed reviews of the company, together with a detailed
review of the financial results and financing positions. In this way the board seeks to present a balanced
and understandable assessment of the group’s position and prospects.
The group will establish comprehensive management reporting disciplines which include the preparation
of monthly management accounts, detailed budgets and forecasts. Monthly results, the financial position
and cash flows of operating units will be reported against approved budgets and compared to the prior
period. Profit and cash flow forecasts will be reviewed regularly and working capital levels are
monitored on an ongoing basis.
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Sustainability reporting and disclosure shall be integrated with the company’s financial reporting. The
financials will state the company’s positive and negative impacts and detail whatever steps have been
taken to ameliorate the negative impacts. The board will ensure the integrity of the group’s integrated
report.
10.
BUSINESS RESCUE
The board will consider business rescue proceedings or other turn-around mechanisms as soon as the
company is financially distressed. In this regard the board will ensure the company’s solvency and
liquidity is continuously monitored. A suitable practitioner will be appointed in the event that business
rescue is adopted.
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Annexure 22
TAX CONSIDERATIONS
South African Taxation
1.
General
The commentary below is based on the current South African Income Tax law as contained in the Income Tax
Act no 58 of 1962, as amended (“the Act”) and international tax principles. These principles are subject to
change occasioned by future legislative amendments and court decisions. The commentary does not constitute
tax advice and is intended only as a guide on the South African tax treatment of:
• dividend distributions by EPP to South African tax resident shareholders only in respect of those EPP
ordinary shares that are listed on the JSE; and
• the future disposal of the EPP shares by the South African shareholders .
Accordingly, the commentary does not consider the South African tax treatment in the hands of South African
tax resident shareholders who hold EPP ordinary shares that are listed on the LuxSE.
The commentary applies only to South African tax resident shareholders who are the beneficial owners of the
EPP ordinary shares.
We have limited our commentary to cover only South African tax resident shareholders that constitute
individuals and companies.
Prospective investors who are in any doubt as to their tax position, or who own their shares through the
Luxembourg Stock Exchange, or who are subject to tax in a jurisdiction other than South Africa are
strongly advised to consult their own professional advisers.
1.1.
South African income tax considerations on foreign dividends distributions
We summarise the expected South African income tax implications for those individuals and companies holding
shares in EPP that are listed on the JSE upon the receipt or accrual of foreign dividends.
1.1.1.
Individual shareholders
Cash settled foreign dividends received by or accrued to individual shareholders in EPP are exempt from normal
income tax, where such foreign dividends are received or accrued in respect of the EPP shares that are listed on
the JSE.
1.1.2.
Company shareholders
Cash settled foreign dividends received by or accrued to a company that holds shares in EPP are exempt from
normal income tax, if such foreign dividends are received or accrued in respect of the EPP shares that are listed
on the JSE.
1.2.
Imposition of South African dividends tax on foreign dividend distributions
Cash settled foreign dividends paid by a non-resident company in respect of shares that are listed on the JSE are
subject to South African dividends tax at a rate of 15%. As such, South African dividends tax will be triggered
on foreign dividends distributed by EPP in respect of the EPP shares listed on the JSE, but subject to certain
exemptions that may apply, depending on the nature of the shareholder.
1.2.1.
Application to individual shareholders
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Individuals are not exempt from dividends tax, therefore South African dividends tax will be withheld at a rate
of 15% on any foreign dividends paid to the individual shareholders, in respect of the EPP shares listed on the
JSE.
The Netherlands may impose a withholding tax on dividends paid in respect of the EPP shares that are listed on
the JSE at a rate of 15%. This rate may be reduced to 10% in terms of the Double Tax Agreement (“DTA”)
between South Africa and the Netherlands (“SA/Netherlands DTA”), provided certain requirements have been
complied with. Recent case law within the Netherlands may suggest that this withholding tax may be reduced
further, and accordingly we advise that each individual shareholder seeks his or her own tax advice.
Individual shareholders may claim the foreign taxes suffered in the Netherlands as a rebate against the dividends
tax payable in South Africa, subject to meeting certain requirements. The regulated intermediary will be
responsible for imposing the 15% dividends tax and will deduct from the 15% any dividend withholding tax
suffered within the Netherlands.
1.2.2.
Application to company shareholders
South African resident company shareholders are exempt from dividends tax. In order to qualify for the
exemption, the company shareholders would need to submit a declaration and an undertaking (in the form
prescribed by the South African Revenue Service) prior to the date of payment of the dividend.
The Netherlands may also impose a withholding tax on dividends at a rate of 15% on foreign dividends paid to
the South African resident company shareholders in respect of the EPP shares listed on the JSE. This dividends
withholding tax rate may be reduced to 5% in terms of the SA/Netherlands DTA, provided certain requirements
are met.
Recent case law within the Netherlands may suggest that this withholding tax may be reduced further, and
accordingly we advise that each company shareholder seeks its own tax advice.
As foreign dividends payable to the resident company shareholders are exempt from dividends tax, the resident
company shareholders may not claim the foreign taxes paid in the Netherlands as a rebate.
1.3.
Taxation on disposal of the EPP shares listed on the JSE
South Africa taxpayers are subject to tax on their world-wide income including gains and losses on the sale of
any assets, including shares.
The South African tax system distinguishes between the tax treatment of receipts and accruals of a revenue
nature and those of a capital nature. Capital receipts are subject to capital gains tax, while revenue receipts are
subject to normal income tax.
1.3.1.
Tax implications where the EPP shares are held as trading stock
To the extent that the shares in EPP are held for trading purposes, any gains or losses arising from the disposal
of shares will likely be considered revenue in nature and should be subject to South African normal income tax.
Companies are subject to normal income tax at a corporate income tax rate of 28%, whilst individuals are taxed
on a sliding scale. The statutory tax rates for individuals range between 0% and 41%.
However, where the EPP shares were held for a continuous period of at least 3 years, any gains or losses derived
from the disposal of such shares will be deemed to be capital in nature. In which case capital gains tax would be
levied.
1.3.2.
Tax implications where the EPP shares are held for investment purposes
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Receipt or accruals of a capital nature are subject to Capital Gains Tax (“CGT”) at an effective tax rate of 22.4%
for companies (which is the inclusion rate of the gain into taxable income at 80% multiplied by the tax rate of
28%), or 16.4% for individuals (which is the inclusion rate at 40% multiplied by the highest marginal tax rate of
41%).
For individual shareholders, an annual exclusion from capital gains can be applied against any capital gain.
A capital gain or loss is calculated as the difference between the proceeds realised on the disposal of the EPP
shares and the base cost of that asset (i.e. cost incurred). Where the “proceeds”derived from the disposal of the
EPP shares exceed the “base cost”, a capital gain will arise in the hands of the shareholders. However, where the
“base cost”of the EPP shares exceeds the “proceeds”, a capital loss will arise.
In certain instances where a shareholder disposes of the EPP shares on capital account, depending on the facts
and circumstances, such shareholder may rely on the participation exemption from CGT, subject to meeting
very specific requirements. Accordingly, this should be examined on a case by case basis.
Under the SA/Netherlands DTA only South Africa has the right to tax the gains from the disposal of the EPP
shares by South African resident shareholders. Consequently, the Netherlands’right to tax any gains from the
disposal of the EPP shares is restricted.
1.4.
Securities transfer tax implications
Securities Transfer Tax (“STT”) is levied in respect of every transfer of the EPP shares that are listed on the JSE
at the rate of 0.25 per cent of the taxable amount.
When the EPP listed shares are transferred through the agency of or from a member (i.e. a JSE stockbroker) or
when the transfer of the EPP listed shares is effected by a participant (i.e. a person that holds in custody and
administers a listed share), the member or participant will be liable for the STT. That member or participant may
however recover the STT payable from the person to whom the EPP listed shares were transferred.
For the purposes of the calculation of the STT, the taxable amount shall be the following:
• Where the EPP listed shares are transferred through the agency of or from a member (i.e. a JSE
stockbroker), the STT must be calculated on the purchase consideration.
• However, where the transfer of the EPP listed shares is effected by a participant, the STT must be
calculated with reference to the declared consideration. If no consideration is declared or if the declared
consideration is less than the lowest JSE traded price on the date of the transaction, the STT must be
calculated with reference to the closing price on that date.
Dutch Taxation
This summary solely addresses the principal Dutch tax consequences of the acquisition, ownership and disposal
of EPP ordinary shares and does not purport to describe every aspect of taxation that may be relevant to a
particular holder. Tax matters are complex, and the tax consequences of the private placement to a particular
holder of EPP ordinary shares will depend in part on such holder's circumstances. Accordingly, a holder is urged
to consult his own tax advisor for a full understanding of the tax consequences of the private placement to him,
including the applicability and effect of Dutch tax laws.
Where in this summary English terms and expressions are used to refer to Dutch concepts, the meaning to be
attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Dutch concepts
under Dutch tax law. Where in this summary the terms "the Netherlands" and "Dutch" are used, these refer
solely to the European part of the Kingdom of the Netherlands. This summary assumes that EPP is organised,
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and that its business will be conducted, in the manner outlined in this prospectus. A change to such
organisational structure or to the manner in which EPP conducts its business may invalidate the contents of this
summary, which will not be updated to reflect any such change.
This summary is based on the tax law of the Netherlands (unpublished case law not included) as it stands at the
date of this prospectus. The tax law upon which this summary is based, is subject to changes, possibly with
retroactive effect. Any such change may invalidate the contents of this summary, which will not be updated to
reflect such change.
The summary in this Annexure 22, section "Dutch taxation”does not address the Dutch tax consequences for a
holder of EPP ordinary shares who:
(i)
is a person who may be deemed an owner of EPP ordinary shares for Dutch tax purposes pursuant to
specific statutory attribution rules in Dutch tax law;
(ii)
is, although in principle subject to Dutch corporation tax, in whole or in part, specifically exempt from
that tax in connection with income from EPP ordinary shares;
(iii) is an investment institution as defined in the Dutch Corporation Tax Act 1969;
(iv) owns EPP ordinary shares in connection with a membership of a management board or a supervisory
board, an employment relationship, a deemed employment relationship or management role; or
(v)
has a substantial interest in EPP or a deemed substantial interest in EPP for Dutch tax purposes.
Generally, a person holds a substantial interest if (a) such person – either alone or, in the case of an
individual, together with his partner or any of his relatives by blood or by marriage in the direct line
(including foster-children) or of those of his partner for Dutch tax purposes –owns or is deemed to own,
directly or indirectly, 5% or more of the shares or of any class of shares of EPP, or rights to acquire,
directly or indirectly, such an interest in the shares of EPP or profit participating certificates relating to
5% or more of the annual profits or to 5% or more of the liquidation proceeds of EPP, or (b) such
person's shares, rights to acquire shares or profit participating certificates in EPP are held by him
following the application of a non-recognition provision.
Taxes on income and capital gains
Resident holders of EPP ordinary shares
A holder of EPP ordinary shares who is resident or deemed to be resident in the Netherlands for Dutch tax
purposes is fully subject to Dutch income tax if he is an individual or fully subject to Dutch corporation tax if it
is a corporate entity, or an entity, including an association, a partnership and a mutual fund, taxable as a
corporate entity, as described in the summary below.
Individuals deriving profits or deemed to be deriving profits from an enterprise
Any benefits derived or deemed to be derived from or in connection with EPP ordinary shares that are
attributable to an enterprise from which an individual derives profits, whether as an entrepreneur or pursuant to
a co-entitlement to the net value of an enterprise, other than as a shareholder, are generally subject to Dutch
income tax at progressive rates up to 52%.
Individuals deriving benefits from miscellaneous activities
Any benefits derived or deemed to be derived from or in connection with EPP ordinary shares that constitute
benefits from miscellaneous activities by an individual are generally subject to Dutch income tax at progressive
rates up to 52%.
An individual may, inter alia, derive, or be deemed to derive, benefits from or in connection with EPP ordinary
shares that are taxable as benefits from miscellaneous activities if his investment activities go beyond regular
active portfolio management.
Other individuals
If a holder of EPP ordinary shares is an individual whose situation has not been discussed before in this section
"Dutch taxation - Taxes on income and capital gains –Resident holders of EPP ordinary shares", the value of
his EPP ordinary shares forms part of the yield basis for purposes of tax on benefits from savings and
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investments. A deemed benefit of 4% per annum of this yield basis is taxed at the rate of 30%. Actual benefits
derived from or in connection with his EPP ordinary shares are not subject to Dutch income tax.
Corporate entities
Any benefits derived or deemed to be derived from or in connection with EPP ordinary shares that are held by a
corporate entity, or an entity, including an association, a partnership and a mutual fund, taxable as a corporate
entity, are generally subject to Dutch corporation tax.
General
A holder of EPP ordinary shares will not be deemed to be resident in the Netherlands for Dutch tax purposes by
reason only of the execution and/or enforcement of the documents relating to the private placement of EPP
ordinary shares or the performance by EPP of its obligations under such documents or under the EPP ordinary
shares.
Non-resident holders of EPP ordinary shares
Individuals
If a holder of EPP ordinary shares is an individual who is neither resident nor deemed to be resident in the
Netherlands for purposes of Dutch income tax, he will not be subject to Dutch income tax in respect of any
benefits derived or deemed to be derived from or in connection with EPP ordinary shares, except if:
(i)
he derives profits from an enterprise, whether as an entrepreneur or pursuant to a co-entitlement to the
net value of such enterprise, other than as a shareholder, and such enterprise is carried on, in whole or in
part, through a permanent establishment or a permanent representative in the Netherlands, and his EPP
ordinary shares are attributable to such permanent establishment or permanent representative; or
(ii)
he derives benefits or is deemed to derive benefits from or in connection with EPP ordinary shares that
are taxable as benefits from miscellaneous activities performed in the Netherlands.
Corporate entities
If a holder of EPP ordinary shares is a corporate entity, or an entity including an association, a partnership and a
mutual fund, taxable as a corporate entity, which is neither resident, nor deemed to be resident in the
Netherlands for purposes of Dutch corporation tax, it will not be subject to Dutch corporation tax in respect of
any benefits derived or deemed to be derived from or in connection with EPP ordinary shares, except if:
(i)
it derives profits from an enterprise directly which is carried on, in whole or in part, through a permanent
establishment or a permanent representative which is taxable in the Netherlands, and to which permanent
establishment or permanent representative its EPP ordinary shares are attributable; or
(ii)
it derives profits pursuant to a co-entitlement to the net value of an enterprise which is managed in the
Netherlands, other than as a holder of securities, and to which enterprise its EPP ordinary shares are
attributable.
General
If a holder of EPP ordinary shares is neither resident nor deemed to be resident in the Netherlands, such holder
will for Dutch tax purposes not carry on or be deemed to carry on an enterprise, in whole or in part, through a
permanent establishment or a permanent representative in the Netherlands by reason only of the execution
and/or enforcement of the documents relating to the private placement of EPP ordinary shares or the
performance by EPP of its obligations under such documents or under the EPP ordinary shares.
Dividend withholding tax
EPP is generally required to withhold and remit Dutch dividend withholding tax at a rate of 15% from dividends
distributed by EPP, subject to possible relief under Dutch domestic law, the Treaty on the Functioning of the
European Union or an applicable Dutch income tax treaty depending on a particular holder of EPP ordinary
shares’individual circumstances.
The concept "dividends distributed by EPP" as used in this Annexure 22, section "Dutch taxation”includes, but
is not limited to, the following:
- distributions in cash or in kind, deemed and constructive distributions and repayments of capital not
recognised as paid-in for Dutch dividend withholding tax purposes;
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-
-
liquidation proceeds and proceeds of repurchase or redemption of EPP ordinary shares in excess of the
average capital recognised as paid-in for Dutch dividend withholding tax purposes;
the par value of EPP ordinary shares issued by EPP to a holder of EPP ordinary shares or an increase of the
par value of EPP ordinary shares, as the case may be, to the extent that it does not appear that a
contribution, recognised for Dutch dividend withholding tax purposes, has been made or will be made; and
partial repayment of capital, recognised as paid-in for Dutch dividend withholding tax purposes, if and to
the extent that there are net profits, unless (a) the general meeting of the EPP's shareholders has resolved in
advance to make such repayment and (b) the par value of the EPP ordinary shares concerned has been
reduced by an equal amount by way of an amendment to the EPP's articles of association.
Gift and inheritance taxes
No Dutch gift tax or Dutch inheritance tax will arise with respect to an acquisition or deemed acquisition of EPP
ordinary shares by way of gift by, or upon the death of, a holder of EPP ordinary shares who is neither resident
nor deemed to be resident in the Netherlands for purposes of Dutch gift tax or Dutch inheritance tax except if, in
the event of a gift whilst not being a resident nor being a deemed resident in the Netherlands for purposes of
Dutch gift tax or Dutch inheritance tax, the holder of EPP ordinary shares becomes a resident or a deemed
resident in the Netherlands and dies within 180 days after the date of the gift.
For purposes of Dutch gift tax and Dutch inheritance tax, a gift of EPP ordinary shares made under a condition
precedent is deemed to be made at the time the condition precedent is satisfied.
Registration taxes and duties
No Dutch registration tax, transfer tax, stamp duty or any other similar documentary tax or duty, other than court
fees, is payable in the Netherlands in respect of or in connection with the execution and/or enforcement
(including by legal proceedings and including the enforcement of any foreign judgment in the courts of the
Netherlands) of the documents relating to the private placement of EPP ordinary shares, the performance by
EPP of its obligations under such documents, or the transfer of EPP ordinary shares, except that Dutch real
property transfer tax may be due upon an acquisition in connection with EPP ordinary shares of real property
situated in the Netherlands, (an interest in) an asset that qualifies as real property situated in the Netherlands, or
(an interest in) a right over real property situated in the Netherlands, for the purposes of Dutch real property
transfer tax.