poland today business review+ no. 024

No. 024 / 24th February 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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HEALTHCARE British firm McKinlay Development open their first Polish retail park page 11

MANUFACTURING & PROCESSING

Industrial output up by 4.1% in January page 3 Henkel acquires Polish laundry brands from PZ Cussons page 4 EBRD divests PLN 29m stake in Lentex page 5

ENERGY & RESOURCES

Nuclear power tender attracts top global engineering firms page 5

LNG terminal 75% complete, PGNiG to renegotiate Qatar deal page 6

PROPERTY & CONSTRUCTION PHN finds partners for two key projects page 6

SERVICES & BPO

Hospitality group Orbis signs franchise partners for two new Mercure & ibis hotels page 7 Best Western's 4th hotel in Kraków is under construction page 8

TRANSPORT & LOGISTICS

Industrial property market breaks new records in 2013 thanks to Amazon's entry page 9 SEGRO pays EUR 100m for three logistics centers in Poland page 11

CONSUMER GOODS & RETAIL

Carrefour building new centre in Sochaczew page 12 Capital Park breaks ground on retail park in Łódź page 12

FOOD & AGRICULTURE

African swine flu cases confirmed in Poland, Russia imposes imports ban page 13

POLITICS & ECONOMY

Opposition party PiS strengthens lead over PO, announces new political platform page 14

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 15-17

Protests in Kiev turned bloody last week with close to 90 people killed. Photo: Mstyslav Chernov CC

Ukraine: revolution across the borderUkraine: revolution across the borderUkraine: revolution across the borderUkraine: revolution across the border Poland watched with great concern the violent political turmoil in Ukraine, which led to President Viktor Yanukovych's hurried getaway from Kiev. With transitional administration in place and new elections scheduled for May, Ukraine is entering a pe-riod of uncertainty that may determine its relationship with Russia and the West for many years to come. page 2

Single ticket price: 1,150 PLNEarly bird registration: 950 PLN (till end-February)

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Conference: Primetime Warsaw 2 Developing a sustainable European metropolis3 April 2014, Conference Center Muranów, The Museum of the History of Polish Jews

LEAD SPEAkErS:

• Keynote: Mrs Elżbieta Bieńkowska, Deputy Prime Minister & Minister of Infrastructure and Development

• Professor Hanna Gronkiewicz-Waltz, Mayor of the City of Warsaw

• Professor Sven Bienert, MrICS, Professor of Sustainable real Estate at the University of regensburg and ULI Sustainability Fellow (Europe’s leading expert in the financial implications of sustainable development)

ToPICS:

• Infrastructural and Social Challenges for Warsaw within the new European Funds Perspective 2014-2020

• Wola & Praga: two of Warsaw’s most dynamic districts, soon to be joined by the 2nd metro line

• Cutting away the ‘green’ Pr fluff: what are the financial results and implications of sustainable development?

• Can Warsaw come up with a comprehensive ‘high street retail’ plan?

• Trends & issues in the office and retail sectors

• The art of Placemaking: creating attractive public spaces in and around commercial properties

Building on the success of our first conference about Poland's capital, we bring you all the major issues and opportunities, in Central Europe's pre-eminent city.

Patrons Partnersorganizing Partner

weekly newsletter # 024 / 24th February 2014 / page 2

POLITICS & ECONOMY

Crisis in Ukraine: Crisis in Ukraine: Crisis in Ukraine: Crisis in Ukraine: Poland Poland Poland Poland facesfacesfacesfaces political political political political turmoil on its doorstepturmoil on its doorstepturmoil on its doorstepturmoil on its doorstep

The political turmoil in Ukraine was the number one topic in Polish media last week, with Poland playing an active part in negotiations between the opposition protesters and pro-Russian President Viktor Yanukovych, who abandoned the capital Kiev on Sat-urday after several days of bloodletting that claimed 88 lives, according to data from the Ukrainian Health Ministry. Yanukovych enraged much of the population by turn-ing away from the European Union to cultivate closer relations with Russia three months ago. Last week, the protests in central Kiev turned bloody with security forces opening fire on demonstrators, who responded with stones and Molotov cocktails. After days of street battles during which police snipers gunned down pro-testers, on Friday Yanukovych made sweeping con-cessions in a deal brokered by Polish Foreign Minister Radosław Sikorski and his French and German coun-terparts. But the deal, which called for early elections by the end of the year, was not enough to satisfy pro-Europe demonstrators on Independence Square. On Saturday, Ukraine's parliament voted to remove President Viktor Yanukovich and freed his arch-rival Yulia Tymoshenko from jail. The vote came after po-lice stopped guarding presidential buildings, allowing protesters in, and parliament made new high-level ap-pointments. Mr. Yanukovych said it was a "coup" and vowed not to stand down. His whereabouts were un-known at the time this edition of Poland Today BR+ went to press. Although an early election was set for

25th May, Ukraine's future is far from certain, as the country remains torn between Europe and Russia. The Ukrainians seem to have thrown a wrench into Rus-sian President Vladimir Putin's dream of creating a new Eurasian Union, of which Kiev were to become the key member, yet Moscow is unlikely to give up without a fight. Russian Foreign Minister Sergei Lavrov said "illegal extremist groups are refusing to disarm and in fact are taking Kiev under their control with the connivance of opposition leaders."

At 8pm on Friday, Polish people lit candles all across the country as an act of solidarity with all the victims of Ukraine's bloodshed. The presidential Palace in Warsaw (pictured above) was also illuminated for the event. Photo: Ł. Kamiński www.prezydent.pl The unrest in Ukraine prompted all sides in Polish politics to unite to try to help the protesters in their eastern neighbor. The Poles were treated to the highly unusual sight of Prime Minister Donald Tusk and Jarosław Kaczyński, leader of the main opposition party Law & Justice (PiS), applauding each other’s speeches in the parliament. Mr. Tusk chaired a meet-ing of members of all the major political parties as well as former president Aleksander Kwaśniewski and former prime minister Jerzy Buzek. They agreed that Poland should try to provide humanitarian aid to

Ukraine and even to offer hospital beds to the injured and to accept refugees, among a series of policies dis-cussed. Building independent Ukraine As it looked to build the foundations for stability, transparency and good governance on its border, a few years ago Poland, along with Sweden, established the European Union's Eastern Partnership program, which aimed to strengthen ties with countries such as Ukraine in the bloc’s post-communist neighborhood. It was under the auspices of that program that Poland had pushed for the EU to solidify ties with Kiev through an association and free trade deal. But Russia, which sees Ukraine as a critical geopolitical prize that must remain within its sphere of influence, scuppered the deal, and offered USD 15bn in loans. Officially, the loans came with no strings attached, though most Russia-watchers fear there was an un-spoken deal that in return the Yanukovych regime would move Ukraine toward signing an agreement to join Russia’s own trading bloc, the Customs Union, putting it firmly in the Kremlin's grasp. With Yanukovych ousted, and Tymoshenko back in the game, pro-Western forces seem to be back in charge in Ukraine, but strong pro-Russian sentiments prevail in parts of the country, which could end up splitting into two or even three parts, according to the most pessi-mistic scenarios. Setting herself immediately on a col-lision course with Moscow, Tymoshenko said she was sure her country would join the European Union in the near future. Her release was welcomed by Wash-ington. Ukraine is right next door, and any prolonged unrest there could have drastic effects for Poland, both politi-cal and economic. Pipelines that carry fuel critical to the Polish economy, namely Russian oil and natural gas, travel through Ukraine. The taps could be turned off if Moscow decides it is in its interest to exert pres-


sure on Warsaw. Russia has shown its willingness to resort to such methods time and again – cutting off gas to Ukraine in the winter or even banning meat or vege-table imports from Poland during political disputes. Any further escalation could also negatively impact the Polish currency and exports. "As the situation in Ukraine continues to escalate, market jitters have spread to other Central and East European markets. Hence, it is not only the Russian ruble that has been under pressure: we have also seen some pressure on the Polish zloty, the Hungarian for-int and the Romanian leu. In our view, the biggest di-rect risk if geopolitical escalates further is to the zlo-ty," Danske Bank analysts wrote in a commentary last Thursday. Experts talk to Poland Today about the situation in Ukraine and its con-sequences for Poland: Eugene Chausovsky, Analyst for Eurasia at Stratfor "The crisis in Ukraine has a significant impact on Po-land, given that Ukraine's foreign policy orientation is of tremendous significance to Poland. Poland has been one of the outspoken leaders of bringing Ukraine clos-er to the EU, and along with Sweden initiated the EU’s flagship Eastern Partnership program. It is this pro-gram which brought Ukraine very close to signing the key Association and Free Trade Agreements with the bloc, and it was Ukrainian President Viktor Yanukovych's last minute U-turn on these deals in late November that precipitated the demonstrations in Ukraine. The protests quickly took on a general anti-government nature, and now we see the possibility of significant changes to the government in the form of a new parliament, changes to the constitution with di-

minished presidential powers, and early presidential elections. Poland could therefore stand to benefit if a new government in Kiev takes on a more EU-friendly position. However, such a government would be at odds with Russia, which remains a key actor in Ukraine in the political, economic, and security realms. This would create a more unstable and dynam-ic situation in Ukraine, and would likely intensify ten-sions between Russia and the EU, to include Moscow’s bilateral relationship with Warsaw." Ievgen Vorobiov, Analyst at the Polish Institute of In-ternational Affairs; Ukraine, Russia and Eastern Europe expert "We have to put this crisis into perspective. Almost 10 years ago during the Orange Revolution [of 2004-2005] Ukrainians were also calling for greater legiti-macy in their government. Poland was very active through its president at the time, Aleksander Kwaśniewski. And Poland was successful in helping the Orange Revolution to bring about free elections. But this time is also very different: there has been much more violence. Poland, nevertheless, took a similar position. It wanted a solution that would in-clude all of the players. It was working to bring the au-thorities and rebels together in compromise. This is where Poland used its experience, based on its trans-formation 25 years ago. Russia's approach this time around was very different. It has been much less willing to contribute to peaceful negotiations. It is now simply trying to push the West out of Ukraine. Poland, on the other hand, is trying to make sure that Russia does not simply impose its will. And there we see a difference in the Polish approach: it has been more outspoken, more explicit about Rus-sia meddling in Ukrainian affairs. If Poland and the West had not acted, it would have allowed Russia to tighten its grip on Ukraine – and that would have been

a threat to democracies in the EU. Russia’s support for undermining democracy in its neighborhood is half the problem; the other half is governance and corrup-tion. Russia has shown, through energy conflicts with Ukraine, that it is willing to use its economic power to exert political pressure. A tighter Russian grip on Ukraine would untie Russia's hands in the EU's east-ern members, including Poland, by using energy, trade and military capacities as pressure tools."


Industrial output Industrial output Industrial output Industrial output up by up by up by up by 4.1% in January4.1% in January4.1% in January4.1% in January

Poland's industrial output increased by 4.1% y/y in January vs. 3.5% y/y growth expected in the PAP Polish news agency consensus survey, as production increased 2.9% from the prior month, the Central Sta-tistical Office (GUS) said last week. The seasonally ad-justed figure was up by 6.3% y/y on a 2.3% monthly in-crease – the best result since the beginning of 2012. According to GUS data, 24 out of 34 industries record-ed y/y growth, mainly the sectors with significant ex-posure to foreign markets. The biggest increase, by 16.2%y/y, was seen in furniture production. On the flipside, however, construction and assembly output disappointed with January's contraction by 3.9% y/y being way below market consensus (1.3% y/y). The decline was mainly due to poor performance of civil engineering firms, which reported a 10.1% drop in output. "Taking into account the negative working day effect in January, the growth rate of output has to be inter-preted as a very good result. This is an optimistic fore-cast for the upcoming months, when we are expecting


further acceleration of output, supported by both ex-ternal demand and recovering domestic demand. The-se statistics are in line with our scenario of gradual re-bound in the domestic economy," BZ WBK's chief economist Maciej Reluga wrote in a commentary.

Industrial output & producer prices

-12%

-8%

-4%

0%

4%

8%

12%

May12

Jul12

Sep12

Nov12

Jan13

Mar13

May13

Jul13

Sep13

Nov13

Jan14

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS, the central statistical office

PPI inflation amounted to -0.9% y/y in January (vs. -1.0% y/y in December after revision), which was slightly below market expectations (-0.8% y/y). In monthly terms, producer prices increased by 0.1%. "We are expecting a slight rise of PPI in the upcoming months, but this gauge will still be running at low lev-els, reflecting the weakness of inflationary pressure," BZ WBK analysts said.


Henkel acquires Polish Henkel acquires Polish Henkel acquires Polish Henkel acquires Polish laundry branlaundry branlaundry branlaundry brands from ds from ds from ds from PZ Cussons PZ Cussons PZ Cussons PZ Cussons

Following a green light from Poland's competition watchdog UOKiK, German chemical giant Henkel has finalized the acquisition of Polish laundry and home care brands from the UK-based consumer products company PZ Cussons Plc. The EUR 53.5m deal was signed in February 2013 but the regulators took their time investigating its potential impact on the Polish market. The transaction includes predominantly "E" branded detergents and fabric softeners, as well as a handful of other smaller brands such as IXI and Kokosal, most of them quite popular locally as legacy of the communist-era producer Pollena, which became part of PZ Cussons. The business operates mainly in Poland but also includes activities in Russia and other Central Eastern European countries. The acquisition is in line with Henkel's global strategy to further develop its three business sectors (laundry & home care, beauty care, adhesive technologies), the company said. In fis-cal year 2012, the brands acquired from PZ Cussons generated sales of around EUR 60m. UOKiK's approval is not unconditional, however, as the cartel protection office demanded Henkel divest its laundry detergent brand Rex in Poland, in order to preserve fair competition. In the latest edition of its Polish brands ranking the daily Rzeczpospolita valued the "E" brand at some PLN 65m (+43% y/y), whereas the Rex brand was worth PLN 14.1m (-9% y/y).

"The transaction strengthens the bond between Hen-kel and our Polish customers. We are ready to include the new brands into our product range. We under-stand and will support UOKiK's decision that seeks to ensure free competition on Poland's detergents mar-ket," commented Markus Raunig, managing director of Henkel Polska's washing and cleaning products de-partments.

The popularity of "E" and other brands acquired by Henkel date back to the communist times when they used to be made by state-owned Pollena Wrocław. Image: PZ Cussons

PZ Cussons, which operates in Europe, Asia and Afri-ca, said it was selling the home care brands as a result of restructuring the business to focus solely on the personal care category. Founded in 1879 as a trading post in Sierra Leone, the British-owned company ex-panded its operations throughout Africa before acquir-ing Cussons Group in 1975 and launching operations in Thailand and Indonesia. In 1993 PZ bought the state-owned Pollena Wroclaw in Poland, followed in 1995 by Pollena Uroda in Warsaw. The company has since discontinued production in Warsaw. In 2011 PZ Cussons turned over GBP 958.9mm and posted a net


income of GBP 38m, with a global workforce of 11,000. Established in 1876, Germany's Henkel is a much larg-er player, operating across home and personal care products as well as adhesives, sealants & surface treatment for consumer and industrial purposes. With a turnover of EUR 16.5bn in 2013, the German giant employs 47,000 staff worldwide, including some 1,000 in Poland. To an average Polish consumer, Henkel is best known for its Persil, Perwoll, Silan, Schwarzkopf, Fa and Syoss brands. Henkel's Ceresit brand is a strong player in the building adhesives segment. Their Polish unit, Henkel Polska, posted a net profit of PLN 98m on PLN 1.82bn worth of revenues in 2012. The company has seven production centers focusing on building adhesives (Stąporków, Wrząca, Dzierżoniów), surface treatment technologies (Bielsko-Biała, Tychy), automotive sealants and adhe-sives (Ciechanów) and laundry detergents (Racibórz). Last year Henkel relocated washing detergent produc-tion from its factory in Vienna to Racibórz. Besides the production plants, the company has a logistics center for adhesives in Żerniki and a center for excellence for building products in Stąporków. In its current strate-gy, announced in late 2012, Henkel lists Poland as one of its key growth markets.


EBRD divests PLN 29m EBRD divests PLN 29m EBRD divests PLN 29m EBRD divests PLN 29m stake in Lentexstake in Lentexstake in Lentexstake in Lentex

The European Bank for Reconstruction and Develop-ment (EBRD) has sold its 5.63% stake in Polish PVC floor covering maker Lentex to institutional investors, via an accelerated book building, announced the Lon-

don-based institution. The sale was finalized before the opening of the Warsaw Stock Exchange on 18th February, and was completed at a discount on the pre-vious day’s closing price at PLN 8.15 apiece. The total sale comprised 3.55m shares. The EBRD invested PLN 13.5m in Lentex back in De-cember 2011 to help the company acquire Gamrat, a construction materials manufacturer which was pri-vatized by the State Treasury. According to its prelim-inary unaudited results Lentex posted a net profit of PLN 15.6 on PLN 167m turnover last year, whereas the respective results for Gamrat came to PLN 23.4m and PLN 242.1m. Consolidated full-year results for the Lentex group are not yet available. "We are very pleased with the results and performance that the management of Lentex has achieved. After the successful restructuring and post-merger integration of the group, the time has come to sell our stake and provide other investors with the opportunity to partic-ipate in Lentex's future success.," commented Frederic Lucenet, EBRD Director, Manufacturing and Services.

ENERGY & RESOURCES

Nuclear power tender Nuclear power tender Nuclear power tender Nuclear power tender attracts attracts attracts attracts top top top top global global global global engineering engineering engineering engineering firmsfirmsfirmsfirms

A number of global giants are competing for the con-tract to provide owner's engineer services to PGE EJ1, the nuclear power subsidiary of Poland's top energy utility PGE. The company has received four bids and hopes to name the winner in Q3 2014, PGE EJ1 said last week. The bids were filed by: AMEC Nuclear UK Ltd, Exelon Generation Company, LLC, a consor-tium of Mott MacDonald Limited with AF-Consult

Ltd. and a consortium of URS Polska sp. z o.o. with Tractebel Engineering S.A. Back in 2011 PGE EJ1 had been hoping to pay no more than PLN 1.25bn for the owner's engineer services un-der a 10-year contract, but now it looks like the final bill will almost certainly prove higher. The lowest bid (from AMEC Nuclear) came to PLN 1.6bn, while the highest (by Exelon) topped PLN 3.8bn. Since all bids were considerably higher than PGE EJ1's budget, the company may choose to repeat the tender, but a final decision will be taken following detailed assessment of the submitted offers.

Energy generation in Poland in 2035 By source, government plans

Gas11%

RES*14%

Nuclear36%

Coal39%

Source: PGE *) renewable sources

The government had entrusted the country's top pow-er utility PGE with the task of developing two nuclear power units ( 3,000 MW each) over the coming two decades. The construction of the first power plant is expected to be begin around 2019 and go online in 2024, at an estimated cost of PLN 40-60bn. The se-cond power plant is planned for 2035. According to plans, by 2035 nuclear power plants are to generate 36% of the country's electricity. At the same time, coal-fired stations are to see their share drop from 84% as of end of 2012 down to 39% in 2035.


Following the recent adoption of a national nuclear energy strategy (see PT Business Review+ No. 021 page 4), the government will begin the search for stra-tegic partners, hoping to be able to name them, along with the plant's precise location, by the end of 2016. Last year, PGE awarded a PLN 252m contract for as-sistance in the delivery of Poland's first nuclear power plant to WorleyParsons, a major Australian provider of professional services to the energy, resource, and complex process industries.

ENERGY & RESOURCES

LNG terminal 75% LNG terminal 75% LNG terminal 75% LNG terminal 75% complete, PGNiG to complete, PGNiG to complete, PGNiG to complete, PGNiG to renegotiate Qatar dealrenegotiate Qatar dealrenegotiate Qatar dealrenegotiate Qatar deal

Poland's first LNG terminal in Świnoujście is 75% complete and will be ready by the end of 2014, the Prime Minister's office announced in mid-February. According to earlier plans, the project, which is of strategic importance for Poland's energy security, were to reach completion in mid-2014, but the Saipem-Techint-PBG consortium has been given an additional six months to deliver the facility. The terminal will allow for importing 5bn cubic me-ters of liquefied natural gas annually (more than a third of Poland's annual consumption), with a possibil-ity of increasing the capacity to 7.5bn cubic meters. The running of the plant, which will significantly re-duce Poland's dependence on Russian gas imports, will be managed by the national gas network operator Gaz System through the company Polskie LNG. The construction of the Świnoujście terminal will cost state-controlled Polskie LNG a total of about PLN 3bn. Another PLN 4.5bn is expected to be spent on all the related infrastructure.

Recently, construction efforts have focused on the terminal's LNG storage tanks – the assembly and welding of internal tanks made of special nickel sheets, and the completion of the assembly of roof bridge steel structures for the installations on both tanks, accord-ing to the statement. In the offshore part, the assembly of LNG pipelines continues and pressure-testing of steel pipelines has begun. In a separate statement, the Chancellery of the Prime Minister said that Poland’s government has approved an amendment to the so-called special act on invest-ments related to the LNG regasification terminal in Świnoujście and to property management. The new regulations will make it possible to step up efforts re-lated to the construction of new gas pipelines and modernization of old ones. This will enable Poland to create of functional and integrated gas infrastructure that will make the Świnoujście LNG terminal accessi-ble to recipients located in any part of the country.

The LNG terminal in Świnoujście is to reach comple-tion in December this year. Image: Polskie LNG The creation of gas transmission infrastructure will enable Poland to import significant amounts of gas from suppliers other than Russia, which currently

provides close to two thirds of Polish gas. As part of the ongoing efforts aimed at improving its energy se-curity, Poland seeks to integrate the domestic trans-mission system with those of neighboring countries (see more on that in PT Business Review + No. 022 page 5). Particular focus has been placed on the north-south pipeline and the integration of connections in the Baltic Sea region. These connections, together with the expansion of the LNG terminal and the na-tional transmission network, are to create a common regional gas market. The first supplier of LNG to Świnoujście will be Qatargas, under an agreement signed in 2009, which stipulates that starting from July 2014 the Qatari com-pany is to deliver 1m cb.m of the fuel annually over a period of 20 years. However, Poland's natural gas gi-ant PGNiG said last week it would seek to renegotiate the deal with Qatargas. PGNiG would like to resched-ule the timetable of future deliveries, as well as the price of the Qatar gas, because of the delayer comple-tion of the terminal as well as significant drop in global gas prices over the past years. The prices in the initial agreement, while competitive five years ago, are now seen as too steep. "I think that within the next 2-3 months we will have negotiation scenarios ready," PGNiG CEO Mariusz Zawisza told the MPs last week.

PROPERTY & CONSTRUCTION

PHN finds partners for PHN finds partners for PHN finds partners for PHN finds partners for two key projectstwo key projectstwo key projectstwo key projects

The Warsaw-listed, state-controlled real estate group Polski Holding Nieruchomości S.A. (PHN), has found partners for another two of its key projects, a warehouse complex near Warsaw and a waterfront mixed-use complex in Gdynia. Letters of intent with


the potential partners, whose names remain undis-closed, were signed in mid-February. The investment site PHN has designated for the War-saw industrial complex is located in Parzniew near Pruszków, close to the Konotopa and Pruszków junc-tions on the A2 Berlin-Warsaw highway, an area that is particularly popular with logistics tenants. Accord-ing to PHN's CEO Artur Lebiedziński, the site had been attracting attention of potential tenants even be-fore a joint-venture partner for the project was found. PHN said its partner is an internationally renowned developer specializing in industrial and warehouse properties. The two parties are to hammer out details of the project. On a similar project in Wrocław (SEGRO Industrial Park Wrocław with a planned space of 40,000 sq.m), PHN's joint venture partner is the British developer SEGRO.

An artist's impression of PHN's Port Rybacki, a wa-terfront project the company seeks to develop with a partner in Gdynia. Image: PHN The Gdynia site is an artificial pier located in the cen-tre of Gdynia, on the Baltic coast, directly next to the landmark Sea Towers residential complex and Gemini shopping center. According to local zoning plans, the site can be used to develop some 70,000 sq.m of com-mercial space and 120,000 sq.m of residential space. PHN and its partner are to prepare detailed documen-tation for the investment. Although rather laconic, PHN's announcements are important given the government's ongoing efforts to

sell its remaining 73% stake in PHN by mid-2014. A virtual data room containing information about the company and current asset valuation is available to po-tential investors interested in the venture. PHN was created in 2011 when the Polish government pooled together some 180 different real estate and land holdings, to raise funds to help it reduce borrowing. In October last year PHN sealed a joint venture agree-ment with Germany's Hochtief Group for its flag-ship development, the office tower on 36 Świętokrzyska St., vis-à-vis Warsaw's most prestigious office project Rondo 1. The two partners are to create a 50/50 SPV, with PHN contributing one of Warsaw's most attractive sites, and Hochtief Development Po-land taking on responsibility for the overall implemen-tation of the project. According to PHN's preliminary plans, the building were to reach some 150m in height and 45,000 sq.m in GLA, but all final details, both fi-nancial as well as architectural, are yet to be ham-mered out together by the two companies. PHN rep-resentatives told Poland Today they are in the process of selecting the most suitable design for the planned office complex, with Hochtief being responsible for coordinating all preparatory work. According to property consultancy CBRE, PHN's portfolio comprising 171 properties, including 123 built-up areas with office, retail, residential, hotel and industrial buildings and 48 investment sites (over 1,100 ha) throughout the country was worth PLN 2.2bn as of end of 2013. PHN has been listed on the Warsaw Stock Exchange since 13 February 2013. Its net earnings came to PLN 96.6m in Q1-Q3 2013.

SERVICES & BPO

Hospitality group Hospitality group Hospitality group Hospitality group OrbisOrbisOrbisOrbis signs franchise signs franchise signs franchise signs franchise partnerspartnerspartnerspartners for two new for two new for two new for two new Mercure & ibis hotels Mercure & ibis hotels Mercure & ibis hotels Mercure & ibis hotels

Poland's leading hotel operator, the French-owned Orbis Hotel Group has signed franchise agreements for new hotels in the northern Polish town of Grudziądz as well as Lithuania's Marijampole, Orbis' Katarzyna Gronek informed Poland Today. The first ibis Styles hotel in Grudziądz. will open in Q4 2014 of-fering more than 80 modern rooms, restaurant and conference facilities. Orbis is part of Accor, Europe's number one hotel op-erator with 3,600 hotels and more than 460,000 rooms across 92 countries. The group entered Poland in 1973 through Novotel franchise with Orbis in which it be-came a majority shareholder 35 years later. Ibis Styles is the non-standardized arm of Accor's economy um-brella brand ibis, which includes also ibis Budget and ibis. There are 233 ibis Styles hotels (21,000 rooms) in 22 countries worldwide. In August last year, Orbis signed a franchise agreement for a new ibis Styles ho-tel in the southern Polish town of Nowy Sącz, to be developed by a local investor. With 57 rooms, the three-star property will open in Q4 2014 as the first hotel in Nowy Sącz belonging to an international chain. The Orbis Hotel Group manages 61 hotels in Poland and two in Lithuania with 11,500 rooms under the ibis, ibis Budget, Mercure, Novotel, Sofitel and Orbis Ho-tels brands. In 2010 Orbis adopted an asset-light strat-egy, which prioritizes the company's role as a hotel


operator and bets on expansion via management and franchise agreements, striving for higher efficiency and focusing on hospitality as its core business. Hence, Orbis has been gradually restructuring its asset portfo-lio, seeking ways to refinance certain real properties with the help of long-term investors. Most of the group's new hotels are being developed under Mercure and ibis Styles conversion brands, which Orbis sees as best fitting the franchisee market. The French group is tempting potential partners with its dominant market position, booking system that gener-ates close to a half of hotel revenue in Europe, 250-strong global sales force and loyalty program which boasts 8.5m members worldwide including 160,000 in Poland. Orbis has so far signed 18 franchise agree-ments of which eight in 2013.

The new ibis Styles in Grudziądz will offer 80 rooms. Image: Orbis

Besides the two existing hotels in Lithuania, Orbis has signed agreements from another two Mercure proper-ties in the Baltics, one in the Latvian capital of Riga, and the other in the Lithuanian town of Marijampole. The four star Mercure Riga Centre, located in a histor-ic building in the centre of the Latvian capital, rede-veloped by a Ukrainian investor, is to open in the first

half of 2014 offering 143 rooms. Mercure Marijampole, with 47 rooms and well-equipped conference facili-ties, will join the Accor network on 1st April 2014. "Latvia and the remaining two Baltic states are among Europe's fastest growing economies at the moment. We want to have 1-2 properties in each of those coun-tries, under management or franchise agreements," Laurent Picheral, CEO of Orbis Group, said a few months ago. Orbis is also working on a Mercure hotel in Bydgoszcz, which is to open by mid-2014 with 90 rooms as well as Mercure/ibis Styles combo in Sosnowiec. Last year saw the opening of a Novotel hotel in Łódź, while in 2012 Orbis launched ibis and ibis Budget Reduta in Warsaw as well as a similar double project in Krakow, alongside an ibis hotel in the Lithuanian city of Kau-nas. The Warsaw-listed Orbis turned over PLN 671.5m in 2013 (down from PLN 688m in 2012, in like-for-like terms), while its EBITDA came to PLN 199.1m (vs 204.7m in 2012). Average revenue per room dropped 4.6% last year, down to PLN 124.1, while room occu-pancy rose by three percentage points and topped 58.8%. The company has recently embarked on a PLN 100m investment program, seeking to upgrade some of its key properties by the end of 2014. Some 90% of the total amount is to be spent in Warsaw, where Orbis operates 11 hotels. The combined price tag on the on-going makeovers of Mercure Warszawa Centrum, Novotel Warszawa Centrum, and Sofitel Victoria War-szawa is PLN 75m. Total capital expenditures in 2013 came to PLN 95m and included also substantial out-lays on IT.

SERVICES & BPO

Best Western's Best Western's Best Western's Best Western's 4th 4th 4th 4th hotel in Krakówhotel in Krakówhotel in Krakówhotel in Kraków is is is is under constructionunder constructionunder constructionunder construction

The global hospitality chain Best Western has se-cured its fourth location in Kraków. The investor, Po-land's Grupa Dobry Hotel, has just broken ground on the four-star property that is scheduled to open by the end of the year as Best Western Plus Q Hotel. With 154 rooms and three conference rooms, the project will be located close to the historic city centre as well as Kraków's brand new ICE convention centre, which will likewise reach completion in 2014. The Kraków project is the 5th property Grupa Dobry Hotel has chosen to open under the Best Western logo, and a second one that belongs to the chain's mid-range "Plus" segment. The Polish developer seeks to open more business hotels with the "Q" mark in Poland's largest cities. The first Best Western Plus Q Hotel, with 127 rooms, is currently under construction in Wrocław. "We have a total of 20 properties operating under the Best Western, Best Western Plus and Best Western Premier brands in Poland. Several contracts are under advanced negotiations and soon we should have more news for the market. We are on track to have 50 con-tracts signed by the end of 2015," Gheorghe Marian Cristescu, Best Western country sales director for Po-land tells Poland Today. "We are securing contracts for new destinations as well as cities like Warsaw or Katowice were we are already present." Prior to joining Best Western in April 2012, Mr. Cristescu had been working in the Polish hospitality


market for over a decade, previously as a national sales director in Poland's leading hospitality group Orbis, subsidiary of France's Accor.

Best Western Plus Q Hotel will open this year close to Kraków's new convention centre. Image: Best Western Last year the chain added properties in Gdańsk, Lu-blin, Kraków, Piotrków Trybunalski and Modlin. Be-sides the aforementioned openings of Best Western Plus Q hotels in Wrocław and Kraków, the coming months will see the launch of a brand new 3-star hotel in Opole (30 rooms) as well as a 3-star Best Western Petropol in Płock (84 rooms), a conversion of a former Orbis property. The chain's expansion in Poland is being managed by BW Hotels Osuuskunta, also known as Best West-ern Hotels Finland, Baltic States and Poland - the affil-iate office of Best Western International responsible for the brand and hotel services in the region. Alt-hough until 2012 Finland, with 16 hotels, had been the largest market for BW Hotels Osuuskunta, the balance has since shifted to Poland, which will continue to fuel the chain's growth in the region for years to come. Founded in 1946 Best Western is the world's biggest hotel chain. All of its hotels are independently operat-ed and owned by private investors. All facilities be-

longing to the chain share the same quality and cus-tomer service standards as well as sales and marketing programs.

DATA BOX: KRAKÓW HOSPITALITY MARKET IN 2013

Kraków's branded hotels as well as the non-flagged

products had a very good year. The number of leisure

stayovers as well as the BPO driven corporate room

nights are making Kraków one of the most visited cit-

ies in Poland year round. Occupancy levels in the 4

star segment was circa 73% at an ADR of EUR 71. 5

star hotels fared well with occupancies reported at the

level of circa 74% with a year-end ADR of EUR 94. The

only hotel completed in 2013 was the PURO hotel of-

fering 138 rooms. Investments currently under con-

struction include the Hilton Garden Inn at the Balice

Airport and the DoubleTree by Hilton and Hampton by

Hilton. What is more, the Kraków Congress Centre as

well as Kraków EXPO are being built and they will be

opened for business in mid-2014. These MICE venues

will further positively impact the hotels trading in the

coming years. We believe Kraków will also experience

a growth in occupancy as well as RevPAR in 2014. This

city is still the number one destination for national and

international leisure visitors in Poland.

Source: Colliers, February 2014


Industrial property Industrial property Industrial property Industrial property market breaks new market breaks new market breaks new market breaks new recrecrecrecords in 2013 thanks ords in 2013 thanks ords in 2013 thanks ords in 2013 thanks to Amazon's entryto Amazon's entryto Amazon's entryto Amazon's entry

Demand for warehouse space in Poland broke some new records last year, largely due to Amazon's deci-sion to build three giant logistics hubs in the country, property consultancy Jones Lang LaSalle (JLL) said in a recent report. The net demand totaled 1.26m sq.m in 2013, 26% out of which were the contracts signed by Amazon in Wrocław and Poznań. However, even without the Amazon deals, the figure came to 926,000 sq.m, marking a significant improvement on the 2012 result (755,000 sq.m). Moreover, gross demand, which includes new take-up and lease renewals, reached a historical maximum of 1.87m sq.m in 2013, represent-ing a 38% increase on the prior year and an 11% im-provement on the previous record result in 2011. The "Amazon effect," which is how JLL refers to the impact of the e-commerce giant on Poland's industrial property market, has made the Poznań and Wrocław regions, where gross take-up stood at 423,000 sq.m and 415,000 sq.m respectively, the top performers last year. In the case of Poznań, this translated into rising from fifth to first place on the list of the most popular industrial regions. The highest demand for industrial floor space came from retailers, whose share (largely due to Amazon deals) amounted to 49%, followed by logistic operators (23%) and automotive sector (12%). According to JLL, at the end of Q4 2013, a total of 850,000 sq.m was unoccupied, equal to 11.4% of exist-ing market stock - up from 10.1% largely due to high


levels of tenant churn and not to an increase in supply. The market also saw a few bankruptcies resulting in space being vacated. The highest amounts of vacant space are found in the markets of Central Poland (15.8%), Warsaw (14.6%) and Wrocław (11.7%), the lowest - in Poznań (4.4%).

Largest new leases in 2013 Region Park Sq.m Tenant

Wrocław Amazon BTS 123,000 Amazon

Poznań Amazon BTS 101,000 Amazon

Wrocław Amazon BTS 101,000 Amazon

Poznań Poznań Logistics Centre II 82,000 ITM

Central BTS Castorama Stryków 50,000 Castorama

Wrocław Prologis Park Wrocław V 35,000 Eko Holding

Opole BTS Polaris Opole 34,000 Polaris

Poznań Segro Logistics Park Poznań 32,000 Volkswagen

Source: Jones Lang LaSalle, warehousefinder.pl Q4 2013

At the end of Q4 2013, the total stock on the Polish in-dustrial market was 7.45m sq.m. During 2013, the market expanded by 305,000 sq m, which was the se-cond lowest figure in the history after 2010 and a fall of 41% compared to the 2012 figure. Such a low result was caused by a number of factors - tenants attracted by lower rents offered in already existing projects, lease space optimization and the long winter that caused many projects to start late. Five BTS projects, with a joint floor space of 82,000 sq m, were complet-ed in 2013, illustrating growing interest in Poland as a destination for manufacturing projects. The regions which saw the most new space delivered included Wrocław (117,000 sq.m), Warsaw (78,000 sq.m) and Upper Silesia (51,000 sq.m), Panattoni was the most active developer, delivering 90,000 sq.m of new space, followed by SEGRO (85,000 sq.m), Prologis (42,000 sq.m), Goodman (25,000 sq.m) and MLP Group (20,000 sq.m).

As of December 2013, 714,000 sq.m of industrial space was under construction, the largest amount since 2008. Almost half of that volume was attributable to Amazon 's projects near Wrocław and Poznań. Ac-cording to JLL, the share of speculation on the market remained insignificant. The largest speculative vol-umes are currently being constructed on markets with limited supply, such as Tri-City or Szczecin, and their total floor space stands at a mere 42,000 sq.m. In spite of the low share of speculative construction in the pipeline underway (5.8%), developers look set to em-bark on more projects of this type, the consultancy said, adding that largest market players had secured ti-tles to large amounts of industrial land, and are ready and able to swiftly deliver buildings.

Panattoni and Goodman are building more tban 300,000 sq.m of industrial space for Amazon in Western Poland. Image: Panattoni According to JLL, the high level of tenant activity dur-ing 2013 did not influence rental levels, which remain largely dependent on location, type of project, length of lease, size, technical improvements needed for the client’s requirements, tenant’s credibility and its long-term ability to handle the rental burden. For instance, rents for Small Business Units are markedly higher than rents in large distribution warehouses in the out-skirts of big cities. At the end of last year the highest

effective rents were typically found in metropolitan areas as well as markets with scarce supply, such as Kraków and Szczecin (see chart below for details).

Warehouse market as of end of 2013 Region Existing stock Effective rents

Warsaw Inner City 563,000 3.6-5.1

Warsaw suburbs 2,063,000 2.1-2.8

Wrocław 780,000 3.4-3.9

Kraków 141,000 3.3-4

Łódź 300,000 2.75-3.7

Central Poland (excl. Łódź) 721,000 2.1-2.8

Poznań 1,023,000 2.5-3.15

Szczecin 48,000 2.8-3.4

Upper Silesia 1,431,000 2.4-3.3

Tri-City 184,000 2.8-3.3

Source: Jones Lang LaSalle, warehousefinder.pl Q4 2013

Some 92% of Poland's total modern warehouse stock is located in the five largest markets (Warsaw, Upper Si-lesia, Poznań, Central Poland and Wrocław). With in-dustrial stock totaling 2.63m sq.m, Warsaw remains by far the largest market in the country, followed by Up-per Silesia (1.43m sq.m), Poznań and Central Poland (each of 1.02m sq.m). However, a major reshuffling in the ranking is expected this year. When the projects now underway are completed, Poznań will markedly outstrip Central Poland, and the latter region will be competing with Wrocław for the fourth position. "The differences between main industrial regions in Poland are becoming increasingly defined. Upper Sile-sia is attracting numerous automotive and production companies as well as logistics operators. Poznań and Wrocław are, to a larger degree, becoming nearshoring locations for western European logistics, and export-bound production. Warsaw region is pre-dominantly focused on catering to the logistics needs of the capital city and the premises of many retail chains. Finally, Central Poland, which is increasingly


integrating with the Warsaw region, is the main distri-bution centre for companies operating across the country," commented Tomasz Olszewski, Head of In-dustrial Agency in Central and Eastern Europe, Jones Lang LaSalle. Since according to most projections, Poland's econom-ic recovery is likely to gain traction this year, the de-mand for industrial space is likewise expected to in-crease. "Despite promising economic prospects, it will be ex-tremely difficult for 2014 to match last year's excellent result, due to the unlikely event of another investment on such a scale as Amazon. In an optimistic scenario, net demand for industrial space shall reach 1m sq.m in 2014. We also expect that more space will be devel-oped as built-to-suit-projects. The supply vs. demand ratio remains relatively well-balanced. Taking into ac-count all the forecasts, it is reasonable to assume, that the demand for warehouse space will be increasing at a pace that shall lead to a drop in space availability, meaning that rents will either remain at current levels or be pushed up slightly in the main regions," conclud-ed Olszewski.


SEGRO SEGRO SEGRO SEGRO pays EUR 100m pays EUR 100m pays EUR 100m pays EUR 100m for three logistics for three logistics for three logistics for three logistics centcentcentcenters in Polanders in Polanders in Polanders in Poland

UK's industrial property company SEGRO is further expanding its asset portfolio in Poland with the acqui-sition of three logistics projects on the outskirts of Warsaw, Łódź and Poznań with a combined floor space of 171,000 sq.m. The EUR 100m takeover is part of a larger transaction that will see SEGRO European

Logistics Partnership (SELP) acquire a EUR 472m portfolio of prime logistics assets and development land in Poland, France and Germany from Tristan Capital Partners. SEGRO holds a 50% stake in SELP and acts as asset, property and development manager for the joint ven-ture. The acquisition of Tristan portfolio, which is to be completed in Q2 2014, underlines SEGRO’s strategy of building scale and expanding its presence in its tar-get Continental European logistics markets in partner-ship with third party capital, the company said.

"Under our current strategy we continue to expand our asset portfolio in CEE," Paweł Sapek, Business Development Director CEE at SEGRO, tells Poland Today. Image: SEGRO

"The off-market acquisition of this significant portfo-lio, just four months after the creation of SELP, in-creases the joint venture's position in some of the best logistics markets in Europe by almost 50%. The assets deliver an attractive income yield from modern, flexi-ble buildings and strong covenants and their addition to SELP's existing assets will accelerate its investment strategy," commented SEGRO Country Business Unit Director, Pawel Sapek said. "We are particularly pleased to have strengthened our presence in Warsaw, Łódź and Poznań, all of which are key markets for us in Poland."

"This transaction confirms Poland as one of the mar-kets that continues to attract real estate investment in significant numbers. 2013 proved to be a record break-ing year for the Polish industrial investment market with approximately EUR 650m in transactions being completed across the country. We expect that this year's investment transaction volume will come in at around EUR 500m with large portfolio transactions once again dominating," Tomasz Puch, Head of Office and Industrial Investment, Jones Lang LaSalle. SEGRO is an owner, asset manager and developer of modern warehousing, light industrial and data centre properties, with GBP 4.7bn of assets (including joint ventures at Group share, as at 30 June 2013) principal-ly concentrated in London’s Western Corridor (in-cluding the Thames Valley) and in key conurbations in France, Germany and Poland. The group serves over 1,400 customers spread across a diverse range of in-dustry sectors. It has 5.2m sq.m of built space and a passing rent roll of GBP 311m (as at 30 June 2013). SEGROs operations in Poland started at the beginning of 2006 and currently its portfolio includes properties in Gdańsk, Warsaw, Poznań, Stryków, Lódz, Tychy, Wrocław and Gliwice. "We keep expanding our Polish portfolio, which totals some 800,000 sq.m of built-up warehouse and indus-trial space that can be quickly expanded by a further 600,000 sq.m," Paweł Sapek tells Poland Today. As for Tristan, the London-based investor has com-pleted a number of deals in Poland in recent years, in-cluding the EUR 121m acquisition of Mokotów Nova office complex in Warsaw from Ghelamco in July 2013, EUR 174.5m purchase of five shopping centers from Charter Hall Retail REIT in June 2013, as well as the EUR 210m takeover of Warsaw Financial Center in November 2012 (in a joint venture with Allianz).


RETAIL PROPERTIES

Carrefour building Carrefour building Carrefour building Carrefour building retail park in retail park in retail park in retail park in Sochaczew Sochaczew Sochaczew Sochaczew

Carrefour has chosen Polish Mirbud as the general contractor for a new retail park the French retailer seeks to build in the town of Sochaczew, some 50km west of Warsaw. With a GLA of 6,000 sq.m the Sonata Park scheme is to open before the end of 2014 next to an existing Carrefour store on Warszawska St. It will house a number of fashion outlets and a large electron-ics & appliance store. "Apart from the Sonata Park project, our plans for this year in the retail center segment include phase one of modernization and redevelopment of CH Morena in Gdańsk and CH Carrefour in Olsztyn," Ronan Martin, V-ce President of Carrefour Polska tells Poland Today. "Besides development work, we plan to refresh the tenant mix at both centers in a move to strengthen their respective positions in the local markets."

Sonata Park is to open by the end of 2014. Image: Carrefour The French company owns 20 retail properties located in large and mediums-sized towns. Last year Carre-four signed new leases for 20,000 sq.m and extended

existing leases for a further 19,000 sq.m of retail space at its shopping centers across the country. Overall, the company owns and operates some 200,000 sq.m of re-tail space in Poland. Carrefour's tenants include the some of the leading retail park brands, such as LPP, Media Expert, Decathlon, Carry, Takko, Hebe, Rossmann, CCC, Komfort, Abra, Deichamnn, Avans, Pepco, Rossmann, Apart, and Textil Market.

" Besides organic growth, we are also looking into possible acquisitions of exist-ing hypermarkets and supermarkets." Ronan Martin, V-ce President of Carrefour Polska tells Poland Today. Image: Carrefour Polska

"We will continue to increase the value of our proper-ties not only through modernization, redevelopment and expansion, but most importantly by expanding their retail offering, to meet the changing consumer habits. This evolution can be seen, for instance, in the growing popularity of local and regional products, which Carrefour has been introducing." The core of Carrefour's business in Poland are its three retail formats: Carrefour hypermarkets, Carre-four Market supermarkets and franchise-based Carre-four Express neighborhood stores. Overall, the com-pany operates some 600 retail units in the country (in-cluding 420-franchise-based) as well as 43 petrol sta-tions. The Carrefour Express convenience format has been a particular hit with owners of small shops in

Warsaw, where 100th franchise outlet under that logo opened in December. "In the franchise segment, we intend to maintain the pace of growth from the past years. Besides organic growth, we are also looking into possible acquisitions of existing hypermarkets and supermarkets," says Ro-nan Martin. In 2012 Carrefour turned over PLN 7.57bn in Poland. The company has slowed the expansion of its hyper-market chain, with no more than four new stores in this format to be opened over the next two years (in-cluding one in CH Łacina in Poznań, developed by French Groupe Apsys). Its recent acquisitions include 10 RAST supermarkets in Olsztyn, the company bought at the end of last year Carrefour "The RAST chain offers online sales, with both home delivery and store pickup. We will carefully scrutinize the performance of this business, treating it as a test before making any decisions on venturing into e-commerce," Mr. Martin replied to our question about the possible launch of an online store. Carrefour's competitors Tesco, Auchan and Piotr i Paweł are busy developing their e-supermarkets, although so far the business is said to be far from profitable.

RETAIL PROPERTIES

Capital Park breaks Capital Park breaks Capital Park breaks Capital Park breaks ground on Visground on Visground on Visground on Vis----àààà----Vis Vis Vis Vis retail centre in Łódźretail centre in Łódźretail centre in Łódźretail centre in Łódź

Warsaw-listed property developer Capital Park has broken ground on its second strip mall under the Vis-à-Vis brand. Located in Łódź's Bałuty district, on Zgierska St., the 5,646 sq.m property is to reach com-


pletion in Q4 2014. Besides an Intermarche supermar-ket (2,458 sq.m) the scheme will house some 20 other outlets, including Rossmann drugstore, Pepco textile discount and Euro Apteka pharmacy. The Vis-à-Vis concept encompasses small neighborhood shopping centers with store access directly from the parking lot.

Łódź will be the second Polish city to get a Vis-a-Vis shopping centre. Image: Capital Park "We launched our first Vis-à-Vis center in November 2011 in Radom and we are seeking locations for further developments under that logo," Kinga Nowakowska, Head of Asset Management, Sales & Marketing at Cap-ital Park tells Poland Today. "Changing consumer hab-its boost demand for smaller retail properties, where one can do everyday shopping, with easy parking lot access." Capital Park shares debuted on the Warsaw Stock Ex-change a few weeks ago raising PLN 136m for several projects currently underway in Warsaw. Its flagship development is Eurocentrum, a 15-floor building hous-ing more that 69,578 sq.m of office and more than 2,400 sq.m of retail-service space as well as more than 770 parking spaces. Phase one (42,337 sq.m) of Eurocentrum, which is located in Warsaw's Ochota district, is to reach completion in June 2014. In August 2013 Capital Park Group broke ground on its latest office project in Warsaw – Royal Wilanów.

Located at the corner of Klimczaka and Przyczółkowa streets in Warsaw's up-scale suburb of Wilanów, the five-storey building will offer close to 36,707 sq.m of office space as well as some 7,000 sq.m of retail space. Their third key Warsaw project is the mixed-use de-velopment Art Norblin in Wola district, with a total lettable area of 64,164 sq.m. Although the company does not communicate financial details of its under-takings, the combined capex for the three projects is likely to come in excess of PLN 1bn.

"We are seeking loca-tions for more Vis-a-Vis developments," Kinga owakowska, Head of Asset Man-agement, Sales & Mar-keting at Capital Park, tells Poland Today. Image: Capital Park

"We are still waiting for the final building permit for ArtNorblin. We are hoping to break ground on that development at the turn of the year with completion expected some 2-2½ year later," says Kinga Nowakowska. Besides large office buildings, Capital Park develops and manages retail properties (Vis à Vis shopping pla-zas) as well as residential projects. Their overall in-vestment approach is to acquire properties with signif-icant value creation potential, be it through changes to land use decisions, obtaining building permits, con-struction of new facilities or alteration of existing ones and improved management of existing buildings. Properties located in Warsaw represent 74% of the group's total portfolio value.

Since the start of its operations in 2003, the Capital Park group has completed approximately 100 invest-ment transactions and its portfolio now comprises 76 properties of approximately 250,000 sq.m of lettable area in 39 towns and cities, including offices (93,030 sq.m), retail properties (26,700 sq.m), mixed-use de-velopments (112,423 sq.m) and 13 other projects. One of Capital Park's specialties are small real estate assets such as high street retail properties. Out of the 76 pro-jects in the group's portfolio, 39 high street retail properties are within the structure of a recently launched closed-ended investment fund – Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych Real Estate Income Assets, which is being actively managed by the group. As of end of 2012 Capital Park's existing retail port-folio was worth PLN 1.3bn, with a target value amounting to more than PLN 3.2bn. Capital Park post-ed a net profit of PLN 46.3m in the first half of last year, with PLN 19.8m in sales for the period.

FOOD & AGRICULTURE

African swine flu cases African swine flu cases African swine flu cases African swine flu cases confirmed in Poland, confirmed in Poland, confirmed in Poland, confirmed in Poland, Russia maintains Russia maintains Russia maintains Russia maintains January imports banJanuary imports banJanuary imports banJanuary imports ban

The European Commission has set up a buffer zone along parts of Poland’s eastern border with Belarus and Lithuania, after two cases of African Swine Fever (ASF) had been identified in two dead wild boars found in the area, Poland's veterinary authorities an-nounced last week. The first cases of ASF in the region were reported in January in Lithuania, prompting


Russia to impose a ban on pork imports from Poland and other EU countries. Although it poses no danger to humans, African Swine Fever (ASF) is a contagious epizootic disease that causes high mortality in the populations of domestic pigs. This is the first time the disease has been regis-tered on the territory of Poland. Farmers in the Podlaskie voivodeship, near the border with Belarus, have been ordered to fence in their land, lay down dis-infectant mats and test and monitor shipments of live pigs out of the zone. The country's Veterinary Service has taken steps to prevent the disease from spreading, imposing stricter supervision over the affected area. Last year Poland took Spain's place as Europe's third largest exporter of pork meat, after Germany and Denmark, with exports in 2013 valued at EUR 912 mil-lion. According to preliminary estimates by the Agri-cultural Market Agency, Polish producers exported close to 650,000 tons of pork last year, which repre-sents a 10% improvement on the prior year. Imports went up as well (by 5%), partly due to a drop in domes-tic production, and reached an estimated 790,000 tons. The Russian ban, which is to remain in force for at least two months, is likely to have a significant impact on Poland's meat industry. The top three buyers of Polish pork are Belarus, Russia and Japan, although China is quickly catching up with the leaders. Last year Poland exported some 85,000 tons of pig meat worth an estimated PLN 800m to Russia and Belarus, who buy a quarter of all Polish pork exports.

POLITICS & ECONOMY

Opposition party PiS Opposition party PiS Opposition party PiS Opposition party PiS strengthens lead over strengthens lead over strengthens lead over strengthens lead over PO, announces new PO, announces new PO, announces new PO, announces new political platformpolitical platformpolitical platformpolitical platform

Poland's main opposition party, the conservative Law & Justice (PiS) movement is strengthening its lead over the centrist ruling coalition ahead of the upcom-ing elections to the European Parliament. According to a brand new poll by TNS Polska, Support for Prime Minister Donald Tusk's Civic Platform (PO) remains stable at 22%, while PiS increased its support since January by 1 pp. to 33%. Voter support for the Democratic Left Alliance (SLD) stood at 10% in mid-February, while the liberal Your Move (Twój Ruch) and PO's junior coalition partner, Polish People’s Party (PSL) each had 5% support, which is the minimum required to enter the Polish parliament. Polish President Bronisław Komorowski has announced that the elections to the European Par-liament in Poland will be held on May 25. Poles will choose 51 MEPs in 13 voting districts. At a recent congress in Warsaw, PiS announced a new 160-page program focusing on pro-social policies. Along with the party congress, the party launched a TV ad campaign, related to the European Parliament elections. PiS is hoping this new mixture of what are essentially the party's old populist ideas will help ex-pand its voter base, which currently stems mainly from rural regions and small towns. Their proposals include the lowering of retirement age, creation of jobs for young workers, radical reor-

ganization of government ministries and institutions and removal of the National Health Fund. PiS envisag-es some 1.2m new jobs created for the young under a National Employment Program. Social Security pre-miums would be cut in regions of high unemployment. The new platform also included calls to retain the złoty as currency, clean public finances, rebuild the tax system, ease regulations for small business, tie the minimum wage to average wages and spend up to 4% of GDP on pro-family policies, including direct pay-ments to families. On the taxation front, VAT rates should be brought back to prior levels and a new Personal Income Tax (PIT) rate at 39% must be introduced for earners above PLN 300,000 annually. New taxes on financial institutions and supermarkets could bring about PLN 7bn annually, PiS said. A new ministry for Economy and Economic Development would be created to be led by a deputy PM. The current Ministry of Treasury is to be dissolved, while new ministries for: European Integration, Maritime Economy, Family Policy should be created, according to PiS.

DATA BOX: CORPORATE WAGES & EMPLOYMENT IN JANUARY The average monthly salary in Poland's corporate sec-

tor grew by 3.4% y/y in January to PLN 3,805, statis-

tics office GUS announced last week. In month-on-

month terms the average salary declined by 9.9%.

Economists surveyed by the Polish Press Agency had

expected salaries to grow by 3.3% y/y and fall by

10.1% m/m. Polish enterprises employed 5.5 million

people in January, GUS also said. The figure remained

unchanged in annual terms and grew by a disappoint-

ing 0.3% m/m. Analysts had expected employment to

grow by 0.6% y/y and by 0.9% m/m in January.

Source: GUS


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Oct '13 Nov '13 Dec '13 Jan '14

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev +1.9 -0.1 +1.9 +0.3 +1.5 +0.7 +1.6 +1.4

Alcohol, tobacco +3.6 +0.1 +3.6 +0.1 +3.7 0.0 +4.2 +0.8

Clothing, shoes -4.8 +3.5 -4.9 -0.2 -4.9 -0.6 -5.3 -3.9

Housing +1.8 +0.2 +1.8 +0.1 +1.8 0.0 +2.1 +0.2

Transport -2.3 -1.0 -2.3 -1.2 -0.9 0.4 -1.2 -1.0

Communications -7.2 +2.8 -11.7 -4.9 -11.6 0.0 n/a n/a

Gross CPI +0.8 +0.2 +0.6 -0.2 +0.7 +0.1 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Aug '13 Sep '13 Oct '13 Nov '13 Dec '13

m/m (%) -0.7 -0.9 +3.6 -5.8 +17.3

y/y (%) +3.4 +3.9 +3.2 +3.8 +5.8

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 n/a

y/y (%) +4.3 +5.5 +11.6 +5.6 +2.3

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2009 2010 2011 2012 2013 Jan

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 8.8 +8.5

Commenced 142.9 158.1 162.2 141.8 127.4 6.5 +56.2

U. construction 670.3 692.7 723.0 713.1 694.0 694.0 -2.6

Completed 160.0 135.7 131.7 152.5 146.1 12.2 -12.8

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q4 2013 +2.7% n/a n/a

Q3 2013 +1.9% 404,310 -1.9%

Q2 2013 +0.8% 395,657 -2.3%

Q1 2013 +0.5% 377,815 -3.1%

2013 +1.6% 1,628,200 n/a

2012 +1.9% 1,522,736 -3.7%

2011 +4.5% 1,462,734 -5.0%

2010 +3.9% 1,416,585 -5.1%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator 2010 2011 2012 2013 *2014

GDP change +3.9% +4.5% +1.9% +1.6% +3.5%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +1.2%

Producer inflation +2.1% +7.6% +3.4% -1.3% +0.6%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.6% -0.8%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.5%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.8%

EUR/PLN 3.99 4.12 4.19 4.20 4.07

Sources: NBP, BZ WBK, GUS *) projections **) year-end

Gross WagesGross WagesGross WagesGross Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q4 2012 Q1 2013 Q2 2013 Q3 2013

A B A B A B A B

Coal mining 8,427 192 6,060 138 6,290 143 6,061 138

Manufacturing 3,522 154 3,491 152 3,560 155 3,625 158

Energy 6,535 198 6,196 188 5,828 177 6,021 183

Construction 3,829 163 3,556 152 3,693 157 3,766 160

Retail & repairs 3,365 143 3,432 146 3,421 146 3,408 145

Transportation 3,816 135 3,439 122 3,547 125 3,589 127

IT, telecoms 6,379 166 6,685 174 6,707 174 6,654 173

Financial sector 6,044 136 6,356 143 6,702 151 6,109 137

National average 3,878 154 3,741 149 3,613 144 3,652 145

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

m/m (%) +7.8 -0.8 +9.4 +14.3 -2.9 +21.5 -64.0

y/y (%) -5.2 -11.1 -4.8 -3.2 -8.9 +5.8 -3.9

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +15.5 +12.1 +5.1 +4.6 +11.8 -0.6 -12.0

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Ap

r 11

Jul 11

Oct

11

Jan 12

Apr

12

Jul 12

Oct

12

Jan 13

Apr

13

Jul 1

3

Oct

13

Jan 14

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14

m/m (%) +0.2 -0.3 +0.1 -0.7 -0.3 -0.1 +0.1

y/y (%) -0.8 -1.1 -1.4 -1.4 -1.5 -1.0 -0.9

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +2.0 +2.2 +3.4 +2.1 +7.6 +3.3 -1.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14

m/m (%) -0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.2

y/y (%) -1.9 -1.9 -1.8 -1.8 -1.7 -1.7 -1.7

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +7.4 +4.8 +0.2 -0.1 +1.0 +0.2 -1.8

Industrial OutputIndustrial OutputIndustrial OutputIndustrial Output

Month Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

m/m (%) +1.5 -4.5 +9.6 +6.0 -6.2 -9.7 +2.9

y/y (%) +6.3 +2.2 +6.2 +4.4 +2.9 +6.6 +4.1

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +10.7 +3.6 -3.5 +9.8 +7.7 +1.0 +2.2


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Nov 2013

y/y (%)

share (%)

2012 share (%)

Jan-Nov 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 63,081 +8.5 10.7 61,694 10.3 43,296 +4.6 7.3 44,287 6.9

Beverages and tobacco 7,955 +6.5 1.4 7,967 1.3 3,764 +1.7 0.6 3,989 0.6

Crude materials except fuels 14,606 +10.1 2.5 14,024 2.4 19,851 -5.3 3.4 22,053 3.5

Fuels etc 27,381 +0.6 4.6 29,389 4.9 69,873 -10.4 11.8 85,280 13.4

Animal and vegetable oils 1,687 +32.5 0.3 1,342 0.2 2,430 -9.6 0.4 2,887 0.5

Chemical products 54,529 +6.9 9.3 54,295 9.1 85,948 +2.6 14.4 89,140 14.0

Manufactured goods by material 120,946 +1.3 20.5 126,161 21.1 104,027 -1.3 17.5 110,773 17.4

Machinery, transport equip. 221,253 +5.3 37.5 223,646 37.5 198,729 +3.4 33.3 203,718 31.9

Other manufactured articles 76,469 +7.1 13.0 75,925 12.7 53,487 -2.8 9.0 57,646 9.0

Not classified 1,606 n/a 0.2 2,653 0.5 14,854 n/a 2.3 18,515 2.8

TOTAL 589,513 +4.9 100 597,096 100 596,259 -0.9 100 638,288 100

Poland's ten largest trading partners, ranked according to 2013

EXPORTS in PLNbn IMPORTS in PLN bn

No Country *2013 share 2012 Share No Country *2013 share 2012 Share

1 Germany 159,622 25.0% 150,046 25.1% 1 Germany 139,334 21.5% 134,933 21.3%

2 UK 41,503 6.5% 40,184 6.8% 2 Russia 79,601 12.3% 91,033 14.0%

3 Czech Rep. 39,421 6.2% 37,475 6.3% 3 China 60,914 9.4% 57,235 8.9%

4 France 35,745 5.6% 34,862 5.9% 4 Italy 33,703 5.2% 32,782 5.2%

5 Russia 34,058 5.3% 32,290 5.3% 5 Netherlands 25,005 3.9% 24,543 3.9%

6 Italy 27,450 4.3% 29,067 4.9% 6 France 24,533 3.8% 25,303 3.9%

7 Netherlands 25,292 4.0% 26,678 4.5% 7 Czech Rep. 23,778 3.7% 23,327 3.7%

8 Ukraine 18,037 2.8% 17,213 2.8% 8 USA 17,350 2.7% 16,436 2.6%

9 Sweden 17,498 2.7% 15,811 2.7% 9 UK 16,861 2.6% 15,509 2.4%

10 Slovakia 16,795 2.6% 15,288 2.6% 10 Belgium 14,913 2.3% n/a 2.2%

Source: Central Statistical Office (GUS) *) preliminary estimates

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 21 February 2014

100 USD 303.89 ↑

100 EUR 416.81 ↑

100 GBP 506.70 ↑

100 CHF 341.49 ↑

100 DKK 55.85 ↑

100 SEK 46.36 ↑

100 NOK 49.73 →

10,000 JPY 296.62 ↓

100 CZK 15.20 ↑

10,000 HUF 133.83 ↓

100 USD/EUR against PLN

300

350

400

450

7 M

ar 13

17 M

ay 13

25 Jul 13

2 O

ct 13

11 D

ec 13

21 Feb 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Oct '13 Nov '13 Dec '13 Jan '14

Monetary base 154,967 153,672 164,010 161,544

M1 536,237 538,837 555,851 546,487

- Currency outside banks 113,174 113,718 114,401 113,455

M2 935,095 934,713 960,361 947,443

- Time deposits 414,941 412,469 421,160 n/a

M3 955,419 953,446 978,924 962,416

- Net foreign assets 150,517 148,702 143,430 140,617 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Sep '13 Nov '13 Dec '13 Jan '14

Loans to customers 901,288 906,298 903,890 914,189

- to private companies 260,585 262,396 259,061 263,063

- to households 559,965 563,157 562,381 567,984

Total assets of banks 1,612,836 1,627,119 1,601,293 n/a

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13

PLN (up to 1 year) 4.7% 4.6% 4.5% 4.5% 4.5% 4.3%

PLN (up to 5 y ) 5.1% 5.1% 4.9% 4.9% 4.9% 4.9%

PLN (over 5 y) 4.9% 4.9% 4.8% 4.8% 4.8% 4.7%

PLN (total) 5.0% 4.9% 4.8% 4.8% 4.8% 4.7%

EUR (up to 1m EUR) 2.3% 1.9% 1.8% 2.0% 1.9% 1.9%

EUR (over 1m EUR) 3.5% 3.5% 3.2% 2.5% 3.0% 2.9%

Warsaw Inter Bank Offered Rate (WIBOR) as of 21 Feb 2014

Overnight 1 week 1 month 3 months 6 months

2.57%% 2.59% 2.61% 2.71% 2.74%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 21 Feb '14

Change 14 Feb '14

Change end of '13

↑ Asseco Pol. 46.94 +1% +2%

↑ Bogdanka 125.5 +5% 0%

↓ BZ WBK 411 -1% +6%

↑ Eurocash 44.55 +4% -7%

↑ Grupa Lotos 39.3 +1% +11%

↓GTC 7.14 -1% -4%

↓ Handlowy 109.25 -2% +4%

→ JSW 52.55 0% -1%

↓ Kernel 35.7 -4% -6%

↑ KGHM 115 +2% -3%

→ mBank 532.8 0% +7%

↑ Orange Pol. 10.32 +4% +5%

↓ Pekao 191.35 -1% +7%

→ PGE 18.47 0% +13%

↑ PGNiG 5.04 +1% -2%

↑ PKN Orlen 43.15 +6% +5%

→ PKO BP 43.15 0% +9%

↓ PZU 430.25 -3% -4%

↑ Synthos 5.19 +3% -5%

→ Tauron 4.84 0% +11%

Source: Warsaw Stock Exchange

Key indices

as of 21 February 2014

WIG Total index

55553333,,,,400400400400....42424242 Change 1 week 0% →

Change end of '13 +4% ↑

WIG-20 blue chip index

2,2,2,2,444488887777....77772222 Change 1 week 0% →

Change end of '13 +4% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

56,000

15 N

ov 13

9 D

ec 13

8 Jan 14

30 Jan 14

21 Feb 14


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New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Dec 2013 *

Monthly wages (PLN)

Jan-Dec 2013 **

Unemploy-ment

Dec 2013

New dwellings Jan-Dec 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 101.1 96.6 4,317 4,114 153.6 13.2 16,730 111.3

Kujawsko-Pomorskie (Bydgoszcz) 103.6 105.4 3,350 3,346 150.1 18.1 6,680 105.1

Lubelskie (Lublin) 104.6 95.9 3,736 3,080 134.0 14.4 6,892 95.9

Lubuskie (Zielona Góra) 97.4 90.7 3,388 2,990 59.8 15.7 3,322 104.8

Łódzkie (Łódź) 104.0 91.0 3,715 3,084 151.6 14.1 6,113 76.2

Małopolskie (Kraków) 98.2 92.5 3,763 3,386 164.4 11.6 15,525 101.5

Mazowieckie (Warszawa) 107.6 78.4 4,488 4,787 283.2 11.0 29,609 96.9

Opolskie (Opole) 97.9 94.4 3,500 3,192 51.6 14.3 1,747 96.0

Podkarpackie (Rzeszów) 108.3 96.8 3,276 3,093 154.2 16.4 6,192 94.9

Podlaskie (Białystok) 106.8 98.6 3,224 3,796 70.9 15.1 4,228 93.4

Pomorskie (Gdańsk-Gdynia) 102.0 97.3 3,885 3,503 114.1 13.3 11,948 84.2

Śląskie (Katowice) 97.8 92.7 4,681 3,582 208.3 11.2 10,384 106.6

Świętokrzyskie (Kielce) 101.9 90.1 3,393 3,211 90.1 16.5 2,786 90.0

Warmińsko-Mazurskie (Olsztyn) 98.9 84.1 3,178 3,076 115.9 21.7 4,768 86.8

Wielkopolskie (Poznań) 104.4 92.4 3,697 3,649 144.8 9.6 13,686 92.4

Zachodniopomorskie (Szczecin) 112.5 86.5 3,436 3,262 111.1 18.0 5,512 77.9

National average 102.2 88.7 3,959 3,729 2,157.9 13.4 146,122 95.6

Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13

in Poland 1,861 1,381 2,886 175 -3,020 -1,794

Polish DI 310 -550 -1,203 957 2,588 -1,529

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 14,832 4,716

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q1 '13 Q2 '13 Q3 '13

Trade balance -8,893 -10,059 -5,313 -139 1,203 1,017

Services, net 2,334 4,048 4,816 1,274 1,686 1,047

CA balance -18,129 -17,977 -13,332 -2,313 486 -2,027

CA balance vs GDP -5.1% -5.0% -3.7% -3.1% -2.3% -2.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q4 10

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

Q4 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, Q4 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 563,000 17,000

22.3% 3.6–5.1

Warsaw suburbs 2,063,000 12.5% 2.1–2.8

Central Poland 1,021,000 80,000 15.2% 2.1–3.3

Poznań 1,023,000 215,000 4.4% 2.5–3.15

Upper Silesia 1,431,000 37,000 9.3% 2.4–3.3

Wrocław 780,000 259,000 11.7% 2.6–3.1

Tri-city 184,000 46,000 9.2% 2.8–3.3

Kraków 141,000 0 4.0% 3.3-4.0

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q3 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,146 +3.4% 11.5-25.5 10.5% 85 85

Kraków 5,989 -13.1% 13-15 2.71% 41 78

Katowice 5,898 +9.0% 13-14 8.29% 48 56

Poznań 6,351 -6.7% 14-16 14.66% 44 55

Łódź 4,780 -3.8% 12-14 14.97% 31 26

Wrocław 5,997 -4.3% 13-16 12.37% 38 41

Gdańsk 6,398 -1.2% 13-15 11.24% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Jan10

Sep11

May11

Jan12

Sep12

May13

Jan14

Wage CPI

Index 100 = Jan 2005. Source: GUS

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