No. 034 / 12th May 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

April PMI data weaker than expected on Ukraine worries page 2

BANKING & FINANCE BNP Paribas boosts free float to please regulator ahead of BGŻ takeover verdict page 3

ENERGY & RESOURCES

PKN Orlen doubles Canadian upstream capacity with new acquisition page 3

Gaspol acquires Orlen's LPG cylinder business page 4

PROPERTY & CONSTRUCTION

PKP picks Ghelamco for PLN 1.5bn project Warszawa Gdańska page 6

Orco divests German arm to buy more time for Złota 44 sale page 7

Big deals push Q1 property investment volume to EUR 900m page 8

Building land market to pick up in 2014 page 9

SERVICES & BPO

IT outsourcing firm Mobica to employ 100 at new Lublin center page 9

Radom hoping to become Poland's next BPO hotspot page 10

TRANSPORT & LOGISTICSDanish e-retailer MyTrendyPhone moves main warehouse to Szczecin page 11

Warehouse developers report highest Q1 take-up since 2008 page 12

RETAIL CHAINS

Empik reaches 200 locations, wants another 15 by year-end page 13

POLITICS & ECONOMY

European commission raises GDP growth forecast for Poland page 14

KEY FIGURES

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

Skanska has developed several buildings under the "Atrium" logo in Warsaw. Image: SPP

Skanska to build more offices in WarsawSkanska to build more offices in WarsawSkanska to build more offices in WarsawSkanska to build more offices in Warsaw Merely days after Skanska Property Poland offered details of its giant office project Generation Park, the company has unveiled another large scheme in Warsaw – Atrium 2. The two projects will contribute some 100,000 sq.m to the city's office stock. page 5

Tarkett acquires Gamrat flooring firmTarkett acquires Gamrat flooring firmTarkett acquires Gamrat flooring firmTarkett acquires Gamrat flooring firm France's Tarkett has acquired the vinyl flooring unit of Polish building products maker Gamrat for PLN 92m, adding a second manufacturing plant to its Polish operations. page 2

weekly newsletter # 034 / 12th May 2014 / page 2

MANUFACTURING & PROCESSING

France's Tarkett France's Tarkett France's Tarkett France's Tarkett acquires Polish vinyl acquires Polish vinyl acquires Polish vinyl acquires Polish vinyl flooring producer flooring producer flooring producer flooring producer GamratGamratGamratGamrat

French-owned flooring company Tarkett has ac-quired a 100% stake in Gamrat Wykładziny (Gamrat Flooring), Poland's leading producer of high performance vinyl flooring, for PLN 92.4m. The seller was Gamrat, the PVC and polyethylene construction materials unit of the Warsaw-listed Lentex group, which had valued the vinyl flooring business at PLN 55.3m in its books. "Thanks to this acquisition, Tarkett strengthens its in-dustrial and commercial footprint in Poland and Cen-tral Europe. With this new plant, we increase our vinyl production capacity and reinforce our competitive-ness, which will enable us to better answer the grow-ing demand for high performance products in Central and Eastern Europe as well from other European countries," Véronique Bouchard Bienaymé, Group Ex-ternal Communications Director atTarkett Group tells Poland Today. "The plant will benefit from Tarkett's manufacturing expertise and knowledge, and we will deploy our world class manufacturing program for safety, produc-tivity, quality and environment improvements. At this stage, it is too early to provide further information on investments or production transfer," she adds The Gamrat takeover strengthens Tarkett's position in added-value and growing segments, such as healthcare, aged care and education, predominantly in

countries across Central Europe and especially in Po-land where Gamrat Flooring already holds recognized positions. With a factory in Jasło, in south east of Poland, Gamrat Wykładziny has generated profitable growth over the past three years with net sales of approxi-mately EUR 20m and 220 employees in 2013. The company produces and sells homogeneous and heter-ogeneous floorings, wall covering and foils dedicated to the commercial segment. The transaction includes the production as well as the distribution activities of the existing product ranges. Tarkett is one of the world's leading suppliers of floor-ing and sports surfaces solutions. With a wide range of products including vinyl, linoleum, carpet, rubber, wood & laminate, synthetic turf and athletics track, the group serves customers in more than 100 countries worldwide. With 11,000 employees and 30 production sites, Tarkett sells 1.3m sq.m of flooring every day, for hospitals, schools, housing, hotels, offices, stores and sports fields. Its 2013 net sales of EUR 2.5bn were bal-anced between Europe, North America and new econ-omies. Tarkett is listed on Euronext Paris. "Tarkett has production and sales activities in Poland, serving the Polish and Central European markets. In Central Europe, we sell flooring for commercial appli-cations mainly for health care, aged care facilities and education, as well for hotels and offices. We also sell flooring for the residential market. End-consumers can buy Tarkett products through distributors. Prior to the Gamrat acquisition we had a staff of 350 in Po-land, including 280 at our wood products plant in Orzechowo. Our sales office in Warsaw was estab-lished in 1994, initially as Sommer Polska, then Tarkett Sommer Polska and finally Tarkett after the merger of these two companies. The Gamrat acquisition adds a vinyl products plant with 260 staff to our Polish organ-ization," says Véronique Bouchard Bienaymé.

POLITICS & ECONOMY

April PMI data wApril PMI data wApril PMI data wApril PMI data weaker eaker eaker eaker than expected than expected than expected than expected on on on on Ukraine worriesUkraine worriesUkraine worriesUkraine worries

Poland's manufacturing sector purchasing managers' index PMI fell to 52.0 pts in April, the lowest level since July 2013, from 54.0 pts just one month prior, a PMI report by HSBC and Markit showed. April was the 10 th consecutive months when the indicator re-mained above the the 50 points threshold that sepa-rates economic expansion from contraction. "The PMI release surprised on the negative side, fall-ing below our (53.8pts) and market (54.3pts) forecasts. All major sub-indexes of the PMI declined, which might partly result from negative impact of uncertain situation in Ukraine on logistic managers’ expecta-tions," BZ WBK analysts said in an e-mailed commen-tary.

Purchasing Managers' Index (PMI) The 50 mark separates growth from contraction

45

50

55

60

Feb 13 Apr 13 Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14

Source: Markit & HSBC

weekly newsletter # 034 / 12th May 2014 / page 3

"Growth rates for production, new orders, new export business and purchasing activity all slowed for the se-cond month running, while employment in the goods-producing sector also increased at a weaker pace," HSBC and Markit said in an overview of the results. At the same time, growth of new orders remained posi-tive for the 11th consecutive month, and the growth of total new orders "remained strong in the context of historic survey data, aided by robust domestic de-mand," authors wrote. Production of goods also rose (for the tenth consecu-tive month), although at "the weakest rate over this sequence," while backlogs declined at a fastest rate since April 2013, the researchers noted. On a positive note, a "further robust increase in manufacturing em-ployment" was visible, "extending the current phase of job creation to nine months." The report finds no infla-tionary pressure in the economy, the report also showed.

BANKING & FINANCE

BNP Paribas boosts BNP Paribas boosts BNP Paribas boosts BNP Paribas boosts free float to please free float to please free float to please free float to please regregregregulator ahead of BGŻ ulator ahead of BGŻ ulator ahead of BGŻ ulator ahead of BGŻ takeover takeover takeover takeover verdictverdictverdictverdict

France's largest listed lender BNP Paribas has car-ried out a share issue at its Polish arm, bowing to a re-quest from Poland's financial regulator KNF to raise its free float to 15%. The Polish BNP unit has so far been 99.89%-owned by its French parent, but since signing a deal with Dutch Rabobank last year to ac-quire the latter's subsidiary Bank BGŻ, Poland's No.11 bank by assets, the French lender has been under in-tense pressure to please the financial watchdog, which

has been increasingly critical of large bank mergers. The issue raised approximately PLN 231m. "Most of the proceeds we intend to use to support our lending , both to corporate and retail clients. A portion will be spent on this year's investment program, in-cluding modernization of our IT infrastructure," said BNP Paribas Bank Polska CEO Frédéric Amoudru. If approved by Poland's regulator KNF the PLN 4.2bn transaction will springboard BNP Paribas to No. 8 po-sition in Poland. The regulator, which said it would not rule on the BGŻ deal before August, has not ex-plicitly linked the share issue to giving a go ahead for the takeover, but BNP does not want to do anything to risk getting on KNF's wrong side at a time when it is seeking the latter's approval. The regulator is applying the 15% free float requirement to all banks with for-eign parents, because it is concerned about their own-ership being concentrated in too few hands.

BNP Paribas seeks to become one of Poland's Top Ten banks. Photo: BNP Paribas

Foreign banks control about 70% of the Polish banking sector, but several have looked for an exit to boost cap-ital positions hit by the global economic crisis, with others being keen to strengthen their foothold in an economy which has outperformed much of the euro

zone in recent years. Major recent exits from Poland's banking market included Belgium's KBC and Ireland's AIB which sold their Polish units to Spain's Santan-der, Greek Eurobank EFG (their Polbank EFG merged with Raiffeisen Polska), and Swedish Nordea (their Polish arm is to be acquired by Poland's largest lender PKO BP for PLN 2.83m). The Polish unit of BNP Paribas posted net earnings of PLN 102.3m in 2013, up from PLN 30.8m in 2012. With 222 retail units and nine business centers, the bank serves 363,000 retail customers and 33,000 small and medium-sized companies. Globally, BNP Paribas has a presence in nearly 80 countries with 190,000 employ-ees, including 145,000 in Europe, focusing on retail banking, investment solutions as well as corporate & investment banking. With combined assets of more than PLN 56bn, the new BNP Paribas-BGŻ will remain far behind the top four lenders (PKO BP: PLN 200bn+Nordea's PLN 30bn; Pekao SA: PLN 150bn, mBank and BZ WBK (each with PLN 100bn in assets), but it will become a worthy rival for the likes of Raiffeisen Bank, Getin Noble, Millennium Bank and even ING BSK. The top ten of Poland's banking sector is therefore looking in-creasingly well-defined.

ENERGY & RESOURCES

PKN Orlen doubles PKN Orlen doubles PKN Orlen doubles PKN Orlen doubles Canadian upstream Canadian upstream Canadian upstream Canadian upstream capacity with new capacity with new capacity with new capacity with new acquisitionacquisitionacquisitionacquisition

TriOil Resources, the Canadian upstream unit of Po-land's oil giant, PKN Orlen, last week acquired its lo-

weekly newsletter # 034 / 12th May 2014 / page 4

cal rival Birchill Exploration for an undisclosed price from Luxembourg-based Bregal-Birchill Investments. PKN wants to finalize the transaction this quarter and expects it to double its Canadian upstream capacity. Orlen Group's existing producing assets in Canada are concentrated in the Pouce Coupe, Kaybob and Lochend fields in the province of Alberta, with total proved and probable reserves (2P) of 22m barrels of oil equivalent (boe). In Q1 2014, TriOil’s average daily production amounted to 3,700 boe, 60% of which were liquid hydrocarbons (crude oil and condensate). State-controlled PKN booked its first net profit from oil production in Q1 2014 with its last-year purchase of TriOil booking core earnings of PLN 37m.

PKN Orlen seeks to diversify into upstream and en-ergy generation to offset falling refinery margins. Photo: PKN Orlen

The oil and gas fields operated by Birchill are also lo-cated in Alberta, Canada, in the Ferrier/Strachan area, in proximity of TriOil's existing fields. Closing of the transaction is subject to certain conditions including clearance from the Competition Bureau in accordance with Canadian laws.

"Our acquisition of TriOil last year paved the way to further development of Orlen group’s E&P operations in North America. The agreement, which initiates the acquisition of additional producing assets, fits into the Group's strategy for the production segment. Diversi-fication and expansion of production capacity is our pathway to increasing our Group's value," said Jacek Krawiec, President of the PKN Orlen Management Board. "At the same time, we continue exploring shale gas and oil in Poland. We have already drilled ten explora-tory wells within our shale license areas, including seven vertical and three horizontal wells, and per-formed two full hydraulic fracturing processes. We al-so intend to drill a fourth horizontal well on the Wierzbica license, and to carry out another hydraulic fracturing process in August," added Jacek Krawiec. The proposed Birchill acquisition is consistent with PKN Orlen's strategy for 2013-2017, which envisages development of the upstream segment by diversifying the group's worldwide portfolio of assets. Orlen has al-located PLN 2.7bn to advance this strategic objective. The company said its acquisitions do not reduce the amount of funds earmarked for exploration and pro-duction activities in Poland, including those in uncon-ventional oil and gas plays. In the coming years, total investments in the upstream segment under the Com-pany's strategy may amount to as much as PLN 5.1bn. PKN Orlen turned over PLN 114bn last year, some 5% less than in 2012. Its EBIDTA dropped 42% y/ to reach PLN 2.5bn, while its net earnings plunged by 96% and topped a mere PLN 90m. PKN Orlen blamed a very challenging environment in the refining industry (mainly the lowest refining margin and Ural/Brent dif-ferential since 2002) for its disappointing result. On the flipside, however, Orlen's capital expenditure rose by a fifth and came in excess of PLN 2.5bn and at the

same time the group managed to its debt by PLN 2.2bn, down to PLN 4.6bn. A leading producer and retailer of fuel in the CEE re-gion, PKN Orlen operates three refineries (in Poland, Lithuania and Czech Republic) with a combined max-imum capacity of 32.4m tons a year. Last year the three sites processed 28.2m tons of oil, 90% of which was Russian Export Blend Crude Oil (REBCO). Be-sides investments in the upstream segment, PKN Orlen has made inroads into the power generation sec-tor with a PLN 1.4bn combined cycle gas turbine plant (463MWe) in Włocławek and plans for a similar pro-ject in Płock.

ENERGY & RESOURCES

Gaspol acquires Gaspol acquires Gaspol acquires Gaspol acquires Orlen's LPG cylinder Orlen's LPG cylinder Orlen's LPG cylinder Orlen's LPG cylinder businessbusinessbusinessbusiness

Orlen Gaz, a subsidiary of Polish downstream oil gi-ant PKN Orlen has finalized the sale of its LPG cylin-ders unit to Gaspol, the Polish unit of Dutch SHV Energy. Financial details of the transaction have not been disclosed. Orlen and Gaspol inked the prelimi-nary deal nearly two years ago but hammering out de-tails of the agreement took time and the parties had to wait for Poland's competition authority UOKiK to give a green light to the transaction. Orlen Gaz is the leading supplier of LPG to the Polish market, selling propane, butane and their mixture. In 2011 the company decided to pull out of the cylinders segment, in order to focus on autogas, wholesale, and industrial installations. Gaspol, which is Poland's number one LNG distributor, has taken over all of Orlen's assets related to the cylinders business. The

weekly newsletter # 034 / 12th May 2014 / page 5

company will be the sole supplier of LPG canisters to Orlen's vast petrol station network and at the same time one of the key recipients of LPG from Orlen's fill-ing facility in Płock. Orlen Gaz has six filling plants as well as a border terminal in Sokółka as well as an ma-rine terminal in Szczecin, which enables the company to unload and load LNG tankers.

Poland's LPG market by segment 2012 2013 y/y

Autogas 1,600 1,575 -1.6%

Gas in cylinders 315 305 -3.2%

Bulk (tanks) 265 270 +1.9%

Total LPG usage in Poland 2,180 2,150 -1.4%

Source: POGP

"The lengthy negotiations had to do with the compli-cated structure of the takeover and complex proce-dures. The agreement concerns not only the acquisi-tion of cylinders and distribution channels from Orlen Gaz but also guarantees the sale of Gaspol's cylinders across the entire PKN Orlen network," said Sylwester Śmigiel, CEO of Gaspol. The other key player in Poland's LPG sector is US company AmeriGas, which last year acquired British BP's LPG distribution business in Poland. The trans-action gave AmeriGas an estimated 23% share in the bulk & canisters segment and 13% of the autogas seg-ment. As a result, its turnover were to leap from PLN 593m in 2012 to PLN 1.244bn in 2014, making AmeriGas one of Poland's top 300 largest corpora-tions. The company now has six LPG filling plants, six regional distribution centers (separate from the plants) and two transshipment terminals for LPG, all with a combined workforce of 350 employees. Cylinders represented 14.2% of the entire LPG market in Poland last year, the rest being autogas (73.3%) and bulk LPG in tanks (12.5%). With annual LPG sales of

2.15m tons, Poland is Europe's number two market af-ter Italy (3.2m tons), particularly due to the popularity of LPG-powered vehicles. Last year Poland's 2.76m LPG-powered cars consumed 1.58m tons of the fuel, more than in any other European country. There are an estimated 82,600 residential LPG tanks currently in-stalled throughout the country and growth on this market segment is expected to continue.

Autogas dominates LPG market Poland's LPG market in 2013

Bulk (tanks)

12.5%

Autogas

73.3%

Cylinders

14.2%

Source: POGP

Besides Gaspol and AmeriGas, the other players in the sector include France's Total (importer of LPG to Po-land from the Leuna and Schwedt refineries in Ger-many), Polish Petrolinvest (owner of an LPG termi-nal in Gdynia as well as a network of autogas and can-ister filling stations throughout the country), and Rus-sia's Novatek, which entered the market some a few years ago with the acquisition of Intergaz-System, a distributor from south east of Poland. As part of the latter transaction, the Russians got hold of a trans-shipment terminal with access to the wide-gauge rail-road from the East. What they are said to be lacking, however, are filling and storage facilities as well as broader market footprint.

Poland's LPG market

2012 2013 y/y

Domestic production 358 340 -5.0%

Imports 1,945 2,080 +6.9%

Exports 123 270 +119.5%

Total LPG usage in Poland 2,180 2,150 -1.4%

Source: POGP

PROPERTY & CONSTRUCTION

Skanska breaks ground Skanska breaks ground Skanska breaks ground Skanska breaks ground on Atrium 2, its new on Atrium 2, its new on Atrium 2, its new on Atrium 2, its new 20,000 sq.m office 20,000 sq.m office 20,000 sq.m office 20,000 sq.m office project in Warsaw project in Warsaw project in Warsaw project in Warsaw

Two weeks ago, when we spoke to Arkadiusz Rudzki, Leasing And Asset Director at Skanska Commercial Development Europe, about Generation Park, their brand new office project in Warsaw, he mentioned a second development in the Polish capital the company was going to break ground on this year. Details arrived earlier than expected, as Skanska has just broken ground on Atrium 2, a 20,000 sq.m office tower in the heart of the city's central business district. The 15-storey Atrium 2 will be located at the Rondo ONZ roundabout, across from Warsaw's top office skyscraper, the Rondo 1, which sold recently for EUR 300m. It will represent another installment of the Atrium complex Skanska has been building on the Western side of the Jana Pawła Avenue since the late 1990s. With completion scheduled for Q1-Q2 2016, Atrium 2 has already been LEED precertified at the highest, Platinum level. The Swedes own at least one more site in this area, the one directly by the ONZ

weekly newsletter # 034 / 12th May 2014 / page 6

roundabout, where they intend to erect an office sky-scraper in the future. "Warsaw is a market with enormous potential and we have ambitious plans for the city. We have not given up our plans for a high rise next to Atrium 2. There is still space left for a tall building that is currently at the concept design stage. However, we are focusing on other projects at the moment, for instance Atrium 2 and Generation Park, which will also include a high-rise section," Katarzyna Zawodna CEO of Skanska Property Poland, Tells Poland Today.

Atrium 2 will be sandwiched between the recently completed Atrium 1 building and the future high rise by the ONZ roundabout. Image: Skanska

Skanska Property Poland has recently completed Atri-um 1, its flagship 18,000-sq.m office project in the city centre, which the Swedes have recently sold to the German open-ended property fund Deka Immobilien-Global for EUR 94m (see BR+ No. 011 page 5). Later this year it will break ground the first of

three buildings that will make up the 80,000-sq.m Generation Park, Skanska's largest project in Warsaw to-date. Atrium 2 and Generation Park will both be lo-cated by the new east-west subway line, only one stop away from each other. Besides Warsaw, Skanska Property Poland is very ac-tive in Poland's regional cities, with investments in Poznań, Łódź, Kraków and Katowice, where it has broken ground on its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park. It has re-cently delivered its third scheme in Wrocław, Green Day (see BR+ No. 028 page 5) and it is currently work-ing on number four, the 40,000 sq.m Dominikański of-fice building. The first lease has already been signed by Deloitte. "We have recently sold four office parks for a com-bined EUR 300m or PLN 1.2bn. Moreover, all those buildings had been sold prior to their completion. We intend to maintain this ambitious pace, with five new projects to be launched in 2014, including Generation Park. Of the remaining four projects one is located in Warsaw and three in regional cities," Arkadiusz Rudzki told Poland Today. Their two new Warsaw projects alone will have a combined GLA of some 100,000 sq.m. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world's leading project development and construction groups, which currently has 57,000 employees in se-lected home markets in Europe, the US and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).

PROPERTY & CONSTRUCTION

PKP picks Ghelamco PKP picks Ghelamco PKP picks Ghelamco PKP picks Ghelamco for PLN 1.5bn project for PLN 1.5bn project for PLN 1.5bn project for PLN 1.5bn project Warszawa Gdańska Warszawa Gdańska Warszawa Gdańska Warszawa Gdańska

Following a few months of talks, Polish railways giant PKP SA has selected Belgium-based Ghelamco as the developer for a large mixed-use project at the site of the Warszawa Gdańska suburban railway station. According to PKP, the estimated total capex on the scheme will come to PLN 1.5bn. "We are pleased that the negotiations with Ghelamco came to a successful close," said PKP SA's Real Estate Director, Jarosław Bator in a press release, adding that "we are undertaking more and more developer in-vestment projects, and this is a solution which is prof-itable for both parties."

Ghelamco envisages nine office buildings at the site, one sitting on top of the station, as the latter is to be moved underground. Image: PKP/Ghelamco

The actual construction work is to get underway by the end of 2014 or at the beginning of 2015. The whole complex will be constructed in stages, with the new

weekly newsletter # 034 / 12th May 2014 / page 7

suburban train station to be delivered first. The new Warszawa Gdańska is likely to become one of the larg-est and most attractive mixed-use developments in the Polish capital, mainly due to the size of the plot (4.7ha) as well as its unique location with direct access by rail, subway, tram, buses and cars. Besides Dworzec Gdański, only the Central Station and its surroundings offer an equally broad selection of transportation op-tions. Ghelamco's competitors in the final stage of the tender were Belgium's Immobel as well as a consortium led by the Czech private equity fund Penta Invest-ments. One of the contenders from the earlier stages of the procedure, Polish Marvipol, which owns a long-term lease of a plot directly adjacent to the planned station investment, argues that the tender should be annulled and repeated and has taken the case to the Supreme Audit Chamber. The latter has announced that it will look into the PKP tender for the Warsaw Gdańska station in the second half of 2014. "We currently are looking for partners to help us de-velop the Warszawa Główna area, where we have some 10ha of largely vacant, centrally located space that would be ideal for a visionary mixed-use project," Jarosław Bator, said at the Primetime Warsaw II con-ference Poland Today hosted back in April. "With all the development that's taking place in the Wola area at the moment, I think an attractive leisure and retail project would be a perfect fit there." PKP hired property consultants Cushman & Wake-field to assess the potential of the Warszawa Główna site on Towarowa St., which currently houses a former train station and a train museum. PKP owns a large portfolio of well-located property assets across the country and in recent years it has participated in a number of large-scale mixed-use developments in-cluding Poznań City Centre (with Hungary's TriGranit), Galeria Katowicka (with Spanish

Neinver), and the soon to-be launched Warsaw West (with Slovakia's HB Reavis). Flemish developer Ghelamco is one of the most active players on Poland's commercial property market. Over the past 22 years Ghelamco has built nearly 0.5m sq.m of offices and warehouses in Poland. Their ongoing projects include the BREEAM-certified Warsaw Spire complex, which will consist three office buildings (the main 220-metre tower plus two 55m-tall blocks) with a combined office space of 100,000 sq.m. and an un-derground parking lot for 1,200 vehicles. Their other major recent and ongoing developments include Łopuszańska Business Park with 17,000 sq.m, and the new T-Mobile HQ, a 40,000 sq.m office com-plex on Marynarska 12. Outside of Warsaw, Ghelamco is developing a 60,000 sq.m. class A project Synergy Business Park in Wrocław. Last year the company sold its Warsaw office projects Mokotów Nova (to Curzon Capital Partners III fund for EUR 121m) and Senator (to Union Investment for EUR 120m). The Belgians have also made inroads into the residential segment with and upscale Warsaw project Woronicza Qbik (350 soft lofts), and they are about to break ground on their first retail projects in Warsaw (see BR+ No. 015 page 11).

PROPERTY & CONSTRUCTION

Orco sells German arm Orco sells German arm Orco sells German arm Orco sells German arm to buy more time for to buy more time for to buy more time for to buy more time for Złota 44 saleZłota 44 saleZłota 44 saleZłota 44 sale

Real estate developer Orco Property Group had agreed to sell its stake in its subsidiary Orco Germany for EUR 55m to an undisclosed buyer in order to fund an acquisition of receivables on its flagship Złota 44

residential project in Warsaw from bank Pekao SA, the Polish unit of UniCredit. "As opposed to the initial intent to obtain a bridge loan to finance the acquisi-tion, (Orco) will secure financing via the disposal of some of its most liquid assets," the company said.

Złota 44 has been a disappointment both for Orco's shareholders as well as fans of Daniel Liebeskind's architecture. Image: ARUP

Orco said the sale of the Orco Germany shares will take place in the future but Orco will receive the pay-ment in advance, subject to certain conditions. Back in March, Orco admitted that the luxury residential pro-ject had been a huge failure and that it would seek to sell the project, leaving its completion to a new owner. "The acquisition of the loan by OPG prevents bank-ruptcy of Zlota project and allows OPG to proceed with an ordered sale of the project to another develop-er or investor without an excessive time pressure. Such process is expected to reduce the loss for the Group compared to a sale orchestrated by the lending bank and the related exercise of the corporate guaran-tees granted by Orco Property Group," the developer said in a statement.

weekly newsletter # 034 / 12th May 2014 / page 8

Designed by Polish-born celebrity architect Daniel Liebeskind, Złota 44 aimed to be the most luxurious apartment building in Poland, offering a wide range of additional services and facilities available exclusively to its residents, including a 25m indoor swimming pool, sauna, and spa. Located between the Palace of Culture and the Central Railway Station, the 192m tower were to become Europe's second-tallest all-residential sky-scraper, with 54 storeys and 251 apartments. However, its completion has been delayed several times and sales of apartments have been rather disappointing. Meanwhile, Orco ended up on the verge of bankruptcy with Czech billionaire Radovan Vitek rescuing the col-lapsing business with an equity boost. Last year, its revenue decreased to EUR 146m from EUR 245m in 2012. The loss in fair value adjustments on investment properties and the impairments of development assets amounted to EUR 193m over 2013 with the Złota 44 project alone being responsible for EUR 121m worth of impairments. Orco's net loss amounted to EUR 227m last year, com-pared to EUR 42m in 2012. Its gross as-set value stood at EUR 1.035bn last year, down by EUR 313m from the prior year, largely due to a like-for-like drop in assets' value.

PROPERTY & CONSTRUCTION

Big deals push Q1 Big deals push Q1 Big deals push Q1 Big deals push Q1 property investment property investment property investment property investment volume to EUR 900mvolume to EUR 900mvolume to EUR 900mvolume to EUR 900m

The commercial real estate investment market in Po-land put up a very good performance in the first quar-ter of this year, with transactions valued at a total of approximately EUR 900m having been signed in the period, according to the major agencies. That marked

a 50% increase upon the combined value of the deals concluded in the same period of last year and suggests that the total volume of transactions will this year amount to more than EUR 3bn. Large transactions Several big transactions largely contributed to the very high Q1 investment volume which, according to DTZ experts, was the best quarter for the investment mar-ket in Poland in the last nine years. These included, first of all, the sale of the Rondo 1 office tower in War-saw for around EUR 300m and the sale of the Poznań City Center mall in Poznań for an undisclosed amount. According to Łukasz Maciak, director of the capital markets department at DTZ, the value of the latter deal, in which TriGranit, Europa Capital and PKP were the selling party and a consortium of Resolution and ECE Funds was the buyer, exceeded EUR 200m. Meanwhile, the sale of Rondo 1, which was acquired by two funds managed by Deutsche Asset & Wealth Management from BlackRock Europe Property Fund II, set a new record in the commer-cial property investment market in Poland. The deal involved the sale of the best office asset in Warsaw and was the largest single-asset office transaction ever closed in Poland and one of the biggest in Central and Eastern Europe, said Mike Atwell head of CEE capital markets at CBRE. Maciak pointed to market speculation that the sale of the Metropolitan, another prestigious office asset in downtown Warsaw, whose value easily exceeds EUR 100m, will be announced soon. With a number of in-vestors currently planning further office building ac-quisitions, the total commercial property investment volume in Poland in 2014 is expected to comfortably exceed the volume recorded last year (approximately EUR 3.3bn), Atwell said. Maciak was of a similar opin-ion, saying that taking into account all the negotiation processes that are already underway, the year 2014

should be at least as good as, or even better than last year. Product shortage Altogether, the office sector accounted for 58% of the total investment volume in Q1 2014, according to Col-liers International data. The retail and logistics sec-tors respectively accounted for 32% and 10% of the volume. Piotr Mirowski, director, CEE investment services, at Colliers International, noted that the de-mand for logistics assets is currently on the rise. A number of new deals in the sector are now in due dili-gence, he said. The transactions signed in the first quarter of 2014 were almost evenly distributed between Warsaw and the regional cities. The Polish capital accounted for 51% of the total investment volume recorded in the pe-riod. According to Mirowski, investor interest in the regional cities is now rising due to factors including the shortage of product in Warsaw. Many of the in-vestment funds that have bought new assets in the city in recent years are long-term holders, he said. New investors Those who invested in commercial real estate in Po-land in Q1 are mostly entities which – like GLL Real Estate Partners, Griffin, Hillwood, IVG, RREEF and W.P. Carey – already have properties in the country. The German investment funds, which are some of the most important market-makers in Poland, continue to witness the inflow of new capital from pri-vate and institutional investors, Mirowski said. How-ever, he stressed that they are now also seeing capital diversification. There are emerging new buyers who are interested in both the "safest" projects and more opportunistic schemes. "Some of the funds will be us-ing capital raised in China and South Korea. This is money which has not yet been present in the Polish market, or has been present to a limited extent," Mirowski said. by Adam Zdrodowski

weekly newsletter # 034 / 12th May 2014 / page 9

PROPERTY & CONSTRUCTION

Building land market Building land market Building land market Building land market to pick up in 2014to pick up in 2014to pick up in 2014to pick up in 2014

The value of transactions for building land in Poland is expected to rise to PLN 1.75bn this year, up from about PLN 1.5bn in the past two years. The increase will come on the back of strong demand from office and residential developers, as well as from international investors set to make their first purchases in Poland. Already in the first quarter of this year, several major transactions for building land have taken place. Among the major consultancies, Colliers International brokered deals valued at approximately PLN 215m in the first quarter, while CBRE participated in transac-tions worth around PLN 100m. But there is still plenty of supply. Among some of the major consultancies, Colliers International expects to close deals valued at a combined PLN 500m within the next few years, while CBRE is currently working on transactions whose total value exceeds PLN 700m. JLL is currently working on a portfolio whose total es-timated value amounts to approximately 1bn zł. Nev-ertheless, demand in Poland has not yet been sated, because there is a shortage of plots that meet commer-cial and residential developers’ requirements, experts say. According to Emil Domeracki of Colliers Inter-national, developers are now even ready to overpay for land if they manage to find a suitable plot. The prices of good residential and office sites increase in the near future, albeit slightly, he said. Residential rising According to Colliers International data, the residen-tial market accounted for as much as 55% of the com-bined value of the building land transactions closed in

Q1. The office and retail markets accounted for 40% and the warehouse market for 5% of the total invest-ment volume. Warsaw accounted for approximately 80% of the total value but investor interest in the re-gional cities is now also on the rise. Developers are currently looking for residential sites in markets in-cluding Wrocław, Tri-city, Kraków and Poznań. Domeracki noted that the large demand for residential sites results from the good apartment sales results which developers have been showing in recent months. Investors are therefore looking for plots which will generate relatively quick returns. Prime of-fice sites are also in demand, but retail developers are now mostly focusing on the revitalization of the exist-ing facilities, rather than on the purchase of land for new projects. New capital A number of new international entities are now plan-ning to make their first building land acquisitions in Poland within the next few years. Several such trans-actions were discussed at the recent MIPIM property fair in Cannes, France, said Daniel Puchalski of JLL. He added that at least nine new foreign investors, coming from markets including the Scandinavian countries and Ukraine, will acquire office and residen-tial sites in Poland in the near future. Generally, after several years of a decreased investor activity, there are now more and more entities in the market that have already raised a substantial amount of capital and are looking for opportunities to invest in building land in Poland. These are often investors who are planning to enter into joint-venture partnerships with the developers already active in the Polish mar-ket, both in Warsaw and the major regional cities, Puchalski added.

by Adam Zdrodowski

SERVICES & BPO

IT outsourcing firm IT outsourcing firm IT outsourcing firm IT outsourcing firm Mobica to employ 100 Mobica to employ 100 Mobica to employ 100 Mobica to employ 100 at new Lublin center at new Lublin center at new Lublin center at new Lublin center

British IT company Mobica will open its fifth Polish unit in the southeastern Polish city of Lublin. The in-vestor plans to recruit some 100 software testers and programmers for two expert teams: mobile technolo-gies and quality assurance. Mobica's existing Polish of-fices in Warsaw, Łódź, Bydgoszcz and Szczecin, em-ploy 600 programmers, who work on projects for global clients. "We have high hopes for our presence in Lublin," says Tomasz Krawczyński, managing director of Mobica in Poland. "Lublin is a university town but so far local IT graduates often found employment in Warsaw. We are offering them competitive pay for work on very inter-esting projects right here, in Lublin. Although at the moment we are seeking mainly experienced staff, who can immediately start working on our projects, we are not excluding the possibility of establishing coopera-tion with local universities in the future." Established in 2004, Mobica is a software develop-ment and integration services company with a global customer base in a host of sectors including automo-tive, mobile, semiconductor, finance and banking, TV and broadcasting, marine and Aviation. Many of their solutions are used in everyday life, from smartphones and TVs, to cars and intelligent buildings. The Lublin office is seeking Java/Android programmers, iOS ex-perts, JEE, Ruby on Rails and Python/Django devel-opers. In the future it may need also experienced C/C++ engineers.

weekly newsletter # 034 / 12th May 2014 / page 10

Poland Today talks to: Tomasz Krawczyński, Managing Director at Mobica Poland • PT: Your Polish business will now be divided be-tween five cities. What's the logic behind this setup? Wouldn’t it be easier to operate a single large center? Tomasz Krawczyński: It most certainly would, but the way we do it, we get to tap into many regional talent pools at the same time and also diversify our cost base. In some of the more mature markets, like Kraków, competition between employers is becoming too tough, whereas in some, for instance in Łódź, the ex-isting talent pool is beginning to dry out. Mobica's motto is to offer western European quality at Central European prices and therefore we are always on the lookout for talent-rich markets with competitive wage levels. I don't think Lublin is our last center in Poland anyway. • PT: Why do you think Lublin is only starting to ap-pear on investors' radar, despite the city's size and considerable academic potential? TK: My guess is that Lublin's proximity to Warsaw is to blame. Plenty of skilled people from Lublin find work in Warsaw, even if many of them would have preferred to stay. Moreover, for foreign investors Lu-blin is still rather difficult to access. They like to set up centers in cities that can be easily reached by plane, convenient for day-trip visits from the HQ. Further-more, investors are now beginning to recognize Lu-blin's potential as the larger cities are becoming in-creasingly saturated. Too many big names arrive there, driving wages to unreasonable levels. According to our sources, in Lublin there are an estimated 50 IT com-panies with more than nine employees, but only four with more than 100 staff. As a result, the city offers solid IT skills at a lower cost than elsewhere.

• PT: What other cities do you find potentially at-tractive for the likes of Mobica? Are there any re-gional markets that haven't been discovered yet? TK: For instance Białystok, Rzeszów or Zielona Góra. The latter has two good universities but it's more easi-ly accessible from Germany than from Poland. Also, some towns in Upper Silesia, such as Gliwice or Chorzów might attract some projects. • PT: Why would skilled IT people choose to remain in those smaller cities, instead of pursuing careers in Warsaw, Kraków or Wrocław, where, as you said, the pay is likely to be better? TK: The Poles are not as mobile as the Americans. There is always a certain percentage of talents who choose not to migrate, be it for personal or other rea-sons. The quality of life in smaller towns is often bet-ter. There is also a large group of those who left their hometowns at some point, gained experience else-where in Poland or abroad, but would very much like to return, as long as there are opportunities to return to. We believe we can provide such opportunities, give employees in Bydgoszcz or Lublin access to the new-est technology and let them take part in global pro-jects, without having to move. • PT: Mobica has been on the market since 2006. Has the quality of candidates improved since? Are Polish universities catching up with the needs of business?? TK: Only some 20-25% of our new recruits are fresh graduates – the rest are experienced professionals. The availability of experienced candidates has certain-ly improved, but I am not sure this has much to do with the academia. The coordination between univer-sities and companies remains rather poor, although I must admit that more and more schools have been opening up recently, inviting business to help them teach skills that are sought after on the market. Mobica has been cooperating with a number of uni-versities, providing workshops, dissertation topics and tutoring, contributing to syllabuses and we can see

some progress. There is still a lot of inertia in the aca-demia, however. Technologies change way faster than teaching programs and teacher mindsets.

SERVICES & BPO

Radom Radom Radom Radom hoping to hoping to hoping to hoping to become Poland's next become Poland's next become Poland's next become Poland's next BPO hotspotBPO hotspotBPO hotspotBPO hotspot

Proximity to Warsaw, attractive re-cruitment potential and pro-business city officials are putting this medi-um-sized Polish city on the invest-ment map. Radom, a city of over 200,000 people located just 100 kilometers south of Warsaw, offers many opportuni-ties for investors looking to expand their business ac-tivities in Poland, according to business leaders and city officials who spoke at a Poland Today Power Breakfast in April. Attendees, including representa-tives of businesses interested in investing in the city, heard an extensive discussion on the city’s unique fea-tures and its ability to become a major source of for-eign and domestic investment in the near future. One of the city’s biggest advantages, experts said, is its proximity to Warsaw and the international airport there. The short distance, taking just about 60 minutes to cover by car on the newly renovated S7 motorway, means firms based in Radom have easy access to other markets throughout Europe. Outsourcing industry ex-pert Wiktor Doktór noted how many small and medi-um-sized cities in Western Europe have already taken advantage of similar proximity to large urban centres. On the domestic front, Radom’s central location and proximity to other Polish cities such as Łódź, Lublin,

weekly newsletter # 034 / 12th May 2014 / page 11

Rzeszów, Kielce and Kraków mean that its location is also very favorable for conducting business within the country. ‘People are number one’ However, PwC partner Roman Lubaczewski noted that "proximity to Warsaw’s airport is not the top pri-ority for businesses – people are number one." On this point Radom also excels. Of the city’s 220,000 people, some 15,000 are students of higher education, provid-ing a large pool of qualified potential employees for businesses looking to invest. The city's advantage in human capital is even stronger considering the high percentage of students receiving education in tech-nical and career-oriented fields. City officials have worked with business leaders to es-tablish vocational training programs for students in-terested in seeking employment in the BPO sector. Ra-dom Mayor Andrzej Kosztowniak said that city offi-cials understand that often, post-graduate vocational training is a requirement for businesses and that offer-ing vocational training at public institutions was the city’s way of offering businesses a helping hand. Kosztowniak noted that this indirect way of financially supporting area businesses is still a novel concept in Poland, but said that his city was "mentally prepared" to cooperate with business. Recruitment potential Radom's recruitment potential is not just due to its high educational standards, but also its relatively low wages – some 50% lower than in Warsaw and 40% lower than in Kraków. AIG/Lincoln development manager Dariusz Domański pointed to this as one of the biggest factors his company had recently devel-oped office space in Radom, believing businesses would be attracted by the cost effectiveness. In addi-tion, Domański described the small city's workforce as "eager, ambitious, numerous, and loyal."

Radom's recruitment potential has proven to not only be an attractive for businesses but even for public in-stitutions such as the Data Processing Centre for Po-land's Ministry of Finance. When asked why the Fi-nance Ministry would choose to have one of its centers in Radom instead of in the capital, director Robert Pasiński explained that even the Finance Ministry was "attracted by Radom’s recruitment potential." Room to grow Anna Polak-Kocińska, vice president of the Polish In-formation and Foreign Investment Agency (PAIiIZ) agreed, noting that recruitment potential in the city had always been high. She added, however, that until recently, the main problem in Radom was the fact that there was not sufficient office space to house the nu-merous potential employees being educated in the city, "In the past, business activity in Radom was never at its full potential because there were no class-A buildings. That is no longer a problem." AIG/Lincoln CEO Mirosław Szydelski, whose compa-ny is the one responsible for the creation of the much-needed office space in the city through its Radom Of-fice Park, said that he expects workers who had mi-grated to other cities in the past will now return to Ra-dom. "We have found that when workers have the op-tion to return to their home towns, they do so even if salaries are lower." Szydelski also said that his compa-ny was prepared for a potential influx of workers in the future, "We are able to build another office build-ing in Radom within eight to nine months if such a need arises." Radom’s competent workforce, excellent location and low costs offer hope for the city’s future. Poland To-day’s event on Radom provided little opportunity to be skeptical about the city’s potential, especially consid-ering already existing investments in the city and the good cooperation with city officials. As Polak-

Kocińska of PAIiIZ said, "now is the time for Radom’s 15 minutes of fame."

TRANSPORT & LOGISTICS

Danish eDanish eDanish eDanish e----retailretailretailretailer er er er MyTrendyPhone MyTrendyPhone MyTrendyPhone MyTrendyPhone moves main warehouse moves main warehouse moves main warehouse moves main warehouse to Szczecinto Szczecinto Szczecinto Szczecin

Although the lease agreement between MyTrendyPhone and North-West Logistic Park in Szczecin was signed back in December, the Danish mobile phone accessory retailer has taken some time before disclosing more information regarding their plans for the site. "We will be moving our primary warehouse to Szcze-cin, hoping to start operating from there in June," Agnieszka Baloban, Managing Director of MyTrendyPhone's Polish unit tells Poland Today. "Ini-tially we are planning to hire around 30 people in dif-ferent departments." Founded and owned by Silvan Popovic, an entrepre-neur of Serbian extraction, MyTrendyPhone is a Den-mark-based online retailer of mobile accessories, op-erating in 10 markets, mainly in Scandinavia. "Szczecin it’s an excellent place for providing this kind of business. It is close to Scandinavian countries and Germany, which is a great logistic advantage. There is of course the human resources potential, as Szczecin offers well qualified and educated people. It’s also a very good business environment for investors. Plus we will have modern facilities of European level," says Agnieszka Baloban. "We would like to maintain our

weekly newsletter # 034 / 12th May 2014 / page 12

excellent position with satisfied customers all across Scandinavia and other regions. But in the same time we need to focus on the Polish market where in our opinion we should be more than competitive with our services." North-West Logistic Park is Szczecin's first class-A warehouse and industrial complex. The Cyprus-based Waimea Holdings, delivered (and fully leased) the first section of the project in July 2013. The 6,850 sq.m unit attracted three tenants (InCom Polska, Premium Distributors, and IQ Metal Polska) which employ 110 staff at the site. Currently work is underway on the 13,380-sq.m phase two of the project, which is situated on a 14ha site in the Szczecin's south-eastern Dąbie district, by the A6 highway (Szczecin-Berlin) and the S3 expressway (Szczecin-Świnoujście port). The en-tire project is to total 64,000 sq.m with an estimated total capex of PLN 110m.

Once fully completed, North-West Logistic Park will have a leasable area of 64,000 sq.m. Photo: North-West Logistic Park

The Szczecin area has attracted a number of Western European e-commerce operators in recent years. Thanks to its strategic location Szczecin represents an attractive warehouse and manufacturing destination for northern European companies seeking to expand

in Germany and the CEE region. After all, it takes merely 1½ hours to get from Szczecin to Berlin by car, which makes the Polish port town a natural logistics hub for the German capital. The Rhenus Contract Logistics unit in Prologis Park Szczecin is in fact the distribution center for German online retailer Limango, handling more than 30,000 parcels a day. Danish online fashion retailer SmartGuy Group (op-erator of the stylepit.com web-site) has recently launched a distribution center in Goleniów near Szczecin, creating more than 150 jobs. Most recently, Danish logistics firm Prime Cargo, which offers lo-gistics services to Scandinavian e-commerce clients, has signed a lease for an 11,200 sq.m distribution facili-ty at Prologis Park Szczecin. With a modern warehouse stock of merely 49,000 sq.m as of end of 2013 (according to Cushman & Wake-field), Szczecin remains one of Poland's smallest re-gional industrial property markets, but the robust take-up of 27,000 sq.m last year signaled a potential for considerable growth in the future. Last year saw the delivery of warehouse A of North-West Logistic Park with subsequent stages of the project being under construction. The vacancy level in the Szczecin area stood at 7.5% as of end of last year.

TRANSPORT & LOGISTICS

Warehouse developers Warehouse developers Warehouse developers Warehouse developers report report report report highesthighesthighesthighest Q1 takeQ1 takeQ1 takeQ1 take----up since 2008up since 2008up since 2008up since 2008

The first quarter of 2014 was the best beginning to a year on Poland's industrial & warehouse property market since 2008 with the gross take-up exceeding 400,000 sq.m, of which 269,000 sq.m (67%) was in

new lease agreements and the rest – lease renewals, according to a report by property consultancy JLL. "After the record-breaking 2013, when demand for in-dustrial and warehouse space peaked, the market still seems to be keeping the momentum. Taking into ac-count developers’ activity and the good shape of the economy, we see no reason to change our forecast, and that the net demand for industrial space will reach 1m sq.m in 2014," said Tomasz Olszewski, Head of Indus-trial Department at JLL. The strongest demand was recorded in Upper Silesia; a total of 126,000 sq.m (31% share in total take-up). Especially noteworthy was the high share of renewals in this region (71%) and the Warsaw Suburbs (49%), which according to JLL demonstrates the maturity and attractiveness of these markets for tenants already operating there. In terms of new demand, Poznań was ranked first with over 74,000 sq.m leased. Szczecin is also an interesting case, with new demand in Q1 hit-ting 21,000 sq.m. The largest transactions in Q1 encompassed Carre-four (renewal of 46,000 sq.m in Distribution Park Będzin) and Goodman’s 40,000 sq.m lease contract, with a tenant for whom the developer will construct a new facility near Konin. Once again the two most ac-tive sectors among all industrial tenants were logistics operators (43% share in new demand) and retail chains (29%). In Q1, 245,000 sq.m of new space was delivered to the market, of which the largest portions were completed in Central Poland (74,000 sq.m), Poznań (68,000 sq.m) and Wrocław (35,000 sq.m). As of end of Q1 2014, Poland's entire stock of leasable industrial floor space stood at 7.73m sq.m. In terms of ownership structure, over half of the supply is in the hands of the four largest market players and their JV partners (Prologis – 2.01m sq.m, SEGRO – 0.97m sq.m,

weekly newsletter # 034 / 12th May 2014 / page 13

Blackstone – 0.56m sq.m and Panattoni – 0.52m sq.m). JLL reports also growing interest from foreign investment trusts who look to buy prime assets across Poland. At the beginning of April 2014, 678,000 sq.m remained under construction across the country, of which 530,000 sq.m in the Wrocław and Poznań regions, largely due to deals signed by Amazon in 2013. Ac-cording to warehousefinder.pl, the share of specula-tive projects in the construction pipeline remains low (5.5%). However, the Wrocław market is now showing clear signs of a rebound in this respect. As of the end of Q1, 24,000 sq.m were being constructed on a specula-tive basis in this region, and some additional develop-ers expressed their interest in commencing such pro-jects in the near future. The vacancy rate stood at 10.9% at the end of Q1, and registered a decrease on Q4, when it totalled 11.3%. The largest share of immediately available space was found in the Warsaw Inner City – 20.5% (a drop of 1.8 p.p. on Q4) and Central Poland – 14.2% ( a drop of 1 p.p.). The steepest reduction in vacancy rate was regis-tered in the Wrocław region, where it dropped from 11.7% in Q4 to 7.9% in Q1. In Q1 2014, most of the rents remained stable, with the exception of Szczecin. In the upcoming months, a stronger upward pressure on rents in Poznań and Wrocław is expected. According to JLL data, pub-lished on the warehousefinder.pl, at the end of 2013, the highest effective rents for SBU (small business units) were typically found in the urban regions -Warsaw Inner City (EUR 3.5-5.0 /sq.m / month), Wrocław (EUR 3.4-3.9 / sq.m / month) and Łódź (EUR 2.75-3.7 / sq.m / month). Lower effective rents are to be found in the "big box" projects in the Warsaw Suburbs (EUR 2.1 –2.8 / sq.m / month) or Central Po-land (EUR 2.1-2.8 / sq.m / month).

RETAIL CHAINS

Empik reaches 200 Empik reaches 200 Empik reaches 200 Empik reaches 200 locationslocationslocationslocations, wants , wants , wants , wants another 15 by yearanother 15 by yearanother 15 by yearanother 15 by year----endendendend

Poland's leading books and multimedia retailer Empik has recently launched its 200th store and the company plans to add a further 15 new locations to the chain by the end of the year, both in large cities such as Warsaw and Kraków, as well as smaller towns, where Empik will make its first appearance (for instance Mława, Brodnica, Grójec or Kutno). Since the beginning of the year Empik has opened six new outlets with an average floor area of 250 sq.m. In April alone new Empik stores appeared in Turek, Wodzisław Śląski and Kraków. Empik is pushing a new "Express" format, with stores measuring between 100 and 200 sq.m, smaller than traditional Empik outlets. So far the company has opened eight shops under that formula and additional few are to be launched later this year. "One year after we introduced the Empik Express con-cept we can confidently say that it has been well re-ceived by customers. Empik Express has the most lo-cal character of all Empik formats and therefore we are still monitoring customer reactions in all locations, which enables us to better tailor our offer," says Olaf Szymanowski, CEO of Empik. "We are monitoring the retail property market, looking for new available spac-es with high customer traffic, such as shopping malls, city centers, and railway stations. In the coming months we will open Empik outlets at Warsaw's cen-tral station and the PKP station in Wrocław."

Asked whether Empik intends to replace some of its existing, larger shops, with the new "Express" outlets, spokesperson Monika Marianowicz declined. "There are no such plans. We are dynamically devel-oping the entire chain, simultaneously opening regular and partner-operated stores as well the "Express" ones," she told Poland Today.

EM&F Group at a glance*

No of

stores/

locations

Total

floor

space

(sq.m)

Countries

Empik Group 198 85,840 Poland

Smyk Group

199 186,076

Poland, Germany,

Russia, Turkey,

Ukraine, Czech Rep.

Learning Systems 113 n/a

Poland, Russia, Tur-

key, Ukraine

Fashion Group 118 42,930

Poland, Russia,

Ukraine

E-commerce empik.com,

smyk.com, gan-

dalf.com.pl,

empiktravel.pl,

empikfoto.p

Poland

Optimum Group

(wholesale)

Chanel, Azzaro,

Clarins, Thierry

Mugler, Converse,

CAT, Rip Curl, etc

Poland, Russia,

Ukraine, Slovakia,

Belarus, Czech Rep.

Source: EM&F *) as of end of 2013

Empik's outlets sell books, multimedia, gifts and home goods, both in brick & mortar outlets and online. The chain, which turned over PLN 1.015bn last year, be-longs to the Empik Media & Fashion Group (EM&F), which operates also leading children's goods retailers Smyk (143 stores in Poland, Russia, Germany.

weekly newsletter # 034 / 12th May 2014 / page 14

Czech Republic, Turkey, and Ukraine) and Spiele Max (56 locations in Germany), 113 language schools, wholesale cosmetics & sportswear business (Optimum Group) and 118 fashion outlets, including 61 in Poland. The group's e-commerce division (which includes the online Empik and Smyk stores) has PLN 202m worth of sales revenues last year. EM&F's business generated losses of PLN 371m in 2013 and 110m in 2012, prompting EM&F to abandon this part of its business, looking for its franchise part-ners or new investors to take over the GAP, River Is-land, New Look, Aldo, Esprit and River Island chains in Poland, Russia and Ukraine. Apart from the huge losses it generated, the company's fashion business has seen its sales shrink rapidly in recent quarters. Last year it contracted by 19% y/y, down to PLN 307m, in-cluding a 45% drop in Q4 2013. Overall, the EM&F group turned over PLN 3.037bn last year, marking a 2% increase on the prior year, but its net loss deepened from a mere PLN 6m in 2012 down to PLN 300m in 2013. Their EBITDA on contin-ued operations increased slightly last year and came to PLN 276m. The key shareholders in EM&F are the Eastbridge Group and the CEE private equity fund Penta Investments.

POLITICS & ECONOMY

European commission European commission European commission European commission raises GDP growth raises GDP growth raises GDP growth raises GDP growth forecast for Polandforecast for Polandforecast for Polandforecast for Poland

According to brand new projections by the European Commission, the Polish economy will outperform its largest post-communist EU peers through next year as

subdued inflation and an improving labor market bol-ster consumption. Gross domestic product will accelerate to 3.2% this year and 3.4% in 2015 from last year’s 1.6%, the Euro-pean Union's executive body said in its spring fore-casts released last week. The Czech and Hungarian economies are set to grow 2% and 2.3% this year, re-spectively the report showed. The 2014 estimate for Poland is the third-fastest in the EU behind Latvia and Lithuania. Poland is set to benefit from domestic demand picking up and with public investment rising, which will help offset possible threats related to escalating conflict in neighboring Ukraine and a possible recession in Rus-sia, according to the EU. "The risks to the forecast are broadly balanced," the commission said. "On the upside, a stronger deprecia-tion of the zloty would further boost exports and en-hance import substitution. On the downside, new ten-sions in Ukraine could weigh on economic activity."

POLITICS & ECONOMY

Europe's wakeEurope's wakeEurope's wakeEurope's wake----up callup callup callup call

The Russia-Ukraine crisis is a test of European leadership – and a chance for the EU to truly unite The West must make a more concerted effort to form a united front to show that the power politics being used by Russian President Vladimir Putin will not succeed, said Horst Koehler, former president of Germany, at a panel discussion in Warsaw in April.

The discussion was hosted by the Executive Club, an initiative started by former Polish President Aleksander Kwaśniewski. Poland Today was a media patron of the Executive Club event. Other members of the panel included President Kwaśniewski himself, as well as former US National Security Advisor General James L. Jones, former Polish PM Jan Krzysztof Bielecki, and Polish business magnate Jan Kulczyk. The panel agreed that more political and economic unity within the European Union would help it to bet-ter face the challenges of the present and future. "This is a big chance for Europe to now wake up and show that we are serious about responding to our challenges,” said President Koehler, adding that Eu-rope should use an approach to the Russia-Ukraine crisis that showed unity and decisiveness. Kulczyk's evaluation was harsh. “Russia has shown us that the ‘united’ Europe is more united in name than in fact. Brussels concerns itself with many details, but not the most important issues,” he said. General Jones bemoaned the fact that more NATO countries had not lived up to obligations to dedicate two percent of their GDP to defense spending. "We now have a symmetric threat, not just asymmetric threats," he said. "This is a defining moment in history that requires defining leadership," he added. "This is a great opportunity, if we seize it, to show that leader-ship." For his part Prime Minister Bielecki said that he would even like to thank President Putin for his moves in Russia, because he ultimately believed they would serve to spur greater unity in the European Union. "This situation offers another chance for Europe to try to answer the question of whether it can live up to its obligations," he said.

by Andrew Kureth

weekly newsletter # 034 / 12th May 2014 / page 15

KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Dec '13 Jan '14 Feb '14 Mar '14

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

Food & bev +1.5 +0.7 +1.8 +1.6 +1.6 -0.2 +1.2 -0.3

Alcohol, tobacco +3.7 0.0 +3.4 +0.8 +2.2 +1.4 +3.7 +0.7

Clothing, shoes -4.9 -0.6 -5.0 -3.7 -4.7 -1.7 -4.3 +0.8

Housing +1.8 0.0 +1.9 +0.2 +1.9 +0.1 +1.8 -0.1

Transport -0.9 0.4 -1.2 -1.5 -1.1 +0.4 -2.7 +0.1

Communications -11.6 0.0 -7.8 -0.3 -3.2 +0.4 -0.3 +0.6

Gross CPI +0.7 +0.1 +0.5 +0.1 +0.7 +0.1 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

m/m (%) -5.8 +17.3 -21.3 -0.6 +12.5

y/y (%) +3.8 +5.8 +4.8 +7.0 +3.1

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-Mar

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 33.9 +49.4

Commenced 142.9 158.1 162.2 141.8 127.4 32.2 +56.4

U. construction 670.3 692.7 723.0 713.1 694.0 691.3 -0.8

Completed 160.0 135.7 131.7 152.5 146.1 35.7 -3.9

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% 442,167 -1.5%

Q3 2013 +1.9% 393,725 -1.9%

Q2 2013 +0.8% 389,244 -2.3%

Q1 2013 +0.5% 370,089 -3.1%

2013 +1.6% 1,635,746 -1.5%

2012 +1.9% 1,596,379 -3.7%

2011 +4.5% 1,528,127 -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% +1.0%

Producer inflation +2.1% +7.6% +3.4% -1.3% -1.4%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.3% -0.7%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.4%

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

EUR/PLN 3.99 4.12 4.19 4.20 4.09

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

GrosGrosGrosGross Wagess Wagess Wagess Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q1 2013 Q2 2013 Q3 2013 Q4 2013

A B A B A B A B

Coal mining 6,060 138 6,290 143 6,061 138 8,615 196

Manufacturing 3,491 152 3,560 155 3,625 158 3,690 161

Energy 6,196 188 5,828 177 6,021 183 6,736 205

Construction 3,556 152 3,693 157 3,766 160 3,895 166

Retail & repairs 3,432 146 3,421 146 3,408 145 3,456 147

Transportation 3,439 122 3,547 125 3,589 127 3,913 138

IT, telecoms 6,685 174 6,707 174 6,654 173 6,695 174

Financial sector 6,356 143 6,702 151 6,109 137 6,602 148

National average 3,741 149 3,613 144 3,652 145 3,823 152

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

m/m (%) +9.4 +14.3 -2.9 +21.5 -64.0 +18.7 +24.2

y/y (%) -4.8 -3.2 -8.9 +5.8 -3.9 +14.4 +17.4

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

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

Oct 13

Jan 14

Apr 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 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14

m/m (%) +0.1 -0.7 -0.3 -0.1 0.0 -0.1 -0.2

y/y (%) -1.4 -1.4 -1.5 -1.0 -1.0 -1.4 -1.3

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 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14

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

y/y (%) -1.8 -1.8 -1.7 -1.7 -1.7 -1.6 -1.6

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 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

m/m (%) +9.6 +6.0 -6.2 -9.7 +2.9 -1.8 +9.4

y/y (%) +6.2 +4.4 +2.9 +6.6 +4.1 +5.3 +5.4

Year 2007 2008 2009 2010 2011 2012 2013

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

weekly newsletter # 034 / 12th May 2014 / page 16

TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Feb 2014

y/y (%)

share (%)

2013 share (%)

Jan-Feb 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 11,425 +7.0 10.6 69,304 10.9 7,921 +2.4 7.6 47,906 7.4

Beverages and tobacco 1,296 +22 1.3 8,624 1.4 564 -8.9 0.6 4,150 0.6

Crude materials except fuels 2,799 +0.9 2.8 15,744 2.5 3,551 -2.3 3.6 21,585 3.3

Fuels etc 5,001 -7.8 5.4 30,013 4.7 13,046 +7.5 11.9 75,539 11.7

Animal and vegetable oils 321 +49.7 0.2 1,864 0.2 397 -4.4 0.4 2,646 0.4

Chemical products 9,592 +4.1 9.2 59,103 9.3 15,616 +3.2 14.8 92,917 14.3

Manufactured goods by material 20,989 +0.7 20.7 129,915 20.3 18,664 +4.2 17.6 112,392 17.3

Machinery, transport equip. 40,068 +7.8 37.0 239,434 37.5 33,679 +4.5 31.6 216,608 33.4

Other manufactured articles 13,873 +8.8 12.7 82,816 13.0 9,508 +5.5 8.8 58,210 9.0

Not classified 163 n/a 0.1 1,782 0.2 2,455 n/a 3.1 16,242 2.6

TOTAL 105,527 +4.9 100 638,599 100 105,401 +3.3 100 648,195 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Feb 2014

share *2013 share No Country Jan-Feb 2014

share *2013 share

1 Germany 27,115 25.7% 159,622 25.0% 1 Germany 22,514 21.4% 139,334 21.5%

2 UK 6,789 6.4% 41,503 6.5% 2 Russia 13,686 13.0% 79,601 12.3%

3 Czech Rep. 6,597 6.3% 39,421 6.2% 3 China 10,644 10.1% 60,914 9.4%

4 France 6,453 6.1% 35,745 5.6% 4 Italy 5,067 4.8% 33,703 5.2%

5 Russia 4,684 4.4% 34,058 5.3% 5 Netherlands 3,799 3.6% 25,005 3.9%

6 Italy 4,759 4.5% 27,450 4.3% 6 France 4,086 3.9% 24,533 3.8%

7 Netherlands 4,217 4.0% 25,292 4.0% 7 Czech Rep. 3,674 3.5% 23,778 3.7%

8 Ukraine n/a n/a 18,037 2.8% 8 USA 2,399 2.3% 17,350 2.7%

9 Sweden 3,186 3.0% 17,498 2.7% 9 UK 2,782 2.6% 16,861 2.6%

10 Slovakia 2,616 2.5% 16,795 2.6% 10 Belgium 2,645 2.5% 14,913 2.3%

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

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 9 May 2014

100 USD 302.47 ↓

100 EUR 417.87 ↓

100 GBP 511.31 ↑

100 CHF 342.92 ↓

100 DKK 55.98 ↓

100 SEK 46.36 ↑

100 NOK 51.37 ↑

10,000 JPY 297.24 ↑

100 CZK 15.25 ↓

10,000 HUF 137.64 ↑

100 USD/EUR against PLN

300

350

400

450

24 M

ay 13

1 Aug 13

9 O

ct 13

18 D

ec 13

28 Feb 14

9 M

ay 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Dec '13 Jan '14 Feb '14 Mar '14

Monetary base 164,010 161,544 158,330 173,213

M1 555,851 546,487 548,033 558,954

- Currency outside banks 114,401 113,455 114,680 116,657

M2 960,361 947,443 954,284 964,624

- Time deposits 421,160 418,259 423,296 422,990

M3 978,924 962,416 968,442 980,377

- Net foreign assets 143,430 140,617 135,759 132,849 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 Dec '13 Jan '14 Feb '14 Mar' 14

Loans to customers 903,890 914,189 914,068 923,709

- to private companies 259,061 263,063 263,941 267,553

- to households 562,381 567,984 567,257 569,334

Total assets of banks 1,601,293 1,628,197 1,616,891 1,628,519

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

PLN (up to 1 year) 4.5% 4.5% 4.3% 4.2% 4.5% 4.5%

PLN (up to 5 y ) 4.9% 4.9% 4.9% 4.9% 4.8% 4.9%

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

PLN (total) 4.8% 4.8% 4.7% 4.8% 4.7% 4.7%

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

EUR (over 1m EUR) 2.5% 3.0% 2.9% 3.6% 3.4% 3.3%

Warsaw Inter Bank Offered Rate (WIBOR) as of 9 May 2014

Overnight 1 week 1 month 3 months 6 months

2.60%% 2.60% 2.62% 2.72% 2.75%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.59% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 9 May '14

Change 25 Apr'14

Change end of '13

↓ Alior Bank 78.10 -3% -4%

↓ Asseco Pol. 43.55 -3% -5%

↓ Bogdanka 113.8 -8% -10%

↓ BZ WBK 364.9 -5% -6%

↑ Eurocash 39.29 -2% -18%

↓ Grupa Lotos 37.1 -5% +5%

↑ JSW 42 +1% -21%

→ Kernel 28.87 0% -24%

→ KGHM 110.65 0% -6%

↓ LPP 7,700 -3% -14%

↓ mBank 488 -6% -2%

↑ Orange Pol. 10.25 +4% +5%

↓ Pekao 189.25 -1% +5%

↓ PGE 20.08 -3% +23%

↑ PGNiG 4.82 +8% -6%

↓ PKN Orlen 42.82 -5% +4%

↓ PKO BP 40.45 -2% +3%

↓ PZU 425.85 -1% -5%

↓ Synthos 4.7 -3% -14%

→ Tauron 5.11 0% +17%

Source: Warsaw Stock Exchange

Key indices

as of 9 May 2014

WIG Total index

55550000,,,,444451515151....77779999 Change 1 week -2% ↓

Change end of '13 -2% ↓

WIG-20 blue chip index

2,2,2,2,534534534534....02020202 Change 1 week +4% ↑

Change end of '13 +6% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

23 Jan 14

14 Feb 14

10 M

ar 14

1 Apr 14

25 A

pr 14

weekly newsletter # 034 / 12th May 2014 / page 17

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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-Mar 2014 *

Monthly wages (PLN)

Jan-Mar 2014**

Unemploy-ment

Mar 2014

New dwellings Jan-Mar 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 101.4 108.3 4,130 3,970 155.3 13.3 3,940 103.4

Kujawsko-Pomorskie (Bydgoszcz) 109.4 123.4 3,392 3,170 151.7 18.2 1,725 87.8

Lubelskie (Lublin) 106.0 77.5 3,778 3,018 136.4 14.6 1,135 84.0

Lubuskie (Zielona Góra) 116.8 115.2 3,425 3,005 59.7 15.6 965 105.6

Łódzkie (Łódź) 102.0 110.8 3,732 3,151 153.9 14.2 1,860 127.9

Małopolskie (Kraków) 96.6 105.9 3,841 3,293 167.1 11.7 4,506 99.2

Mazowieckie (Warszawa) 106.9 104.7 4,562 4,903 287.4 11.1 6,906 86.9

Opolskie (Opole) 108.3 144.1 3,573 3,461 52.2 14.3 522 116.8

Podkarpackie (Rzeszów) 106.6 112.0 3,367 3,024 155.3 16.4 1,625 103.4

Podlaskie (Białystok) 104.6 114.0 3,280 3,672 71.0 15.1 868 126.0

Pomorskie (Gdańsk-Gdynia) 105.0 108.8 4,052 3,428 116.2 13.4 2,043 69.3

Śląskie (Katowice) 100.2 112.3 4,647 3,495 212.7 11.4 2,628 94.4

Świętokrzyskie (Kielce) 116.9 75.2 3,395 3,151 90.6 16.5 803 134.1

Warmińsko-Mazurskie (Olsztyn) 106.1 115.1 3,294 3,063 115.7 21.5 1,342 104.4

Wielkopolskie (Poznań) 109.4 106.8 3,729 3,590 145.9 9.6 3,453 106.0

Zachodniopomorskie (Szczecin) 112.6 90.2 3,525 3,363 111.0 17.9 1,348 86.7

National average 104.8 106.3 3,983 3,705 2,182.2 13.5 35,669 96.1

*) 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 Q3 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13

in Poland 1,381 2,886 175 -3,020 1,885 -3,614

Polish DI -550 -1,203 957 2,588 -1,449 1,588

Year 2008 2009 2010 2011 2012 2013

in Poland 10,128 9,343 10,507 14,896 4,763 -4,574

Polish DI -3,072 -3,335 5,484 -5,935 -607 3,684

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

Period 2011 2012 2013 Q2 '13 Q3 '13 Q4 '13

Trade balance -10,059 -5,175 2,309 1,203 1,094 151

Services, net 4,048 4,642 5,249 1,686 1,032 1,257

CA balance -18,519 -14,191 -4,984 486 -2,086 -1,071

CA balance vs GDP -5.0% -3.7% -1.5% -2.3% -1.9% -1.5%

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

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

Q3 13

Q1 14

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 2H'13 Retail rents**2H'13

Q4 '13

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 8,088 +5.1% 11.5-25.5 11.75% 80-90 85

Kraków 6,073 -8.9% 13-15 4.90% 35-45 78

Katowice 5,456 +2.5% 13-14 7.30% 35-45 56

Poznań 6,404 +4.4% 14-16 14.20% 35-45 55

Łódź 4,768 +2.6% 12-14 14.40% 35-45 25

Wrocław 5,928 +2.3% 13-15.5 11.75% 35-45 40

Gdańsk 6,525 +0.1% 13-15 11.20% 35-45 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

Mar10

Nov10

Jul11

Mar12

Nov12

Jul13

Mar14

Wage CPI

Index 100 = Jan 2005. Source: GUS