Workshop on Sell-Side M&A

Presented byLeighton Peter Prabhu, BCom MPhil CA CPAManaging Partner, Interstice Consulting LLP

Board Member, Canada-Eurasia-Russia Business Association (CERBA)Member, Global Strategy & Leadership Alumni Panel, McGill University

Higher School of Economics, Moscow

1 December 2012

Session objective

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To provide participants with “virtual” experience in M&A advisory through review of an actual sell-side transaction, and an opportunity to ask questions of

an experienced transactor

Role of financial advisor

• “Pilot” for the transaction

• Coordinate communications

• Develop the offering and market the transaction

• Assist with negotiations

• In general, bridge gaps between buyer and seller in the interests of closing the transaction under the most favourable terms to the seller

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Typical conflicts• Price

• Timing

• Due diligence period

• Due diligence access to materials

• Buyer’s financial backing

• Seller’s representations and warranties

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Transaction overview

€168,000,000

Baltic Properties Trust

has acquired a

This announcement appears as a matter of record only.

commercial real estate portfolio

from

Telecom Poland S.A.

August 2008

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Transaction background

• Seller: Telecom Poland / Orange Polska

• Former state-owned telecom monopoly

• Publicly listed on the Warsaw Stock Exchange

• 33 000 employees

• Majority controlled by France Telecom

• New campus project “Miasteczko” to house all Warsaw office-based employees

• Sale of legacy buildings part of “Asset Base Optimization” strategy

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Macro environment

• Real estate considered a stable asset class

• Poland - Eastern Europe ‘Lite’

• Uninvested funds

• Incentives to deploy

• Shortage of quality, occupied properties in prime areas

• 2008 - pre GFC

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Process

• Pre-mandate

• Seller due diligence

• Defining the transaction

• Marketing the transaction

• Bid evaluation, preliminary negotiations

• Buyer due diligence

• Final negotiations

• Closing

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Transaction team

AdvisorsCFO

Transactioncommittee

Project manager

Financial advisor

Legal advisor

Industry advisor

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Offering

• Sale and leaseback of 3 key buildings, including TP’s head office

• 2 extra parcels of land including in the portfolio

• Bidders to propose sale price and lease rates

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Marketing

• Pre-marketing: market soundings

• Selecting potential investors

• Teaser & NDA

• Procedure letter

• CIM

• Market research

• Structured Q&A

• Direct meetings

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Risks to buyer

• Valuation: “buyer’s curse” in auction situation

• Capex: cost estimates of refurbishing buildings post TP occupancy

• Lease period uncertainty: lessor’s option to terminate early or extend

• Market risk: takeup of new space

• Currency: PLN lease terms vs. EUR financing

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Non-binding bids

• 11 offers received

• Valuations within a fairly narrow range

• Bidding strategies: high price / high lease cost, low price / low lease cost

• Some bidders excluded vacant land plots

• 3 bidders selected for short list

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Evaluating bids• Quantitative / objective

• Financial terms

• Markups to model agreements

• Flexibility for timing of new office availability

• Qualitative

• Income statement impact

• Conditionality

• Financing

• Other caveats

• Bidder reputation and personal dynamics

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BPT closes largest ever Polish sale and lease back transaction1 August 2008After over six months of intensive project studies and negotiations, on Wednesday this week - 30th of July, BPT entered into the final sale and lease back agreements with one of the largest European communications companies, Telekomunikacja Polska S.A. - part of the France Telecom Group. On the basis of the sale agreements BPT Optima Fund acquired in total approximately 62,000 sq. m. in the Business Districts of Warsaw. The entire project consists of three top-located properties - two landmark office towers included. The acquisition brought into the portfolio high quality and conveniently equipped A-class office space supplied by nearly 500 parking spaces and a private heliport. All three properties benefit from an easy access to the surrounding facilities such as public transportation within a walking distance, shopping centre, banks, public institutions, hotels, restaurants.

The total investment, close to 168 million EUR, is expected to provide the investors with a solid yield much exceeding 7%.

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Result

Key themes

• Are parties close in terms of valuation? This underpins the viability of the deal.

• Does the buyer understand the seller’s priorities and non-financial criteria?

• Is overall market power on the side of buyers or sellers?

• Differences between financial investors and corporates

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Aftermath

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Aftermath

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• Prime rental rates peaked at EUR32 sq.m• Current rates represent a 22% decline

Aftermath

BPT Optima sells the Twarda Tower in Warsaw, Poland to Europa Capital3 September 2012

In an agreement signed on 30 August 2012 the BPT Optima real estate investment fund has sold its single largest asset, the Twarda Tower in Warsaw, Poland, to London-based Europa Capital.

The tower was originally acquired in July 2008 as part of a large sale-and-lease back transaction with Telekomunikacja Polska S.A. (TP SA) - the Polish telecom operator majority-owned by France Telecom. The original transaction included three office assets in the Polish capital. Although the transaction price is not disclosed, with today's sale BPT Optima exits its single largest asset and with it also closes all liabilities associated with the original transaction.

The approx. 27,000 sq. m. large Twarda Tower is located at the very heart of the Warsaw central business district.

"With the sale of the Twarda Tower, BPT Optima achieves an important milestone in the current restructuring process of the fund," says Fund Manager, Antanas Anskaitis.

The other tower in the original portfolio, the Moniuszki Tower, was sold in December 2011 while the last of the three buildings, Obrzezna, located in the Mokotow District of Warsaw, still remains with BPT Optima. The building houses the R&D organisation of TP SA, and this July the lease agreement with this single tenant was prolonged until 2023.

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Q&A

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