June 3, 2013

June 3, 2013 This is bne's monthly dispatch covering the real estate sector in Eastern Europe. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options at: http://businessneweurope.eu/users/subs.php RUS RE TOP STORIES 1. AFI Development: General Prosecutor issues warning on AFIMall City 2. Czech fund to invest over EUR600m in Russian real estate market 3. Estonia’s growth in construction volumes slowed down in the 1st quarter 4. Government eases restrictions in construction sector to attract foreign companies 5. Housing prices seem to be stabilising in Russia 6. Moscow dissolved real estate contracts for 30m square meters 7. Oligarch Roman Polonsky to sell real estate company Mirax 8. Prices on property in New Moscow drop RUS RE COMPANY NEWS 9. AFI Development: General Prosecutor issues warning on AFIMall City 10. LSR Group acquires construction permit for residential project – 11. PIK Group Raises $275m in Share Offering RUS COMPANY FINANCIALS 12. AFI Development 1Q13 IFRS review: impressive results UKR RE NEWS 13. DUPD reports USD 15 mln loss in 2012 KAZAKH RE NEWS 14. Akhmetov calls for investigation into building materials prices 15. Chagala sees further writedowns in 2H2012 as acquires Almaty office building 16. Fitch Assigns Kazakhstan Mortgage Company Upcoming Bond Issues 'BBB-(EXP)' Expected Ratings EURASIA RE NEWS 17. Tojikcement debt remains unsettled as renovation begins SE RE NEWS 18. Croatia to get €1bn golf resort after referendum flops 19. Diyarbakir mall to contribute to peace 20. Russians buy most property in Turkey 21. Yeni Gimat Isyerleri Isletmesi AS to convert its status to a real estate investment company CE RE NEWS 22. Banks anticipate end to stagnation on Lithuanian real estate market 23. Czech construction sector to fall 4.7 % this year 24. Estonian retail sales growth slightly decelerated in April 25. Estonia’s growth in construction volumes slowed down in the 1st quarter 26. Euro area production in construction down by 1.7% 27. H&M has chosen Gedimino 9 Shopping Centre for its store in Vilnius, Lithuania 28. Immofinanz lists in Warsaw 29. Panevezio statybos trestas signs up to build Klaipeda police HQ 30. Prague drives leasing activity in Czech industrial real estate in Q113 RUS RE TOP STORIES

1. AFI Development: General Prosecutor issues warning on AFIMall City UralSib May 20, 2013 Inspects buildings in business district. The general prosecutor’s office published the results of the inspection of buildings located in the Moscow City business district: it considers AFI Development’s (AFID LI – Under Review) primary income generating project, AFIMall City, unsafe for operation and has proposed dismantling and rebuilding at least part of the building. Prosecutors claim retail center is unsafe. A press release published by the general prosecutor’s office said that the construction lacked the required supporting structures. On opening the decorative facade of the AFIMall building, the inspectors found a reinforcing cage wrapped in net and filled with a mixture of cement mortar and constructionwaste, instead of supporting columns. Significant downside risk to earnings and valuations. We find the news negative for AFI Development’s GDRs. Shutting down the retail center, which generates about 50% of the company’s consolidated revenues and accounts for about 46% of its portfolio value, will seriously undermine the company’s financials. We have placed the stock Under Review until further details are disclosed. Marat Ibragimov 2. Czech fund to invest over EUR600m in Russian real estate market bne May 24, 2013 PPF Group owned by Czech billionaire Peter Kellner plans to invest over EUR600m in the Russian real estate market until 2014. As a result, investments in the sector will make a total of EUR1.2bn. The company will build new shopping complexes as well as logistics and business centers, said Tomas Lastovka, Development Director at PPF Real Estate Russia, RBC Daily reports. Most of the amount will be invested in the leisure center Mitino Park and the ComCity business park located 2 km from Moscow Ring Road along Kiev highway. The construction of the second project started in 2012 and is split into four stages until 2020. EUR265m is required for the first stage. EUR186m of this amount was received by PPF as a loan from Sberbank. The money will be used for the construction of 115,000 square meters of office premises. After the completion of the construction, the total area of ComCity will be 440,000 square meters. Rostelecom is one of the first companies to show its interest in the business center. The operator announced its intention to rent 80,000 square meters. "There are slightly more than 10 business parks in Moscow at the moment, with little vacant space left," says Liliana Stoyanova at Jones Lang LaSalle, cited by RBC Daily. Total vacant space in A-class business parks is not more than 4%.

Kellner's group started showing interest in the Russian real estate after the acquisition of the Eldorado retail chain. "During the due diligence, we found out that the owner of the Eldorado chain possessed about 150 real estate assets all over Russia," Tomas Lastovka said. PPF Real Estate Russia has two trading centers in Russia: M5 Mall in Ryazan and Yarmarka in Astrakhan. Peter Kellner is not going to sell them in the near-term, said a source close to PPF's management. 3. Estonia’s growth in construction volumes slowed down in the 1st quarter Statistics Estonia May 31, 2013 According to Statistics Estonia, in the 1st quarter of 2013 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries grew 2%, of which 6% on domestic market. In 2012, the construction volumes grew by 19% on average compared to a year earlier, in the 1st quarter this year the growth slowed down. In the 1st quarter of 2013, the production value of construction enterprises amounted to 380 million euros, of which the production value of building construction was 240 million euros and the production of civil engineering totalled 140 million euros. Compared to the same quarter of 2012, the volume of building construction in real terms decreased 3%, but the volume of civil engineering increased by a tenth. During the recent years the construction market has been supported mainly by the increase in the civil engineering and repair and reconstruction work in building construction, but by now also the new building construction has started slowly to upturn, mainly on the domestic construction market. The construction volume of Estonian construction enterprises in foreign countries decreased by nearly a fifth compared to the 1st quarter of 2012. Both, the volumes in building construction as well as in civil engineering decreased. The share of the construction volumes in foreign countries accounted for 12% of the total volume of construction volume in the 1st quarter. According to the data of the Register of Construction Works, in the 1st quarter of 2013, the number of dwelling completions was 419, i.e. about a third less than in the same period of 2012. More than half of completed dwellings were situated in onefamily, two-family or terraced houses. The majority of completed dwellings were situated in Tallinn. There is still a demand for new dwellings with good location and quality on the construction market. In the 1st quarter of 2013, building permits were granted for the construction of 608 dwellings. Although the number on completed dwellings stayed by a tenth less compared to the 1st quarter of 2012, the planned dwellings are on average 16 square metres bigger than at the same time a year ago. The most popular type of building is blocks of flats. In the 1st quarter of 2013, the number of completed non-residential buildings was 154 with the useful floor area of 149,300 square metres – this was primarily made up of new office, agricultural and industrial premises. Compared to the 1st quarter of

2012, the useful floor area as well as the cubic capacity of completed non-residential buildings increased.

4. Government eases restrictions in construction sector to attract foreign companies bne May 13, 2013 Russian government makes an access to local construction sector easier for foreign investors, wires reported. Winners of tenders for road construction will be spared the tasks of preparing future construction sites and solving numerous legal, property and infrastructure issues related to construction areas, according to a decree published on the official government site. Excessive legal obligations related to road construction have been known to scare away potential foreign investors, undermining healthy competition in the sector. The government now wants to solve contractors' problems by classifying preparing future building sites as a separate stage of construction, Vedomosti reported Monday. According to the decree, road-construction contractors will no longer have to solve disputes with property owners, chop down trees and bushes or carry out archeological digs, among other requirements, before they can start building. President Vladimir Putin last year ordered the government to attract more foreign companies to the construction of federal and local roads in Russia. Previously, foreign contractors were confronted with a set of problems including legal issues and difficulties with obtaining authorization for the use of new technologies. Current legislation on state purchases requires that contracts must be awarded to the lowest bidders in tenders. This provision undermines competition on the market by reducing the profitability of projects and stifling potential investors' interest in participating.

Experts say foreign investors would be interested in building roads in Russia if the profit margin was at least 18%, while infrastructure projects currently yield profit of about 7%, Vedomosti said. 5. Housing prices seem to be stabilising in Russia Bank of Finland May 20, 2013 Rosstat reports that the average price for residential apartments (measured in square metres of living space) in the first quarter of this year rose by slightly more than 1 % qoq, while prices of older apartments declined nearly 2 % qoq. In Moscow prices continued to climb fairly briskly in the first quarter, but analysts estimate that in past weeks Moscow housing prices have witnessed a slight drop. In recent years, housing prices in Russia have risen quite rapidly and are close to record levels. Now pressure for further price increases has begun to abate with many people priced out of the market, increased consumer unwillingness to commit to large purchases due to higher uncertainty and rising interest rates on housing loans. In March, the annual growth rate of new housing loans was still 20 % and the average interest rate was 12.9 % p.a. Housing prices vary considerably in Russia from region to region. The highest prices are in Moscow and St. Petersburg. Rosstat reports that in JanuaryMarch the average price for residential apartments was just over 160,000 rubles (€4,000) per square metre in Moscow and 90,000 rubles (€2,300) in St. Petersburg. If housing costs are adjusted to wages, the most expensive regions to live in are the City of Moscow and the surrounding oblasts, as well as the City of St. Petersburg. In wageadjusted terms, the most affordable housing is found in resourcerich regions in the north and Far East. A Muscovite’s average monthly wage is sufficient to purchase 0.3 m2 of apartment, while the average monthly wage in Russia’s relatively most affordable housing market, the YamalNenets autonomous region (the centre of Russian natural gas production in western Siberia) buys 1.2 m2 of apartment. In Finland, the average monthly wage is sufficient to purchase about 1.5 m2 of apartment (national average). 6. Moscow dissolved real estate contracts for 30m square meters bne May 13, 2013 Moscow authorities have dissolved real estate contracts totaling more than 30m square meters since the end of 2010, Vedomosti reported, citing Deputy Mayor Marat Khusnullin. This number is almost triple the 11m square meter estimate that municipal authorities were previously said to have dissolved, most of them due to concerns that the projects would worsen the transportation situation in the city. The projects that make up the new number include dissolved investment contracts, land lease agreements and cancelled site planning initiatives. Officials looked over the land development plans and terminated land lease agreements for 629 sites whose construction was expected to cover 14.8m square

meters. According to a representative of the city's construction committee, almost all of the projects were terminated because their documents had expired. The termination of land lease contracts has freed up an estimated 600 hectares of land for the city. Authorities are planning to bring this land back on the market through bids, Vedomosti reported. 7. Oligarch Roman Polonsky to sell real estate company Mirax bne May 26, 2013May Russian real estate oligarch Sergei Polonsky, who is currently under arrest in Cambodia he is in negotiation to sell the developer Potok, formerly known as Mirax Group, to the Russian businessman Alexander Dobrovinsky and Roman Trotsenko. Trotsenko intends to buy 90% in the firm and Dobrovinsky the remaining 10%. In March 2011, Polonsky, decided to liquidate Mirax Group and promised to fulfill its obligations, including Moscow City business district’s Federation Tower, under the Potok brand, which he no longer managed. 8. Prices on property in New Moscow drop bne May 13, 2013 Property prices in the territories recently annexed to Moscow are plummeting, the Rway real estate portal reported, as cited by Vedomosti. As a result, the Moscow City Duma is expected to come up with a new plan for the development of the areas by the end of this year, according to Rway. Immediately after Moscow’s expansion came into effect in July of last year, prices jumped by 30 percent, but then they began falling. Between January and March of this year, the prices of new buildings on the annexed territories fell by another 0.3%. When taking into account the inflation rate (1.9% in the first quarter) and developers’ discounts, the decline was much greater, Rway said. In April, the negative trend was even more prominent. Land prices in the annexed territories dropped 2.5% in rubles and more than 4% in dollars. Property prices are usually driven up by inflation or increase when a project is completed, since completed buildings always cost more, developers said. However, this is offset by developers’ discounts. RUS RE COMPANY NEWS 9. AFI Development: General Prosecutor issues warning on AFIMall City UralSib May 20, 2013

Inspects buildings in business district. The general prosecutor’s office published the results of the inspection of buildings located in the Moscow City business district: it considers AFI Development’s (AFID LI – Under Review) primary income generating project, AFIMall City, unsafe for operation and has proposed dismantling and rebuilding at least part of the building. Prosecutors claim retail center is unsafe. A press release published by the general prosecutor’s office said that the construction lacked the required supporting structures. On opening the decorative facade of the AFIMall building, the inspectors found a reinforcing cage wrapped in net and filled with a mixture of cement mortar and constructionwaste, instead of supporting columns. Significant downside risk to earnings and valuations. We find the news negative for AFI Development’s GDRs. Shutting down the retail center, which generates about 50% of the company’s consolidated revenues and accounts for about 46% of its portfolio value, will seriously undermine the company’s financials. We have placed the stock Under Review until further details are disclosed. Marat Ibragimov 10. LSR Group acquires construction permit for residential project – VTB Capital May 17, 2013 117,000sqm in the elite segment – company successfully appealed News: According to Vedomosti, LSR Group’s subsidiary has acquired a construction permit for a 117,000sqm residential project. The estate is located in St Petersburg and is scheduled for deliveries in the elite segment. Our View: The development is positive for the Group as a construction permit for the project had previously been turned down. LSR then filed an appeal with the Arbitration Court in April, which it won. We estimate the project to account for 1.3% of the total portfolio and be margin supportive, as this is in the elite segment. Maria Kolbina 11. PIK Group Raises $275m in Share Offering RIA Novosti June 3, 2013 PIK Group, one of Russia’s largest real estate developers, has raised about $275m in its secondary public offering, the company said on Friday. The company released 139m new ordinary shares, “representing an increase from the previously announced minimum offering size of $150m which is as a result of strong investor demand,” the company said. The offering involved Suleiman Kerimov’s Nafta Moskva holding (which controlled 38.3% of PIK Group prior to the offering) and a number of other investors, PIK group said. The company set the placement price for the SPO at 62.50 rubles on May 28.

PIK Group, which is listed in both London and Moscow, said previously that at least 50% of the proceeds from the share sale will go towards deleveraging. PIK Group's debt burden stood at 37.1bn rubles ($1.2bn) at the end of last year. While the minimum value of the share issue was $150m, media reports earlier this year suggested PIK Group was actually hoping to raise between $300m and $500m. The company “reserves the right to increase the size of the offering to accommodate excess demand,” it said on Wednesday when it announced the SPO. PIK Group, which held a $1.93bn Initial Public Offering in London in 2007, focuses on the development of residential real estate, mortgage financing, construction and the production of construction materials. VTB Capital and Sberbank CIB acted as Joint Global Coordinators and Joint Bookrunners for the offering. RUS COMPANY FINANCIALS 12. AFI Development 1Q13 IFRS review: impressive results UralSib May 22, 2013 Strong gross profit growth. AFI Development (AFID LI – Buy) released rather upbeat 1Q13 IFRS results yesterday. Revenue grew 3% YoY to $33.4 mln in 1Q13. Rental income – which accounts for 99% of total revenues – rose 13% YoY to $33.1 mln. AFIMall City’s contribution reached $23.2 mln. Operating profit surged more than fourfold YoY, driven by the sale of a 50% stake in the Four Winds office project. Net profit almost doubled YoY to $15.6 mln for the quarter. The gross value of the property portfolio increased 19% QoQ to $2.5 bln. Legal risks for AFIMall City look negligible. During yesterday’s conference call management provided a detailed response to structural safety issues at AFIMall City. The safety of the building had been questioned by the General Prosecutor's office last Friday. However, management effectively proved the allegations have no grounds, which means there is no risk for AFIMall’s operations or the company’s financials. Buy rating reinstated. We view the results as very good. AFI demonstrated strong gross profit growth, which is largely attributed to improved performance from a joint venture with Kislovodsk hotel. The 1Q13 numbers also imply significant upside risk to the 2013 consensus forecast for net profit of $33.8 mln. Given the mitigated legal and financial risks related to AFIMall City’s operations, we reinstate our Buy rating for the stock and our 12-month target price of $1.1/GDR, which implies more than 60% upside potential. UKR RE NEWS 13. DUPD reports USD 15 mln loss in 2012 Concorde Capital May 13, 2013 Real estate developer DUPD (DUPD LN) reported a 5x yoy decline in its net loss in 2012 to USD 15.3 mln. Its operating loss fell 4x yoy to USD 18.3 mln, mainly on a

5.5x decline in impairment losses on land prepayments (to USD 10.2 mln). The company’s cash outflow from operating activities (net of working capital changes) increased 16% yoy to USD 5.7 mln. The company’s NAV (total equity) decreased 7% over the year to USD 198 mln, driven mainly by declining value in its land bank investments. The company remained cash-rich, while its cash and equivalents contracted 24% yoy to USD 21.7 mln. In its operating update, the company highlighted the boosted sales of its residential properties in Green Hills and Riviera Villas, its key cash-generating projects. DUPD also stressed on a progress in its Obolon Residential Towers project, where the company reached good pre-sales results and is going to commence above-ground construction work in 2Q13. KAZAKH RE NEWS 14. Akhmetov calls for investigation into building materials prices bne May 15, 2013 Kazakhstan’s Prime Minister Serik Akhmetov has called for an investigation into the sharp increase in building materials prices. Akhmetov told a government meeting on May 14 that prices of basic building materials had increased by 30-40% within one month. The price hike has put the government’s Affordable Housing 2020 programme into jeopardy as builders say they cannot continue constructing homes at previously agreed prices, Kazinform reports. "The prices of construction materials are going up, and a certain amount of construction of affordable housing does not suit our builders,” Akhmetov said. 15. Chagala sees further writedowns in 2H2012 as acquires Almaty office building Visor Capital May 6, 2013 Impact: NEUTRAL Facts/News. Chagala last Friday (3 May) announced its FY2012 results and announced the acquisition of an office building in Almaty. In FY2012 the Company generated US$32.0m in revenues, down 12% YoY. Operating profit for the year was US$1.4m versus profits of US$7.1m last year, with a 15% increase in G&A to US$5.0m and DD&A costs by 22% to US$8.3m. Following an asset base revaluation and the consequent non-cash assets write-down costs of US$23.6m, net loss for the year totalled US$25.2m. In 2013, the Company plans a new project for a 2,000 m2 office building in Atyrau and to make further progress on the Saraishyk building - a residential building designed for sale to the general public. Separately, Chagala also announced that it had completed the purchase of an existing office building in Almaty. The purchase was undertaken through the joint venture established with ADM Capital's Kazakhstan Capital Restructuring Fund; the

building will be managed by Chagala on behalf of the venture. The building has six floors and 6,500m2 of useable class 'A' office space, purchased fully let. On the funding side, in its FY2012 results Chagala reported on entering into a joint agreement with Aktau Development Company and Bayan Limited for a KZT denominated non-revolving credit facility from HSBC Bank Kazakhstan for US$5.0m, due December 2015. The facility was fully drawn in 2012 and proceeds were used to refinance a portion of previously existing loans. The loan bears refinancing interest rate plus 4% (2012 effective rate of 10.8%). Analysis. While in line with our EBIT projections, net loss of US$0.29 per share was above our 2012F of US$0.10 largely due to higher non-cash write-down costs. The Company’s revenues continued to deteriorate as expected on the back of significant delays in the development of the Kashagan and Karachaganak projects – major clients of Chagala. However, with some new projects, including the office building acquired in Almaty, Chagala could improve profit margins to a limited extent. In general, we expect improvement on the revenue side for the Company later in 2014 with major oil and gas projects commencing production operations. Valuation/Conclusion. We believe the results were largely expected by the market, the negative of further writedowns balanced by the news of the new Almaty office. We maintain our BUY rating. Zhanar Nazkhanova Dominic Lewenz 16. Fitch Assigns Kazakhstan Mortgage Company Upcoming Bond Issues 'BBB-(EXP)' Expected Ratings Fitch Ratings May 8, 2013 Fitch Ratings has assigned Kazakhstan Mortgage Company's (KMC) upcoming KZT10bn domestic bond issue with five-year maturity (series 12) and KZT10bn domestic bond issue with seven-year maturity (series 13), expected Long-term local currency ratings of 'BBB-(EXP)'. The final ratings are contingent upon the receipt of final documents conforming to information already received. EURASIA RE NEWS 17. Tojikcement debt remains unsettled as renovation begins bne May 14, 2013 Tajik cement producer Tojikcement has embarked on a $7.73m upgrade programme, despite having failed to repay a $2.5m outstanding debt to the Czech export credit agency. Tajikistan’s ministry of energy and industry announced May 13 that Beijing UniConstruction Group has started work on the upgrade programme at Tojikcement, the country’s largest cement producer.

Meanwhile, the Czech Export Guarantee and Insurance Corporation (EGAP) says that the company has not yet repaid a loan issued in 2006 for the renovation of its cement plant in Dushanbe, Asia Plus reports. Tojikcement’s delay in repaying the debt was cited as an obstacle to increasing trade between Tajikistan and the Czech Republic by Czech diplomats in Central Asia. Tojikcement’s plant, which has a capacity of 1.1 million tonnes per year, has been out of action since the start of 2013 because of a lack of gas supplies. It is one of five cement plants supplying the Tajik market. SE RE NEWS 18. Croatia to get €1bn golf resort after referendum flops bne April 30, 2013 Construction of a €1bn golf resort near the medieval Croatian town of Srdj is to go ahead after few local residents turned out to vote in a referendum over the project. The resort is being built by Israeli businessman Aaron Frenkel and Australian golfer Greg Norman. It will see the construction of two golf courses, two hotels, 240 villas and 400 apartments on on a mountain overlooking the town. Norman, the former world no 1 golfer, also plans to build a golf academy at the 310 hectare site. A referendum was held on April 28 but only 31.5% of 38,000 eligible voters turned out, local official Kate Brajlovic said the following day, AAP reported. This meant the number of votes fell well below the 50% turnout needed for the referendum to be valid. Srdj currently receives around 700,000 tourists a year, and residents had complained that the project would see an attractive area of countryside lost to real estate development. However, government officials have welcomed the result of the referendum, with Tourism Minister Darko Lorencin saying April 29 that “It would have been bad for an investment climate in Croatia if the referendum halting investments in golf courses at Srdj had passed.” Croatia has successfully developed its tourist industry, with the country receiving over 10 million visitors a year. The country boasts seven UNESCO world heritage sites as well as its long coastline on the Adriatic. 19. Diyarbakir mall to contribute to peace Hurriyet Daily News May 8, 2013 A foreign and a local company are to finance the construction of the biggest mall in the eastern province of Diyarbakir, which is expected to contribute to the ongoing peace process by creating employment and bringing vitality to the economy of the city.

Forum Diyarbakir, a project equally financed by the Holland-based Multi Development Turkey and local Altında_ Real Estate Investment Development Construction Company, is planned to open at the end of 2014. Multi Development Turkey CEO Hulusi Belgü said the mall would be one of the biggest foreign investments in the city and contribute to the ongoing process to find a peaceful solution to the Kurdish issue by creating employment. We will employ approximately 1,500 locals in the mall, said Belgü at a recent press conference in Diyarbakir, adding that this would contribute to the peace process in the region. "The new investments will contribute to preventing any problems from being repeated in the region," said Belgü. Altında_ Construction Company's General Manager Selahattin Altında_ said he hoped that their project would draw the attraction of other companies to the city. Altında_ Company would make the construction itself, said Altında_ at the same press conference. Within only four months, around 45 percent of its total 54,000-square-meter leasable area had already been rented out to stores including MediaMarkt, Koçta_, Cine Maximum, said Belgü, adding that the mall would have around 140 stores in total. Six more malls in Anatolia The three-storey building will have an open and an underground parking lot. The two firms have spent 25 million euros on the Forum Diyarbakir so far. Multi Development Turkey has 10 malls across Turkey and is planning to have six more by 2015, by introducing new mall projects to Diyarbakir, Elazı_, Adana, Çorum, Çanakkale and Gaziantep provinces. Belgü said that the Multi Development Turkey's 10 malls made $3.6 billion annual turnover with around 110 million visitors every year. Multi Development Turkey is an affiliate of the Netherlands-based Multi Corporation and operates in Turkey with multi-purpose projects such as malls, offices, and residences. Altında_ Construction Company held many construction and infrastructure projects for public institutions such as the Defense Ministry, the General Directorate of Construction, the General Directorate of Highways, the Office of the Prime Ministry, Housing Development Administration and universities. 20. Russians buy most property in Turkey Hurriyet Daily News May 20, 2013 A total of 14,599 foreigners from different countries have bought 13,495 properties across Turkey since the reciprocity law came into effect, according to data from the Turkish Environment and Urban Planning Ministry. Russians ranked first among foreign citizens purchasing real estate in Turkey with 2,313 properties in the last year. Russians were followed by Britons and Germans. Other countries that have showed high interest in Turkish real estate are Norway, Sweden, Belgium and the Netherlands. Mersin most preferred

Foreigners preferred the southern province of Mersin in the last year. Mersin was followed by Izmir, Yalova, Bursa, Ankara and Trabzon. The real estate sector has witnessed an increase in foreign real estate acquisitions since the enactment of a bill last year that removed the condition of reciprocity and eased restrictions on the sale of land and real estate to foreign citizens and firms. 21. Yeni Gimat Isyerleri Isletmesi AS to convert its status to a real estate investment company Erste May 3, 2013 Yeni Gimat Isyerleri Isletmesi AS, of which a 14.83% stake is owned by Torunlar REIC, received the Capital Markets Board's approval to convert its status to a real estate investment company called Yeni Gimat REIC. The value of the Torunlar REIC's stake was TRY192.8mn as of 2012, representing 5% of Torunlar REIC's real estate portfolio value. CE RE NEWS 22. Banks anticipate end to stagnation on Lithuanian real estate market Bank of Lithuania May 6, 2013 Although a large part of commercial banks participating in the Bank of Lithuania's survey indicated that they don't expect changes in the price of real estate, there has been a significant increase in those that believe that the market's stagnation is over. "In the period under analysis, there were more banks that believed in the rise of real estate prices than those that predicted a drop in prices. However, as in earlier surveys, a large number of banks (76%) indicated that they don't expect a change in real estate prices in the future," says Virgilijus Rutkauskas, Chief Economist of the Macroprudential Analysis Division of the Financial Stability Department of the Bank of Lithuania. A third of respondents hope that in the coming years the price of old-construction housing will drop 10 per cent, while slightly more than half predict a rise in newconstruction housing prices of up to 10 per cent. Banks participating in the survey don't expect that the prices of commercial premises will change. Compared to the results of an analogous survey performed half a year ago, respondents slightly postponed the date of the end of the stagnation of the real estate market-until the end of 2014 or an even later period. On the other hand, the number of banks that indicated the already-ended stagnation of the real estate market grew three times. The Bank of Lithuania, twice a year, conducts a survey of senior staff at commercial banks and foreign bank branches in regards to lending, presenting also additional questions on the real estate market and other factors that could impact lending. In the March-April Bank of Lithuania survey, senior staff from six commercial banks and three foreign bank branches participated.

23. Czech construction sector to fall 4.7 % this year bne May 31, 2013Project The Czech construction sector will contract by 4.7 % in 2013 say construction company directors, according to a report on the Czech Construction Sector authored by CEEC Research and KPMG ?eská Republika. According to the study the sector is waiting for the launch of missing large infrastructure projects but these are neither prepared nor planned. In 2014 directors anticipate a market drop averaging 0.2 %. 24. Estonian retail sales growth slightly decelerated in April Statistics Estonia May 31, 2013 According to Statistics Estonia, in April 2013 compared to April of the previous year, the retail sales of goods of retail trade enterprises increased 5% at constant prices. When in March the retail sales increased 7% compared to the same month of the previous year, then in April the retail sales growth slightly decelerated. In April 2013, the retail sales of goods of retail trade enterprises were 369 million euros, which was almost 287 euros per inhabitant. The retail sales in stores selling manufactured goods increased 9% compared to April 2012. The sales increased in most economic activities. Only the retail sales in non-specialized stores selling predominantly industrial goods (e.g. department stores) and in stores selling textiles, clothing and footwear stayed at the same level compared to the previous year. In April, the retail sales of second-hand goods in stores and non-store retail sale (stalls, markets, direct sale) increased the most, where the retail sales increased by half (50%) compared to April of the previous year. The sales increase in these stores does not significantly influence the retail sales of goods of retail trade enterprises, because the share of this economic activity is very small – 1.8% in April 2013. In April, a higher than average increase in retail sales occurred in retail sales via mail order or the Internet (growth 21%), in stores selling household goods and appliances, hardware and building materials (growth 16%) and in stores selling pharmaceutical goods and cosmetics (growth 14%). The retail sales in grocery stores which slightly recovered in March turned into fall again in April and decreased 1% compared to April of the previous year. The fall in retail sales of these stores was partly influenced by the acceleration in the price increase of food products. If in April 2012 the annual price increase of food products was 1.4%, then in April this year 5.2%. The retail sales of automotive fuel increased 13% at constant prices compared to April 2012, compared with the previous month, the retail sales growth rate slightly decelerated. The growth in retail sales of automotive fuel was influenced by the price decrease of automotive fuel. In April this year the automotive fuel was 6.6% cheaper than a year earlier. Compared to the previous month, in April the retail sales in retail trade enterprises increased 1% at constant prices. According to the seasonally and working-day adjusted data, the retail sales decreased one percent. During the four months

(January–April), the retail sales in retail trade enterprises increased 4.5% at constant prices compared to the corresponding period of the previous year. In April the turnover of retail trade enterprises were 442.9 million euros, out of which the retail sales of goods accounted for 83%. Compared to April 2012, the turnover increased by 5% at current prices. Compared to the previous month, this indicator increased 1%.

25. Estonia’s growth in construction volumes slowed down in the 1st quarter Statistics Estonia May 31, 2013 According to Statistics Estonia, in the 1st quarter of 2013 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries grew 2%, of which 6% on domestic market. In 2012, the construction volumes grew by 19% on average compared to a year earlier, in the 1st quarter this year the growth slowed down. In the 1st quarter of 2013, the production value of construction enterprises amounted to 380 million euros, of which the production value of building construction was 240 million euros and the production of civil engineering totalled 140 million euros. Compared to the same quarter of 2012, the volume of building construction in real terms decreased 3%, but the volume of civil engineering increased by a tenth. During the recent years the construction market has been supported mainly by the increase in the civil engineering and repair and reconstruction work in building construction, but by now also the new building construction has started slowly to upturn, mainly on the domestic construction market.

The construction volume of Estonian construction enterprises in foreign countries decreased by nearly a fifth compared to the 1st quarter of 2012. Both, the volumes in building construction as well as in civil engineering decreased. The share of the construction volumes in foreign countries accounted for 12% of the total volume of construction volume in the 1st quarter. According to the data of the Register of Construction Works, in the 1st quarter of 2013, the number of dwelling completions was 419, i.e. about a third less than in the same period of 2012. More than half of completed dwellings were situated in onefamily, two-family or terraced houses. The majority of completed dwellings were situated in Tallinn. There is still a demand for new dwellings with good location and quality on the construction market. In the 1st quarter of 2013, building permits were granted for the construction of 608 dwellings. Although the number on completed dwellings stayed by a tenth less compared to the 1st quarter of 2012, the planned dwellings are on average 16 square metres bigger than at the same time a year ago. The most popular type of building is blocks of flats. In the 1st quarter of 2013, the number of completed non-residential buildings was 154 with the useful floor area of 149,300 square metres – this was primarily made up of new office, agricultural and industrial premises. Compared to the 1st quarter of 2012, the useful floor area as well as the cubic capacity of completed non-residential buildings increased.

26. Euro area production in construction down by 1.7% Eurostat May 17, 2013 In the construction sector, seasonally adjusted production fell by 1.7% in the euro area (EA17) and by 1.1% in the EU27 in March 2013, compared with the previous month, according to first estimates released by Eurostat, the statistical office of the European Union. In February 2013, production declined by 0.3% in the euro area and remained stable in the EU27. Compared with March 2012, production decreased by 7.9% in the euro area and by 7.2% in the EU27 in March 2013.

Monthly comparison Among the Member States for which data are available for March 2013, production in construction fell in ten and rose in four. The largest decreases were registered in Portugal (-10.7%), the Czech Republic (-7.6%) and Slovakia (-5.0%), and the highest increases in Romania (+2.8%) and Spain (+2.4%). Building construction decreased by 1.4% in the euro area and by 0.9% in the EU27, after -0.3% and +0.2% respectively in February 2013. Civil engineering fell by 2.4% in the euro area and by 1.2% in the EU27, after +0.2% and -0.1% respectively in the previous month. Annual comparison Among the Member States for which data are available for March 2013, production in construction fell in ten and rose in four. The largest decreases were registered in Slovenia (-31.8%), the Czech Republic (-19.0%), Poland (-16.9%) and Portugal (16.7%), and the highest increases in Spain (+16.6%) and Hungary (+9.9%). Building construction decreased by 7.1% in the euro area and by 6.8% in the EU27, after +1.3% and -0.8% respectively in February 2013. Civil engineering fell by 11.3% in the euro area and by 8.0% in the EU27, after +2.8% and +0.3% respectively in the previous month. 27. H&M has chosen Gedimino 9 Shopping Centre for its store in Vilnius, Lithuania East Capital May 8, 2013 Well-known and prestigious Swedish multinational retail-clothing company "Hennes & Mauritz" (H&M) has signed a lease agreement with East Capital Real Estate to open a store in Gedimino 9, the most famous high street shopping centre in the heart of Vilnius . The H&M store will open in spring 2014. East Capital Baltic Property Fund II acquired Gedimino 9 in December last year. Immediately thereafter, planning of the commercial improvement and reshaping of Gedimino 9 shopping centre started with the view to create the no 1 shopping centre and meeting place in Vilnius. The opening of H&M is one of the most important and awaited events among all the planned changes. "We are targeting to make Gedimino 9 the most liked, lively and popular shopping centre among cosmopolitan and modern people in Vilnius", says Biljana Pehrsson, head of Real Estate at East Capital. Gedimino 9 shopping centre was opened in 2008 after a total redevelopment of the premises, a historical building that had previously housed the Vilnius Municipality. The shopping centre has an excellent location in the best part of Gedimino Avenue with a daily pedestrian footfall of more than 15,000. Anchor tenants include successful supermarket Rimi, Swedish fashion retailer Lindex, exclusive perfumery Douglas and very popular restaurants Studio 9 and Carre. East Capital Baltic Property Fund II will invest in the reconstruction of Gedimino 9 that will start in May and will be executed in phases with the grand re-opening in spring 2014. "H&M's decision to open its store in Gedimino 9 is an important first step in the development and attractiveness of Gedimino 9. The shopping centre will be open during the whole construction period and we welcome our Gedimino 9 customers and

visitors to closely follow and be part of the redevelopment of our shopping centre", says Biljana Pehrsson. 28. Immofinanz lists in Warsaw Press release May 7, 2013 Immofinanz AG has been newly listed today on the WSE's Main Market. The company is the 45th foreign issuer and the 2nd foreign company to introduce its shares to the Main Market in 2013. The issuer is also the 439th company listed on the WSE's Main Market and the 5th new listing on the market in 2013. Following today's new listing, the two equities markets of the Warsaw Stock Exchange list 53 foreign companies (45 companies on the Main Market and 8 companies on NewConnect) from several countries, mainly from Ukraine, the Czech Republic and Israel. The new listing of yet another foreign company on the WSE is a result of the consistently pursued strategy geared towards strengthening of the international position of the WSE by way of increasing the number of foreign issuers, brokers and investors, including those from outside Central and Eastern Europe. Immofinanz AG has been listed on the Vienna Stock Exchange since 1996. The company's new listing on the Warsaw Stock Exchange was not preceded by an offering of shares. The reference price for the first trading session on the WSE was PLN 13.33. The company introduced to trading 1,128,952,687 ordinary shares at an aggregate amount of over PLN 14.67 billion. As measured by capitalisation (as at 6 May 2013), Immofinanz AG is the fourth biggest foreign issuer following UniCredit (PLN 97.24 billion), CEZ (PLN 49.69 billion) and MOL (PLN 23.41 billion). The core business of the Immofinanz AG group, which comprises three direct subsidiaries and eleven indirect subsidiaries, is to purchase and manage real estate investment, implement developer projects, and sell real estate. The real estate portfolio of the group includes 1,600 investments. The group is active in the commercial, office, logistic and residential property segments in Austria, Germany, the Czech Republic, Slovakia, Hungary, Romania, Poland and Russia. 29. Panevezio statybos trestas signs up to build Klaipeda police HQ Press release May 23, 2013 Today AB Panevezio statybos trestas will sign the contract with V_ Turto bankas for construction of the main and auxiliary buildings of Klaipeda City Police Headquarters. The total value of the contract, including VAT, amounts to 61 million Litas. The total duration of the project is 18 months. 30. Prague drives leasing activity in Czech industrial real estate in Q113 DTZ May 3, 2013 Industrial development activity continues to focus on Central Bohemia, South Moravia and Greater Prague.

All new supply completed in Q1 2013 was fully preleased. A vast majority of supply under construction is also pre-leased and therefore it will not contribute upon completion to an increase of the vacancy rate. Gross take-up in Q1 2013 was driven by occupier activity around Prague due to a few large renegotiations along the D1 highway. Net take-up has been recorded its lowest level since Q3 2011. New demand concentrated to the Pardubice region, Liberec region, the South Moravia region and Moravia-Silesia. Prime headline rents are predicted to remain stable during 2013.