Conclusion of a preliminary purchase agreement concerning enterprise of a subsidiary of Echo Investment S.A., including land in Wrocław on which the development of Sagittarius Business House project is carried out.

The Management Board of Echo Investment S.A. (the “Company”) hereby informs that on 20 July 2017, the subsidiary of Echo Investment S.A., i.e. Sagittarius – Projekt Echo – 113 spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered office in Kielce, as the seller (the “Seller”), and a fund operating under the name “W-HIH Immo Invest”, as the buyer (the “Buyer”; the Buyer and the Seller will hereinafter jointly be referred to as the “Parties”) represented by Warburg-HIH Invest Real Estate GmbH with its registered office in Germany, entered into a preliminary purchase agreement concerning the Seller"s enterprise (the “Preliminary Agreement”) (the “Transaction”). In connection with the Transaction: (I) the Company granted the Buyer a guarantee for up to EUR 5,000,000 concerning the performance of the Seller"s obligations under the Preliminary Agreement, including the conclusion of the final purchase agreement concerning the Seller"s enterprise (the “Enterprise”) (the “Final Agreement”); and  (II) the German Pension Fund related with the Buyer granted the Seller a guarantee concerning the performance of the Buyer"s obligations under the Preliminary Agreement, including the conclusion of the Final Agreement and payment of the price. Subject of the Transaction The Parties agreed that the Buyer will purchase the Enterprise which will include and/or will include in particular: (I) the right of perpetual usufruct of the land located in Wrocław at Sucha and Borowska streets (the “Land”), the right of ownership of the office and retail building being under construction located on the Land (the “Building”) and known as the Sagittarius Business House (the “Sagittarius Project”) and structures related to the Land; (II) the right of ownership right to relevant movables; (III) the rights and obligations stemming from the property management agreement; (IV) the rights and obligations stemming from key agreements (including receivables) concluded by the Seller; (V) the copyrights to the construction designs concerning the Sagittarius Project; (VI) the intellectual property rights and the associated obligations (including rights to internet domain and the Sagittarius logo); Conditions Precedent The Final Agreement will be concluded if the following conditions precedent (“Conditions Precedent”) will be satisfied: (I) final tax ruling concerning the Transaction has been obtained; (II) geodetic division of plots regarding separation of the Land has been completed; (III) the construction of the Building and other construction works specified in the Preliminary Agreement will be finished; (IV) a final occupancy permit for the Building has been issued; (V) none of the key agreements concluded by the Seller have been amended (save for the exceptions specified in the Preliminary Agreement), terminated or rescinded, unless agreed to by the Seller and the Buyer; (VI) none of the key contractors of the Seller have notified that concluded key agreement is void or that it does not intend to perform it or that it is entitled to a monetary claim for damages under a contract or tort against the Seller; (VII) tenants taking over premises and parking spaces in the Building that represent at least 60% of the leasable area in the Building; (VIII) obligations, specified in the Preliminary Agreement, have been performed by key contractors based on the key agreements and the corresponding Seller"s rights will be transferrable to the Buyer; (IX) completion of redesign of specified parts of the public roads; (X) the pre-emption right in favour of the Municipality of Wrocław, which should not apply to the Land, has been deleted from the land and mortgage register; XI) approval for the separation of the Land from the land and mortgage register has been received (if needed); (XII) the Buyer and Seller have received insurance policies (or relevant binding offer) required for the purposes of the Transaction. The parties intend to conclude the Final Agreement once all of the Conditions Precedent are fulfilled or waived by the relevant Party (“Closing”) by 30 November 2018, however, the Closing date may be postponed until 31 January 2019 (the “Final Date”). Save for exceptions specified in the Preliminary Agreement, the Preliminary Agreement will expire after the Final Date at the latest. Price The sale price of the Enterprise was established as follows: (i) the quotient of NOI (i.e. the difference between the operating income and not deductible operating costs) of the Enterprise and capitalised rate at the level of 6.175%. The estimated price will amount to approx. EUR 65,000,000. The price will be payable at Closing. Whereas the price after the price increase, which will take place in case tenants will take over premises and parking spaces in the Building that represent at least 80% of the leasable area in the Building, the total sale price of the Enterprise will approx. amount to EUR 73,000,000. It must be underlined that the price payable at Closing and price after price increase will be decreased by, inter alia, value of “rent-free periods” and “rent reductions” and costs of fit-out works. Consequently, the price payable at Closing and price after price increase will approx. amount to EUR 56.000.000  and EUR 63,000,000 respectively. The price may be decreased at Closing due to retained amounts relating to the Building defects notified by the Buyer during technical inspections of the Building and due to delay in delivering of post-construction documentation related to the Building. At the same time the fit-out agreement relating to the Building (the “Fit-Out Agreement”) stipulates remuneration for the Seller to be paid by the Buyer for the execution of the finishing work after the conclusion of the Final Agreement in the rooms in the Building which are earmarked for lease and will not have been leased on the day of conclusion of the Final Agreement or will have been leased but the finishing work will not be completed. The remuneration will approx. amount to EUR 6,414,606 +VAT, i.e. to EUR 450 + VAT for each square metre of the area finished by the Seller and it is to be paid after the fulfilment of the conditions specified in the Fit-Out Agreement. The above values are estimates as of the conclusion of the Preliminary Agreement and the final values will be known and provided once the Transaction will be completed. Other information concerning the Transaction For breach of the Preliminary Agreement, the Parties have stipulated a contractual penalty, among other things, for failure by the Seller to obtain a BREEAM certificate for the Building in the amount of EUR 420,000. However, the Buyer may seek damages in excess of the contractual penalty
The Buyer and the Seller may rescind the Preliminary Agreement in the cases set forth in the Preliminary Agreement, if the provisions stipulated therein are not fulfilled. At Closing or shortly after fulfilment of the Conditions Precedent, the Parties will sign, in addition to the Final Agreement, among other things: (I) the Fit-Out Agreement;
(II) a quality guarantee agreement;
(III) a construction guarantee agreement; and 
(IV) a rental guarantee agreement, if required. Furthermore, the Company will grant the Buyer a surety, inter alia, concerning all of the Seller"s obligations under the Final Agreement, Fit-Out Agreement, the rental guarantee agreement (if concluded), the quality guarantee agreement for the Building. Moreover, the German Pension Fund related with the Buyer will grant the Seller a surety concerning all of the obligations under the Final Agreement concerning payment of the price increase and payment of VAT in connection with the Seller"s compensation under the Fit-Out Agreement. Legal basis: Article 17 paragraph 1 of MAR - inside information