Conclusion of a final purchase agreement concerning enterprise of a subsidiary of Echo Investment S.A., including land in Wrocław concerning Sagittarius Business House project

With reference to the current report of Echo Investment S.A. (the “Company”) no. 25/2017 dated 20 July 2017 (the “Report”), the Management Board of the Company hereby informs that on 21 August 2018, 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”) represented by Warburg-HIH Invest Real Estate GmbH with its registered office in Germany, entered into a final purchase agreement concerning the Seller"s enterprise (the “Final Agreement”) (the “Transaction”). The Final Agreement was concluded in performance of a preliminary purchase agreement for the sale of the Seller"s enterprise (the “Enterprise”) described in the Report. The terms and conditions of the Final Agreement are generally similar to the terms and conditions generally applied in such types of transactions. The Final Agreement contains representations and warranties of the seller and the buyer and provisions relating to the liability of the parties that are standard for such types of transactions. Terms not defined in this report have the meaning as defined in the Report. Information on the Enterprise The Enterprise, inter alia, includes: 

1. 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; 
2. the right of ownership right to relevant movables; 
3. the rights and obligations stemming from the property management agreement; 
4. the rights and obligations stemming from key agreements (including receivables) concluded by the Seller; 
5. the copyrights to the construction designs concerning the Sagittarius Project; 
6. the intellectual property rights (including rights to internet domain and the Sagittarius logo).

Price The value of the Transaction was determined as the quotient of the NOI of the Enterprise and the capitalisation rate of 6.175%. The value of the Transaction as of the date of the conclusion of the Final Agreement (the “Closing”) equals to the amount of EUR 74,455,635, which was further decreased by, inter alia, the value of “rent-free periods”, costs of fit-out works and certain other costs and increased by the lease receivables and cash. Consequently, the price paid at Closing was EUR 68,509,792.75. Additionally, the payment of EUR 844,729 has been retained due to existence of the minor Building defects and certain as-built documentation remaining to be delivered after the Closing (the “Retained Amounts”). The Retained Amounts will be paid by the end of March 2019 after the defects will be removed and the as-built documentation will be delivered to the Buyer. Other information concerning the Transaction At Closing, the Seller and the Buyer concluded the Fit-Out Agreement which 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 parts of the Building which are earmarked for lease and have not been leased on the day of conclusion of the Final Agreement or have been leased but the finishing work is not completed. The remuneration will approximately amount to EUR 2,127,897 +VAT, i.e. to EUR 450 + VAT for each square metre of the area finished by the Seller and it is to be paid until the end of September 2020 after the conditions under the Fit-Out Agreement will be satisfied. Additionally, the Seller and the Buyer concluded, inter alia, the following documents at Closing:

1. a rental guarantee agreement (the “Rental Guarantee”) under which the Seller granted to the Buyer a guarantee in particular regarding the Seller"s coverage of rent payments and average service fees for sections of the Building that are not leased out to third parties as at the date of signing the Final Agreement; and
2. a quality and construction guarantee agreement (the “Quality Guarantee”) under which the Seller in particular granted to the Buyer a guarantee for the Building and the structures related to the Land (existing on the date of execution of the Final Agreement, including the fit-out works (prace wykończeniowe) consisting of an obligation to remove, at the Seller"s cost, the defects on the terms and conditions of the Quality Guarantee).

Furthermore, “Echo - SPV 7” sp. z o.o. and “Echo - Aurus” sp. z o.o., the Company"s subsidiaries, granted the Buyer a surety concerning the Seller"s obligations under the Final Agreement, the Fit-Out Agreement, the Rental Guarantee and the Quality Guarantee. Moreover, the German Pension Fund related with the Buyer granted the Seller a parent company guarantee concerning all of the obligations under the Final Agreement and under the Fit-Out Agreement. Legal basis: Article 17 paragraph 1 of MAR - inside information