CROATIA RESEARCH & FORECAST REPORT MID-YEAR Accelerating success.

CROATIA RESEARCH & FORECAST REPORT MID-YEAR 2012 Accelerating success.

2012 RESEARCH & FORECAST MID-YEAR REVIEW CROATIA TABLE OF CONTENTS Executive Summary 3 Economic Overview 4 Industrial Market 5 Office Market 6 Retail Market 7 Key Metric Definitions 8

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA ECONOMIC OVERVIEW Executive Summary RECENT TRENDS Economy: Economic growth suffered a decline in H1 2012 as the inflation and unemployment rates both increased. Other factors impacting a slowdown in the Croatian economy included a VAT increased from 23% to 25% as well as growth in energy prices. Investment: There was a lackluster investment market in Croatia due to several reasons including the Croatian economy s close ties to the EU zone which resulted in heightened cautiousness when it came to investment in the country as well as the conservative lending practices of commercial banks which diminished the financing of real estate properties. Industrial: The industrial and logistics sector is still one of the least developed real estate markets in Croatia. Zagreb and its surrounding areas operate as main centres of national industrial, warehouse and logistics activity. Invest Volumes Invest Yields MARKET PROGNOSIS GDP Growth 3 2 1 0 Industrial Rents Office Rents Retail Rents Office: Zagreb s office sector is the most developed property segment in Croatia. Despite the fact that vacancy levels increased in Q1 2012, more office stock will continue to be added in the coming years. Retail: One new shopping centre opened in H1 2012, which brought 50,000 m 2 to the Zagreb market. Despite a decrease in average shopping centre rents, rents and vacancy levels remained stable in prime shopping centres and on high streets. MARKET PROGNOSIS Economy: Signs of economic recovery are expected in H2 2012 as well as in 2013. Exports and investments will be the main drivers of this recovery. The unemployment rate is also expected to decrease, while the nominal wage increases. Investment: A positive investment climate is expected to emerge as Croatia is nearing accession into the EU. Prime yields are expected to remain the same, while yields on secondary stock will weaken. Industrial: Croatia s accession to the EU coupled with the entry of new retailers, and new freight and distribution players is expected to stimulate the industrial market and increase its appeal to foreign investors. The announced accession of Croatia into the European Union is set for July 1 st, 2013. Office: An additional 113,000 m² of office space will come to market in H2 2012. This will cause the office vacancy rate to rise to 15%. Due to uncertain economic conditions, renegotiations of lease contracts will represent the majority of take up in H2 2012. Retail: In addition to an IKEA store, Zagreb has two shopping centres in its development pipeline for 2013 and 2014. A saturation point in Zagreb shopping centre stock might be achieved with the completion of these projects. However, rents and vacancy levels in prime shopping centres and on high streetss are expected to remain unchanged. 3 COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA ECONOMIC OVERVIEW Economic Overview Key Economic Figures Source: Focus Economics 2011 2012 2013 GDP % 0.0-0.5 1.1 CPI % 2.1 2.6 2.4 Unemployment % 18.6 19.2 18.5 Population 4 290 612 Top 3 Cities 1 108 802 20.54% Zagreb 792 875 14.68% Split 178 192 3.47% Rijeka 128 735 2.38% Source: Croatian Bureau of Statistics GDP, INFLATION & UNEMPLOYMENT 20,0 15,0 10,0 5,0 0,0-5,0-10,0 Source: Focus Economics. QUARTERLY DATA - GDP, INFLATION 4,0 3,0 2,0 1,0 0,0-1,0-2,0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 11 Q4 11 Economic Growth (GDP, annual var. in %) Unemployment (% of active population, eop) Inflation (CPI, annual variation in %, eop) Q1 12 Q2 12 Source: Focus Economics. Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Economic Growth (GDP, annual var. in %) Inflation (CPI, annual variation in %, eop) Q4 13 SUMMARY The number of unemployed people in the country is continued to increase. However, the unemployment rate is expected to decrease in the following months due to an uptick in seasonal work. A decline in economic growth was seen in H1 2012. GDP contracted by 1.3% in Q1 2012 in relation to the same period in 2011. The Central Bank forecasted the GDP to contract around 1% in 2012. The CPI inflation rate increased in reaction to the VAT increase from 23% to 25%. Further inflation increases are expected in H2 2012 in response to the rise of electricity and gas prices. In Q1 2012 the current account deficit increased slightly in relation to the same period of last year. Local sector financing, which suffered a slowdown since mid-2011, started to recover. Interest rates were still high in H1 2012 in comparison to the same period of last year. A slowdown in private sector financing has also been recorded. In Q1 2012, total tourist nights in commercial accommodation facilities grew by 11.4%. The increase in foreign tourist nights exceeded domestic tourist nights. PROGNOSIS The unemployment rate is expected to decrease in 2013. The nominal average wage is expected to increase, however, it is likely that the real net wage will be slightly lower in comparison to previous year because of the rise in prices on an annual basis. Signs of economic recovery are expected in H2 2012 with further recovery in 2013, particularly in the export and investment sectors. According to the Central Bank, domestic exports are expected to grow in 2013. According to the Consensus Forecast panelists, the CPI inflation rate is expected to reach 2.6% in 2012, while in 2013, the inflation rate is expected to decrease to 2.4%. The Central Bank has a somewhat different prognosis and expects the inflation rate to stand at 3.2% in 2012, while reaching 2.6% in 2013. Specific government measures aimed at reducing the average cost of capital for companies with development potential are expected to have a positive impact on the domestic export of goods and services in 2013. The accession of Croatia into the European Union is set for July 1 st, 2013. In 2013, The Central Bank will persist to maintain price and exchange rate stability in the country. 4 COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA OFFICE MARKET Key Office Figures - Zagreb Total Stock 746,000 m² Take-up 21,000 m² Vacancy 13% Prime Headline Rent 15 m²/month Office Market SUPPLY In H1 2012, total office supply in Zagreb totaled 746,000 m². Grade A buildings made up 54% of total supply, Grade B buildings represented 21% and Grade B+ buildings totaled 25% of office stock. New office completions in H1 2012 totaled 26,670 m² of space including Auto Hrvatska (19,840 m²) and the Merkur Insurance Building (6,830 m²). 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0 ANNUALIZED TAKE UP ZAGREB 2005 2006 2007 2008 2009 2010 2011 H1 2012 DEMAND Total take-up activity in H1 2012 equaled 21,000 m². In Q1 2012 the office market witnessed slightly more take-up activity (11,000 m²) than in Q2 2012 (10,000 m²). The majority of take-up activity was realised through renegotiations and relocations. Major requirements in renegotiations included a decrease in rental rates and renovation or adaptation of office space. Active developers in the Zagreb office market included Dalekovod d.d. and Zagrebmontaža (Sky Office), IGH Institute and Stipić Grupa (Projekt Bundek). VACANCY/AVAILABILITY 900.000 800.000 700.000 600.000 500.000 400.000 300.000 200.000 100.000 Total Office Stock - Zagreb H1 2012 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 H1 The Zagreb office vacancy rate reached 13% in H1 2012. Total available stock in Zagreb in Q1 2012, without available stock in buildings currently under construction, amounted to 97,000 m². RENTS Prime headline rents in Zagreb remained unchanged at 15 m²/month in H1 2012. Average headline rents also remained unchanged at 12.5 m²/month since Q1 2011. Total stock Additions PROGNOSIS An additional 113,000 m² of office space will come to the market in 2012, bringing Zagreb s total office stock to 859,000 m². New office arrivals in H2 2012 will include the Sky Office Tower (37,658 m²), Conditum office project (9,510 m²), Projekt Bundek (14,500 m²), Vrbani office building (10,800 m²), Ban Centar (1,800 m²), Sigma office building (3,300 m²), Poslovni Centar Adris (10,791 m²), Business Building One (12,725 m²) and Vesna project (11,958 m²). As a result of the upcoming increase in supply, H2 2012 vacancy rates are expected to increase to 15%. Prime headline rents are expected to remain stable. 5 COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA INDUSTRIAL MARKET Key Industrial Figures - Zagreb Total Stock Take-up Vacancy 11% Prime Headline Rent Completed Logistic Projects, Zagreb H1 2012 Immorent Jastrebarsko 762,000m² 65,000m² 5m²/month 13,000 m² Industrial Market SUPPLY Immorent Jastrebarsko completed the first phase of its logistic park which added 13,000 m² to the modern industrial stock in Zagreb. Total stock, including owner occupied facilities in the city, amounted to 760,000 m². Around 30% of the stock was owner-occupied, 50% of stock was space constructed between 1970 and 1990 and around 20% (142,000 m²) of industrial space came on market between 2007 and 2011. In the region around Zagreb there are 18 established, fully functional enterprise zones which can operate as future centres of industrial/warehouse activity. DEMAND Demand for modern Grade A industrial premises outstripped supply, especially as the industrial and logistics sector did not keep pace with the rate of expansion of the retail sector over the past few years. The retail sector has been one of the main drivers of logistics space demand and will continue to serve as its main driver. VACANCY/AVAILABILITY In H1 2012, the industrial sector in and around Zagreb was marked by stable vacancy levels of 11%. Available space in modern Grade A logistics premises totaled 21,000 m². Available space was centered in the Zagreb Logistics Park (15,000 m²) and in Immorent Jastrebarsko (13,000 m²). RENTS H1 2012 saw no changes in prime rents which amounted to 5 m²/month. Rents for older and refurbished industrial premises were stable as well and ranged from 3-4.5 m²/month. PROGNOSIS Limited new supply planned for 2012. As a result, industrial rents and vacancy rates will stay at their current levels in 2013. 6 COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA RETAIL MARKET Retail Market Key Retail Figures - Market Total Shopping Centre Stock Prime Headline TSC Rent Prime Headline SSC Rent Prime Head High Street Rent 542,000m² 25 m²/month 8.7 m²/month 75 m²/month SUPPLY The first half of the 2012 saw opening of one new shopping center in the capital. This is an extension of the construction activity from previous year when three new shopping centers opened its door in Zagreb and four new shopping centers in secondary and tertiary cities. The only completion in H1 2012 was shopping center City Centre One East, positioned in eastern part of Zagreb. The Kaufmann group invested 135 million in this 50,000 m² shopping center as its third investment in shopping center in Croatia. The overall shopping center stock in Zagreb now reached 542,000 m² of GLA. 700000 600000 500000 400000 300000 200000 100000 0 TOTAL SHOPPING CENTRE STOCK - ZAGREB H1 2012 19941999200020022003200620072009201020112012 Total stock Yearly additon DEMAND H&M, Zara, New Yorker, C&A and Sportina Group, are the most active retailers in the market. Oysho (fashion) is a new brand that entered the Croatian retail market in Q1 2012 and opened a store in City Centre One East. B-Hyper, a hypermarket from Scandinavia and the Baltic States, opened in Lumini Shopping center in Varaždin in Q2 2012 and is planning further expansion in several cities across Croatia. RENTS Zagreb s prime shopping centre rents averaged 25/m², while prime high street rents were 75/m². The stronger negotiation power of the tenants lead to decrease in average rents. In Q1 2012 the average rent decreased to 11 per m² and in Q2 2012 continued to fall amounting 10 per m². However, in prime shopping centers and high street locations vacancy levels and rents are still stable. PIPELINE No new shopping centre construction started in H1 2012. However, Zagreb has approximately 20,000 m² of new retail space in the pipeline for 2013. IKEA will open an IKEA big box store in 2013 and has chosen to postpone its 300 million investment in a shopping centre until 2015. Rijeka, Split, Poreč and Slavonski Brod have shopping centres in the pipeline over the next 24 months thanks to interest from developers in secondary and tertiary cities. Croatia s first green shopping centre, which is in pipeline for 2013, will be developed in Split. This will be the first shopping centre with goal of obtaining a LEED gold certification. 7 COLLIERS INTERNATIONAL

RESEARCH & FORECAST REPORT MID-YEAR 2012 CROATIA COLLIERS RESEARCH 522 offices in 62 countries on 6 continents EMEA: 118 United States: 147 Canada: 37 Latin America: 19 Asia: 36 Aus/New Zealand: 165 49 billion of transactional value 76,000 annual transactions 1.3 billion in annual revenue 116 million square metres under management Over 12,300 professionals CROATIA : Ivana Mihaljević Colliers International Ilica 42 Zagreb, 10 000 Croatia Tel +385 1 4886 280 FAX +385 1 4886 290 EMAIL ivana.mihaljevic@colliers.com The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers Research Services Group is recognized as a knowledge leader in the commercial real estate industry, providing clients with valuable market intelligence to support business decisions. Colliers research analysts provide multi-level support across all property types, ranging from data collection to comprehensive market analysis. Across the Eastern European region of EMEA, Colliers researchers regularly collect and update data on key real estate metrics, set to consistent definitions bringing greater transparency and reliability to our real estate market analysis in the region. In most Eastern European markets, the office definitions used are consistent with those set out by the CEE Research Forum an umbrella group, of which Colliers is a founding member. Definitions of the key metrics used in our regular reports are highlighted below. KEY METRIC DEFINITIONS Prime Net Initial Yield: The yield an investor is prepared to pay to buy a Grade A building, fully-let to high quality tenants at an open market rental value in a prime location. Lease terms should be commensurate with the market. As a calculation Net initial yield = First years net income/purchase price (prior to deducting fees and taxes) Prime Headline Rent: Represents the top open-market tier of rent that could be expected for a unit of standard size commensurate with demand, of the highest quality and specification in the best location in the market at the survey date. This should reflect the level at which relevant transactions are being completed at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. If there are no relevant transactions during the survey period, the quoted figure will be more hypothetical, based on expert opinion of market conditions. The figure excludes service charges, taxes, and tenant incentives. Total Occupational Market Activity (Take-up): Total Occupational Market Activity is the total floorspace known to have been let or sold as one of the following activity types during the survey period: Pre-let, New Occupation/Lease, Renewal/Renegotiation, Expansion, Sub-lease and Sale & Leaseback. Net Take-up: Net Take-up represents the sum of all Total Occupational Market Activity categories which represent a net increase in demand for space. This would only include the following activity types: Pre-lets, New Occupation/lease, Expansion Total Competitive Stock - Offices: Includes the gross leasable floorspace in all A and B class buildings, including owner-occupied buildings but excluding government owned properties. Ancillary office space is only included if it can be reasonably used independently of the primary use of the building in which it is located. Total Competitive Stock - Industrial: Includes the gross leasable floorspace in all A and B class buildings, including speculative, Build to suit and owner-occupied stock. Other reference points include that the building must be heated and have a clear usable height minimum of 6metres. This includes both warehouse (500m²+)& bulk space (10,000m²+). Total Competitive Stock Retail Shopping Centres: Split into two categories Traditional & Specialised as per ICSC definitions. Traditional includes retail properties that are planned, built and managed as a single entity, comprising units and communal areas with a minimum gross leasable area (GLA) of 5,000 square metres. Specialised shopping centres includes Retail Parks, Factory Outlet Centres and Theme-Oriented Centres - specific, purpose-built retail schemes that are typically open-air with a minimum gross leasable area (GLA) of 5,000 m². Space Under Active Construction: Represents the total amount of gross leasable floorspace of properties where construction has commenced on a new development or where a major refurbishment/renovation is ongoing at the survey date. Vacant Space: The total gross leasable floorspace in existing properties that meet the Competitive Stock definition, which is physically vacant and being actively marketed at the survey date. Space should be available for immediate occupation. www.colliers.com/markets/bratislava Total Availability: Total Availability is a calculation derived from the combination of total vacant space + total available speculative developments, (which exclude the total volume of pre-let or sold space under construction) during the survey period.

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