poland today business review+ no. 010

No. 010 / 8th November 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Toshiba sells Polish TV factory in Wrocław to Taiwan's Compal Electronics page 2

BANKING & FINANCE

BNP Paribas bidding on Rabobank-owned Polish BGŻ Bank page 3

ENERGY & RESOURCES

Grupa Lotos to pay USD 176m for share in Norwegian oil fields page 5

Tauron opens two new farms, boosting wind power capacity beyond 180MW page 6

PROPERTY & CONSTRUCTION

Developer Capital Park hopes to raise PLN 210m from Warsaw IPO page 7

New report shows first signs of upturn on Poland's residential property market page 8

SERVICES & BPO

Korea's Samsung expands Polish R&D unit, creates tech jobs in Kraków page 10

TRANSPORT & LOGISTICS

PKP Cargo lands on Warsaw bourse with a splash, stock up 18% on first day page 11 PointPark Properties to intensify expansion in Poland under new owners page 12

CONSUMER GOODS & RETAIL

Austria's Immofinanz lays foundation stone for new EUR 95m retail center in Lublin page 14 Rank Progress completes large retail project, more to come by 2015 page 15

IT & TELECOM

Publicis Group buys top Polish digital agency page 16

POLITICS & ECONOMY

Doing business in Poland got easier, World Bank says in new report page 16

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 18-20

Energa generates most of its profits from power distribution. Photo: Energa

Energa's IPO may Energa's IPO may Energa's IPO may Energa's IPO may totaltotaltotaltotal PLN 2.6PLN 2.6PLN 2.6PLN 2.6----3333bnbnbnbn Following the successful floatation of state-controlled rail freight company PKP Cargo, the Warsaw bourse is gearing up for another huge IPO. The government is about to sell 34% of power utility Energa for an estimated PLN 2.6-3.0bn. page 4

EI pay EUR 57m for prefab home makerEI pay EUR 57m for prefab home makerEI pay EUR 57m for prefab home makerEI pay EUR 57m for prefab home maker Private equity company Enterprise Investors has acquired 100% shares in Danwood, one of Europe's leading makers of prefab timber houses, from Polish construction giant Budimex. The new owners seek to expand Danwood's market footprint. page 2

weekly newsletter # 010 / 8th November 2013 / page 2


Enterprise Investors Enterprise Investors Enterprise Investors Enterprise Investors acquire prefab timber acquire prefab timber acquire prefab timber acquire prefab timber house maker Danwood house maker Danwood house maker Danwood house maker Danwood from Budimexfrom Budimexfrom Budimexfrom Budimex

One of Poland's top construction companies, the Span-ish-owned Budimex, has sold its subsidiary Danwood to Polish Enterprise Fund VII, a private equity fund managed by Enterprise Investors. The lat-ter agreed to pay EUR 57m for 100% of shares in Danwood, which is one of Europe's largest and fastest-growing producers of prefabricated timber houses. Danwood produces prefab houses using modern tech-nology that is well established in Germany and Scan-dinavia. The company's official seat, production plant as well as design and research department are located in Bielsk Podlaski and Białystok, near Poland's eastern border. In 2012 Danwood built 565 houses, generating revenue of EUR 76m. The company sells 91% of its output to Germany, the biggest European market for ready-made houses, where it is the dominant player. Danwood controls all key areas of the value chain, from design through production and sale of prefabri-cated elements, construction and finishing. "We see considerable further growth potential for Danwood, which has already succeeded in building its position on Europe's most demanding markets with a technologically advanced product. We believe the company will be able to continue its dynamic devel-opment with our support." said Sebastian Król, partner at Enterprise Investors in charge of the investment. "The key to Danwood's growth will be the expansion of its geographical footprint, further strengthening of

its presence in Germany, Austria, and Switzerland and Poland. We will also seek to penetrate new market segments. With the "Family" range we intend to build a strong position in the lower segment of the market, where customers are more cost-conscious and can ac-cept standard fit-out features as well as carry out cer-tain simple work, such as painting or laying floor-boards, themselves, in exchange for a lower price. We are also counting on further efficiency improvements that should come with economies of scale," Mr. Król told Poland Today.

Danwood plans to focus on organic growth and building its position as leader on key markets. Image: Danwood

Commenting on this market segment, Danwood’s president Jarosław Jurak said: "Prefabricated houses are increasingly popular throughout Europe. They are environmentally friendly, energy efficient and eco-nomical, and their construction takes less time and is cheaper than in the case of traditional technology." Enterprise Investors is one of the largest private equi-ty and venture capital firms in Central and Eastern Eu-rope. Active since 1990, the firm has raised eight funds with total capital exceeding EUR 2bn. To date the

funds have invested EUR 1.6 billion in 131 companies across a range of sectors and exited 102 companies with total gross proceeds of EUR 2bn.


Toshiba sells Polish TV Toshiba sells Polish TV Toshiba sells Polish TV Toshiba sells Polish TV factory to Taiwan's factory to Taiwan's factory to Taiwan's factory to Taiwan's Compal ElectronicsCompal ElectronicsCompal ElectronicsCompal Electronics

Japan's Toshiba Corporation has sold its Polish manufacturing plant in Kobierzyce near Wrocław to Taiwan's Compal Electronics Inc., the world's No. 2 contract notebook maker. The deal to acquire 100% ownership of Toshiba Television Central Europe will cost Compal USD 25m and is expected to be complet-ed in Q1 2014, Compal said in a filing to the Taiwan Stock Exchange. Toshiba opened the factory back in 2007 at the cost of approximately PLN 136m. With a staff of 700 employ-ees the plant makes LCD TV sets for the European and Russian markets. The move is part of Toshiba's global restructuring program, triggered by unsatisfactory performance of the company's TV-manufacturing di-vision, which posted a USD 166m net loss last year. The Japanese electronics giant has recently decided to lay off a half of the estimated 6,000 employees who work for its TV arm. According to IHS, Toshiba had a 5% share in global TV sales in Q3 2013, way behind the leading Samsung (19%) as well as other competitors (LG, TCL, Sony). "Toshiba is one of Compal's major customers in the LCD TV business. This deal will undoubtedly further strengthen the relationship between Compal and Toshiba," Compal spokesman Gary Lu said in a state-ment on its website. "After the completion of the deal,


Toshiba will continue to supply the European market with LCD TVs manufactured at the plant, through an original design manufacturer (ODM) partnership with Compal," Lu said. The Taipei-based company said the acquisition fits in with its long-term growth strategy to focus on the "4-Screens" sectors: notebook computers, tablets, smartphones and LCD TV products. The new factory will help it expand its LCD TV manufacturing flexibil-ity, diversify its geographical coverage and generate revenue growth momentum in the future, the compa-ny said.

Toshiba's factory in Kobierzyce near Wrocław has been one of Japan's flagship greenfield investments in Poland. Image: Prochem

Compal generates 84% of its sales from its notebook and personal computer business, against only 7% from smart devices and 9% from other businesses, accord-ing to Macquarie Securities. By 2015, however, Compal should derive 60% of its revenue from note-book and PC sales, 30% from smart devices and 10% from other businesses, Macquarie estimated. Compal produces notebooks for the likes of Lenovo and HP. Five years ago the company opened a service center for portable PCs and other electronic equipment in Łódź, Poland.


PMI PMI PMI PMI data data data data showsshowsshowsshows gradual improvement gradual improvement gradual improvement gradual improvement in manufacturingin manufacturingin manufacturingin manufacturing

Poland's purchasing managers' index PMI moved up to 53.4 points in October, the highest level since April 2011, from 53.1 pts in September, according to a survey of 300 industrial companies, prepared by Markit Eco-nomics for HSBC. It was the fourth consecutive month when the indicator remained above the key 50-point threshold, which separates expansion from con-traction, indicating improving business conditions in manufacturing.

Purchasing Managers' Index (PMI)

The 50 mark separates growth from contraction

45464748495051

525354

Aug 12 Oct 12 Dec 12 Feb 13 Apr 13 Jun 13 Aug 13 Oct 13

Source: Markit & HSBC

"The highlight in the October survey was a surge in new export orders while output and employment indi-ces inched lower. For the fourth month in a row rising input prices were matched by falling output prices.

What is more, October saw input prices rise faster than a month earlier while output prices fell more sharply than in September. This still points to weak demand and highlights how vulnerable the recovery still remains at this stage. And that is exactly in line with the recent comments from several rate setters who highlighted disappointment with the pace of re-covery and lack of inflationary pressures," commented Agata Urbańska-Giner, Economist, Central & Eastern Europe at HSBC. According to the report, new export orders rose for the fifth month running in October, the longest se-quence of growth in nearly two and-a-half years. Moreover, the rate of expansion accelerated sharply reaching the fastest rate in the survey's 15-year history. The rate of growth of total (domestic and export) new orders also accelerated since September, and was the second-fastest in two and-a-half years.

BANKING & FINANCE

BNP PBNP PBNP PBNP Paribas bidding aribas bidding aribas bidding aribas bidding on Rabobankon Rabobankon Rabobankon Rabobank----owned owned owned owned Polish BGPolish BGPolish BGPolish BGŻ BankŻ BankŻ BankŻ Bank

After Italy's UniCredit (see PT Business Review+ No 006, page 3), another major European bank - France's BNP Paribas, has placed a non-binding bid on a 98.5% stake in Polish lender BGŻ. The latter's owner, Dutch Rabobank is reportedly contemplating an exit from Poland, where it has failed to establish a strong enough presence so far. In a statement BNP Paribas said it needs to carry out a detailed due diligence and obtain all the necessary regulatory permissions before making a final decision regarding the acquisition. Ac-cording to media reports, BNP Paribas is offering EUR 1bn for BGŻ.


Bank BGŻ is number 11 in Poland by assets and its cap-italization totals some PLN 2.5bn, but its stock is any-thing but liquid. Last year Rabobank increased its ownership in the Polish lender by 40%, reaching the current 98% and later boosted the bank's equity by PLN 0.5bn. Rabobank, the biggest Dutch retail bank, said in June it was reviewing its options for BGŻ, but had not officially put the unit up for sale. At the end of October the Dutch bank confirmed plans to merge its Polish unit Rabobank Polska that serves primarily large corporate clients, with BGŻ. Rabobank Polska will become a separate division of BGŻ focusing on corporations. In most of the markets where it oper-ates, Rabobank is among the top three-top five players, but in Poland the only way to achieve such a position would be through acquisitions. In the first three quarters of the year BGŻ boosted its net earnings by 73% y/y, reaching PLN 134m. Net lending remained unchanged from the end of 2012 at PLN 26.3bn, whereas deposits dropped 4% and totaled PLN 25.8bn. The bank's solvency ratio stood at 13.1% as of end of September 2013. Besides BNP Paribas and UniCredit also Alior Bank, Credit Agricole and Santander are said to be inter-ested in BGŻ, which has a strong position in the agri sector. Foreign banks control about 70% of the Polish banking sector, but several have looked for an exit to boost capital positions hit by the global economic cri-sis. Major recent exits from Poland's banking market included Belgium's KBC and Ireland's AIB which sold their Polish units to Spain's Santander, Greek Eurobank EFG (their Polbank EFG merged with Raiffeisen Polska), and Swedish Nordea (their Polish arm was acquired earlier this year by Poland's largest lender PKO BP).

BANKING & FINANCE

Finnish FerratFinnish FerratFinnish FerratFinnish Ferratum Bank um Bank um Bank um Bank to operate in Poland to operate in Poland to operate in Poland to operate in Poland under Maltese licenseunder Maltese licenseunder Maltese licenseunder Maltese license

Finnish micro-loan provider Ferratum Group has launched a banking unit in Poland, under a license the company obtained in September last year from the Malta Financial Services Authority. The newly estab-lished Ferratum Bank will incorporate the Ekspres Kasa operation, which the Finns have been rolling out in Poland over the past few years. Earlier this year, in March, Ferratum Bank had entered Slovakia. Ferratum Bank seeks to lend money both online and offline, with small short terms loans (PLN 100-2,000 for 15-60 days) to be offered under the Ekpress Kasa brand, and longer-term ones (PLN 400-2,000 for 3-12 months) to be distributed under the aegis of Ferratum Bank. The whole concept is based on simple and clear unsecured credit products, offered mainly via the in-ternet, similar to other payday loan providers, such as British Wonga, which has recently entered Poland, and a number of other domestic and foreign players. According to the company, even though all risk as-sessment procedures are to be carried out by the bank's head office in Malta, customer screening should not take longer than before. Independent of any financial institutions, Ferratum claims to be the world's first provider of microloan services online and via mobile phone. Since commenc-ing its activities at the beginning of 2005, the company has opened offices in 20 countries (with a particular focus on the CEE region), and employs more than 220 customers who serve 1.5m clients.

IN BRIEF: Austria's Erste Group is interested in acquiring a Polish bank, but sees current market valuations as too high, Erste representatives told the media. "In the medium-term we want to be present in Poland in the banking sector, but current valuations that are in the range of 1x to even twice the book value are too high for us to think about an acquisition," Erste investment banking head Ingo Bleier told Polish news agency PAP. "We would like to take over a bank that would give us a notable share in the retail segment." High valuations of Polish banks might be justified by low costs of risk, Bleier said.

ENERGY & RESOURCES

Poland to sell 34.2% of Poland to sell 34.2% of Poland to sell 34.2% of Poland to sell 34.2% of Energa and raise Energa and raise Energa and raise Energa and raise somesomesomesome PLN 2.6bn in upcoming PLN 2.6bn in upcoming PLN 2.6bn in upcoming PLN 2.6bn in upcoming IPO of power utilityIPO of power utilityIPO of power utilityIPO of power utility

Following last month's successful floatation of rail freight company PKP Cargo, hopes are high for the upcoming IPO of power utility Energa, details of which emerged earlier this week. The government plans to offer a 34.2% stake in the Gdańsk-based com-pany, Energa announced, and according to estimates by Bloomberg the sale may raise about PLN 2.6bn for the state budget, helping the government curb debt growth. The financial regulator KNF is to approve Energa's prospectus in the coming days. Energa is the last state-owned Polish energy company to hit the bourse and its IPO would be the biggest in central Europe since Polish coal producer Jastrzębska Spółka Węglowa's PLN 5.37bn (USD 1.74bn) sale in 2011. Over the last five years, Poland sold stakes in Energa's competitors including PGE,


Tauron, Enea, and PAK, raising a total of PLN 12.9bn from their IPOs, according to data compiled by Bloomberg. Energa is one of Poland's leading vendors of clean en-ergy, with some 36% of renewable energy produced in the country last year coming from the company. Earli-er this year Energa, which operates the country's big-gest hydroelectric plant in Wloclawek, bought 165 MW of wind farms from Denmark's Dong Energy A/S and Sopain's Iberdrola SA, raising its total re-newable energy capacity to 508 MW, or 40% of its portfolio.

Sales & profits on the rise Energa, key figures*

Q1-Q3 2012 Q1-Q3 2013

Sales revenues, PLNbn 8.2 8.5

Net result, PLNbn 0.5 0.6

Source: Energa

The company plans to spend PLN 19.7bnthrough 2021, with PLN 12.5bn of that amount earmarked for in-vestments in power distribution. Energa's power plants can generate up to 1.3 GW of energy and last year it sold some 28 TWh of electricity. Energa, which makes most of its profit from a regulated power-distribution business, boosted nine-month earnings before interest, taxes, depreciation and amortization 13% to PLN 1.5bn. Net income rose 15% from a year earlier to PLN 610.8m. According to analysts, Energa needs to come up with a convincing business model and offer attractive valua-tion to make the IPO a hit, as its competitors have so far failed to impress, as far as their stock market per-formance is concerned. Poland's top electricity pro-ducer PGE has seen its share price drop 19% since its IPO in 2009, Tauron shares trade 2.9% below the company’s 2010 offering, while Enea’s stock price is

4.9% below its first sale in 2008. The sector has seen its earnings slide due to decline in electricity prices. However, the power plant group PAK, controlled by Polish billionaire Zygmunt Solorz-Żak, has climbed 7.3% since the government sold its remaining 50% last year.

In the coming years the bulk of Energa's investment projects will focus on the power distribution seg-ment. Image: Energa

The Treasury Ministry first tried to sell Energa in 2010. The PLN 7.5bn sale of an 84.2% stake to PGE was blocked by Poland’s antitrust regulator. PGE is currently valued at 9.9 times this year's profit, accord-ing to Bloomberg. Tauron, the second-biggest power utility, trades at 6.3 times this year’s profit, while Enea 10.3 times earnings. Energa's relatively high valuation has to do with the fact that the company relies to a significant extent on the regulated (and therefore pre-dictable) distribution segment. Poland's state railways sold a PLN 1.42bn stake in its cargo unit's IPO last month and shares in the company opened at 18% above the issue price on the first day of trading (see page 11).

JP Morgan and UBS Investment Bank have been ap-pointed global coordinators and joint bookrunners. Dom Maklerski PKO BP will offer the shares. Banco Espirito Santo, BofA Merrill Lynch, Citi, DM PKO BP and UniCredit are also joint bookrunners. Biuro Maklerskie Alior Banku, DM BOŚ, DI BRE Banku and Ipopema Securities are also managers of the offer.

Most profits come from distribution Energa's EBIDTA structure in Q1-Q3 2013

Sales

11%

Distribution

76%

Generation

13%

Source: Energa, Estimates

ENERGY & RESOURCES

Grupa Lotos to pay Grupa Lotos to pay Grupa Lotos to pay Grupa Lotos to pay USD 176m for share in USD 176m for share in USD 176m for share in USD 176m for share in Norwegian oil fieldsNorwegian oil fieldsNorwegian oil fieldsNorwegian oil fields

Poland's second largest refiner Grupa Lotos will buy stakes in several Norwegian oil fields for USD 176m from Centrica PLC, the company announced. Lotos will buy stakes ranging from 7.9%-50% in 14 oil fields, which are expected to produce around 5,000 barrels of oil equivalent a day in 2013.


The transaction, which is expected to close in Decem-ber, is part of the company's efforts to diversify away from its low-margin core business of oil refining to-ward more lucrative, but risky, oil production. A few weeks ago Lotos announced that its oil exploration project in the Baltic will receive financing from Po-land's state investment vehicle Polskie Inwestycje Rozwojowe (PIR). Created last year as part of the gov-ernment's "Polish Investments" program to stimulate economic recovery by investing future privatization proceeds into projects of strategic importance, PIR has agreed to inject up to PLN 563m in Lotos Petrobaltic's B8 exploration project in the Baltic Sea (see PT Busi-ness Review+ No. 007 page 5).

Poland's only domestic oil producer

Lotos Petrobaltic's crude oil production in '000 tons

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011 2012

Poland Lithuania

Source: Grupa Lotos

The Polish company had been searching for an oppor-tunity to acquire assets in the Norwegian Sea in order to take advantage of a tax shield it is entitled to after failing to produce oil from the Yme field in the North Sea. The Yme field failed to produce oil due to prob-lems with an oil platform, forcing Lotos to write off the investment and making it eligible for tax benefits

in Norway, if it acquires new assets. Grupa Lotos op-erates in Norway via Lotos Exploration & Production Norge, a subsidiary of its exploration arm Lotos Petrobaltic. Controlling approximately a third of Poland's fuel market, Grupa Lotos is the country's second largest company by revenue. The firm operates in explora-tion, production and crude oil processing, as well as in distribution and sales of a wide range of petroleum products. Over the past year's the production capacity if its Gdańsk refinery has risen from 6 to 10.5m tons. In the first half of 2013 Grupa Lotos turned over PLN 13.3bn, 18% down y/y, and posted a net loss of PLN 273m, reflecting dropping margins and unfavorable economic conditions. Its retail network includes more than 400 petrol stations.

ENERGY & RESOURCES

Tauron opens two new Tauron opens two new Tauron opens two new Tauron opens two new farms, boosting farms, boosting farms, boosting farms, boosting its its its its wind power capacity wind power capacity wind power capacity wind power capacity beyond 180MWbeyond 180MWbeyond 180MWbeyond 180MW

Polish power utility Tauron has opened two new wind farms in the past weeks, boosting its combined installed wind power capacity in excess of 182 MW. The company seeks to expand its renewable capacity beyond 800MW by 2020, CEO Dariusz Lubera said in a statement. The first of the two new completions - an 82MW wind farm in Marszewo (120km west of Gdynia) is the third largest facility of this kind in Poland. The project com-prises 41 turbines (V80 and V90 manufactured by Vestas) of 2 MW capacity each. The height of the

towers varies from 60 to 100 m. Annual output of the farm is expected to reach almost 184 thousand MWh, which meets the demand for electricity of approx. 80 thousand households. Spain's Iberdrola Group de-veloped the project for Tauron at the cost of PLN 632m net, including 3-years warranty service. The second new wind farm (and Tauron's fourth in to-tal), was launched at the end of October in Wicko, 60km north west of Gdynia. Developed at the cost of PLN 244m the 40MW project includes 20 Vestas V90 turbines. The contractor was Spain's Aldesa. Both in Marszewo and in Wicko substantial investments were made in local power distribution networks as well as service roads. The Warsaw-listed Tauron is Poland's leading distrib-utor and vendor of electric energy as well as the se-cond largest power producer in the country. Last year the company generated 11.11TWh of electricity and sold 44.74 TWh. Beside's four wind farms (Marszewo, Lipniki, Wicko, and Zagórze, with a combined capaci-ty of 182.5MW), Tauron's renewable energy arm Tauron Ekoenergia also owns 35 hydroelectric power plants, capable of producing up to 133 MW of electrici-ty. Most of them are being currently upgraded in an ef-fort to boost their efficiency and improve water man-agement systems. Tauron's domestic competitors are all busy developing their renewable energy sources. Earlier this year Denmark's Dong Energy and Spain's Iberdrola Re-newables sold their wind energy projects in the country to Polish utilities PGE and Energa Hydro. As part of the DONG deal, PGE has taken over 60.5 MW in operating wind farms and a portfolio of 555 MW in projects, including 130 MW in advanced pro-jects, while Energa Hydro has acquired a 51 MW wind farm and 220 MW in wind farm projects under devel-opment. In the subsequent transaction with Iberdrola (worth PLN 840m), PGE and Energa purchased oper-


ating wind farms with installed capacity of 70.5 MW, with contracted off-take of electricity as well as certif-icates and pipeline of projects with planned capacity of 36 MW at an advanced stage of development. For-eign investors operating in the sector include Germa-ny's RWE, France's EdF, and Portugal's EDPR.

Poland's installed wind energy capacity in MW

0

500

1,000

1,500

2,000

2,500

3,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

*20

13

Source: URE *) as of end of September

Poland's installed renewable energy capacity came to 5,177 MW as of end of Q3 2013 , up by over 761 MW compared to end-2012, according to energy market regulator URE. Wind power capacity increased the most, reaching 3,080 MW as of September, followed by hydro-power capacity amounting to 969 MW and biomass-fueled plants with 973 MW, the data showed. Renewable energy currently represents slightly over 10% of Poland's energy supply. The country seems to be way on its way to reach its 15% target for the share of renewable sources in gross final consumption of en-ergy in 2020.

PROPERTY & C0NSTRUCTION

Developer Capital Park Developer Capital Park Developer Capital Park Developer Capital Park to raise PLN 210m to raise PLN 210m to raise PLN 210m to raise PLN 210m fromfromfromfrom Warsaw IPOWarsaw IPOWarsaw IPOWarsaw IPO

Warsaw-based property developer Capital Park seeks to hit the Warsaw bourse hoping to raise some PLN 210m for its ongoing and pipeline projects. New institutional and retail investors are being invited to acquire a 20% share in the company, which has been investing jointly with London-based private equity fund Patron Capital Partners. Since the start of its operations in 2003, the Capital Park group has completed approximately 100 invest-ment transactions and now comprises 76 projects of approximately 247,560 sq.m of lettable area in 39 towns and cities, including office projects (93,030 sq.m), retail projects (26,700 sq.m), mixed-use pro-jects (112,423 sq.m) and 13 other projects. The compa-ny describes itself as an active opportunistic investor with a track record of more than ten years in develop-ing and managing real estate properties and projects in Poland. One of Capital Park's specialties are small real estate assets such as high street retail properties. Out of the 76 projects in the group’s portfolio, 39 high street re-tail properties are within the structure of a recently launched closed-ended investment fund – Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych Real Estate Income Assets, which is being actively managed by the group. As of 30 June 2013 Capital Park's existing retail port-folio was worth PLN 1.3bn, with a target value amounting to more than PLN 3.2bn. Properties located

in Warsaw represented nearly three quarters of the to-tal portfolio value. The company has been rather con-servative when it comes to the use of financial lever-age, as reflected by its low net indebtedness ratio of 35.4% as at 30 June 2013. Its limited dependence on bank financing makes Capital Park less susceptible to turbulence on the credit and loan market.

With a planned GLA of more than 70,000 sq.m Eurocentrum is one of the largest office projects currently under construction in Warsaw. Image: Capital Park

As far as its development pipeline is concerned, Capi-tal Park is working on three large projects in Warsaw. Its flagship development is the Eurocentrum scheme on Jerozolimskie avenue in Warsaw's Ochota district. The investor, which acquired the site back in 2007, awarded the PLN 337m contract for the construction of Eurocentrum to Polish Erbud. Eurocentrum will be a 15-floor building housing more that 69,578 sq.m of office and more than 2,400 sq.m of retail-service space as well as more than 770 parking spaces. According to the developer it will be the largest LEED CS Gold-certified office scheme in Poland, employing a whole range of energy-efficient solutions. Phase one (42,337


sq.m) of Eurocentrum is to reach completion in June 2014. In August 2013Capital Park Group broke ground on its latest office project in Warsaw – Royal Wilanów. Lo-cated at the corner of Klimczaka and Przyczółkowa streets in Warsaw's up-scale suburb of Wilanów, the five-storey building will offer close to 36,707 sq.m of office space as well as some 7,000 sq.m of retail space, accommodating restaurants, bars, cafes, shops and service units, all much needed in this largely residen-tial neighborhood.

Warsaw office market Key indicators as of end of 1H 2013

Office zones Stock

sq.m

Vacan-

cy

Central locations 1,287,000 9.9%

CBD-Central Business District 501,000 11.4%

CCF-City Centre Fringe 786,000 8.9%

Non-central locations 2,724,000 10.8%

E-East (Praga) 172,000 9.8%

LS-Lower South (Puławska) 176,000 13.0%

N-North (Żoliborz) 135,000 9.0%

SE-South East (Wilanów & Sadyba) 188,000 2.2%

SW-South West (Jerozolimskie & Okęcie) 660,000 15.6%

US-Upper South (Mokotów) 1,105,000 10.5%

W-West (Wola) 288,000 6.4%

Total 4,011,000 10.5%

Source: CBRE H1 2013 Warsaw Office MarketView

Their third key Warsaw project is the Art Norblin de-velopment in Wola district, on the edge of Warsaw's central business district, a stone's throw from the ONZ roundabout and its iconic Rondo 1 building. Art Norblin will incorporate the pre-war Norblin factory buildings, striving to create a trendy mixture of indus-trial architecture, class A office and shops spread across a total lettable area of 64,164 sq.m.

Although the company does not communicate finan-cial details of its undertakings, the combined capex for the three projects is likely to come in excess of PLN 1bn. Besides large office buildings, Capital Park devel-ops and manages retail properties (Vis à Vis shopping plazas) as well as residential projects. Their overall in-vestment approach is to acquire properties with signif-icant value creation potential, be it through changes to land use decisions, obtaining building permits, con-struction of new facilities or alteration of existing ones and improved management of existing buildings. Last year Capital Park group cashed in PLN 42.3m in rental income. However, due to a new valuation of its prop-erty portfolio, the company posted a net loss of PLN 115m. In 1H 2013 the net result was a PLN 46m profit. Capital Park hopes to finalize the IPO before the end of the year with Espirito Santo Investment Bank and DI BRE Banku acting as joint bookrunners and the lat-ter being also the global coordinator and offering agent.


New repoNew repoNew repoNew report shows first rt shows first rt shows first rt shows first signs of upturn on signs of upturn on signs of upturn on signs of upturn on Poland's residential Poland's residential Poland's residential Poland's residential property marketproperty marketproperty marketproperty market

Sales of new homes are picking up according to a brand new report from Poland's top residential prop-erty market consultancy REAS. Close to 9,600 new dwellings were sold in Q3 2013, marking an 18% in-crease over the prior quarter and the strongest result since the boom times of 2007, even though the aggre-gate value of transactions was considerably lower . Transaction volumes were exceptionally high despite two holiday months which usually result in reduction

in buy activity. The total number of new homes sold between Q4 2012 and Q3 2013 in the six markets ana-lyzed by REAS came to 33,500. There are a number of factors behind this sudden surge in residential demand. One the one hand, we are seeing increased activity on the part of cash buyers, who treat mortgage as a supplementary form of fi-nancing and often focus on larger and more expensive dwellings. With interest rates at their lowest level in years, those with fat wallets and little appetite for risk are turning to good old real estate as a safe form of long-term investment.

Selling the future

Residential units available for purchase from developers in Warsaw,

Kraków, Poznań, Wrocław, Tricity, and Łódź, breakdown by delivery

date.

2011

4%

2010 &

before

5%

2012

11%2013

27%

2014

41%

after 2014

12%

Source: REAS

Low interest rates are also attracting those at the other end of the earnings curve, as chances for the cost of credit to get any lower in the near future seem rather slim. Moreover, some buyers may have sought to get loans before the regulator further tightens its already conservative approach to lending by gradually limiting


the maximum LTV level for mortgage (the so-called "S" Recommendation). On the supply side, average prices are also relatively low, remaining at a level comparable to that from late 2011. Besides a minor appreciation in Warsaw, where sales have picked up in the low-end segment, asking prices remain flat in other markets. According to REAS, developers are not feeling confident enough yet to be raising prices, but they have been doing so indi-rectly by putting a cap on discounts and special offers. The number of new dwellings released to the market in Q3 in the six key cities came to 5,300, some 3,000 fewer than the quarterly average from the past few years. Over the past 12 months the combined new sup-ply came to 23,000 – way below the earlier annual av-erage of 35,000-37,000 units. A large portion of the newly released dwellings are still being offered with-out escrow accounts, which are required for all in-vestments formally launched after 29th April 2013. Thanks to sales which considerably outpace new re-leases, the overall number of dwellings offered in the six major markets has dropped for the fifth consecu-tive quarter. It now stands at ca. 44,000 and is nearly 9% lower than the previous three months and over 22% lower than in the record Q2 2012. Although a de-cline was recorded in all six cities, the steepest/q de-cline, by 13.4%, was recorded for Kraków. Sizeable drops were observed also in Warsaw (9.4%) and in Poznań (8.5%). REAS findings match the figures provided by Poland's central statistical office GUS. According to the latter, countrywide, developers commenced construction of some 36,400 dwellings in Q3, down 21.2% compared with the same quarter last year. Over the same time, they obtained building permits for upwards of 41,000 units (down 24.6%). According to REAS, the full-year result is likely to go down to the crisis level from 2009.

Compared to the preceding quarter, the aggregate number of completed, unsold dwellings decreased in Q3 by some 1,300 (8.5%) in all six cities. At the end of September, over 13,800 such units were available on the market. In some markets, such as Warsaw, Wrocław, and TriCity, the market is nearly balanced, as on the average it takes only five quarters to sell new properties there. Łódź, on the other hand, suffers from the highest oversupply rate, but due to the market's small size it should be able to regain balance with rel-ative ease.

No. of newly completes homes in Poland

100,000

110,000

120,000

130,000

140,000

150,000

160,000

170,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

*20

13

Source: GUS *) Q1-Q3

The report argues that the key driver in the low-end segment next year will be the government's new sup-port scheme "Home for the Young." Next year, the new program is to offer PLN 600m in subsidies on de-posits for loans taken out for the purchase of new-built dwellings. REAS expects the scheme's impact to be comparable to that of Family’s Own Home in 2012. As-suming the new program is launched in the beginning of January, 2014 will most probably record some six-teen to eighteen thousand subsidized home purchases, accounting for around 20-23% of sales concluded by

developers and worth 16-18% of the total annual value of transactions, REAS said. In Warsaw and Kraków the scheme's impact will be limited, however, with less than one in ten available properties meeting the minimum requirements, but in Gdańsk and Łódź over a half of all homes may qualify. Another potentially groundbreaking development could be the creation of a state-backed rental housing fund, an idea that has received some media attention in recent months. The fund, to be set up and later managed by Bank Gospodarstwa Krajowego, is to in-vest PLN 5bn in apartments, mostly in the country's major cities, making it the largest home buyer or key developer in these markets. Constructed and turn-key finished dwellings are to be leased at rates ensuring a 4% annual return on equity. Details of this program are still being discussed and its potential consequences for the market as a whole are still largely unclear.


Swedish Skanska lays Swedish Skanska lays Swedish Skanska lays Swedish Skanska lays cornerstone for its cornerstone for its cornerstone for its cornerstone for its first office project in first office project in first office project in first office project in KrakówKrakówKrakówKraków

Swedish developer Skanska Property Poland has laid the cornerstone for its first project in Kraków. Phase one of the development, known under a work-ing name of Kapelanka 42, is to cost EUR 32m, includ-ing a EUR 26m building contract for Skanska's con-struction unit. Kapelanka 42 will comprise two A class office build-ings, with nine storeys above and three below ground level. The total leasable area will amount to 30,000


sq.m. Nearly 400 parking spaces will be available for tenants in the underground car park connecting the two buildings as well as at the ground level. Over-ground construction work is currently in progress. The first building is due for completion in Q2 2014. "Kraków is currently considered the leading center for the outsourcing sector not only in Poland but in the whole region”, said Bartosz Kalinowski, Skanska Property Poland regional director. "We are currently in talks with a number of tenants who are interested in locating their offices in our building. We plan to final-ize some lease contracts in near future, with the pro-ject to be 60%-leased by the end of the year. Tenants value green buildings by Skanska, as they provide comfortable working environments where people can thrive."

Although Skanska Property Poland has been very active in other regional cities, Kapelanka 42 will be its first project in Kraków. Image: Skanska

All of Skanska’s recent office investments are being designed and built in line with the principles of sus-tainable development, and Kapelanka 42 will be no ex-ception. The complex is Kraków’s first office project which has been LEED-precertified at the Gold level. The building will also receive EU GreenBuilding cer-tificate.

DATA BOX: KRAKÓW OFFICE MARKET IN 1H 2013

• In June 2013, total prime stock in the second-largest office market in Poland stood at 605,000 sq.m. Only one small office building in Dekerta Street totaling around 1,800 sq m has been delivered since the beginning of the year. In H1 2013, Krakow’s absorption declined by more than 50% compared with the same period of 2012, which, however, owing to the low supply should not stir anxiety among investors.

• Take-up remained high at close to 55,000 sq.m. The largest deal was Lufthansa’s lease of approx. 8,500 sq.m in building D of the Bonarka4Business complex..

• At the end of June 2013, there was 16,400 sq.m of vacant space, accounting for 2.7% of Krakow’s total stock, being its record high vacancy rate. Around 28,000 sq m is in the development pipeline to be completed by the end of this year. The largest schemes under construction include phase III of the Quattro Business Park (12,000 sq.m), developed by the Buma Group, and building D of the Bonarka4Business complex (8,700 sq.m), developed by TriGranit.

• Despite the relatively low supply, rents remained stable. Asking rents stood at EUR 13–15/sq.m/month, with effective rents at EUR 12–13/sq.m/month. Source: Cushman & Wakefield

Skanska Property Poland is the leading office develop-er operating outside Warsaw, with investments in Poznań, Łódź, Cracow, as well as in Wrocław, where it has just launched its 4th project, the Dominikański (see PT Business Review+ No. 006 page6). In Warsaw, the company is building one of its most ambitious un-dertakings to-date: Atrium 1, which according to Skanska will be the greenest office building in Central

and Eastern Europe. The project is to reach comple-tion by the end of this year, offering 18,000 sq.m. In September, Skanska signed a 12-year agreement with a key tenant for Atrium 1, Poland's third largest bank BZ WBK, belonging to Spain's Banco Santan-der. The bank will take up 12,200 sq.m at Atrium 1, making it the largest office deal in Warsaw's central business district in years. Atrium 1 will house the new headquarters of BZ WBK along with the bank's flag-ship branch. The remaining space in the office build-ing, located by one of War-saw's key intersections, Rondo ONZ, will be occupied by the property consul-tancy CBRE as well as the developer, Skanska Proper-ty Poland itself. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world’s leading project development and construction groups. The group currently has 57,000 employees in selected home markets in Europe, the U.S. and Latin America. Skanska's revenue in 2012 totaled EUR 15.2bn.

SERVICES & BPO

Korea's Samsung Korea's Samsung Korea's Samsung Korea's Samsung expands Polish R&D expands Polish R&D expands Polish R&D expands Polish R&D unit to Krakówunit to Krakówunit to Krakówunit to Kraków

One of Europe's fastest growing research and devel-opment centers for consumer electronics, the Warsaw unit of South Korean giant Samsung, continues to branch out to Poland's regional cities. After opening R&D units in Poznań in 2011 and Łodź earlier this year, Samsung Electronic Polska has launched a brand new division in Kraków. The official opening of Sam-


sung R&D Institute Poland's newest office took place on 30th of October. "We have been present in Poland for 13 years, continu-ously growing and now employing more than 1,000 highly skilled engineers," said Dae-Hyun Sim, VP and Head of Samsung R&D Institute Poland, praising Po-land's technology talents and business friendly envi-ronment. The company is recruiting telecommunica-tions, embedded programming and software develop-ment specialists for the new office, which currently employs several dozen staff and plans to double their number over the coming years.

Youngky Kim, EVP and Head of Networks Business at Samsung Electronics, Dae-Hyun Sim, VP and Head of Samsung R&D Institute Poland, and Polish officials took park in the official ribbon cutting cere-mony. Image: Samsung

The Kraków unit will focus on development of soft-ware for mobile network infrastructures for major Eu-ropean telecom operators. With the new office, Sam-sung expects to enhance its capability to support Eu-ropean mobile operators with development of the highest quality of mobile network infrastructure solu-tions and accelerate the globalization of its Networks business, the company said. The increasing of invest-

ments in R&D activities is a part of the global strate-gies of the company. Samsung Electronics invested around USD 10bn in research and development activi-ties in 2012. Samsung's Warsaw R&D center is the company's se-cond largest unit of this kind outside Korea and the largest in Europe. Established back in 2000, it is cur-rently responsible for dozens of projects in the home and mobile entertainment segments. The center em-ploys more than 1,000 engineers across four locations (Warsaw, Poznań, Łódź and Kraków). Established last year, the Poznań unit were to initially concentrate on developing software for digital television equipment (such as set-top boxes), including Samsung's own Smart TV platform, as well as mobile phone applica-tions, but its responsibilities are being gradually ex-panded. In all four cities the Korean giant bets on tight cooper-ation with local universities. Over the past couple of years, Samsung's Warsaw center has been organizing shared research projects, conferences, training ses-sions, as well as faculty and student exchange pro-grams in cooperation with top engineering schools in Poland. Besides its 1,000 Polish R&D professionals, Samsung employs more than 1,700 staff at its Warsaw sales unit and manufacturing plants in Wronki, which the com-pany acquired in March 2010 from Polish Amica at the cost of USD 65.5m. The investor is in the process of converting the factories into its European manufac-turing hub, which by the end of 2013 will be making 1.5m washing machines and 1.5m refrigerators per an-num. As far as financials are concerned, Samsung Elec-tronics Polska turned over PLN 6.3bn and net-earned PLN 114m in 2012. Globally, Samsung employs 270,000 people across 79 countries with annual sales of USD 187.8bn.


PKP CargoPKP CargoPKP CargoPKP Cargo lands lands lands lands on on on on Warsaw bourseWarsaw bourseWarsaw bourseWarsaw bourse with a with a with a with a splashsplashsplashsplash, stock , stock , stock , stock price price price price surgessurgessurgessurges 18% on first day18% on first day18% on first day18% on first day

Shares in Polish PKP Cargo, the European Union's second largest railway freight company after Deutsche Bahn AG, jumped 18% on the first day of trading, valuing the business at PLN 3.5bn. The com-pany's PLN 1.42bn IPO, Poland's biggest so far this year, was heavily oversubscribed, with demand ex-ceeding the offer by nearly six times. PKP Cargo is the EU’s first listed rail-freight company. Its state-owned parent PKP, the nation’s ailing railway operator, sold 20.9m shares in Cargo at PLN 68 each to raise funds for cutting its own debt. The price range was set at between PLN 59 to 74 apiece. Foreigners bought 20% of the freight operator with the Europe-an Bank for Reconstruction and Development having acquired a 5.27% stake in the IPO and thus be-coming the second-biggest shareholder in PKP Cargo. State-owned railway group PKP does not rule out sell-ing another stake in freight firm PKP Cargo next year, the group’s CEO Jakub Karnowski said at a press con-ference following the floatation, adding that it would seek permission from the Treasury Ministry to de-crease its involvement in PKP Cargo while at the same time maintaining control over the company. The current PKP Cargo articles of association prevents any other entity from having more than 10% of the votes at the shareholders meetings. Such solutions are in place in many other state-controlled companies,


where the Treasury holds a 20-30% stake in a firm but maintains control. If PKP does decide to sell more shares, they will most likely sold on the WSE. The PKP-owned stock has a 180-day lock-up period.

Poland's top rail freight operators 2012 market shares based on freight volume

Other, 13.8%

PKP LHS,

4.5%

Lotos Kolej,

4.5%

CTL Group,

6.5%

DB

Schenker,

20.2%

PKP Cargo,

50.5%

Source: Rail Market Regulator UTK

PKP Cargo saw its revenues drop 9.2% to 2.29bn, in 1H 2013, due to economic slowdown, while its net income slumped 44% to PLN 76.8m. Last year the company carried around 116m tons of freight (mainly hard coal and building materials) and generated net profits of PLN 267m on PLN 5.2bn worth of revenues, down from its record net result of PLN 400m in 2011. War-saw-based PKP Cargo had a 60.3% share in the Polish market in 2012 and controlled 8.5% of total rail freight in the EU. That compares with DB Schenker's 28% and 5.4% shares in the EU and Poland, respectively. PKP Cargo's management will propose spending 35% to 50% of consolidated profits on dividends, according to the prospectus.


PointPark Properties PointPark Properties PointPark Properties PointPark Properties to intensify expansion to intensify expansion to intensify expansion to intensify expansion in Poland under new in Poland under new in Poland under new in Poland under new ownerownerownerownerssss

TPG, a leading global private investment firm, with its partner Ivanhoé Cambridge, one of the world’s largest real estate companies, have acquired ware-house developer PointPark Properties (P3) from Arcapita, an international investment company. As part of the transaction, the investors will also commit additional capital to strengthen P3’s balance sheet and to provide support for future growth. "Poland is a natural place for expansion of P3's busi-ness. It is a promising and leading market in CEE. Our business model has changed as a result of the new ownership. It means that P3 is looking at opportunities to grow its business through development as well as acquisitions," Anja van den Berg of PointPark Proper-ties tells Poland Today. She declines, however, to dis-close the value of P3 capital expenditures in the coun-try. P3 is a specialist investor, developer and asset manager of warehouse properties, providing services to logis-tics, retail, automotive and electronics manufacturing companies. The company's real estate assets consist of 48 warehouses (1.46m sq.m) and a land bank allowing for the development of more than 590,000 sq.m of warehouse space across Europe. Besides its key mar-ket – France, P3 operates in Spain, Germany, Nether-lands, Italy, Slovakia and the Czech Republic.

"After 5 years working with Arcapita, who successfully assembled this portfolio, we look forward to TPG and Ivanhoé Cambridge becoming long term investors in P3," commented Ian Worboys, CEO of P3. "We are now in a position with our current land bank to build upon our established customer base. P3 will also look to enhance its existing portfolio by acquiring quality income producing warehouses in key logistic loca-tions."

Under its new owners, Point Park Properties will look for new investment opportunities across the CEE region. Image: P3

"This strategic investment represents a unique oppor-tunity to acquire a large and independent logistics platform in Europe. With assets strategically posi-tioned along major air, sea and rail transport routes, P3 offers a very attractive growth potential, and will con-tribute to the diversification of our real estate portfo-lio," added Meka Brunel, Executive Vice President, Europe, at Ivanhoé Cambridge. "The strong growth trend in e-commerce can only benefit the logistics in-dustry in the long term and offers an opportunity to generate excellent returns from changing consumer lifestyles in Europe."


In Poland, PointPark Properties owns close to 160,000 sq.m of in existing assets, has more than 27,000 sqm under construction and a land bank where a further 327,000 sq.m can be developed. Its overall warehouse space potential totals nearly 515,000 sq.m. "We are always looking at opportunities in Poland, but I am reluctant to put a number on our investment plans in the country because it will depend on what opportunities arise. These are hard to predict. What I can say is that with the support of TPG and Ivanhoe Cambridge, P3's ambition is be a prominent actor in the Polish industrial and warehouse market. We are looking at opportunities to expand our existing busi-ness, make investment acquisitions and to offer clients Build-to-Suit solutions in Poland," says Anja van den Berg. P3's two existing Polish logistic parks (in Mszczonów south of Warsaw and near Poznań), are both strategi-cally located and have excellent transport connections. PointPark Mszczonow comprises three buildings to-taling 95,857 sq.m, with the potential to expand this to 318,981 sqm. in 12 buildings. Its three largest tenants are Fiege, Jeronimo Martins Dystrybucja (opera-tor of Poland's top retail chain Biedronka) and ID Logistics Polska. PointPark Poznan as a whole offers up to 194,570 sq.m of warehouse space, including more than 131,000 sq.m of zoned land for further Build-To-Suit developments. Key customers include Hager, DAMCO, Jeronimo Martins Dystrybucja, ND Po-land, CEVA, and PF Concept. The parks have plan-ning consents for new warehouse developments, while P3 is also able to offer other excellent locations for BTS projects near key Polish cities, including Warsaw, TriCity, Wrocław, Kraków, Rzeszów, Bydgoszcz and Lublin as well as in the industrial regions of Upper Si-lesia and Legnica.


Demand for warehouse Demand for warehouse Demand for warehouse Demand for warehouse space plunges in Q3space plunges in Q3space plunges in Q3space plunges in Q3 butbutbutbut developers developers developers developers remairemairemairemain n n n optimistic, JLL saysoptimistic, JLL saysoptimistic, JLL saysoptimistic, JLL says

Demand for new warehousing space declined signifi-cantly in Q3 2013, despite higher construction activity and an increase in speculative volume, according to a brand new edition of Jones Lang LaSalle's quarterly report on Poland's industrial market report. Gross de-mand was 329,000 sq.m, a fall of some 29.8% as com-pared to the Q2 2013 and 23.4% weaker than in Q3 2012. New leases accounted for 54% (179,000 sq.m). Most new demand was concentrated in Central Poland (28% of net-take up), the Warsaw Suburbs (27%) and the Tri-City (17%). Renewed leases were important drivers of Wrocław, Poznań and Upper Silesia mar-kets. The largest transactions were signed by Żabka retail chain (renewal of 26,000 sq.m, SEGRO Logistics Park in Poznań and lease of 25,000 sq m, SEGRO Logistics Park Gdańsk), Dino retail chain (22,000 sq.m, Logistic City, Piotrków Trybunalski) and ID Logistics (20,000 sq m, AB Logistyka building, Grójec). Third-party lo-gistics providers remained the most active tenants (33.5% share of net take-up), but retailers leased only 1,000 sq.m less and accounted for 32.9% of new de-mand. "After the promising H1, when the take-up of industri-al space recorded an increase, the demand registered in Q3 seems to be somewhat modest in size. Although take-up is lower than the previous quarter, the market fundamentals remain strong and optimism prevails re-

garding the overall performance of the market in 2013. Interestingly, the structure of demand has changed with logistics companies leading but retail chains have significantly enhanced their position with higher lease activity. We are also observing a rise in speculative ac-tivity," commented Tomasz Olszewski, Head of Indus-trial Agency in Central and Eastern Europe, Jones Lang LaSalle.

Poland's industrial property market Key indicators as of end of Q3 2013

Q3 2013 q/q y/y 12 month

outlook

Stock (sq.m) 7,390,000 1.2% 4.1% ↑

Gross take-up (sq.m) 329,000 -29.8% -23.4% ↑

Net take-up (sq.m) 179,000 -39.1% -5.1% ↑

Vacancy rate (%) 10.3% -0.30% -0.90%

Vacancy (sq.m) 761,000 -11,000 -31,000

Completions (sq.m) 89,000 +18,9% -34.6% ↑

Under construction (sq.m) 342,000 +37.5% +107% ↑

Source: Jones Lang LaSalle Q3 2012 In Q3, the market grew by 89,000 sq.m, with the most notable projects including Prologis Park Wrocław V (36,000 sq.m), Tulipan Park Warszawa (24,000 sq.m) and Ideal Idea III in Warsaw (10,000 sq m). In the an-alyzed quarter, the Warsaw Suburbs strengthened their position as the largest industrial hub of Poland, hitting the threshold of 2m sq.m of existing supply. Along with Warsaw Inner City, these markets offer almost 2.6m sq.m, (more than 35% of the national sup-ply). The second largest region is Upper Silesia (1.41m sq.m), followed by Poznań and Central Poland, each with 1,02m sqmm. The total modern warehouse space in Poland currently amounts to 7,39m sq.m, according to Jones Lang LaSalle. As of the end of Q3, 342,000 sq.m of new warehouse space was under construction across the country, which is the highest amount recorded since Q4 2011.


The largest volume (74,000 sq.m) is being built in Central Poland (50,000 sq.m in the BTS building for Castorama, Stryków). Developers are also active in Poznań (61,000 sq.m), Upper Silesia (44,000 sq.m), Wrocław (42,000 sq.m) and the Tri-City (41,000 sq.m). The share of speculative projects in the total construc-tion activity remains at the relatively low level of 18%. However, the increasing volumes underway translate into more speculative developments (63,000 sq m). This is the good news for regions with low vacancy rates, such as Poznań, argue Jones Lang LaSalle ana-lysts. At the end of Q3, the overall vacancy rate on the mar-ket stood at 10.3% and had slipped back slightly from the 10.6% in Q2. The most pronounced shift in availa-bility took place in Central Poland, where the vacancy rate dropped from 18.1% in Q2 to 14.9%, largely due to rising occupancy levels in Piotrków Trybunalski. In contrast, in Upper Silesia the recently vacated space in Mysłowice and Chorzów drove the availability up to 8.4% from the 5.8% in Q2. High vacancy remains in the Warsaw Suburbs (13.1%). The lowest vacancy rate among the major markets is found in Poznań (3.4%). Two industrial regions saw slight shifts in levels of rents in Q3: rents were being adjusted to fit the chang-ing availability in the markets of Poznań (increase by approximately 1%) and Upper Silesia (decrease by 2.5% on average). The remaining industrial regions featured relatively stable rents. The Warsaw Suburbs remains the market with the lowest rents. Typically, the highest rents are found in small markets with lim-ited existing stock and availability, such as Kraków, the Tri-City and Szczecin.


Austria's Immofinanz Austria's Immofinanz Austria's Immofinanz Austria's Immofinanz lays foundation stonelays foundation stonelays foundation stonelays foundation stone for new EUR 95m for new EUR 95m for new EUR 95m for new EUR 95m retail center in Lublinretail center in Lublinretail center in Lublinretail center in Lublin

Austrian property giant Immofinanz AG has laid the cornerstone for its flagship retail development in Po-land – Tarasy Zamkowe in Lublin. Scheduled to open in Q4 2014, the EUR 95m shopping and entertainment project will comprise up to 38,000 sq.m of rentable space divided into ca. 150 retail units. "Lublin is an attractive market for the retail trade with its 350,000 residents and a catchment population of 800,000. The interest from potential international, na-tional and local tenants confirms this standing. We have recently signed a contract with the Spanish Inditex Group, which is one of the world's largest fashion retailers," explains Eduard Zehetner, CEO of Immofinanz Group. Inditex will be represented in the Tarasy Zamkowe with all seven brands (Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho and Zara Home) on 5,300 sqm. "We expect a broad and balanced tenant mix, including well-known brands that were previously not available in Lublin and the surrounding region." Designed by Polish architecture firm Stelmach i Partnerzy, Tarasy Zamkowe, is located in the heart of Lublin, close to the historic castle. The Austrian inves-tor chose Warbud, part of the French construction group Vinci, for the general contractor. More than 230 persons are currently operating in two shifts at this largest construction Lublin has ever seen. The excava-

tion works as well as the bottom slab and the dia-phragm walls have already been completed.

Tarasy Zamkowe, Immofinanz's first project in Lublin, is being developed only a stone's throw from the city's historic castle, which can be seen in the background. Image: Immofinanz

"Our aim is to revitalize the surroundings of the Lublin Castle and the Old Town. In order to do this, effective cooperation between the investors and owners of the adjacent lots is critical. The development of the Tarasy Zamkowe fits perfectly with our plans: the shopping center will be located in a historic area and also ex-pand the retail offering in Lublin. At the same time, it will make an important contribution to the creation of a new road system in the area," says Krzysztof Żuk, the Mayor of Lublin. Immofinanz, which has just recently carried out a sec-ondary listing in Warsaw, plans to bolster its develop-ment arm and sell properties more quickly in a strate-gy to increase profit. The company expects to hold as-sets from three to 10 years before selling them, CEO


Eduard Zehetner said earlier this year. A few weeks ago Immofinanz AG completed one of the largest ever deals on Poland's property markets with the sale of Si-lesia City Center retail property in Katowice for EUR 412m to an international consortium of investors led by Allianz. Silesia City Center has about 340 stores with combined floor space of 89,000 sq.m, all of which is occupied. The company has also announced a new retail project in southern town of Stalowa Wola, 60 km north of Rzeszów, where they plan to build a shopping center with a GLA of approx. 30,000 sq.m. The investment is expected to total EUR 50m. Construction should start during the first half of 2014, and completion is sched-uled for the first half of 2015, the company said. Besides the Lublin mall, Immofinanz Group's ongoing projects in Poland include the Nimbus office building (19,000 sq.m of GLA) in Warsaw, STOP.SHOP. retail parks in Mława and in Ketrzyn, and residential pro-jects Riverpark in Poznań (189 apartments) and Dębowe Tarasy in Katowice (phase three with 317 apartments). Since its founding in 1990, Immofinanz has compiled a portfolio that now comprises more than 1,700 invest-ment properties with a carrying amount of approx. EUR 10.5bn. The company concentrates on develop-ment management and sale of commercial properties in top locations. Immofinanz Group concentrates its activities in the retail, office, logistics and residential segments of eight regional core markets: Austria, Germany, Czech Republic, Slovakia, Hungary, Roma-nia, Poland and Russia.


Polish Rank Progress Polish Rank Progress Polish Rank Progress Polish Rank Progress completecompletecompletecompletes large retail s large retail s large retail s large retail project in Chojniceproject in Chojniceproject in Chojniceproject in Chojnice, , , , more to come by 2015more to come by 2015more to come by 2015more to come by 2015

Warsaw-listed property developer Rank Progress has completed its latest retail project, the 34,000 sq.m regional shopping centre Brama Pomorza in Chojnice, some 100km south west of Gdańsk. The grand opening of the scheme, which houses 50 retail units, will take place on 15th November. Brama Pomorza is Rank Progress' 2nd delivery this year, following the June completion of its 5,500 sq.m retail park Pasaż Wiślany. Based in Legnica, Rank Progress had long specialized in development of shopping centers for international retail chains, such as Tesco, Carrefour, Castorama, Leroy Merlin, or Jeronimo Martins. The company also carried out a number of highly-profitable short-term projects that typically encompassed site acquisition, permitting, and design, and eventually sale to re-nowned domestic and foreign buyers. However, in the past couple of years their key focus have been large shopping centers and retail parks in medium-sized cit-ies. Since 2001 Rank Progress has completed 25 pro-prietary investments, including eight shopping cen-ters, located in Legnica, Jelenia Góra, Świdnica, Zgorzelec, Kłodzko, Zamość, Kalisz (all three sold to Blackstone Real Estate), and Grudziądz (Pasaż Wiślany, opened earlier this year). Back in mid-2011 Rank Progress has announced plans to build 16 new retail centers at the cost of PLN 2.2bn over the 2011-14 period. Besides Brama Pomorza, the company is currently working on retail centers in Piła

and Oleśnica, and its future pipeline includes also schemes in Krosno (where final paperwork and talks with potential general contractors are close to comple-tion), Mielec, Olsztyn, Kołobrzeg, Kielce, Duchnów near Warsaw, Kielce and Wejherowo. "A few projects have suffered delays due to prolonging administrative procedures," Łukasz Gruszczyński, marketing director at Rank Progress tells Poland To-day. "Overall, by 2015 we plan to launch 10 shopping centers with a total floor space of 340,000 sq.m. and a GLA of 275,000 sq.m. Besides our current pipeline projects we continue to analyze new locations and ac-quisition opportunities."

Rank Progress' latest project Brama Pomorza (Gateway to Pomerania), is a large regional shopping centre located some 100km south west of Gdańsk.. Image: Rank Progress

With a GLA of 7,700 sq.m, Centrum Pogodne in Oleśnica will open in Q1 2014. Built by Erbud, the pro-ject is already 100% leased to tenants that include Me-dia Expert electronics store, LPP fashion stores (Re-served, Sinsay, Cropp Town), CCC footwear store, su-permarket & drugstore operators and other retail and service outlets. Recently Erbud has also broken


ground on the new project by Rank Progress in Piła, which is likewise almost fully leased to Deichmann, Swiss, CCC, H&M, Adidas – Reebok, Nike, Levi's Mus-tang, Marilyn, Play, Techno Dry, Wrangler Lee, Hebe, Kolporter, Media Expert, as well as a supermarket and DIY store. With a GLA of 23,800 sq.m the Piła project is to reach completion in Q3 2014. In Krosno, Rank Progress is planning a small retail park (5,600 sq.m GLA) adjacent to an OBI home improvement outlet that opened in 2011. In the first half of the year Rank Progress posted oper-ating gains of PLN 12.4m on revenues of PLN 20.3m. As of end of June its assets were worth some PLN 965m, approximately PLN 100m more than a year ear-lier. The company is currently in advanced negotia-tions on the sale of Galeria Świdnicka.

Targeting medium-sized towns Rank Progress and its retail center projects

City Name GLA sq.m Opening

Completed

Legnica Galeria Piastów 15,600 2006

Kłodzko* Galeria Twierdza 31,000 2009

Zgorzelec* Park Handlowy Eden 8,500 2008

Jelenia Góra Pasaż Grodzki 10,500 2010

Kalisz* Galeria Tęcza 16,000 2011

Zamość* Galeria Twierdza 24,000 2011

Świdnica Galeria Świdnicka 15,600 2012

Grudziądz Pasaż Wiślany 5,400 Q2 2013

Under development

Chojnice Brama Pomorza 25,600 Q4 2013

Piła Galeria Piła 28,750 Q3 2014

Oleśnica Pogodne Centrum 7,700 Q1 2014

Planned

Olsztyn CH Jaroty 30,000 TBA

Kielce Regional Center S7 97,800 TBA

Krosno Miejsce Piastowe 5,600 TBA

Warsaw/Duchnów Warszawa Wschód 62,300 TBA

Mielec Galeria Aviator 26,000 TBA

Wejherowo n/a 18,200 TBA

Source: Rank Progress *) sold

IT & TELECOM

Leading Polish digitalLeading Polish digitalLeading Polish digitalLeading Polish digital agency to be integrated agency to be integrated agency to be integrated agency to be integrated into Saatchi & Saatchi into Saatchi & Saatchi into Saatchi & Saatchi into Saatchi & Saatchi PolandPolandPolandPoland

French communications giant Publicis Group has acquired Interactive Solutions, one of Poland's lead-ing digital agencies. Following the transaction, the value of which has not been disclosed, the new media shop will be integrated into the Warsaw-based Saatchi & Saatchi Poland, boosting the latter's con-solidated sales revenues and staff numbers by a half, up to approximately PLN 90m and 300 employees, re-spectively. Founded in 2004, Interactive Solutions is one of the largest digital agencies in Poland with over 160 em-ployees in Poznań and Warsaw. The agency specializ-es in developing complex e-marketing strategies for a range of international and local clients, including Procter & Gamble, T-Mobile, Toyota and Visa. In-teractive Solutions was named Digital Agency of 2013 by the KTR Awards Committee. Since 2010, when In-teractive Solutions turned over a reported PLN 10.5m, the agency has seen its sales triple. "We have been cooperating with Interactive Solutions on various projects since 2008 so this is a natural next step for us to fully integrate and increase the value we can deliver for our clients," said Igor Kaleński, CEO of Saatchi & Saatchi Poland. Since both companies have been working for Procter & Gamble, after their merger they will be pocketing some 80% of the FMCG giant's digital ad spending in the CEE region.

"Digital continues to rise as a key component of a fully integrated marketing mix. Having a track record of working for the most respected brands together for years, we expect the transition will go smoothly and bring numerous benefits to the current Saatchi opera-tion," commented CEO of Interactive Solutions, Piotr Morkowski, who joins Saatchi & Saatchi Poland as Ex-ecutive Vice President. The Paris-based Publicis Groupe, which is gearing up for a USD 35.1bn merger with US Omnicom Group, is the 3rd largest communications holding company worldwide, uniting some of the world's top brands in digital (DigitasLBi, Razorfish, Rosetta, VivaKi), crea-tive services (BBH, Leo Burnett, Publicis Worldwide, Saatchi & Saatchi), public affairs, corporate communi-cations and events (MSLGROUP), media strategy, planning and buying (Starcom MediaVest Group and ZenithOptimedia) and healthcare communications, (Publicis Healthcare Communications Group). Present in 108 countries, the Group employs 60,000 profes-sionals. In October MSLGROUP merged its Polish units Ciszewski MSL and Ciszewski MSL Financial Communications under a single brand MSL Group. Publicis acquired the Ciszewski business, one of Po-land's top PR agencies, in December 2011.

POLITICS AND ECONOMY

Doing business got Doing business got Doing business got Doing business got easier in Poland, World easier in Poland, World easier in Poland, World easier in Poland, World Bank saysBank saysBank saysBank says

Poland moved up in the World Bank's "Doing Business 2014" ranking that analyzes the ease of running a small or medium sized-firm in 189 countries worldwide, the World Bank's regional rep Xavier Devictor said during a joint conference with Prime Minister Donald Tusk


for the report's publication. The country ranked as the world's 45th most business friendly location, marking a significant progress since the previous edition of the report, where it came in at 55th position (later cor-rected to 48th). Poland "reformed itself to the largest extent world-wide last year," Devictor said. In the 2014 ranking, topped by Singapore, Poland ranked behind highly de-veloped countries, but ahead of its CEE-4 peers and several EU countries. World Bank praised Poland for easing the process of registering new businesses and facilitating the process for obtaining a construction permits. However, the country still lags on those two key measures, ranked no.88 worldwide for construc-tion permits and no.116 for new firm registration, where authors point to long procedures and relatively high costs. Poland additionally takes weak marks for obtaining a new electricity connection (no.137), also burdened by procedures and costs. The country scores low also in the "Paying Taxes" category. Of 11 index categories, Poland ranks highest in 'Getting Credit' (No.3 worldwide). The World Bank gives high marks for Poland's system of access to credit infor-mation and notes that collateral and bankruptcy laws are designed to facilitate credit, the report showed. Commenting on the report, Prime Minister Donald Tusk emphasized that Poland had continued to move up in the ranking over the past years, even though year by year the advances are more and more difficult, add-ing that Poland is "at or about the EU average" in terms of being business-friendly.

POLITICS & ECONOMY

Local leadership vote Local leadership vote Local leadership vote Local leadership vote deepens rift within deepens rift within deepens rift within deepens rift within Poland's ruling partyPoland's ruling partyPoland's ruling partyPoland's ruling party

The news of alleged irregularities during recent local elections in Civic Platform (PO) have dealt a fresh blow to the already declining public support for Po-land's ruling party. According to cabinet spokesman Paweł Graś, the country could face early elections should the situation within PO ranks deteriorate fur-ther, forcing the ministers to focus more on the inter-nal squabbles rather than domestic issues. According to Polish newspapers, an internal conflict in PO between the supporters of Prime Minister Donald Tusk and his rival Grzegorz Schetyna intensified after the publication of video material suggesting political corruption during the recent elections for regional leader in the Dolnośląskie (Lower Silesia - Wrocław) region in southwestern Poland. Schetyna unexpectedly lost the election to PO MEP Jacek Protasiewicz by merely 11 out of nearly 400 votes. Shortly after, a video recording leaked out showing one of PO MPs promising to help find job at state-controlled copper giant KGHM to one of the del-egates in exchange for backing Protasiewicz in the elections. Protasiewicz denied any wrongdoing and said he did not authorize any such offers and was un-aware of the whole situation. Most PO members are convinced that it was Schetyna's supporters, who re-leased the video material, as a warning sign to PM Donald Tusk. Although the politicians shown in the video had their PO membership rights suspended, as the party investi-

gates the issue, the result of the election was upheld. According to Polish media, Tusk will seek to remove Schetyna from the post of PO's first chairman at the upcoming party convention. However, some sources went on to suggest that the ousted regional leader may have even embarrassing recordings in store, should Tusk attempt to marginalize him any further.

IN BRIEF: The Polish economy is expected to grow by 1.3% y/y in 2013 and accelerate to 2.5% in 2014 and 2.9% in 2015, the European Commission said in its autumn forecast, revising upwards its prior forecast. "Real GDP growth is expected to reach 2.5% and 2.9% in 2014 and 2015 re-spectively, with domestic demand projected to gradual-ly replace external trade as the main growth engine," the European Commission wrote. According to the EU's governing body, the scenario "is subject to broadly bal-anced risks" with a weaker currency further boosting exports and enhancing import substitution on the up-side and possible pick-up in inflation, which "might dent real incomes and lead to lower private consumption," on the downside. On the fiscal front, the European Commission underlines that 2014 and 2015 forecasts are largely based on the planned reform of private pension funds OFE, which is expected to result in a one-off gen-eral government surplus in 2014.

Poland will introduce checks at the internal EU bor-ders between Nov. 8 and 23 to secure public order and security during the upcoming UN climate conference starting in Warsaw on November 11. Checks will be re-stored at 126 land border crossings with the Czech Re-public, Germany, Lithuania and Slovakia as well at nine sea crossings and 18 airports. The checks will be pro-filed and held at random, and concern those entering Poland, authorities said


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Jun '13 Jul '13 Aug '13 Sep '13

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev +0.7 -0.3 2.5 -0.3 2.5 -1.2 2.6 0.0

Alcohol, tobacco +3.7 +0.2 +3.6 +0.1 +3.6 +0.2 +3.7 +0.2

Clothing, shoes -4.7 -0.8 -5.0 -2.7 -4.8 -2.7 -4.7 +0.7

Housing +0.9 0.0 +2.0 +1.2 +2.0 +0.1 +1.8 +0.1

Transport -3.5 +0.4 -1.2 +1.1 -1.4 +0.5 -1.4 +0.8

Communications -9.7 0.0 -9.7 0.0 -9.7 0.0 -9.7 0.0

Gross CPI +0.2 0.0 +1.1 +0.3 +1.1 -0.3 +1.0 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month May '13 Jun '13 Jul '13 Aug '13 Sep '13

m/m (%) +1.6 +1.5 +3.8 -0.7 -0.9

y/y (%) +0.5 +1.8 +4.3 +3.4 +3.9

Year 2008 2009 2010 2011 2012

Turnover in PLNbn 564.7 582.8 593.0 646.1 n/a

y/y (%) +13.3 +4.3 +5.5 +11.6 +5.6

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2008 2009 2010 2011 2012 Jan-Sep

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 104.8 -18.1

Commenced 174.7 142.9 158.1 162.2 141.8 97.9 -16.2

U. construction 687.4 670.3 692.7 723.0 713.1 707.4 -3.9

Completed 165.2 160.0 135.7 131.7 152.5 103.2 -1.5

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q2 2013 +0.8% 395,507 -1.9%

Q1 2013 +0.5% 377,815 -2.8%

Q4 2012 +0.7% 442,231 -3.5%

Q3 2012 +1.3% 393,792 -4.1%

2012 +1.9% 1,522,736 -3.5%

2011 +4.5% 1,462,734 -4.9%

2010 +3.9% 1,416,585 -5.1%

2009 +1.6% 1,344,384 -3.9%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator *2010 *2011 *2012 2013 2014

GDP change +3.9% +4.5% +1.9% +1.2% +2.7%

Consumer inflation +2.6% +4.3% +3.7% +1.1% +2.0%

Producer inflation +2.1% +7.6% +3.4% -1.3% 0.3%

CA balance, % of GDP -5.1% -4.9% -3.5% -1.2% -0.2%

Nominal gross wage +3.9% +5.2% +3.7% +3.0% +4.3%

Unemployment** 12.4% 12.5% 13.4% 13.7% 13.2%

EUR/PLN 3.99 4.12 4.19 4.20 4.06

Sources: NBP, BZ WBK, GUS *) actual figures **) year-end

Gross WagesGross WagesGross WagesGross Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q3 2012 Q4 2012 Q1 2013 Q2 2013

A B A B A B A B

Coal mining 5,920 135 8,427 192 6,060 138 6,290 143

Manufacturing 3,463 151 3,522 154 3,491 152 3,560 155

Energy 5,790 176 6,535 198 6,196 188 5,828 177

Construction 3,709 158 3,829 163 3,556 152 3,693 157

Retail & repairs 3,322 142 3,365 143 3,432 146 3,421 146

Transportation 3,543 125 3,816 135 3,439 122 3,547 125

IT, telecoms 6,493 169 6,379 166 6,685 174 6,707 174

Financial sector 5,875 132 6,044 136 6,356 143 6,712 151

National average 3,690 147 3,878 154 3,741 149 3,613 144

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13

m/m (%) +20.9 +7.9 +16.1 +19.1 +7.8 -0.8 +9.4

y/y (%) -18.5 -23.1 -27.5 -18.3 -5.2 -11.1 -4.8

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +18.1 +15.5 +12.1 +5.1 +4.6 +11.8 -0.6

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

Oct 13

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Mar '13 Apr '13 May'13 Jun '13 Jul'13 Aug'13 Sep'13

m/m (%) -0.3 -0.7% +0.1 +0.7 +0.2 -0.3 +0.2

y/y (%) -0.7 -2.1% -2.5 -1.3 -0.8 -1.1 -1.4

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +2.0 +2.0 +2.2 +3.4 +2.1 +7.6 +3.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Mar '13 Apr '13 May'13 Jun '13 Jul'13 Aug'13 Sep'13

m/m (%) -0.2 -0.1 -0.2 -0.1 -0.1 -0.2 -0.1

y/y (%) -1.8 -1.9 -2.0 -2.0 -1.9 -1.9 -1.8

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +3.2 +7.4 +4.8 +0.2 -0.1 +1.0 +0.2

IndustIndustIndustIndustrial Outputrial Outputrial Outputrial Output

Month Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13

m/m (%) -0.2 -2.3 -0.7 +2.6 +1.5 -4.5 +9.6

y/y (%) -0.6 +2.7 -1.8 +2.8 +6.3 +2.2 +6.2

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +11.6 +10.7 +3.6 -3.5 +9.8 +7.7 +1.0


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Aug 2013

y/y (%)

share (%)

2012 share (%)

Jan-Aug 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 43,520 +9.0 10.5 61,694 10.3 30,470 +3.1 7.3 44,287 6.9

Beverages and tobacco 5,633 +5.8 1.4 7,967 1.3 2,593 +0.1 0.6 3,989 0.6

Crude materials except fuels 10,501 +7.7 2.5 14,024 2.4 14,118 -7.9 3.4 22,053 3.5

Fuels etc 19,670 +1.7 4.8 29,389 4.9 48,392 -12.8 11.6 85,280 13.4

Animal and vegetable oils 1,088 +60.8 0.3 1,342 0.2 1,736 -8.8 0.4 2,887 0.5

Chemical products 38,680 +6.2 9.4 54,295 9.1 61,502 +0.7 14.7 89,140 14.0

Manufactured goods by material 85,413 -0.2 20.7 126,161 21.1 72,837 -5.0 17.5 110,773 17.4

Machinery, transport equip. 155,077 +3.3 37.5 223,646 37.5 137,560 +1.3 33.0 203,718 31.9

Other manufactured articles 52,390 +4.5 12.7 75,925 12.7 36,624 -7.0 8.8 57,646 9.0

Not classified 1073 n/a 0.2 2,653 0.5 11,273 n/a 2.7 18,515 2.8

TOTAL 413,045 +3.8 100 597,096 100 417,105 -3.1 100 638,288 100

Poland's ten largest trading partners, ranked according to 2012

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan- Aug 2013

share *2012 Share No Country Jan- Aug 2013

share *2012 Share

1 Germany 103,223 25.0% 150,046 25.1% 1 Germany 88,967 21.3% 134,933 21.1%

2 UK 26,788 6.5% 40,184 6.7% 2 Russia 52,447 12.6% 91,033 14.3%

3 Czech Rep. 25,260 6.1% 37,475 6.3% 3 China 38,360 9.2% 57,235 9.0%

4 France 23,321 5.68% 34,862 5.8% 4 Italy 21,213 5.1% 32,782 5.1%

5 Russia 22,508 5.4% 32,290 5.4% 5 France 16,034 3.8% 25,303 4.0%

6 Italy 17,805 4.3% 29,067 4.9% 6 Netherlands 15,726 3.8% 24,543 3.8%

7 Netherlands 16,321 4.0% 26,678 4.5% 7 Czech Rep. 15,426 3.7% 23,327 3.7%

8 Ukraine 11,709 2.8% 17,213 2.9% 8 USA 11,909 2.9% 16,436 2.6%

9 Sweden 11,339 2.7% 15,811 2.6% 9 UK 11,030 2.6% 15,509 2.4%

10 Slovakia 10,673 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates, full year

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 8 November 2013

100 USD 311.13 ↑

100 EUR 417.99 ↓

100 GBP 500.26 ↑

100 CHF 339.79 ↓

100 DKK 56.05 ↓

100 SEK 47.29 ↓

100 NOK 51.16 ↓

10,000 JPY 316.98 ↑

100 CZK 15.49 ↓

10,000 HUF 141.21 ↓

100 USD/EUR against PLN

300

350

400

450

26 N

ov 12

5 Feb 13

15 A

pr 13

25 Jun 13

2 Sep 13

8 N

ov 13

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Jun '13 Jul '13 Aug '13 Sep '13

Monetary base 144,260 155,767 153,867 166,620

M1 523,783 530,666 531,124 540,873

- Currency outside banks 112,815 112,565 114,083 113,223

M2 927,345 921,662 928,359 931,042

- Time deposits 418,252 405,900 412,407 405,703

M3 946,586 945,077 949,988 947,228

- Net foreign assets 160,267 159,749 154,035 147,978 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Jun'13 Jul '13 Aug '13 Sep '13

Loans to customers 900,999 896,635 901,863 908,106

- to private companies 263,453 261,000 263,491 262,963

- to households 553,055 552,503 556,027 560,608

Total assets of banks 1,634,587 1,616,221 1,627,182 1,626,489

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13

PLN (up to 1 year) 5.6% 5.4% 5.3% 5.0% 4.7% 4.6%

PLN (up to 5 y ) 6.2% 5.9% 5.7% 5.4% 5.1% 5.1%

PLN (over 5 y) 6.0% 5.7% 5.6% 5.3% 4.9% 4.9%

PLN (total) 6.0% 5.8% 5.6% 5.3% 5.0% 4.9%

EUR (up to 1m EUR) 2.3% 2.1% 2.3% 1.9% 2.3% 1.9%

EUR (over 1m EUR) 3.6% 2.9% 3.2% 2.9% 3.5% 3.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 8 Nov 2013

Overnight 1 week 1 month 3 months 6 months

2.58%% 2.55% 2.59% 2.66% 2.70%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 8 Nov '13

Change 25 Oct

'13

Change end of '12

↑ Asseco Pol. 51.73 +2% +14%

↑ Bogdanka 127.3 +9% -6%

↓ BRE 504 -4% +55%

↓ BZ WBK 367.9 -3% +52%

↓ Eurocash 45.75 -9% +5%

↓ GTC 7.61 -6% -23%

↓ Handlowy 111.65 -9% +14%

↓ JSW 65.6 -1% -29%

↓ Kernel 43.58 -4% -35%

↑ KGHM 123.45 +1% -35%

↑ Lotos 38.52 +1% -7%

↑ Pekao 193 +1% +15%

↓ PGE 17.79 -5% -2%

↑ PGNiG 5.69 +1% +9%

↓ PKN Orlen 44.17 -1% -11%

↑ PKO BP 40.45 +1% +10%

↓ PZU 452.35 -3% +4%

↑ Synthos 5.22 +1% -4%

↑ Tauron 4.94 +2% +4%

↑TP SA 9.97 +1% -18%

Source: Warsaw Stock Exchange

Key indices

as of 8 November 2013

WIG Total index

55553333,,,,363363363363....39393939 Change 1 week -1% ↓

Change end of '12 +12% ↑

WIG-20 blue chip index

2,2,2,2,555509090909....11111111 Change 1 week -1% ↓

Change end of '12 -3% ↓

WIG Total closing index

last three months

45000

47500

50000

52500

55000

8 A

ug 13

2 Sep 13

24 Sep 13

16 O

ct 13

8 N

ov 13


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RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Sep 2013 *

Monthly wages (PLN)

Jan-Sep 2013 **

Unemploy-ment

Sep 2013

New dwellings Jan-Aug 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.7 90.1 4,199 3,980 148.8 12.8 12,009 117.9

Kujawsko-Pomorskie (Bydgoszcz) 102.0 99.1 3,314 3,235 143.5 17.5 4,618 106.8

Lubelskie (Lublin) 100.5 98.7 3,630 3,014 126.9 13.8 4,435 89.4

Lubuskie (Zielona Góra) 95.9 90.8 3,359 2,975 58.0 15.3 2,239 99.0

Łódzkie (Łódź) 104.3 89.0 3,611 3,024 147.4 13.7 4,537 91.1

Małopolskie (Kraków) 98.0 91.8 3,744 3,313 158.8 11.3 11,234 107.4

Mazowieckie (Warszawa) 107.5 81.0 4,474 4,722 281.0 11.0 20,771 94.9

Opolskie (Opole) 97.3 98.6 3,466 3,147 49.5 13.8 1,324 112.4

Podkarpackie (Rzeszów) 108.1 91.9 3,236 3,029 145.9 15.6 4,388 98.9

Podlaskie (Białystok) 105.4 91.3 3,181 3,769 68.1 14.6 2,801 85.9

Pomorskie (Gdańsk-Gdynia) 102.5 92.5 3,871 3,478 111.0 13.0 8,501 94.3

Śląskie (Katowice) 96.5 89.7 4,465 3,532 205.3 11.1 7,785 115.6

Świętokrzyskie (Kielce) 100.5 88.7 3,339 3,199 86.2 15.9 1,764 84.7

Warmińsko-Mazurskie (Olsztyn) 98.8 84.1 3,160 3,065 107.6 20.4 2,998 84.6

Wielkopolskie (Poznań) 103.5 91.2 3,638 3,589 141.8 9.4 9,791 94.7

Zachodniopomorskie (Szczecin) 111.6 86.7 3,408 3,296 103.3 16.9 4,027 78.4

National average 101.4 87.8 3,880 3,672 2,083.1 13.0 103,222 98.5

Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q1'12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13

in Poland -1,365 1,861 1,381 2,886 175 -2,883

Polish DI 836 310 -550 -1,203 957 2,719

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 13,646 2,455

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q4 '12 Q1 '13 Q2 '13

Trade balance -8,893 -10,059 -5,313 -1,050 -139 1,194

Services, net 2,334 4,048 4,816 1,032 1,274 1,652

CA balance -18,129 -17,977 -13,332 -3,368 -2,313 362

CA balance vs GDP -5.1% -4.9% -3.5% -3.5% -2.8% -2.8%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1800

2000

2200

2400

2600

Q3

10

Q1

11

Q3

11

Q1

12

Q3

12

Q1

13

Q3

13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,728,000 41,000 15.9%

3.5–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,021,000 8,000 16.5% 1.9–3.1

Poznań 1,041,000 50,000 3.6% 2.3–2.9

Upper Silesia 1,478,000 33,000 5.8% 2.5–3.1

Wrocław 795,000 84,000 5.5% 2.4–3.0

Gdańsk 192,000 n/a 9.6% 3.2–4.0

Kraków 149,000 n/a 7.6% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q1 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,076 -5.9% 11.5-25.5 10.5% 85 85

Kraków 6,305 -12.1% 13-15 2.71% 41 78

Katowice 5,526 -5.0% 13-14 8.29% 48 56

Poznań 6,412 -13.3% 14-16 14.66% 44 55

Łódź 4,898 -9.2% 12-14 14.97% 31 26

Wrocław 6,031 -13.5% 13-16 12.37% 38 41

Tricity 6,453 -8.1% 13-15 11.24% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Sep09

May10

Jan11

Sep11

May12

Jan13

Sep13

Wage CPI

Index 100 = Jan 2005. Source: GUS

poland today business review+ no. 010

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