Conclusion of material conditional agreements relating to real properties located in the area of ul. Towarowa in Warsaw

Further to the information published in the form of current reports No. 32/2016, 39/2016 and 54/2016, the Management Board of Echo Investment S.A. (the “Company”) hereby reports that on 23 February 2022, the Company and its subsidiaries concluded a number of conditional agreements relating to real properties located in the area of ul. Towarowa in Warsaw held by Projekt Echo – 138 sp. z o.o. sp.k., in which the Company indirectly holds a partial interest (“PropCo”), currently developed with the existing shopping centre (the “Properties”). In consequence, following the satisfaction of certain conditions set out herein, the other indirect shareholder in PropCo and the partner of the Company within the joint venture established for the purpose of the development of the Properties, in place of EPP N.V. together with its subsidiaries, will be AFI Europe NV (a wholly owned subsidiary of AFI Properties Ltd., being a public company incorporated in Israel and listed on the Tel Aviv Stock Exchange) (“AFI Europe”) (the “Transaction”).

The currently envisaged project to be developed by PropCo on a major part of the Properties includes properties with various uses, including office and retail areas and buildings with residential units for rent, as well as, within the remaining part of the Properties, residential buildings with apartments for sale (the latter: the “Residential Quarters”).

In particular, the following conditional agreements were concluded by the Company and/or its subsidiaries as part of the Transaction:

1. a shareholders’ agreement to be binding between the Company, AFI Europe and Strood sp. z o.o. (a wholly controlled subsidiary of the Company being the PropCo’s Limited Parter), which regulates the corporate governance principles of Projekt Echo – 138 sp. z o.o. (being the PropCo’s general partner, the “GP”) i PropCo;
2. development management agreements concluded by the Company as the developer and PropCo as the investor under which the Company is to render certain development management services;
3. a preliminary sale agreement between PropCo and Projekt Echo – 137 sp. z o.o. (the “R4S Purchaser”), a wholly owned subsidiary of the Company, pursuant to which, subject to, among others, the completion of the Transaction and the formal division of the Property into quarters, the R4S Purchaser will purchase the Residential Quarters for a price of approximately EUR 47,000,000 (net of VAT) being paid according to agreed milestones.

The completion of the Transaction remains subject to the satisfaction of certain conditions precedent by the date agreed between the parties, including the completion of the transaction regarding the acquisition by AFI Europe from EPP N.V. of the interest in PropCo, as well as antimonopoly clearance from the Polish Competition Authority and the final settlement regarding the price increase under the sale agreement pursuant to which PropCo acquired the Properties. After completion of the Transaction, the Company will be entitled to a 30% profit share in PropCo.

Under the Transaction documents, it is envisaged that certain agreements currently binding between the Company, EPP N.V. and its respective affiliates in relation to the Properties and the related project are to be finally settled and terminated with effect from the completion of the Transaction.

The Transaction involved the establishment of certain customary security, including reciprocal parent/corporate guarantees, securing the obligations of the Company and/or its subsidiaries as well as the obligations of AFI Europe and/or its respective subsidiaries under the binding Transaction documentation.

The Transaction documentation contains representations and warranties of the parties that are customary for transactions of this type as well as substantially standard contractual clauses concerning the parties’ liability and security. The provisions of the aforementioned agreements do not materially diverge from the provisions commonly used in these types of transactions.

Legal basis: Art. 17(1) of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC – inside information