Conclusion of the transfer agreement for the sale of the real property in Łódź that is in perpetual usufruct by a subsidiary of the Issuer

The Management Board of Echo Investment S.A. (Issuer) informs you that on 30 June 2022, a subsidiary of the Issuer, i.e. Projekt Echo - 130 spółka z ograniczoną odpowiedzialnością with its registered office in Kielce, as the seller (Seller) and the German law company FARKAS Grundstücksgesellschaft mbH & Co KG, an entity managed by an institutional real estate manager, as the buyer (Buyer, whereas the Buyer and the Seller shall be jointly referred to as the Parties), concluded a transfer agreement for the sale of a real property located in Łódź held in perpetual usufruct by the Seller (Transfer Agreement).

Subject of the transaction

On the basis of the concluded Transfer Agreement, the Buyer purchased the Seller's real property and other assets, including in particular:

(a)        the right of perpetual usufruct of the plot of land bearing registration number 158/54 located in Łódź at Milionowa Street (Land), the ownership of two office buildings known as “C” and “D” developed on the Land (Buildings), along with the structures developed on this Land for which the District Court for Łódź-Śródmieście in Łódź, 16th Land and Mortgage Register Division keeps the land and mortgage register no. LD1M/ 00338912/8;

(b)        the ownership of the specified movable property.

The Transfer Agreement was concluded in the performance of the preliminary sale agreement concluded between the Parties on 23 December 2021, and the Issuer has informed about it with the current report no. 3/2022 dated 11 January 2022, after the fulfilment or waiver of the relevant conditions precedent and in the performance of the conditional sale agreement concluded between the Parties on 15 June 2022 after the fulfilment of the condition specified therein.

As part of the transaction, the Seller undertook to complete (after Closing), the construction of Building “J”, which will be located on the Land.

As part of the transaction, the Parties also concluded quality guarantee agreements for Buildings and Building “J” (Quality Guarantee Agreement), a rental guarantee agreement (Rental Guarantee Agreement) and a fit-out agreement (Fit-Out Agreement). The basic provisions of the Quality Guarantee Agreement provide for granting the Buyer a quality guarantee for the Buildings, Building J and structures located on the real property. The basic provisions of the Rental Guarantee Agreement provide for a guarantee to the Buyer that the Seller will cover rent payments and service charges for individual parts of the Buildings that have not been rented to third parties on the date of signing the Transfer Agreement and those that have been rented, and for which rent reductions or rent-free periods have been applied. The basic provisions of the Fit-out Agreement provide for the Seller’s obligation to carry out arrangement and construction works on the real property.

The Transaction Value and the Price

The value of the transaction (Transaction Value) at the conclusion of the Transfer Agreement was EUR 56,701,267 plus VAT.

The amount to be paid at the Closing was calculated on the basis of the Transaction Value reduced, inter alia, by the value of the rent-free periods, the value of rents on premises not handed over to tenants, the value of arrangement works, and other costs. In addition, the Price will be reduced by the amount of arrangement and construction works (including works related to the removal of any defects). As a result, the Price payable at Closing was EUR 42,989,316 plus VAT.

In addition, after the Closing, as part of the amount of the Transaction Value, the Seller will receive a separate fee related to the completion of arrangement works on the tenants' premises and the repair of defects in the total amount of EUR 3,055,768 plus VAT.

In addition, after the Closing, as part of the amount of the Transaction Value, the Seller will receive a separate fee related to the obtainment of occupancy permit for Building “J” and the repair of defects in the total amount of EUR 4,100,889 plus VAT.

The provisions of the Transfer Agreement do not differ from the provisions used in this type of transaction. The Transfer Agreement contain standard provisions for this type of transaction regarding the warranties and representations of the Seller and the Buyer, and the liability of the Parties.