DTZ Ukraine Retail in the Regions

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1 DTZ Ukraine Retail in the Regions December 2014 Established London, 1784 Established Kyiv, 1994

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4 Kyiv Population 2,870,000 inhabitants Major existing multi-tenant retail centres in Kyiv Project Delivery Size (sq m) 1. Dream Town 2009 / 2011 (in phases) 90, Ocean Plaza* , Sky Mall* 2007 / 2010 (in phases) 66, Gulliver , Prospekt , Marmelade , Karavan Megastore 2004 / 2005/ 2008 (in phases) 37, Art Mall , Bilshovyk 2007 / , Atmosfera , Promenada Centre 2004 / ,000 Major pipeline multi-tenant retail centres in Kyiv until Project Delivery Size (sq m) 19. Respublika , Lavina Mall , Blockbuster Mall , Retroville , KyivMall , Hartz , Ideal 2016 / 2017 (in phases) 51, River Mall , Lukyanivka Mall , TSUM 2016 (reconstruction) 22, Podil Mall , RayON , Domosfera , Magellan , Ukrayina Department Store 2003 (reconstruction) 20, Globus 2002 / 2003 (in phases) 18, Manufaktura outlet village , Aladdin 2004 / 2005 (in phases) 10, Epicentre 2014 / 2015 (in phases) 105, Darynok ,000 * extension planned

5 Supply & Demand Total modern retail stock in Kyiv amounted to around 1,529,440 sq m (GLA) in December 2014, or 533 sq m (GLA) per 1,000 inhabitants. In January-September 2014, approximately 89,890 sq m (GLA) of modern retail space was delivered in Kyiv. Major schemes opened during during the period included the shopping and entertainment centres Prospekt and Atmosfera, the DIY-store Leroy Merlin and the small-format retail centre Appetite, all located in the non-central areas of Ukraine s capital. An additional 120,300 sq m (GLA) was added to the total retail stock in Kyiv during the fourth quarter of The first phase of the retail and leisure centre Epicentre in Obolon is the major retail scheme delivered in the city during the period. The modern retail stock in Kyiv has been dominated by multi-tenant retail centres and shopping malls of varying quality, which presently account for approximately 70% of total stock in the sector. Cumulative gross leasable area of multi-tenant shopping centres in the Ukrainian capital amounted to approximately 1,063,000 sq m (GLA), with 35% of this figure formed by first generation and/or poor quality schemes with some redevelopment potential. Big box retail developments account for around 29% of total retail stock in Kyiv. The first factory outlet, Manufaktura outlet village, was opened in the Greater Kyiv area in 2013, whilst retail parks are yet to appear. A majority of pipeline retail stock scheduled for opening in Kyiv by 2017 are regional and super-regional shopping malls. As of December 2014, DTZ estimates that presently approximately 807,400 sq m (GLA) of new modern retail space is in active stage of planning or construction in Kyiv. If these properties were commissioned in accordance with the announced plans, by the end of 2017 current retail stock in the Ukrainian capital may increase by 53%. During 2015 new supply on the retail property sector in Kyiv may amount to around 505,400 sq m (GLA), an increase of total stock by 33%. Major retail developments scheduled for delivery in the city next year include Respublika, Blockbuster Mall, Lavina Mall and Retroville. Taking into account the scale and location of these properties, against the background of the presently challenging economic conditions in Ukraine, delivery of some of them may be postponed to later periods. Rents During the period from October 2011 to June 2013 inclusive, average monthly rents in quality retail schemes in Kyiv remained generally stable at USD per sq m for premises of sq m, reaching highs of USD per sq m per month in the most sought-after prime properties. Due to increasing supply in the sector, in July-December 2013 prime rents in the shopping malls in the Ukrainian capital were subject to some downward correction. High street retail rents in Kyiv remained generally stable during The challenging situation in Ukraine, the resultant decrease in purchasing power of the population and retail turnover, as well as devaluation of the hryvnya led to strong downward pressure on the rents across all categories of retail space in Kyiv and Ukraine on the whole during In order to retain quality retailers in their retail properties, many landlords have negotiated occupational costs individually with each retailer. Some of the landlords provided temporary discounts in the range of 20-50% of the contractual rents (depending on the tenant and its lease terms). Other landlords are known to have agreed to fix the rental payment in the amount equivalent to the exchange at UAH/USD, or defined the upper value of the Ukrainian hryvnya against the US dollar. At the same time, during 2014 base rental rates remained generally stable in relation to the prime properties in Kyiv. As of December 2014, prime shopping centre rents in Kyiv were registered at USD per sq m per month, whilst high street rents decreased to USD per sq m in the city. DTZ anticipates that, other things being equal, base rental rates during the first half of 2015 will remain stable in relation to the prime properties. At the same time, rental rates in poorly conceived retail schemes in Kyiv will be subject to further downward pressure. This is due to the economic and political uncertainty in Ukraine, the hryvnya devaluation, as well as the comparatively low retailers demand and lack of critical mass of actual new market entries combined with significant retail stock in pipeline. The longer term sustainability of current rental rates in Kyiv will depend on the actual commissioning and quality of new sizeable pipeline retail schemes scheduled for completion in 2015 and beyond, as well as general macroeconomic conditions and currency fluctuations in Ukraine.

6 Kyiv Globus Shopping Centre Location and description Home to over 100 stores of the world s leading fashion and lifestyle brands, Globus is located at the historical central square of Kyiv Maydan Nezalezhnosti (in English Independence Square). It started life, as a retail destination in the early , when the city decided to do a capital reconstruction of the square and Globus was built. Located both under and over Independence Square, with immediate metro access, Globus is perfectly situated to attract visitors 12 hours per day, 7 days per week. In 2015 re-conception of the project is planned. DTZ s involvement Landlord Architect Delivery GBA GLA DTZ is presently working with London&Regional and Dutch-based architects T-Concept in the formulation and implementation of plans for the upgrade and repositioning of the scheme. The works are planned to commence in London & Regional Local architects / T-Concept 2004/2005 (in phases) 39,500 sq m 18,600 sq m Levels 5 Anchors Billa, Brocard, Mothercare, MAC, oodji, Monton, Carlo Pazolini, McDonald s, others

7 Aladdin Shopping and Entertainment Centre Location and description DTZ s involvement Landlord Architect Located within one of the most populated residential neighborhoods of Kyiv, in immediate proximity to the metro station Poznyaky. Aladdin was delivered in phases during with a major renovation undertaken in DTZ is involved in the project as an exclusive leasing agent on behalf of the landlord. Meyer Bergman Chapman Taylor Delivery 2004/2005 (refurbishment in 2014) GBA GLA 16,500 sq m 10,200 sq m Levels 4 Anchors Mothercare, Intertop, Love Republic, Naf Naf, Brocard, Watsons, Adidas, Liniya Kino (3 screens), others

8 Kyiv Troitskyi Mixed-use complex Location and description DTZ s Involvement Landlord Project is located within Kyiv s Central Business District, in immediate proximity to Olympiyskyi stadium and the metro station. Project envisages development of a supermarket and/or fashion gallery within a mixed-use complex comprising hotel, business centre, retail centre and restaurants / cafes. DTZ is involved in the project as a leasing agent on behalf of the landlord. Yudzhyn / Smart Holding Delivery Q3-Q GBA GLA Levels 63,850 sq m (the whole complex) 4,000 sq m (retail part) 2 (including mezzanine)

9 High Street Retail Khreshchatyk Street Location and description DTZ s Involvement Owner Intended use GLA Retail premises, located in the heart of Kyiv, at 34 Khreschatyk Street. 2 façade entrances, 7 large show windows on the ground and second floor levels. DTZ is involved in the project as an exclusive leasing agent on behalf of the landlord. Legal entity Footwear and clothes stores, or restaurant 1,446.4 sq m, which can be divided in two stores with separate entrances with areas of around 700 sq m each. Levels 3

10 Odesa Population 1,013,000 inhabitants Major multi-tenant retail schemes Odesa: existing and in pipeline until Project Delivery Status Size (sq m) Developer Major brands / anchors 1. Riviera Shopping City 2. Les Vignes Yessa Operating 65, City Centre I 2012 / 2014 Operating 5. City Center Kotovskyi Argo Real Estate Opportunities Fund Auchan, Comfy, JYSK, M&S, Inditex Group brands, LPP brands, LC Waikiki, New Yorker, Sportmaster, Odessa Kino (cinema), Leopark (kid s play), City Bowling, others Under construction 48,000 Immochan Auchan, DIY supermarket, retail gallery, strip mall Silpo, Comfy, retail gallery, Sport Life fitness Under construction 38,000 BUDHOUSE GROUP centre, Lucky Strike (bowling), Multiplex (cinema), kid s play, others 33,000 (phase 1) / 20,000 (phase 2) Venford 2014 Operating 20,120 Venford 6. Srednefontanskiy 2007 Operating 19,530 local developer Silpo, Foxtrot, Comfy, LPP brands, L etoile, oodji, INCITY, Piazza Italia, Intertop, Sport Life fitness centre, Planeta Kino (cinema), Ihroland (kid s play), others Tavria V, Comfy, INCITY, oodji, Colin s, Gloria Jeans, Antoshka, Planeta Kino, others Furshet, Comfy, Antoshka, JYSK, Bomond, Monton, Cinema Citi, Ihroland, others

11 Supply & Demand With a total population over 1 million inhabitants, Odesa is one of the largest cities of Ukraine located in its southern part. The city is an important trade sea port on the Black Sea and a popular tourist destination. Total modern retail stock in Odessa was estimated at around 480,370 sq m in December 2014, or 474 sq m (GLA) of modern retail stock per 1,000 inhabitants. The modern retail stock in Odesa has been dominated by multi-tenant retail centres and shopping malls, which presently account for approximately 67% of total stock in the sector. Big box retail developments account for the remaining 33% of total retail stock in the city. There are no retail parks or fashion outlets in Odesa, but some retail parks are scheduled for delivery in the medium to long term in the city. The 65,000 sq m (GLA) retail and leisure centre Riviera Shopping City remains the largest and most notable retail scheme in Odesa, which was developed by the LSE-listed company Argo Real Estate Opportunities Fund during The scheme is anchored by Auchan, while its gallery benefits from the presence of majority of quality retail brands operating in the city (and brought some of them), including JYSK, Inditex Group, Marks&Spencer, New Yorker, LPP (House, Cropp Town, Reserved) and LC Waikiki. As of December 2014, there was approximately 133,200 sq m (GLA) retail space planned for delivery until late Out of this pipeline stock in the sector, DTZ projects that during 2015 new supply in the retail property sector in Odesa may amount to around 51,000 sq m (GLA) formed by Yessa and Equator in the northern Kotovskyi neighbourhood, as well as the central retail centre Kadorr. High street retailing is well-developed in Odesa due to the urban structure of the city and its high popularity among the tourists. Odessa has been traditionally considered to be the second most attractive destination after Kyiv to enter for majority of retailers in all pricing categories. Demand remains strong for quality retail space both in high street locations and multi-tenant retail centres across the city. Rents In Odesa high street retail rents are higher than average rents in multi-tenant retail centres, mostly due to the urban structure of the city with many tourist attractions in its central part, developed nature of street retailing, shopping habits of local inhabitants and high tourist flows, as well as lack of quality retail schemes in the non-central areas of the city. As of December 2014, prime high street retail rents in Odesa amount to $50-75 per sq m per month, with the highest rents typically achieved for quality retail premises with the frontage to Derybasivska, Rishelyevska and Yekaterynynska Streets. In the prime multi-tenant retail centres in Odesa, net monthly retail rents presently vary in the range of $30-60 per sq m for standard units of area sq m.

12 Odesa Riviera Shopping City Shopping and Entertainment Centre Location and description DTZ s involvement Landlord After six years of successful operations, Riviera Shopping City is not only considered the largest shopping and entertainment centre in the southern region of Ukraine, combining more than 230 popular Ukrainian and international brands, but also an integral part of social and cultural life in the region, seeking opportunities to support the development of modern culture and growth of the new generation. In 2014 the retail centre was granted a status of The best shopping centre in Southern Ukraine DTZ was involved from initial concept development, as exclusive leasing agents and centre managers. Presently DTZ acts as exclusive leasing agent on behalf of the landlord. Argo Real Estate Opportunities Fund Delivery 2009 GBA GLA 85,000 sq m 65,000 sq m Levels 2 Parking Anchors 2,500 car spaces Auchan (food hypermarket), Comfy (electronic appliances store), Jysk, M&S, Inditex Group brands, LPP brands, LC Waikiki, New Yorker, Sportmaster (sports supermarket), Odessa Kino cinema, Leopark kid s play, City Bowling

13 Srednefontanskyi Shopping and Entertainment Centre Location and description DTZ s involvement Landlord Located in the central Odesa, in walking proximity to the central railway station, and surrounded by multi-family housing. DTZ has been involved in the project as a leasing agent on behalf of the landlord. local developer Delivery 2007 (phase 1) GBA 40,000 sq m GLA 19,530 sq m (phase 1) Levels 3 Anchors Furshet (food supermarket), Comfy (electronics supermarket), JYSK, Antoshka, Bomond, Monton, Cinema Citi (cinema), Ihroland (kid s play)

14 Lviv Population 755,260 inhabitants Major multi-tenant retail schemes in Lviv: existing and in pipeline until Name Delivery Status Size (sq m) Developer Major brands /anchors 1. King Cross Leopolis 2. VICTORIA Gardens 2008 / 2010 (in phases) Forum Lviv Q Operating 52,700 King Cross Group Auchan, Praktiker, Foxtrot, Inditex Group brands, LPP brands, Intertop, M&S, Mothercare, Planeta Kino with IMAX, Leopark (kid s play), bowling, ice-rink, others Under construction 50,630 Yeditepe / Fenix Capital Food hypermarket, electronic appliances store, cinema (7 screens), bowling, kid s play, others Multi Development / Under construction 35,000 BUDHOUSE GROUP / Galereja Centre Silpo, Comfy, LPP brands, Inditex Group brands, MTI brands, Melon Fashion Group brands, Mango, Budynok Ihrashok, Planeta Kino (6 screens), Ihroland (kid s play), others

15 Supply & Demand Lviv is an important economic, cultural, academic and transportation centre of Ukraine with total official population of around 760 thousand inhabitants. Lviv is the largest city in Western Ukraine and, its historic and architectural heritage makes it a popular tourist destination. The city has also developed as an important IT and business process outsourcing centre in Ukraine. Total modern retail stock in Lviv was estimated at over 269,000 sq m in December 2014, or 356 sq m of modern retail stock per 1,000 inhabitants. The modern retail stock in Lviv has been dominated by multi-tenant retail centres and shopping malls, which account for almost 68% of total stock in the sector. Big box retail developments, comprised of the DIY-stores Epicentre (2 hypermarkets) and Nova Liniya, and two outlets Metro Cash&Carry, account for the remaining 32% of total retail stock. There are no retail parks or fashion outlets in Lviv. The central fashion centre Roksolana was the only retail scheme delivered in Lviv during Rents In Lviv high street retail rents were historically higher than average rents in multi-tenant retail centres, mostly due to the urban structure of the city with many tourist attractions in its central part, developed nature of street retailing, shopping habits of local inhabitants and high tourist flows. However, after the commencement of the leasing campaign in the retail and leisure centre Forum Lviv, which is presently under construction in the central area of Lviv, the correlation between prime high street and shopping mall rents in the city significantly converged. As of December 2014, prime high street retail rents in Lviv amount to $30-70 per sq m per month, with the highest rents typically achieved for quality retail premises located along Tarasa Shevchenka and Svobody Avenues, and on Rynok Square. In the best multi-tenant retail centres in Lviv, such as Forum Lviv, prime net monthly retail rents presently vary in the range of $35-60 per sq m for standard units of sq m. As of December 2014, there was around 87,000 sq m (GLA) modern retail space planned for delivery in Lviv in 2015, an increase on current stock by around 32%. The shopping and entertainment centre Forum Lviv is a major retail development scheduled for delivery in Lviv in Q The property is presently under construction in the central part of the city by the international firm Multi Development, which developed many award-winning shopping centres in Europe and Turkey, in partnership with the Ukrainian developer BUDHOUSE Group and Lviv-based Galereja Centre. As of December 2014, Forum Lviv is pre-let by 80% to high-quality occupiers. Despite challenging economic conditions in Ukraine, the opening of Forum Lviv will bring many renowned retailers and leisure operators to Lviv, including Mango, Melon Fashion Group brands and Ihroland kid s play, as well as Comfy, Silpo, Planeta Kino cinema, Zara, Reserved and Budynok Igrashok. In addition, the year 2015 may see the opening of the shopping centre VICTORIA Gardens, construction of which was suspended for several years and is now resumed. Though the scheme benefits from the advantageous location in immediate proximity to densely populated residential neighbourhood, its general concept, tenant mix and further approach to property management remain uncertain. High street retailing is developed in Lviv due to the urban structure of the city and high tourist flows in its central part. However, a very limited number of fashion brands operate in street retail format in the historic centre of Lviv. Though not being a priority destination for expansion, Lviv has been increasingly considered a first-tier city to enter for majority of retailers in Ukraine, particularly in view of the city s economic base, and the changed perception of Eastern Ukraine in terms of retail attractiveness. DTZ believes that the highest potential for retailers in Lviv exists in low, lower middle and middle price segments.

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17 Forum Lviv Shopping and Entertainment Centre Location and description DTZ s involvement Landlord Forum Lviv can be considered a significant success case for a whole complex of services by several DTZ departments. The sq m shopping and entertainment centre, located in central Lviv, is scheduled to open in Q leading Ukrainian and international brands will lease space in this scheme. Following the brokering of a JV agreement on behalf of local developer Galereja Centre and Multi Development, an international developer with wide experience in development of shopping centres throughout Europe, DTZ was appointed as a co-exclusive leasing agent for this centrally located scheme. In early 2013 DTZ brokered the entry of a third partner into the JV BUDHOUSE GROUP. Multi Ukraine / BUDHOUSE GROUP / Galereja Centre Delivery Q GBA GLA 70,000 sq m 35,000 sq m Levels 3 Parking Anchors 600 car spaces Silpo, Comfy (electronics supermarket), Inditex Group brands, LPP brands, Terranova, Calliope, Mango, Budynok Ihrashok (children goods store), Planeta Kino (cinema), Ihroland (kid s play), others

18 Kharkiv Population 1,445,000 inhabitants Major multi-tenant retail schemes in Kharkiv: existing and in pipeline until Project Delivery Status Size (sq m) 1. Cosmo Mall 2017 Planned 73, Magellan 2011/2012/2015 (in phases) Operating (phase 3 under construction) 3. Levada Mall 2017 Planned 60, Karavan 2006/2007/2008 (in phases) Operating 57,050 Developer EASTGATE DEVELOPMENT 62,500 Kray Property 5. Dafi 2008 Operating 56,070 Dafi 6. Nikolskyi French Boulevard 2006 / 2013 (in phases) Under construction 52,000 EASTGATE DEVELOPMENT Karavan Group / CDA Real Estate BUDHOUSE GROUP Operating 38,000 Aksioma Major brands /anchors Food hypermarket, electronic appliances store, sports supermarket, retail gallery, leisure area, eateries Hypermarket Krayina, LPP brands, Argo brands, Adidas / Reebok, Megasport, INCITY, Mango, leisure (planned) Food hypermarket, electronic appliances store, sports supermarket, retail gallery, leisure area, eateries Hypermarket Karavan, furniture store Karavan-Mebli, Eldorado, MD Group brands, LPP brands, MTI brands, M&S, SMYK, Budynok Ihrashok, Mothercare, Ihroland, ice-rink, others Hypermarket Fozzy, Comfy, Inditex Group brands, Argo brands, Megasport, Intertop, Terranova, L Etoile, Kronverk Cinema, Ice Hall, Chudo Park (kid s play), others Food supermarket, electronic appliances store, sports supermarket, retail gallery, Sport Life fitness centre, Multiplex (6 screens), Chudo Park (kid s play), Lucky Strike (bowling), eateries Silpo, Comfy, Megasport, Mexx, Planeta Kino with IMAX, ice-rink, roller-drome, McDonald s, others

19 Supply & Demand Kharkiv is the second largest city in Ukraine with over 1.4 million total population plus thousands more commuting to the city due to many higher educational establishments located here, and the developing IT sector. In terms of economic base, Kharkiv used to rely heavily on industrial sector, particularly machine building, and is presently in transition. Total modern retail stock in Kharkiv was estimated at around 412,100 sq m in December 2014, or 285 sq m (GLA) of modern retail stock per 1,000 inhabitants, which reflects the lowest retail saturation compared to other major cities of Ukraine. The modern retail stock in Kharkiv has been dominated by multi-tenant retail centres and shopping malls, which account for approximately 70% of total stock in the sector. Big box retail developments account for the remaining 30% of total retail stock in the city. There are no true retail parks or fashion outlets in the city. Rents In Kharkiv high street retail rents currently tend to exceed average rents in multi-tenant retail centres, mostly due to the developed nature of street retailing in Sumska Street within the boundaries of the administrative centre, and lack of quality retail stock within shopping malls and retail centres in the city. Prime high street monthly rents in Kharkiv presently vary in the range of $35-55 per sq m, with the highest rents achieved for properties located on Rozy Luxembourg and Konstytutsiyi Squares, and those having frontage to Sumska Street. In the prime multi-tenant retail centres in the city, net monthly retail rents vary in the range of $35-45 per sq m for standard units of area sq m. In 2014, no new shopping centres were delivered in Kharkiv. As of December 2014, there was around 63,000 sq m (GLA) retail space under construction in the city, which is planned for delivery during 2015 and will increase current retail stock by 15%. More large-scale retail development projects are in medium to long-term pipeline in Kharkiv. Major scheme planned for delivery in Kharkiv is the central retail and leisure centre Nikolskyi by BUDHOUSE GROUP, which is presently under construction. Other pipeline retail projects in the city include Levada Mall and Cosmo Mall by the Kharkiv-based development company EASTGATE DEVELOPMENT, as well as Forum Kharkiv and Forum Artem concepted by the international firm Multi Development. Though not being a priority destination for expansion, Kharkiv is considered a first-tier city to enter for majority of retailers in Ukraine. Occupiers generally consider occupation of quality retail space both in high street locations and quality multi-tenant retail developments in Kharkiv. However, many of them adopt a wait-and-see attitude in view of the city s proximity to the Ukraine s boarder with Russia, and the resultant operational risks due to the current geopolitical context. DTZ believes that, due to the city s economic base, the highest potential for retailers in Kharkiv exists in low, lower middle and middle price segments. The retail market in Kharkiv is strongly influenced by the large-scale covered market Barabashovo, which extends to around 75 hectares and is a popular retail destination not only among local population, but also visitors from Kharkiv region and other regions of Ukraine.

20 Kharkiv Cosmo Mall Shopping and Entertainment Centre Location and description Developer Architect Cosmo Mall will be located in a densely populated and rapidly growing residential area in Kharkiv, having perfect transport and visual accessibility. EASTGATE DEVELOPMENT Chapman Taylor Delivery Q GBA GLA Levels 3 Parking Anchors 96,000 sq m 73,000 sq m 1,700 car spaces Food hypermarket, retail gallery, electronics supermarket, sports supermarket, cinema and other leisure operators

21 Levada Mall Shopping and Entertainment Centre Location and description Developer Architect Levada Mall is located near the central part of Kharkiv. EASTGATE DEVELOPMENT Mir LLC Delivery Q GBA GLA 85,000 sq m 60,000 sq m Levels 3 Parking Anchors 1,350 car spaces Food hypermarket, electronics supermarket, retail gallery, cinema, bowling, kid s play, ice rink

22 Dnipropetrovsk Population 989,200 inhabitants Major multi-tenant retail schemes in Dnipropetrovsk: existing and in pipeline until Name Delivery Status 1. Karavan 2008 / 2009 / 2014 (in phases) Size (sq m) Operating 76,200 Developer Karavan Group / CDA Real Estate 2. Most City Centre 2006 Operating 25,300 Alef Estate 3. Appolo 2009 Operating 20,000 UMK 4. Dafi 2005 Operating 15,543 Dafi 5. Babylon 2007 / 2014 (opened after reconception) Operating 14,000 Logos-Invest 6. Passage 2011 Operating 13,000 Akselrod Estate 7. Nasha Pravda 2013 Operating 12,950 Alef Estate Major brands /anchors Hypermarket Karavan, furniture store Karavan-Mebli, Oldi, Eldorado, Comfy, Sportmaster, Brocard, Adidas, Intertop, Plato, Centro, oodgi, O STIN, Mothercare, Budynok Ihrashok, Multiplex (7 screens), Ihroland (kid s play), ice-rink, others Varus, Comfy, Inditex Group brands, MTI brands, LPP brands, Mango, Most-Kino (5 screens), ice-rink, Ihroland (kid s play), eateries, others Varus, Comfy, Antoshka, Centro, Plato, Megasport, Gloria Jeans, ProStor, oodji, Fit4You (fitness centre), care and repair services centre, others Velmart, Eldorado, Megasport, O STIN, Colin s, Kinostantsia (4 screens), Chudo Park (kid s play), others Fozzy hypermarket, Kari, Master Zoo, VD One, Luxoptyka, Fissman GAP, M&S, MTI brands, Centro, Plato, eateries, others Amstor, Comfy, Jysk, CentrObuv, Gloria Jeans, Watsons, food court, others

23 Supply & Demand Total modern retail stock in Dnipropetrovsk, the third largest city in Ukraine, was estimated at around 409,130 sq m (GLA) in December 2014, or 414 sq m of modern retail stock per 1,000 inhabitants. The modern retail stock in Dnipropetrovsk has been dominated by multi-tenant retail centres and shopping malls, which account for approximately 76% of total stock in the sector. Big box retail developments account for the remaining 24% of total retail stock in the city. In Dnipropetrovsk there are no retail parks and fashion outlets. In the first quarter of 2014, the company CDA Real Estate (part of DCH) opened for visitors the extension of the retail and leisure centre Karavan ; the two earlier phases of the property were delivered in In addition, the retail centre Babylon, which was commissioned in 2007 and later closed for reconception, was opened in July 2014 on the eastern bank of the Dnipro River. There were no other major retail schemes delivered in Dnipropetrovsk during As of December 2014, no multi-tenant retail centres were under construction or scheduled for delivery in in Dnipropetrovsk. Nevertheless, construction of several major shopping malls of cumulative area around 234,000 sq m (GLA) was commenced in Dnipropetrovsk prior to the financial crisis 2008/2009 and suspended due to unfavourable conditions for property development in the country. However, if general dynamics in Ukraine improves, these projects may be resumed increasing total retail stock in the city by 57%. Dnipropetrovsk is considered a first-tier city to enter for a majority of retailers, which are either operating or considering expansion to Ukraine. Occupier demand remains relatively strong for quality retail space both in high street locations and multitenant retail centres of the city. In DTZ s opinion, the high attractiveness of Dnipropetrovsk is related to a combination of such factors as large population, relatively stable and diversified economic base, availability of critical mass of the retail schemes of decent quality in the city and developed high street retailing. DTZ believes that the highest potential for retailers in Dnipropetrovsk exists in low, lower middle and premium price segments. Rents In Dnipropetrovsk high street retail rents historically tended to exceed average rents in multi-tenant retail centres, mostly due to the developed nature of street retailing along Karl Marx Avenue within the boundaries of the administrative centre, shopping habits of local inhabitants and lack of quality retail schemes in the in the city. However, delivery of the retail centre Passage in 2011 altered this correlation, as prime high street and shopping mall rents in the city converged. Prime high street monthly rents in Dnipropetrovsk presently vary in the range of $45-65 per sq m, with the highest rents achieved for properties along Karl Marx Avenue and Lenin Square. Similar prime net monthly retail rents, in the range of $40-70 per sq m, have been registered in the retail centres in the city for standard units of area sq m.

24 Zaporizhzhya Population 766,000 inhabitants Major multi-tenant retail schemes in Zaporizhzhya: existing and in pipeline until Project Delivery Status Size (sq m) Developer Major brands /anchors 1. Fabrika Planned 57,000 BUDHOUSE GROUP Food supermarket, retail gallery, leisure, food court 2. Port City Planned 53,000 Vesta Trade / Continium Tam Tam, DIY store, retail gallery, leisure, food court 3. City Mall 2007 / 2011 (in phases) Operating 21,420 Arricano Development 4. Ukrayina 2004 Operating 16,000 local developer 5. Avrora 2013 Operating 13,150 Avrora Development / Group of companies Olimp Auchan, Comfy, Plato, oodji, INCITY, Colin s, Carlo Pazzolini, Top Secret, Respect, Brocard, befree, Love Republic, Mothercare, kid s play, food court, others Silpo, oodji, Ost-West, Megasport, Brocard, Centro, Mosaic, Berghoff, Pizza Celentano, others Amstor, Megasport, Centro, INCITY, Deseo, O STIN, LTB, Colin s, Watsons, Antoshka, Budynok Ihrashok, Chicco, Multiplex (3 screens), kid s play, food court, others

25 Supply & Demand Zaporizhzhya with an official population over 766 thousand persons, located in the south-east of Ukraine, is one of the major industrial centers of Ukraine. Well supplied with electricity, Zaporizhzhya forms, together with the adjoining Donets Basin and the Nikopol manganese and Kryvyy Rih iron mines, one of Ukraine s largest industrial complexes. The retail property sector in Zaporizhzhya remains very fragmented and immature by western standards and compared to major regional centres in Ukraine. Markets and small-format retail centres, occupied by local retailers, remain popular shopping destinations among the city inhabitants. Cumulative modern retail stock in Zaporizhzhya was estimated at around 175,400 sq m (GLA) in December 2014, or 229 sq m of modern retail stock per 1,000 inhabitants. This figure accounts for all major retail developments in the city of or over 5,000 sq m (GLA), and includes approximately 44,500 sq m of big box developments. The modern retail stock in Zaporizhzhya has been dominated by multi-tenant retail centres, which account for approximately 75% of total stock in the sector. Big box retail developments, comprised of Metro Cash&Carry, as well as the DIY-stores Epicentre and Nova Liniya, account for the remaining 25% of total retail stock in the city. In addition, a dozen of small-format retail centres operate in city centre and other areas of Zaporizhzhya, whilst their cumulative area is estimated at around 40,000 sq m (GLA). As of December 2014, around 110,000 sq m (GLA) of modern retail space was planned for delivery in Zaporizhzhya until late 2017, an increase on current stock by around 63%. There were only two shopping malls in pipeline, being Fabrika-2 by BUDHOUSE GROUP and Port City by Continium. The likelihood of delivery of these schemes by 2017 remains generally low, due to currently challenging economic situation in Ukraine and moderate demand of quality chain retailers in Zaporizhzhya. DTZ believes however that, due to low market saturation, poor quality of existing retail stock and weak current competition on the retail market in Zaporizhzhya, the city has long-term potential for retailers and developers, particularly in low and middle minus price segments. Rents Both in the high street retail locations and multi-tenant retail centres, retail rents are lower compared to those registered in major regional centres of Ukraine. The highest retail rents are achieved for properties located along Lenina Avenue, where rents typically are in the range of US$20-40 per sq m per month. Avrora Shopping and Entertainment Centre Location and description DTZ s involvement Developer Delivery 2013 GBA GLA Levels 6 Parking Avrora is located in the densely populated neighborhood within the central part of Zaporizhzhya, along Lenina Avenue, a major commuting route in the city. DTZ is engaged as consultant in relation to an ongoing internal re-organisation of the centre, as well as leasing agent. Avrora Development 28,000 sq m 13,100 sq m 206 car spaces In the existing multi-tenant retail centres in the city, prime net monthly retail rents vary in the range of $15-25 per sq m for standard units of area sq m. Anchors Amstor (supermarket), Budynok Ihrashok and Antoshka (kid s supermarkets), Deseo by INCITY, oodji, O STIN, Colin s, Multiplex (3 screens)

26 Chernihiv Population 295,000 inhabitants Major multi-tenant retail schemes in Chernihiv: existing and in pipeline until Project Delivery Status Size (sq m) Developer 1. Hollywood 2015 Under construction 43,000 Hollywood Capital 2. Mega Centre 2005 Operating 12,250 local developer Major brands /anchors Silpo, Comfy, JYSK, Pierre Cardin, Brocard, Adidas, Rebook, Watsons, New Yorker, Megasport, Kari, Colin's, drive-in cinema, kid s play, others Sympatik (supermarket), Eldorado, Cosmo, Megasport, Centro, oodji, Tiffi, others 3. Royale 2010 Operating 9,100 local developer Silpo, Kinder City (kid s play), local retailers

27 Supply & Demand Chernihiv with an official population around 295,000 inhabitants is the regional and administrative centre of Chernihiv oblast in Northern Ukraine. In accordance with the Ukrainian National Competitiveness Report 2012, Chernihiv oblast was at the bottom of the national ranking by population and by contribution to the country s GDP. However, the region s economy benefits from its high development potential in the agrarian sector, as well as proximity to Ukraine s border with the neighbouring countries. The retail property market in Chernihiv is highly fragmented and immature compared to major cities of Ukraine. Markets and several small-format retail centres occupied by local retailers, remain popular shopping destinations among the city inhabitants. Cumulative modern retail stock in Chernihiv was estimated at only around 52,250 sq m (GLA) in December 2014, or 177 sq m of modern retail stock per 1,000 inhabitants. This figure accounts for all major retail developments in the city of or over 5,000 sq m (GLA), and includes approximately 30,900 sq m of big box developments. The modern retail stock in Chernihiv has been presently dominated by big box retail developments, represented by the DIY-stores Epicentre and Vienna. Multi-tenant shopping centres account for around 41% of total stock in the city. As of December 2014, there was around 43,000 sq m (GLA) modern retail space planned for delivery in Chernihiv in 2015, an increase on current total stock by around 82%. The shopping and entertainment centre Hollywood is the only shopping mall scheduled for delivery in Chernihiv during The property is presently under construction in the densely populated residential neighbourhood of the city, in the area well-accessible by public and private transport. In Chernihiv several more retail schemes are in pipeline in the longer term, however the likelihood of their delivery by 2017 remains very low. DTZ considers that, due to low market saturation, poor quality of existing retail stock and weak current competition on the retail market in Chernihiv, in the longer term the city has potential for retailers and developers, particularly in low and middle minus price segments. Rents In Chernihiv high street retail rents are higher than average rents in multi-tenant retail centres, due to the absence of quality modern retail schemes in the city, as well as its urban structure and shopping habits of local inhabitants. As of December 2014, prime high street retail rents in Chernihiv amount to $15-35 per sq m per month. In the few, mostly poor quality first-generation, multi-tenant retail centres in the city prime net monthly retail rents vary in the range of $10-25 per sq m for standard units of area sq m. Hollywood Shopping and Entertainment Centre Location and description DTZ s involvement Developer Architect Hollywood is currently under construction near the central part of Chernihiv, at the crossroads of major transit routes from Belorussia to Ukraine. The biggest retail and leisure centre within 150 km radius. DTZ is appointed as lead agent on the project since October 2014 Hollywood Capital local architects Delivery Q GBA GLA Levels 3 Parking Anchors 53,800 sq m 43,000 sq m 900 car spaces Silpo (supermarket), Comfy (electronics supermarket), JYSK, Budynok Ihrashok (kid s supermarket), Brocard, New Yorker, Adidas, Reebok, Megasport, Moyo, Kari, Colin s, others

28 Ivano-Frankivsk Population 246,000 inhabitants Major multi-tenant retail schemes in Ivano-Frankivsk: existing and in pipeline until Name Delivery Status 1. Veles Stanislav 2016 Operating (expansion planned) Under construction (45% completed) Size (sq m) Developer 16,000 local developer 15,500 local developer 3. Arsen 2006 Operating 12,000 Intermarket 4. Velmart 2010 / 2017 Operating (phase 2 planned) 5. Panorama Plaza 2004 Operating 7,100 local developer Major brands /anchors Kolibris food supermarket, SHOK electronic appliances store, Tyhres, Watsons, CentrObuv, other local brands Food supermarket, electronic appliances store, sports supermarket, cinema (5 screens), others Arsen, Eldorado, Foxtrot, Intertop, Adidas, BRW, Top Secret, Kira Plastinina, Junker, Wojas, Luciano Carvari, Colin s, others 7,800* VK Development Velmart, Adidas discount, others Silpo, Brocard, furniture shops arcade, bowling, billiards, night club, others * Once extended, gross leasable area of shopping mall Equator is planned to amount to around 32,600 sq m (including phase 1).

29 Supply & Demand Ivano-Frankivsk with an official population around 250,000 inhabitants is the regional and administrative centre of Ivano-Frankivsk oblast in Western Ukraine. The city is located close to the Carpathian mountains, in proximity to numerous resorts including Bukovel, the leading ski resort in the country. According to DTZ, the retail property market in Ivano-Frankivsk is highly fragmented and immature compared to major cities of Ukraine. Markets and small-format retail centres, occupied by local retailers, remain popular shopping destinations among the city inhabitants. Cumulative modern retail stock in Ivano-Frankivsk was estimated at around 81,400 sq m (GLA) in December 2014, or 331 sq m of modern retail stock per 1,000 inhabitants. This figure accounts for all major retail developments in the city of or over 5,000 sq m (GLA), and includes approximately 26,500 sq m of big box developments. In Ivano-Frankivsk there are presently no modern quality shopping malls with attractive tenant-mix and of gross leasable area over 10,000 sq m. The modern retail stock in Ivano-Frankivsk has been dominated by multitenant retail centres and shopping malls, which account for around 67% of total stock, whilst big box retail development, comprised of the DIY-store Epicentre and Metro Cash&Carry, for the remaining 33%. In addition, numerous small-format retail schemes operate in the city centre and other areas of Ivano-Frankivsk. DTZ estimates that cumulative area of these properties, predominantly of very low quality, presently amounts to approximately 41,600 sq m (GLA). As of December 2014, around 31,100 sq m (GLA) of modern retail space was planned for delivery in Ivano-Frankivsk until late 2017, an increase on current stock by around 38%. There were only two retail schemes in pipeline, i.e. the centrally located retail and leisure centre Stanislav, and Equator planned to be developed in the remote part of the city via extension of the existing Velmart. The likelihood of delivery of the latter scheme by 2017 remains very low. DTZ reckons that, due to low market saturation, poor quality of existing retail stock and weak current competition on the retail market in Ivano-Frankivsk, in the longer term the city has considerable potential for retailers and developers, particularly in low and middle minus price segments. Stanislav Shopping and Entertainment Centre Location DTZ s involvement Developer The scheme benefits from the unique core city centre location in Ivano-Frankivsk. It is situated on Andriy Melnyk Street in immediate proximity to the central pedestrian zone and Nezalezhnosti Street, which is major central street in the city and important commuting route. The property is surrounded by prime multi-family residential buildings and located in front of the Memorial Park. DTZ is involved in the project as consultant on its concept revision and optimisation, as well as leasing agent. OJSC Energetychni Tekhnologii Rents In Ivano-Frankivsk high street retail rents are higher than average rents in multi-tenant retail centres, due to the absence of quality modern retail schemes in the city, as well as urban structure of the city, shopping habits of local inhabitants and considerable tourist flows in the city centre. Prime high street retail rents in Ivano-Frankivsk amount to $15-35 per sq m per month. In the small-format multi-tenant retail centres, which are located in the downtown, asking base monthly rents vary in the range of $10-20 per sq m. In the few, mostly poor quality first-generation, multi-tenant retail centres in Ivano-Frankivsk, prime net monthly retail rents vary in the range of $10-25 per sq m for standard units of area sq m. Planned delivery Project status GBA GLA No. of retail and leisure floors Parking Anchors % completed 20,100 sq m 15,500 sq m car spaces Food supermarket, electronic appliances store, sports supermarket, entertainment area (cinema, kid s play, billiards), restaurants and food court

30 Lease terms and conditions in the quality multi-tenant retail centres in Ukraine Lease duration 3-5 years for standard retail units of sq m; 7-10 years for semi-anchors (500-1,000 sq m) and years for anchor tenants plus a priority right to renew the lease. Rent payment Indexation Rent Service charge Marketing charge Fit-out of retail units Guarantee Usually pegged to the US dollar or Euro, but paid in the Ukrainian hryvnya. Annually, by change in CPI in the United States published by the US Department of Labour, by change of Euro CPI published by Eurostat or by change in CPI in Ukraine published by the State Statistics Committee. Fixed, an additional turnover rent has now become a common practice applied in the new high-quality retail developments (e.g. Riviera Shopping City, Sky Mall, Forum Lviv, King Cross Leopolis, and others). USD 2-8 per sq m per month in addition to utility costs, depending on quality of a retail development. USD 2-5 per sq m per month, depending on quality of a retail development. Shell & core. Cost contribution for partial fit-out or turn-key condition in sometimes provided to anchor tenants. The form of cash deposit or bank guarantee in the amount from 2 to 6 months of lease period has been common. Parent company guarantee is rarely applied. Definitions Retail stock Individual developments or stand-alone retail units with a gross lettable area of or exceeding 5,000 sq m. Small retail format Retail scheme delivered to the market after 1990 or extensively upgraded, with a gross lettable area (GLA) of less than 5,000 sq m, with 5 or more retail units. Hypermarket Store selling food or food plus non-food items having a gross lettable area (GLA) of at least 5,000 sq m. Stand-alone hypermarkets may include some kiosks or in-line units in front of the check-out areas. Fashion (factory) outlet Shop or group of shops, usually in an out-of-centre location, specialised in selling end-of-line and, occasionally, damaged goods at permanently discounted prices. Retail park An out of town retail development with multiple retailers operating typically from individual units in large area format. High street The most important shopping streets in town and city centres having the highest concentration of retailers. Prime retail rent The attainable average prime rent that could be expected for a retail unit of size in the range of sq m located along the high street (i.e. prime high street rent) or in the prime retail scheme (i.e. prime shopping centre rent). The rent is given as a base rent, i.e. no service charge and tax is included. Frontage zoning is not adopted in Ukraine.

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34 Nick Cotton FRICS Managing Director DTZ Ukraine DTZ Tel.: Fax: Antonina Puchko Director Retail Agency and Consultancy DTZ Tel.: Mobile: Fax: Marta Kostiuk MScRealEst Director Research and Development Consultancy DTZ Tel.: Mobile: Fax: V Horkoho Street, 3 rd floor, Maxim BC, Kyiv, Ukraine Tel.: Fax: info@dtz.kiev.ua DISCLAIMER Information contained in this brochure should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ. DTZ December 2014