Retail Real Estate in Emerging Markets Company Presentation 1 March - - PowerPoint PPT Presentation

November 2007 (v1)

Retail Real Estate in Emerging Markets

Company Presentation

1 March 2012

IMPORTANT NOTICE

This document (hereinafter referred to as the “Presentation”) does not constitute an invitation or offer to the public to subscribe for any shares

• r debentures of Fulcrum Limited or its subsidiaries (hereinafter referred to collectively as the “Company”), whether for cash or otherwise as

regulated in terms of Article 209 of the Companies Act, Chapter 386 of the Laws of Malta (hereinafter referred to as the “Companies Act”). The Company is a private company, and, as such, does not intend the Presentation to represent an "offer of securities to the public" within the meaning of article 2(3) of the Companies Act, or a prospectus as described in terms of articles 89 to 96 of the Companies Act. The Company is not authorised, and does not intend to offer any shares or debentures of the Company to the general public. The Presentation is for information purposes only, in the context of a proposed discussion leading to negotiations for the subscription of a limited number of shares, in the Company, at a premium (hereinafter referred to as the “Investment”) by a limited number of persons (hereinafter referred to as the “Investors”) and shall not be treated as investment advice and/or any other form of recommendation. Investment in the Company involves significant risks and special consideration and should be considered as risk capital investment. Should the Company fail, this may result in the total loss of any Investment. The Presentation is addressed to and for the sole benefit of the person/s to whom a copy of the Presentation has been furnished (hereinafter referred to collectively as the “Relevant Persons”). The Presentation must not be acted on or relied on by persons who are not Relevant Persons. Any Investment or investment activity to which the Presentation relates is available only to the Relevant Persons and will be engaged in only with Relevant Persons. Distribution of the Presentation, in any manner whatsoever, by any of the Relevant Persons, is prohibited without prior approval by the Company. Interested Relevant Persons should conduct their own investigation and analysis of the information provided in the presentation and should seek their own financial, legal, tax or other professional advice. Relevant Persons should also be aware that there may be certain limitations imposed on the transfer of shares in the Company in terms of the Company’s Memorandum and Articles of Association. Figures shown in the Presentation are based on various assumptions and are presented for illustrative purposes only. They are by no means a reliable indicator of future results; the Relevant Persons should not place undue reliance on such assumption based information and data. The Presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or

• ther variations or comparable terminology. These forward-looking statements relate to matters that are not historical facts. They appear in a number of places

throughout this document and include statements regarding the intentions, beliefs or current expectations of the Company concerning, among other things, the investment objective and investment policy, financing strategies, investment performance, results of operations, financial condition, liquidity, prospects, and dividend policy of the Company and the markets in which it, directly or indirectly, will invest. By their nature, these forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future

• performance. The Company’s actual investment performance, results of operations, financial condition, liquidity, dividend policy and the development of its financing

strategies may differ materially from the impression created by the forward-looking statements contained in the Presentation.

IMPORTANT NOTICE

In addition, even if the investment performance, results of operations, financial condition, liquidity and dividend policy of the Company, and the development of financial strategies are consistent with the forward-looking statements contained in the Presentation, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that may cause these differences include, but are not limited to, changes in economic conditions generally and in property markets in regions the Company is active specifically, legislative/regulatory changes, changes in taxation regimes, the Company’s ability to invest in suitable investments on a timely basis, the availability and cost of capital for future investments, the availability of suitable financing and the Company’s ability to attract and retain suitably qualified personnel. The Company has exercised utmost diligence in the preparation of the Presentation. However, neither the Company nor any of its advisors, nor any of the Company’s or the advisors’ directors, officers or employees make any representation or warranty as to the fairness, correctness, accuracy or completeness of the information contained herein. Nor is any liability accepted for the reasonableness of assumptions made or

• pinions stated or the achievement of projections, prospects or returns. The Company does not accept liability whatsoever for any loss or

damage howsoever arising from any use of this document or its content or third party data or otherwise arising in connection therewith. No broker, dealer, salesman or other person has been authorised by the Company or its directors, to issue any advertisement or to give any information or to make any representations in connection with the Presentation other than those contained in the Presentation, and if given or made, such information or representations must not be relied upon as having been authorised by the Company or its directors. The issue of the Presentation shall not be taken as any form of commitment to proceed with any transactions and the Company and /or the sponsor reserve the right to:

• Terminate or suspend all further participation by any party in the investigation of the transaction at any time without prior notice or enter into a definitive

Investment agreement with any of the Relevant Persons without any prior notice to other recipients of the Presentation;

• Cancel the transaction or modify the rules and procedures relating to the transaction without prior notice to any Relevant Person who may receive the Presentation.

The Company may, despite having furnished any Relevant Person with a copy of the Presentation, reject any proposed Investment, for any reason, and is not obliged to disclose the reason, or reasons, for rejecting such proposed Investment. It is the responsibility of any Relevant Person in possession of the Presentation, to inform themselves of, and to observe and comply with, all applicable laws and regulations of any relevant jurisdiction. Interested Relevant Persons should inform themselves as to the legal requirements and taxes in the countries of their nationality, residence or domicile. No matter how many Relevant Persons receive the Presentation, the Company shall, to the extent that it remains a private company, at no point, accept more than fifty members, as prescribed in Clause 2(b) of the Company’s Articles of Association. The information in this Presentation is only valid as of the date of the Presentation. Subsequent changes can materially and detrimentally affect the assumptions and the business model of the Company. The preceding paragraphs and any statements made therein are based on and subject to the law and practice currently in force in Malta, and are subject to changes therein.

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FULCRUM AT A GLANCE

Fulcrum has been founded to create a retail real estate investment and development platform for Emerging Markets. Fulcrum provides investors with exposure to fast growing economies of CEE, SEE, Russia, Turkey and other Emerging Markets providing significant upside potential. Fulcrum focuses on development projects offering high return potential from development

• profits. In addition Fulcrum intends to invest in investment properties with optimization potential

that offer ongoing cash flows with additional upside potential from value enhancement. Fulcrum takes advantage of its managements’ expertise and extensive network in the retail and real estate sector. Fulcrum is the parent company of a holding company operating through local real estate

• companies. Top level participation enables founding Investors to benefit from the intended growth
• f all future Group companies. Potential future listing of the holding company or on local level

provides further upside potential for investors. Retail real estate platform Experience and expertise Growing markets Attractive return potential Future growth possibilities

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Emerging Europe

• A growth region for

retail real estate

6 |

EASTERN EUROPE OVER THE PAST 10 YEARS

• High demand in all segments
• Strong inflows of foreign capital
• Transaction boom
• No vacancies
• Double-digit price increases

2003 - 2007

• Overnight collapse
• “Unwanted child effect”
• Standstill in transaction market (e.g.

Romania -95%)

• Unfair formation of prices
• High vacancies

2008-2010

• Various countries in Eastern Europe
• utperforming the West again
• New demand from retailers
• Prices start to increase again
• Real estate market still underdeveloped

2011 Emerging Eastern European markets offer attractive growth potential

7 |

EAST OUTPERFORMING THE WEST AGAIN

• Economies in Eastern Europe were growing faster than those in

Western Europe for years. Following a temporary interruption in 2008/09 - many economies in Emerging Europe are currently

• utperforming Western Europe again.
• GDP in Eastern Europe is expected to grow by average annual rates
• f 4% in the next 5 years – compared to an expected average growth of

less than 2% in Western Europe.

• Many Eastern European countries have lower national debt ratios

than Western European countries.

• The strong economic growth should have a direct effect on

consumer spending which is expected to grow significantly faster in Eastern Europe than in Western Europe:

• Since 2000 the majority of Eastern European countries

experienced cumulative retail sales growth rates of above 50% compared to 20% in Western Europe.

• In the next decade Eastern Europe is expected to see

retail sales grow in excess of 40% - twice the expected growth in established markets.

• International retailers recognized the potential in Eastern Europe,

Russia and Turkey and announced plans to expand into the region

• r increase their existing presence.

FORECAST GDP GROWTH 2011-2016 Average annual growth in %

Source: IMF

SALES GROWTH IN EUROPE Cumulative 2000/2010 and 2011/2020 in %

Sources: King Sturge, Company research

8 |

EASTERN EUROPEAN MARKETS: FAVOURABLE DEMOGRAPHIC CONDITIONS

• Eastern Europe has the same number of consumers as Western

Europe – but market saturation is significantly lower.

• Many countries in Eastern Europe have a substantial number of

cities with sizable population enhancing the chances for a successful development of retail properties.

• Turkey – one of Fulcrum’s major target regions - stands out

with a very young and dynamically growing population: The average age is 27 , making Turkey especially interesting for consumer products.

• These factors offer attractive conditions for expansion and potentially

positive growth prospects for retailers and real estate investors.

POPULATION IN WESTERN AND EASTERN EUROPE Western Europe 402m Eastern Europe 405m # Cities with population > 100,000 > 50,000 Russia 164 ~ 500 Turkey 73 159 Ukraine 45 91 Poland 39 86 Romania 25 44 France 39 80 AGGLOMERATIONS IN EASTERN EUROPE

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RETAIL MARKETS IN EASTERN EUROPE OFFER (NEW) ATTRACTIVE GROWTH POTENTIAL

• On the back of economic growth Eastern Europe has become increasingly

attractive for retailers and investors which resulted in rising rents and property prices. The financial crisis in 2008 temporarily interrupted this growth process and property values declined by 20% and more depending on the region.

• Today, yields for retail properties in Eastern Europe are approximately

at the level as they had been in 2005.

• Irrespective of the strong growth in the past decade, retail space

penetration in Eastern Europe is still significantly lower than in Western Europe: Shopping centre space per 1,000 inhabitants ranges between 100 -150 sqm in the CEE region and less than 50 sqm in Romania or Ukraine – in Western Europe average shopping centre space amounts to 220 sqm per 1,000 inhabitants.

• High demand from retailers provides positive occupational growth prospects:

Until 2020 retail demand in Eastern Europe is expected to grow by 40% - double the forecast growth of the Eurozone countries.

• High retailer demand and comparable low prices for retail properties in Eastern

Europe provide attractive growth potential.

• In the more established markets of CEE and yields have started to decline

already in the past months. Other regions in Eastern Europe are expected to follow and experience a new yield compression as they did in the past.

RETAIL YIELDS IN EUROPE in % SHOPPING CENTRE STOCK in sqm per 1,000 inhabitants

Source: Cushman & Wakefield

RETAIL SPACE DEMAND GROWTH UNTIL 2020 in %

Sources Charts: Colliers, Cushman & Wakefield

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UPSIDE POTENTIAL FOR RETAIL PROPERTIES IN EMERGING EUROPE

• Between 2000 and 2008 property markets in Eastern

Europe, Russia and Turkey had increasingly caught up with levels in Western Europe. Investors, that had recognized this potential in time generated attractive returns from valuation upsides.

• As many Eastern European economies are outperforming

Western Europe again, the current situation on the property investment markets provides a new window of opportunity.

• Property yields are expected to decline again to pre-

crisis level or even beyond which offers significant new upside potential for investments.

EFFECT OF YIELD COMPRESSION AND RENT INCREASES

Property value in EUR/sqm 3.450 3,8% 4,3% 4,9% 5,7% 6,5% 7,5% 3.000 4,3% 5,0% 5,7% 6,5% 7,5% 8,7% 2.600 4,4% 5,0% 5,8% 6,5% 7,5% 8,7% 10,0% 2.250 5,1% 5,8% 6,7% 7,6% 8,7% 10,0% 11,6% 1.950 5,1% 5,9% 6,7% 7,7% 8,7% 10,0% 11,5% 13,3% 1.700 5,9% 6,8% 7,6% 8,8% 10,0% 11,5% 13,2% 15,3% 1.500 6,7% 7,7% 8,7% 10,0% 11,3% 13,0% 1.300 7,7% 8,8% 10,0% 11,5% 13,1% 1.150 8,7% 10,0% 11,3% 13,0% 1.000 10,0% 11,5% 13,0% 100 115 130 150 170 195 225 260 Rental level p.a. in EUR/sqm

Yield Market value 2003 9.3% EUR 11.5m 2007 7.0% EUR 15.5m Upside from yield compression 34% 2011 8.0% EUR 13.7m Potential yield/value after 3 years 6.5% EUR 16.9m Upside from new yield compression w/t debt 24% Upside on equity incl. 60% leverage (interest 6%) 58% Annual return from rent with 60% leverage 11.1% Total potential return at exit after 3 years 92% total = 30.7% p.a. CASE STUDY : RETAIL PARK CZECH REPUBLIC (GLA 11,000 sqm, undertaken by Fulcrum Management Members)

Western European level Eastern European level

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Business model

• Sound strategy to maximize

shareholder return

CLEAR FOCUS ON GROWING MARKETS

12 |

• Focus on growing regions of Russia, Poland, Turkey, CEE, SEE, CIS and
• ther fast growing Emerging Markets that currently offer attractive terms

for real estate investors:

• Yields are higher than in established markets but are expected to catch

up providing attractive upside potential.

• Strong demand by mainly international retailers offering positive
• ccupational growth prospects.
• Less competition: markets are less saturated which reduces the risk.
• Despite focus on Emerging Markets the Company might also consider

investments in other regions in the future.

• Focus on towns with sizeable populations and visible purchasing power.
• Take advantage of second-tier cities offering premium sites at good

valuations due to lower level of competition.

• Private consumption is the motor of growth in all markets, a trend that

is expected to continue. Hence, Fulcrum’s focus is on retail real estate to take advantage of this development.

Capital cities Secondary cities Shopping centre space/1,000 capita ~ 280 sqm ~ 50 sqm Shopping centre yields 10% 12-13% CAPITALS VS. SECOND-TIER CITIES – EXAMPLE RUSSIAN MARKET 2011 Western Europe Eastern Europe Retail yields (Shopping centres) ~ 6% 7.5-12% Shopping centre stock per 1,000 inhabitants ~ 220 sqm 50-150 sqm Growth retail space demand (10 years) 20% 35-60% RETAIL MARKET CONDITIONS IN EUROPE 2011

Sources: Jones Lang Lasalle, Colliers Sources: Jones Lang Lasalle, Company research

CLEAR FOCUS ON RETAIL SEGMENT

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• Focus on retail properties as attractive asset class:
• Long-term lease contracts provide stable cash flows
• Lease contracts mostly EUR denominated with CPI indexation
• Major international retailers as anchor tenants
• Low lease default and high occupancy.
• Even though a clear focus is set on the retail segment the Company might also

consider investments in other asset classes in the future.

• Take advantage of the management’s long-term experience in retail and

real estate.

• Within the retail segment intention to focus, amongst others, on retail

parks which can offer favourable conditions for investors and developers:

• Majority of rental income from (international) anchor tenants
• Attractive debt financing terms due to highly quality tenants
• More efficient use of space
• Low number of tenants and therefore easier and cheaper to maintain
• Limited capital expenditure requirements
• In case of developments - lower risk due to standardized designs and high

pre-leasing rates.

Retail Park Shopping Centre GLA of GBA 85-100% 70-75%

• No. of tenants

15-50 90-150 Rent anchor tenants 70-80% 30-40% Construction costs/sqm EUR 750-900 EUR 900-1200 RETAIL PARKS VS. SHOPPING CENTRES 2011 RETAIL VS. OFFICE SEGMENT 2011 Retail Office Lease term anchors 10-15 years 3-5 years Lease term others 3-10 years Vacancy rate (average) ~ 5% ~ 10%

Sources: Jones Lang Lasalle, Company research Sources: RICS, Company research

A NEW WINDOW OF OPPORTUNITY IN EMERGING MARKETS

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• Retail markets in Eastern Europe had been growing at a

high rate prior to 2008 resulting in rising rents and property

• prices. Early investors in the region realized significant returns as

valuations rose.

• During the financial crisis prices declined by 20% and more resulting

in prices for retail properties today that are at levels they had been 5 years ago.

• Given the new growth in Eastern Europe, Russia and Turkey

yields will possibly return to pre-crisis levels in the future.

• As a result, there could be a new window of opportunity for

property investments in Eastern Europe :

• Investments can be undertaken at comparably low

prices and the expected new yield decline offers attractive upside potential for those investments.

• The recent financial crisis has left many property companies

in a distressed situation and attractive assets can be acquired at prices below market conditions.

• Fulcrum intends to (i) initiate developments, (ii) make direct

investments in properties or (iii) acquire stakes in listed or privately held real estate companies (or real estate holding companies).

Yield The past growth 2004-2007 Property value The future growth 2011 - ? 6% Decline of retail yields from 10% to 7% resulted in a value appreciation of EUR 43m or 43%. EUR 167m Today yields range at 9% - new yield compression to 7% would result in a value appreciation

• f EUR 32m or

29%. 7% EUR 143m 8% EUR 125m 9% EUR 111m 10% EUR 100m 11% EUR 91m 12% EUR 83m PAST AND NEW WINDOW OF OPPORTUNITY ILLUSTRATED AS THE EXAMPLE OF TURKEY

CORE STRATEGIES TO MAXIMIZE GROWTH

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• Planned active portfolio management through local teams enable quick reactions to changing conditions
• Deep understanding of the specific conditions in the individual markets
• Strong relationship with current and potential future tenants

Optimize upside potential and reduce downside risk Local subsidiaries with local teams

• Intended focus on retail and in particular retail parks enables the implementation of standardized concepts
• Uniform property management and portfolio monitoring standards
• Standardized contracts for properties and projects in all subsidiaries

Increase efficiency, reduce failure risk and take advantage of synergy effects Standardized procedures and concepts

• Planned constant asset monitoring and optimization through local teams
• Constant review if assets still fit to the overall company strategy through central management
• Intended focus on properties with extension potential to enable future optimization

Increase asset profitability and reduce risks through fast reaction on market changes Constant Portfolio Optimization

• Intended use of reasonable debt levels to increase potential investment volume and portfolio value
• Through the use of debt shareholders potentially benefit from positive leverage effects including higher returns
• n equity invested

Maximize portfolio growth and returns Debt capital to maximize growth Local subsidiaries with local teams Standardized procedures and concepts

BALANCED RISK-RETURN PROFILE

16 | Classic Development Joint Venture Lower Risk Higher Returns Property Development Property Investment Forward Purchase Standing Investments Rental cash flows Cash flows from rents after completion Upside potential from yield compression Upside from development profits

• Fulcrum intends to focus on development projects with high return

potential from development profits.

• In addition Fulcrum intends to invest in investment properties with
• ptimization potential and/or extension possibilities that offer
• ngoing cash flows with additional upside potential from value

enhancement and new yield compression.

• To minimize risks Fulcrum plans to establish investment

guidelines regulating

• Target yields
• Exposure to single regions
• Overall exposure to development projects
• Pre-conditions for commencement of development activities.
• Fulcrum intends to establish corporate governance guidelines in line

with best practice regulations among others with respect to

• Board and management structure, corporate structure
• Related party transactions
• Management compensation and management fees
• Fees paid to external parties.
• Fulcrum intends to enhance returns through structures enabling

tax optimization.

TWO DIVISIONS IN ONE GROUP

Note: This is an example of a possible structure. Actual implementation depends on a series of factors, partly unknown at the date of the Presentation.

ENGINEERING OF RISK-RETURN PROFILE

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• Fulcrum’s planned strategy is to provide attractive return chances to investors

through one or more channels:

• 1. Special cash dividends from profits on the sale of development

projects

• 2. Cash dividends from profits on the sale of investment properties
• 3. Recurring cash dividends based on rental income from standing

investments

• 4. Increased value of equity stake as a result of expected yield

compression and rising rents.

• Flexible risk-reward strategy:
• Level of recurring cash dividends depends on amount of capital

Fulcrum allocates to development activities relative to the fund’s total size

• Potential to enhance recurring cash dividends through holding of

completed development projects as opposed to selling these.

Rental income Development profits Valuation upsides

FULCRUM‘S SOURCES OF POTENTIAL RETURN:

BUSINESS CASE MODEL (1)

18 | Base case assumptions:

• Initial equity : EUR 80m
• Dividend returns are after expected operating expenses on company and

subsidiary level

• Development profits after expected operating expenses and development

manager compensation

• Regional split in calculation example: Investment properties in CEE

countries, development projects in Russia

• Assumptions Investment Properties:
• Acquisition yield: 8%
• Exit yield /market yield after 6 years: 7%
• Debt ratio: 60%
• Loan: fixed interest rate of 5%; 15 year facility where 70% of the facility

would have to be repaid in equal annual installments

• Equity: 40%,- 3/4 granted as interest bearing (7%) shareholder loan
• Rent indexation: 3% p.a.
• Assumptions Development Projects:
• Yield at cost: 14%
• Exit yield after 3 years of first investment: 11%
• Debt: 70%
• Loan: 11% interest for construction loan, 8% for loan after completion
• Equity: 30% - fully spent in year 1 (e.g. for land purchase)
• Rent indexation: 1% p.a.

Note:

• A change of assumptions may have massive impact on the outcome
• This business model is for illustrative purposes only and includes a

number of assumptions that may or may not be correct

• Assumptions are subject to legal and tax diligence.

Please take also into account the information outlined on page 2 of this presentation.

• Over a 6 years period and under the base case business model an IRR of approximately 20% is targeted depending on the exposure to

development projects and subject to certain assumptions described below: all amounts in EUR‘000 Case 1 Case 2 Case 3 Case 4 Case 5 Investment/Development Split 100/0 75/25 50/50 25/75 0/100 Equity in Investments 80,000 60,000 40,000 20,000 Equity in Development 20,000 40,000 60,000 80,000 Total Equity Invested 80,000 80,000 80,000 80,000 80,000 Average Annual Dividend from Investment Properties 3,164 2,373 1,582 791 Cash Dividend - % of Total Equity Invested 4.0% 3.0% 2.0% 1.0% Investment Property Cash Return 4.0% 4.0% 4.0% 4.0% Total Dividends over 6 years (Dev + Inv) 197,564 198,918 200,271 201,625 202,979 Investment Property Total IRR 17.2% 17.2% 17.2% 17.2% Development Property IRR 20.7% 20.7% 20.7% 20.7% Combined Total Return IRR 17.2% 18.0% 18.9% 19.8% 20.7%

BUSINESS CASE MODEL (2)

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• Business model is based on an assumed yield

compression for investment properties from an average of 8% to 7% in a period of 6 years reflecting an annual increase of property value of 4%.

• Higher or lower yield compression will influence

total returns significantly.

• The business model does not take into account any

increase in rental income (like-for like) or future yield compression on the development

• projects. This would further increase returns.

ANNUAL IRR DEPENDING ON YIELD COMPRESSION AND DEVELOPMENT EXPOSURE

Note: This is an illustrative calculation. Actual IRR depends on market developments and other factors and can be significant lower.

Value Increase p.a. Exit Yield Case 1 (100/0) Case 2 (75/25) Case 3 (50/50) Case 4 (25/75) Case 5 (0/100) 2.5% 8.0% 13.6% 15.3% 17.1% 18.9% 20.7% 3.6% 7.5% 15.3% 16.6% 17.9% 19.3% 20.7% 4.8% 7.0% 17.2% 18.0% 18.9% 19.8% 20.7% 6.1% 6.5% 19.1% 19.5% 19.9% 20.3% 20.7% 7.5% 6.0% 21.2% 21.1% 21.0% 20.9% 20.7%

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Value creating corporate structure

• Top level participation

VALUE CREATING STRUCTURE OFFERING DIFFERENT PARTICIPATION POSSIBILITIES

• Fulcrum Limited is a private top level company with majority
• wnership in Fulcrum Properties S.E., a holding

company that intends to operate through asset companies in different geographies.

• Fulcrum Limited has one core investor that will invest at

least EUR 40 million in the underlying capital raising.

• Fulcrum Limited will – through Fulcrum Properties S.E. -

invest in real estate investment properties and development projects in fast growing regions.

• Fulcrum is an internally managed company with a

professional management team with long-term experience in the real estate business.

• Key benefits of the structure to Investors:
• Exposure to various regions reduces risks and increases

valorisation potential.

• Potential future listing of Fulcrum Properties S.E. or local

property companies to enhance Investors’ returns and portfolio growth.

• At the time of a potential public listing of Fulcrum

Properties S.E. Investors in Fulcrum Limited shall be awarded with founder incentives (directly or through granting incentives to Fulcrum Limited as company).

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Fulcrum Limited (Malta) Sponsor and core investor Fulcrum Properties S.E. (Malta) Max. 49% Fulcrum A Fulcrum B Holding Company Level Exposure to different regions and asset types through participation in local entities. Potential listing in the future when a track record has been built. Operating Company Level Focus on specific regions and asset types. Potential listing of individual companies on the longer term. Top Company Level Control over a diversified and growing portfolio. Investment opportunity offered to selected investors only.

ENVISAGED GROUP STRUCTURE

100% 100%

Shares offered to

• ther Investors

Projects Project Level Individual projects. Min. 51%

INTEGRATED DEVELOPMENT MANAGEMENT COMPANY CREATES ADDED ECONOMIC BENEFIT

22 |

• Fulcrum Development Limited, a 51% subsidiary of Fulcrum

Limited, acts as the holding company for local development management companies providing services in connection with certain property development projects, mainly in Russia.

• Local development management tasks include
• Strategic development management e.g. advice on strategic

direction, decision on project realization, …

• Operational project management e.g. arrange financing, market

research, land sourcing, letting, construction supervision, …

• Local development managers are intended to be incentivized as

minority shareholders, and include persons that have functions in Fulcrum as well.

• Development Manager’s compensation comprises a percentage of

total investment amount as well as a share of the development profits upon disposal.

• Through its majority stake Fulcrum Limited plans to control Fulcrum

Development Limited and to receive 51% of any compensation generated by the company.

• Similar structure possible for future companies
• Added economic benefit to investors in Fulcrum Limited
• Management motivation and thereby increase of project

profitability.

Fulcrum Limited

Fulcrum Properties S.E. Property Company Local Development Management Company Management Development Management Agreement

INTENDED STRUCTURE & PROFIT FLOW

51% 49% Fulcrum Development Limited (Malta) 100% Profit Participation Agreement

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Experience & Expertise in Retail Real Estate

PROVEN EXPERTISE IN RETAIL REAL ESTATE IN EMERGING MARKETS

• In 1997 Meinl Bank and Caledonia Investments

founded an investment company focusing on retail properties in CEE that was brought public in 2002.

• At the time of the IPO the portfolio consisted of retail

properties in the Czech Republic and Hungary with a total value of EUR 85 million.

• In the following years that entity expanded to Poland,

Slovakia, Latvia, Romania, Russia and Turkey and became

• ne of the leading real estate companies in CEE.
• Following the IPO the founders stepwise reduced their

holding in the entity and in 2008 sold the remaining interest in the Company.

• At that time the entity had an operating portfolio of 162

retail properties with a total market value of approximately EUR 1.9 bn plus a development pipeline exceeding EUR 3 bn.

• Members of Fulcrum’s management team have gained

extensive experience in the above described investment company.

24 | 2002 2007

• No. of properties

70 162 GLA 137,000 sqm 905,000 sqm Market value EUR 85 m EUR 1.9 bn Project pipeline EUR 3 bn DEVELOPMENT PROPERTY PORTFOLIO NAV DEVELOPMENT FORMER REAL ESTATE GROUP

CASE STUDIES – SUCCESSFUL PROPERTY INVESTMENTS

25 |

SHOPPING CENTRE KOSICE SLOVAKIA Description Shopping centre in Kosice, the largest city in the East of Slovakia. Tenants Ahold plus 50 local and international tenants. GLA 32,000 sqm Acquisition YE 2004 Purchase price EUR 35 million Valuation YE 2007 * EUR 66 million Upside from value enhancement 88% total 29% on annual basis SHOPPING CENTRE TORUN POLAND Description Shopping centre in a 200,000 inhabitants city in North Poland. Tenants Metro (Mediamarkt, Real) plus 80 mainly international tenants. GLA 30,000 sqm Completion YE 2005 Investment costs EUR 50 million Valuation YE 2007 * EUR 80 million Upside from value enhancement 60% total 30% on annual basis SHOPPING CENTRE KAZAN RUSSIA Description Shopping centre in a city of 1 million inhabitants in Russia. Tenants Metro plus 100 local and international tenants. GLA 48,500 sqm Completion YE 2006 Investment costs EUR 90 million Valuation Q3/2007 * EUR 110 million Upside from value enhancement 22% total 29% on annual basis

* Valuations undertaken by Cushman & Wakefield Case studies show projects realized by certain members of Fulcrum‘s management team in previous engagements.

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The Portfolio

• Potential pipeline properties

and projects

27 |

SHOPPING CENTRE DEVELOPMENT PROJECT ARKADA UFA, RUSSIA

• Shopping centre under construction in the centre of Ufa, with 1,090,000 inhabitants one of

the largest Russian cities. Despite the city’s size, retail space penetration is comparable low.

• The shopping mall has a direct catchment area of almost 200,000 people.
• Excellent access to the main roads of the city and good public transport connections.
• Project secured in October 2011, SPA to be signed in February 2012.
• Pre-lease agreements with Auchan signed, agreements with other anchors in negotiations.
• Development Manager for this project is Fulcrum Development Management, a 51%

subsidiary of Fulcrum Limited with remaining shares owned by local management, including persons that have functions in Fulcrum as well. For its efforts the Development Manager will receive upon disposal of the centre 30% of the development profit. Through its majority stake Fulcrum controls Fulcrum Development Limited and receives 51% of any compensation generated by the company.

• Project key data (all figures projected):

Expected development costs EUR 42.6million Expected NRI EUR 5.9 million Total GLA 23,500 sqm Expected opening Q4/2013 Planned leverage 70% debt financing Expected value upon completion EUR 54.2million Return on equity at disposal 81%

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PIPELINE PROJECTS POLAND

RETAIL PARK DEVELOPMENT PROJECT POLAND Description Development project for a retail park in a city with around 40,000 inhabitants 20km North-East of Warsaw. Total catchment area (below 20 min driving distance of over 100,000 people. Development cost EUR 43 million (est.) NRI EUR 4 million (est.) GLA 28,000 sqm Opening Q4/2013 Leverage 80% debt financing planned Value at completion EUR 53 million(est.) Return on equity 116% (projected at disposal) RETAIL PARK DEVELOPMENT PROJECT POLAND Description Development project for a neighbourhood retail park in a city with more than 300,000 inhabitants in the East of Poland. Development cost EUR 7.8million (est.) NRI EUR 0.86 million (est.) GLA 6,150 sqm Opening Q1/2014 Leverage 80% debt financing planned Value at completion EUR 10.1 million(est.) Equity return @ exit 147% (projected at disposal)

The projects included as pipeline projects are only examples for potential future projects. The Company has not entered into an agreement for any pipeline project and an analysis might result in the Company‘s decision not to proceed with certain projects.

FULCRUM - 7 REASONS TO INVEST

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• Focus on growing markets with positive macroeconomic prospects and higher growth potential than established markets.
• Retail focus provides attractive growth potential due to the lack of retail space in Eastern Europe.

Growth markets

• Property developments provide high return potential from development profits.
• Additional upside potential for properties and projects from expected yield compression.
• Property investments are planned to ensure stable revenues based on long-term rent contracts with CPI indexation.
• Fast growing economies and consumption provide potential for rental growth.

Stable cash-flows Development profit

• Fulcrum has a highly professional management with a long-term expertise and an extensive network in the retail and

real estate sector. Expertise

• Co-Investors on top level invited to nominate board members depending on size of their investment.

Partnership

• Attractive return potential from possible development profits in the form of special dividends at disposal.
• Additional return potential from investment properties as recurring cash dividends from possible rental income with

additional return potential from value enhancements at disposal. Attractive returns Attractive investment opportunity with the potential to generate an IRR of 20-30%

• Top level participation enables Investors to benefit from the anticipated growth of all future group companies.
• Potential future listing of the holding company or on local level provides further upside potential for Investors.

Growth potential

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Appendices

INSIGHT TARGET REGIONS: RUSSIA

• Russia was among the fastest growing nations in terms of economic and

consumption growth before 2008, and is now growing aggressively again with GDP growth rates exceeding 4%.

• Retail sales in Russia are currently growing even faster at rates of 12%

and above.

• Retailers have recognized chances in the Russian market and re-commenced

expansion in 2010 resulting in increased demand for retail space and rising rents for prime locations.

• With 50 sqm retail space per 1,000 inhabitants retail space penetration in Russia

is still well behind Western European levels, and even in Moscow the shopping centre penetration is still significantly below the penetration in capital cities in Western Europe.

• Yields have started to decline but have not reached pre-crisis levels yet.

Further yield compression would result in significant valorization returns.

• In particular secondary cities offer attractive growth potential for retailers

but also investors due to lack of modern retail space.

31 | SHOPPING CENTRE PENETRATION sqm per 1,000 inhabitants PRIME RETAIL YIELDS in % MARKET OUTLOOK Rents Further rental growth expected for prime locations Yields Moderate yield compression expected in H2/2011 Supply Lack of modern retail space will remain an issue Demand Further increase expected from retailers new expansion plans

Sources: Colliers, Cushman & Wakefield, Jones Lang Lasalle, data as of mid 2011

INSIGHT TARGET REGIONS: TURKEY

• Turkey is one of the fastest growing economies in Europe, in 2010 the

GDP grew by 8.9%. It is expected that the growth will slow down in 2011, however with a 5.1% GDP growth forecast Turkey will still outperform the rest of Europe.

• After a stagnant period in 2009 retailers returned to the market in 2010

and as a result of increased consumer purchasing are now also expanding to regional cities.

• Following a strong growth in the past 5 years the total retail space in Turkey

amounts today to 6.5 million sqm or 88 sqm per 1,000 inhabitants. 2/3 of the available retail space is however concentrated on main cities in Turkey and supply in the regions is significantly lower.

• Given retailers’ planned expansion to regional cities the current market situation

provides attractive growth potential for investors and developers.

• The strong growth prior to 2008 resulted in fast rising property prices and yields

declined to a level of around 7%. During the crisis yields went up by around 200bp, but started to decline again in 2010.

• Today prime shopping centres in Istanbul or Ankara are traded at

around 8% - prices in regional cities are still lower but are expected to catch up with the increasing demand as well.

32 | DEVELOPMENT RETAIL SPACE IN TURKEY Total leasable rental are in sqm PRIME SHOPPING CENTRE YIELDS in % MARKET OUTLOOK Rents Further rental growth expected for prime locations Yields Moderate yield compression expected in H2/2011 Supply Lack of modern retail space will remain an issue Demand Further increase expected from retailers new expansion plans

Sources: Colliers, Cushman & Wakefield, Jones Lang Lasalle, data as of mid 2011

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• The CEE region was characterized by fast growth until 2008 and after a

temporary interruption economies in CEE are growing at average rates of 4% again - twice the growth rates in Western Europe.

• Retail sales in CEE markets are rising fast again – for the next 10 years a

sales growth of 40% and more have been forecasted.

• International retailers recognize new opportunities in the region and plan to

revive or start expansion plans in the region which should result in increasing demand for retail space.

• Rents are still below Western European level and are expected to rise in

the longer run.

• Yields that had almost caught up with Western levels before the crisis are now again

around 2% above the Western European average.

• New growth in the region should result in rising property prices and yields are

expected to return to pre-crisis levels in the future which provides attractive upside potential for investments.

PRIME RETAIL YIELDS in %

2009 2020f Growth Czech Rep. 2.749 4.178 52% Hungary 2.000 2.902 45% Slovakia 2.022 3.418 69% UK 7.064 8.829 25%

RETAIL SALES PER CAPITA in EUR MARKET OUTLOOK Rents Stable in the short term but rise expected in the longer run Yields Interest in retail assets exerting downward pressure on yields Supply High supply in capitals, lack of modern space in secondary cities Demand Mixed retailers demand: strong demand in countries as Poland, still low demand in Hungary

INSIGHT TARGET REGIONS: CEE MARKETS

Sources: King Stuge, Cushman & Wakefield, Jones Lang Lasalle, data as of mid 2011

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INSIGHT TARGET REGIONS: SEE MARKETS

• Even though economies have not fully recovered from the crisis yet the mid-term
• utlook for the region is positive and economies in SEE are expected to
• utperform Western European markets as they did before 2008..
• Outlook for retail sales is positive as well with currently expected average

sales growth rates of more than 50% over the next decade.

• International retailers are pushing for expansion in prime locations in

the region again to benefit from strategic market opportunities now the market is working towards equilibrium.

• Retail space penetration in the SEE region is still on a low level ranging at

approximately 90 sqm/1000 inhabitants compared to more than 200 sqm in Western markets which provides positive occupational growth prospect.

• Institutional investor interest in the region is still limited and yields are still at

the range of around 9% but expected to decline again in the future which providing attractive upside potential.

• In the last months transaction volumes increased in particular due to distressed

sales– it is expected that similar investment opportunities will come to the market which provide potential for transactions at favourable terms.

MARKET OUTLOOK

Rents After a decline stable at a low level increase expected for mid-term Yields Still relatively high – new decline expected in the future Supply Lack of modern space in regions- capital cities balanced Demand New retailer expansion starting only slowly

SHOPPING CENTRE PENETRATION sqm per 1,000 inhabitants

PRIME SHOPPING CENTRE YIELDS in %

Sources: Colliers, Cushman & Wakefield, Jones Lang Lasalle, data as of mid 2011

SELECTED RETAILERS EXPANDING IN EASTERN EUROPE

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• Operates 2,100 stores in 33 countries, 500 stores (food, consumer electronics) in 13 Eastern European countries.
• More than 150 store openings planned per year , a good part in the growth markets Eastern Europe and Asia.
• European retailer currently present in 16 countries, including 8 Eastern European countries.
• Rewe announced to open 350 new stores on 2012 - a good part expected in Eastern Europe.
• Operates 5,300 stores in 14 countries, 950 stores in Hungary, Slovakia, Poland, Czech Republic and Turkey.
• Until 2014 Tesco plans to double selling space in CEE to 4.1million sqm, Tesco further announced to open 40 new

stores in Slovakia and Czech Republic in 2012.

• Operates 1,300 stores in 12 countries, 170 stores in Poland, Hungary, Romania, Ukraine and Russia.
• In September Auchan announced to expand its Russian activities to cities with more than 500,000 inhabitants.
• International fashion retailer currently active in 29 countries, 135 stores in 6 CEE markets, Russia and Turkey.
• Expansion to Romania and Croatia in 2011, for 2012 expansion to Bulgaria announced.
• Part of Inditex, a major fashion retailers with 5,200 stores in 78 countries, active in 15 Eastern European countries.
• Inditex recently confirmed that Eastern Europe will remain one of the main expansion markets.
• German based DIY-retailer with over 500 stores – 200 in Germany and 300 in 13 Eastern European countries.
• OBI recently announced to push its international expansion focusing on Russia, CEE and the Balkans.
• Austrian based DYI-retailer with 154 stores in Austria, CEE, SEE and Turkey.
• Baumax announced to increase activities in the current markets in the coming years.

Members of Fulcrum’s management team entertain long term relationship with these and other major retailers.

SUMMARY OF RISK FACTORS

Prospective Investors should be aware that an Investment in the Company involves a high degree of risk and that, if certain or some of the risks (whether or not described in this document) occur, Investors may find their Investment fully diminished. Some potential risks are summarized in the following:

• Risks relating to the Company’s business:
• The Company’s success and income will depend on the ability to identify and acquire suitable real estate investments.
• The Company may not be able to attract and retain sufficiently qualified personnel in the countries in which it operates.
• The Company may be subject to significant competition in seeking investments, particularly acquisition opportunities.
• The Company may be reliant on development or joint venture partners for a significant portion of its future real estate development projects.
• The Company’s financing arrangements could give rise to additional risk and the Company may be exposed to foreign exchange risk.
• Risks relating to the real estate industry:
• Real estate is an illiquid investment. This could lead, amongst others, to loss making overpayments and a downturn in the property market and economic

conditions may adversely affect the Company.

• The Company may be affected where its properties are exposed to risks of improper zoning and defects during planning and construction.
• The age and quality of a property may affect its occupancy and rent levels and over time, increased costs may be required to maintain a property.
• Increase of online-business can reduce the demand for retail real estate.
• Risks relating to the geographical markets in which the Company operates:
• Economic or political developments could have a material adverse effect on the Company’s business.
• The success of the Company is dependent on the retail sector in the jurisdictions in which the Company makes investments.
• There are a number of risks specific to those countries in which the Company plans to set up operations, for example, Russia.
• Risks relating to certain directors, officers or senior staff of the Company or its Group Companies
• People in management functions of Group Companies and other people acting in different capacities for the Group have extensive experience in the retail real

estate sector in the target region gathered in the course of their past activities for another investment vehicle. The capital market activities of this entity and other conduct is under scrutiny by public prosecutors. The affected people acting for the Group believe that the allegations are unfounded. It cannot be ruled out, however, that criminal investigations and proceedings might materially impede these person’s activities for the Group Company for a longer period of time.

• Risks relating to an Investment in the Company:
• The Company’s Shares are unlisted. There is no public market for the Shares and Investors might not be able to resell their Shares at a fair price or at all.
• Price and value of the Shares may rise or fall. There is no guarantee that the Company will pay any dividend. In a worst-case scenario, there is a high risk of

complete loss of the capital originally invested.

• Despite the Management’s experience in the real estate business any Investment in the Company should be considered as a risk capital investment. Accordingly,

an Investment in the Company’s Shares is only suitable for Investors who are particularly knowledgeable in investment matters.