RE-DEFINING THE GREEK REAL ESTATE MARKET Commercial Real Estate Market Report 2013

E79 ALEXANDROUPOLI

ΚAVALA

THESSALONIKI

IGOUMENITSA VOLOS

IOANNINA

PREVEZA LAMIA

ΑTHENS

PATRAS

ΤRIPOLI KORINTHOS

KALAMATA

RHODES

CHANIA

HERACLION

CRETE

E79

Capital: Athens

AIRPORTS

Official Language: Greek

PORTS

Currency: Euro (€)

NATIONAL ROADS

Population: 10,815,197 (2011 Cencus)

UNDER CONSTRUCTION

GDP (2012):193.7 bil €

EUROPEAN ROAD

Executive Summary After five consecutive years of recession, in 2013 there was a steady improvement in two of the three main macroeconomic indicators for Greece, while the rise in unemployment showed signs of slowing: GDP CPI Unemployment rate

Similarly Real Estate values, having closely followed the financial market since 2008, decreased on average (all sectors) by c. 55%. The close of 2013 showed stabilization in rental and capital values and a new normal being created. Towards the end of 2013, the office, retail and hotels & leisure sectors seemed the most likely candidates for recovery. In the Athens office market, rents and yields for Grade A offices remained at 2012 levels, ranging from 12€ to 20€/m2 per month and from 8.25% to 11% respectively. Kifissias Avenue and Athens City Centre are still the most popular office locations. Demand for Grade A quality accommodation is increasing as is the supply of Grade B accommodation. Likewise, in the retail market, rents and yields for prime locations in Athens remained steady compared to 2012 (ranging from 60€ to 140€/m2/month for Ermou Street, Kifissia, Glyfada & Kolonaki) and 20€ to 50€ for other retail markets, with yields ranging between 7.25% to 8% respectively. Established prime retail locations continue to be favored and enjoy low vacancy rates. Shopping centres have been comparatively less affected by the credit crunch and on the whole perform better in terms of rental values and vacancy rates. A notable trend in the retail market has involved a large number of small retail units converting into F&B establishments. In hotels & leisure, the rapid increase in tourist arrivals since 2004, led to an increase in hotel units by an average of 20% during the last 10 years. Greece is still a favored tourist destination, showing in H1 of 2013 an increase of tourism receipts by 15.4%. In 2013, RevPAR is estimated to exceed 30,000€ for 5* hotels and 20,000€ for 4* hotels, while the ADR is estimated to reach 150€ for 5* hotels and 90€ for 4* hotels. In the logistics sector, a decrease of demand is noted, which resulted in a decrease of rents and softening of yields (which ranged from 3€ to 4€/m2 and 10.5%-11.5% respectively) for Grade A logistics in prime locations. 2014 is expected to be a year of correction in capital and rental values. A new normal is being created in the market and that has already started to show. Opportunities are on offer for investors who buy now, at discount, and benefit from the gradual increase of capital and rental values.

03

04

Greek Real Estate Market Overview During the last 15 years, the Greek real estate market went through a full property cycle. Following closely the financial market, it fell dramatically in the beginning of 2000, only to start rising in 2001 and reached a peak in 2007. The boom period was a result of historically low interest rates, aggressive bank lending, a rise in income rates and high public spending on infrastructure due to the Olympic Games of 2004. High LTV ratios and relaxation of lending terms led to high construction and development rates. Commercial buildings in Greece increased in capital value by almost 40% while rents grew over 20%. After the credit crunch of 2008, Greek real estate experienced a severe downturn characterized by falling market values. Market uncertainty, rising unemployment, reduced income and rising taxes were the main reasons that resulted in falling capital values and low rents; limited demand and minimum project financing also led to frozen development and construction. Rental values are estimated to have fallen by more than 30% in all sectors while capital values became increasingly uncertain. It is estimated that the average decrease of real estate (all sectors) capital values since 2008 has been c. 55%. Due to the prolonged economic recession, oversupply of commercial space increased considerably offering the opportunity for tenants to negotiate better terms.

Greek Investment Markets’ Yields post 2008 credit crunch Comparison 25% 20% 15% 10% 5% 0% 2008

2009

2010

10Y Gov. Bond Yield to maturity ARY - Grade A Offices Kifissias Av. ARY - Prime Retail Ermou Str.

2011

2012

2013

FTSE/ATHEX Large CAP Divident Yield ARY - Prime Grade A Logistics Aspropyrgos Area

Source: European Central Bank, Hellenic Exchanges Group, NAI Hellas

The Real Estate industry appears to be less volatile than the other markets, where the logistics industry has higher yields than the office market which has in turn higher yields than the retail market. Until 2009 the 10 year Greek Government bond was considered to be a risk free investment, yet from 2010 the yield to maturity grew significantly, indicating the economic uncertainty in the country. The dividend yield of the FTSE/ATHEX Large Cap (top performing companies in the Athens Stock Exchange) was considerably lower than the All Risks Yield (ARY) of the property industry, demonstrating the low returns in the stock market. On the whole, where the government bond's risk tripled and the return from the stock market fell by 3% in the 5 year period after the crisis, the investment yield in real estate increased only by 2% in all sectors to reflect risk. Property has historically proven to be a stable investment.

Greek Real Estate Market Overview

Greek Investment Markets’ Capital Values Comparison (2007=100) 120 100 80 60 40 20 0 2007

2008

2009

2010

OTE Stock Price Office Grade A Kifissias Av. Prime Retail Ermou Str.

2011

2012

2013

Prime Grade A Logistics Aspropyrgos Area 10 year Gov. Bond

Source: European Central Bank, Hellenic Exchanges Group, NAI Hellas

After 2008 capital values of real estate, bonds and stocks fell dramatically and reached a bottom in 2011/2012. Capital values of stocks fell more than all other markets while capital values of bonds during 2010-2012 fell less than capital values of grade A offices and prime retail. On the whole real estate capital values followed a similar trend as the values of stocks and bonds. However, bonds' and stocks' capital values appear to be growing since 2011, while property capital values follow with a slower rate. The year 2013 shows that the increase in capital values of bonds and stocks continues while real estate values stabilize. Capital values in 2013 appear to be at a turning point given also the change in macroeconomic indices.

As the real estate market began to stabilize in 2013, the last quarters of the year presented a number of noteworthy transactions: Major Transactions for 2013 Project Name

Period

Type

Vendor

Taiped I

Q4

Office Portfolio

Taiped II

Q4

Office Portfolio

Pangaia REIC

Q4

66% capital share

National Bank of Greece

Invel

653 mil €

Fairfax

Q3

41.2% capital share

Eurobank Properties REIC

Fairfax Financial Holdings LTD

146 mil €

Praktiker

Q4

4 DYI Stores

Rockspring

Eurobank Properties REIC

50 mil €

Dolphino Capital

Q3

Office Building

BNP Bank

Dolphino Capital

10.3 mil €

City Gate

Q3

Mall

APN

Marinopoulos Group

6 mil €

Cosmote Headquarters

Q1

Office Building

DIMAND

Pangaia REIC

Asteras Vouliagmenis

Q4

Ermou 19

Q3

Source: NAI Hellas

Buyer

Price

Greek State

Pangaia REIC

115 mil €

Greek State

Eurobank Properties REIC

145 mil €

Long term Hotel Concession Greek State & National Bank of Greece Jermyn Street Real Estate Fund IV LP Retail Shop

Greek State

Pangaia REIC

120 mil € 493 mil € 5.9 mil €

05

06

Macroeconomic Outlook The year 2013 shows a steady improvement of the main macroeconomic indicators of Greece. This is reflected in the Economic Sentiment Indicator which continues to rise from 80.0 units in 2012 to 91.2 units in 2013, the highest in the last five years.

The expected 2013 contraction of the GDP is c. 3.5%, lower than the 2012 expectation (-6.4%). GDP is expected to rise by 0.6% in 2014 and by 2.9% in 2015. In total the GDP for the period 2007-2013 shrank by c. 27%.

CDP (% change) 8% 6% 4% 2% 0% -2%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014F

-4% -6% -8% Source: Eurostat, processed by NAI Hellas

Inflation (CPI) in 2011 was 3.1%, in 2012 was 1.00% and is expected to fall by 0.8% in 2013 and by 0.4% in 2014. The Uniformed CPI in October 2013 reached a record low of -1.9% (12 month change).

Inflation Rate (% change) 5% 4% 3% 2% 1% 0% -1% -2%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014F

Source: Eurostat, processed by NAI Hellas

The unemployment rate reached a high of 27% in 2013 and is expected to remain at this level in 2014.

Unemployment Rate (% change) 30% 25% 20% 15% 10% 5% 0%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014F

Source: Hellenic Statistical Authority, processed by NAI Hellas

Net disposable income fell in 2013 by 6.7% since 2011 and is expected to fall by 4.8% in 2013 as an outcome of stringent austerity measures that resulted in a decline in salaries and social benefits while is estimated to rise by 0.63% in 2014.

Disposable Income (% change) 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12%

2003

2004

2005

2006

2007

Source: Hellenic Statistical Authority, processed by NAI Hellas

2008

2009

2010

2011

2012

2013E

2014F

Macroeconomic Outlook

Current Trade Balance showed a surplus of 1.5 bil.€ in 2013 compared to a 2.8 bil.€ deficit in 2012 as a result of improved performance in the food and drinks industry, tourism and the non-metallic minerals industry.

Trade Balance (bil. €) 5 0 -5 -10 -15 -20 -25 -30 -35

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014F

Source: Bank of Greece, processed by NAI Hellas

The Automobile industry was one of the sectors in Greece that was hit by the 2008 recession. According to the Hellenic Association of Automobile Merchants & Importers, in 2013 the number of new car licences rose by 0.4% since 2012. Merchants and Importers are optimistic that the car market will slowly pick up and is forecasted to further rise by 5% in 2014.

New Car Licences 350,000 300,000

20%

-12.6% -6.9%

-4.2%

-0.8%

-4.5%

-4.5%

250,000

0.4%

5.0%

-10%

200,000 -35.8%

150,000 100,000

-31.0%

-40.1%

2011

2012

-20% -30% -40%

50,000 0

10% 0%

-17.5%

2003

2004

2005

2006

2007

2008

2009

2010

2013E

2014F

-50%

Source: Hellenic Association of Automobile Merchants & Importers, processed by NAI Hellas

After a deficit in the Budget of 2.8 bil. € in 2012 the Greek Government achieved a surplus of 0.6 bil.€ for 2013 and the forecast for 2014 is nearly 2.9 bil.€.

Government Budget (bil. €) 4 3 2 1 0 -1 -2 -3 -4

2012

2013E

2014F

Source: Hellenic Republic Ministry of Finance, processed by NAI Hellas

2014 Forecast GDP CPI Unemployment Trade Balance Disposable Income Source: NAI Hellas

2015 Forecast

07

08

Office Market The Office Market in Athens since 2008 has witnessed an average fall in capital and rental values of between 40% and 50% respectively. Occupiers' priority has shifted to downsizing in space and achieving more affordable rents.

N W

C

S

Athens Office Market Athens West (W) Athens North (N)

Athens Centre (C)

Athens South (S)

City Centre

National Rd

Kifissias Av.

Sygrou Av.

Alexandras Av.

Petrou Rali

Mesogeion Av.

Faliron

Patision Av.

Iera Odos

National Rd

Vouliagmenis Av.

Piraeus Av.

Thivon Av.

Attiki Odos

Poseidonos Av.

Vas. Sofias Av.

Athinon Av.

Piraeus

Ampelokipi

The Athenian Office Market is characterized by a large supply of Grade C or even D offices and a much lesser offer of Grade A and B accommodation. This specificity drives vacancy rates of offices to an average range of 3% to 6% for Grade A and from 5% to 10% for Grade B, much lower than the EU average. On the other hand, vacancy rates for Grade C or D offices range between 20% to 30% while the stock of ageing buildings continues to rise.

Grade A Office Market - Historic Overview 30 €

8.50%

8.25% 7.50%

25 €

7.25%

7.50% 7.00%

6.50%

8.00%

8.25%

8.25%

9% 8%

7.00%

7%

20 €

6% 5%

15 € 4%

10 €

3% 2%

5€ 1%

0€

0%

2003

2004

2005

2006

2007

2008

Rent (€/sq.m./month) Source: NAI Hellas

2009

2010

Yield

2011

2012

2013

Office Market

Office stock Allocation per Area (Grades A & B) 6% 19% 15%

City Centre West Athens 10%

Kifissias Av. Sygrou Av. Vouliagmenis Av.

50% Source: NAI Hellas, on-site inspections

On the whole, vacancy rates for Grade B buildings remain higher than Grade A as demand for good quality accommodation is ongoing.

Rental values and yields for Grade A office buildings in Athens in 2013 remained at 2012 levels. Athens City Centre is still expected to achieve higher rents than other locations followed by Kifissias Av. (North Athens) which is the second preferred office market in Athens. Grade A Prime Rent

Prime Yield

Grade B Vacancy Rate

Rent

Yield

Vacancy Rate

Athens CBD

20.00 €

8.25%

3%

12.00 €

9.50%

16%

Athens West

12.00 €

11.00%

n/a

7.00 €

11.00%

n/a

15.00 €

8.25%

3%

10.00 €

9.50%

3%

14.00 €

8.50%

2%

10.00 €

9.50%

5%

12.00 €

9.00%

0%

9.00 €

10.00%

6%

Kifissias Av. Mesogeion Av. National Rd Sygrou Av. Faliron Surroundings Vouliagmenis Av. South Athens Source: NAI Hellas

Athens Office Market 2014 Forecast Rents Grade A Grade B

Yields

Demand

Supply

09

10

Retail Market The growing disposable income up to 2008 led to an increase in retail spending which consequently pushed retail rental values significantly higher especially in prime locations such as Ermou, Kifissia and Glyfada. Post 2008, a reduction in disposable income, credit availability and unemployment reduced consumer activity. The average reduction in 2013 retail sales has been lower than 35% since 2008. According to the National Confederation of Hellenic Commerce the percentage of stores that closed down in the city centre of Athens in March 2012 was 29% higher than August 2011 and 27% higher in Piraeus.

Kifissia

Chalandri Peristeri Aegaleo Athens Pagrati Patission Str. Piraeus

Stadiou Str.

Glyfada

Ermou Str.

Grade A Office Market - Historic Overview 350 € 300 €

8%

5.00% 6.50%

6.50%

7.25%

5.00%

6.75%

6.50% 6.00%

7.25%

5.75%

7%

6.25% 6%

250 €

5%

200 € 4%

150 € 3%

100 €

2%

50 € -€

1%

2003

2004

2005

2006

2007

2008

Rent (€/sq.m./month) Source: NAI Hellas

2009

2010

Yield

2011

2012

2013

0%

Retail Market Retail rents in 2013 remained stable at 2012 levels while yields in prime locations reached 7.50%. Throughout the years of the recession, established prime retail locations continued to be favored and have enjoyed comparatively lower vacancy rates whereas secondary locations have suffered high vacancy rates and falling rental values. New conditions in the market created an opportunity for big retailers to consolidate their market positions, reduce occupational costs through negotiation and continue their expansion program. The Food and Beverage sector has grown significantly as the new trend in the retail market is to convert small retail units into bars, cafes, and restaurants.

High Street Retail Space (sq.m.) 60,000

25%

22%

50,000

20%

20% 19% 40,000

17% 16%

15%

14%

30,000

10%

20,000

9%

10%

9%

6% 10,000

5%

3% 0 Glyfada

Kifissia

Ermou

Stadiou

Retail space sq.m.

Patission

Pagrati

Aegaleo

Piraeus

Peristeri

Vacant space sq.m.

Kolonaki Chalandri

0%

Vacancy rate

Source: NAI Hellas on-site inspections

Athens High Street Retail Market 2013 Outlook Rents

Yields

Prime

Secondary

Glyfada

60€-80€

30€-50€

Kifissia

70€-100€

30€-50€

Ermou

90€-140€

45€-70€

Stadiou

80€-100€

50€

Patission

20€-30€

8€-15€

Pagrati

25€-50€

8€-15€

Aegaleo

30€-40€

15€-20€

Piraeus

25€-35€

10€-15€

Peristeri

30€-50€

10€-15€

Kolonaki

60€-110€

25€-50€

Chalandri

30€-75€

15€-25€

Source: NAI Hellas

Prime

Secondary

7.25% - 8.00%

8.00% - 9.00%

11

12

Retail Market

Occupancy by Sector Ermou

Glyfada

Kifissia

Stadiou

Patission

Pagrati

Aegaleo

Piraeus

Peristeri

Kolonaki

Chalandri

Food & Beverage

Cosmetics

Clothing & Footwear

Cars/Moto/Heavy Equip.

Household Goods

Services

Books/Electronics/Toys/Mobile

Vacant

Supermarket/Grocery/Butcher

Other

Source: NAI Hellas on-site inspections

Athens High Street Retail Market 2014 Forecast Rents Prime Secondary

Yields

Demand

Supply

Shopping Centres

Shopping Centres in Greece appeared after 1990 and are typically multi-storey buildings of 3 retail floors where normally one or more large anchor tenants generate footfall. In Athens, Shopping Centres (Malls) followed the same trend whereas bigger outlets commonly known as Retail Boxes or Retail Parks consist of a single large floor space and are found in outer Athens. Shopping Centres compared to High Street retail were less affected by the credit crunch and on the whole performed better than high street retail, with lower vacancy rates, higher footfall and more stable rates. The average leasable space per 1,000 inhabitants (for the greater Athens area) remains less than 100m2 /1,000 persons compared to the EU-27 average of 246m2 /1,000 persons. Shopping Centers - Key Figures Maintenance (pa)

4 - 6 € / m2

Property Management (% of GPI pa)

2 - 4%

Allowance of risk of rental loss

> 5%

Useful Life

50 years

No. of parking spaces requirred

guide: 1 space for 15-20 m2 of sales area

No. of storeys

multi-storey, 2 - 3 retail floors

Fitout Specification

average to high

Building Costs (excl. site improvements)

1,000 - 1,500 € / m2 GEA

Ancillary building costs

7 - 15% of building costs

Source: International Council of Shopping Centers (ICSC), processed by NAI Hellas

Malls

Boxes

Name

Location

Name

Location

Athens Heart

Tavros

Airport Retail Rark

Attica Rd

Avenue

Kifissias Av., Maroussi

Jumbo

Pireos Str.

Golden Hall

Kifissias Av., Maroussi

Media Markt

Metro Mall

Agios Dimitrios

Leroy Merlin

River West

Kifissos Av., Tavros

Smart Park

Spata

The Mall Athens

Maroussi

IKEA

Kifissos Av.

Village Shopping & More

Thivon Av., Rentis

McArthurGlen Designer Outlet

Spata

Total sqm of retail space

272,500 m2 approx.

Tavros

Total sqm of retail space 175,000 m2 approx.

Source: NAI Hellas

Athens Shopping Centres Rents Mall - Anchor Tenant (2,000m2 +)

11€-15€

Mall > 100 m2

35€-60€

Mall < 100 m2

50€-90€

Box (min. 5,000 m2)

8€-16€

Turnover Rent

Yields

7%-13%

8.25%-9.00%

2%-7%

8.50%-9.50%

Source: NAI Hellas

Athens Malls’ Vacancy Rate

Athens Boxes’ Vacancy Rate Occupancy Rate Vacancy Rate

Source: NAI Hellas

Athens Shopping Centres Market 2014 Forecast Rents

Malls Boxes

Yields

Demand

Supply

13

14

Logistics

Investment and development interest for logistics from international players remained low in 2013, with very few transactions to report and low business activity. The market remains owner occupied and demand for logistics during 2013 decreased. Supply of newly constructed logistics buildings was very limited in 2012 and 2013, as developers only look to pre-let or pre-sell before commencing any new development. Falling demand created an opportunity for occupiers to bargain rents on Grade A logistics buildings in prime locations. Attica Logistics Market

Schimatari

Athens North (1)

Inofita

4

Metamorfosi Kifissia Krioneri Agios Stefanos Krioneri

3 Magoula

Athens East (2)

Ag. Stefanos

Kifissia

1

Koropi Spata

Aspropyrgos

Metamorfosi

Airport (El. Venizelos)

Elefsina

Peania

2 Peania

Athens West (3)

Spata

Aspropyrgos

Airport (El. Venizelos)

Magoula

Koropi

Elefsina Inofita & Schimatari (4)

Rents in 2013 varied from 3€/m2/month to 4€/m2/month for the best quality buildings, while yields ranged from 10.50% to 11.50% depending on the location. It is estimated that for 2014 rents and yields for prime logistics will remain constant as the market appears to be stabilizing. Supply of logistics space is not expected to increase as no new development plans are on the way, while existing stock is ageing. Demand for prime logistics is expected to increase due to the new development of the freight center in Thriassio (Athens West).

Prime Logistics Market - Historic Overview 7€ 10.50% 6€

9.50%

9.50%

8.50%

7.00%

8.00%

9.00%

9.00%

9.00%

10.75%

9.50%

12%

10%

5€

8%

4€ 6%

3€ 4%

2€

2%

1€ 0€

2003

2004

2005

2006

2007

2008

Rent (€/sq.m./month)

2009

2010

2011

2012

2013

0%

Yield

Source: NAI Hellas

Athens Logistics Market 2014 Forecast Rents Prime Secondary

Yields

Demand

Supply

Infrastructure

Road Network The continuous upgrade of the E79 international road network will link Athens with the rest of Central Europe. The construction of IONIA ODOS highway will connect the whole of Western Greece linking also three ports (Patra, Astakos, Igoumenitsa) and three airports (Araxos, Preveza, Ioannina). It will run from Antirrio and end on Egnatia Odos highway, which connects the whole of North Greece and E79. It also connects the industrial centres of Western Europe with Eastern Europe and acts as the main road axis for transportation in the Balkans and SE Europe. Ports Due to Greece's extensive coastline, there are several commercial ports located strategically in the country; in Attika (Piraeus, Rafina, Lavrio), Crete (Heraklion, Chania), Western Greece (Kalamata, Patra, Korinthos, Astakos, Igoumenitsa) and Northern Greece (Volos, Thessaloniki, Kavala, Alexandroupoli). New Projects Cosco Pacific Ltd which is already exploiting Pier II of the Piraeus container terminal has announced an additional 230 mil € investment in the port of Piraeus until 2015 including: - the construction and exploitation of Pier III - the upgrade with new machinery of Pier II and East Pier III plus installation of Superpost Paramax cranes - the construction of a Petroleum Pier The capacity of Piers II & III will increase from 3.7 mil TEU to 6.2 mil TEU. Piraeus is becoming a bigger trade gateway and the Southern Europe entry point serving the Balkans and the Black Sea.

2002 Total % change

2003

2004

Piraeus Container Terminal (in TEUs) 2005 2006 2007 2008 2009 2010

2011

2012

1,404,939 1,605,135 1,541,563 1,394,512 1,403,408 1,373,138 433,582 664,895 513,319 490,904 625,914 n/a

14.2%

-4%

-9.5%

0.6%

-2.2%

-68.4%

53.3%

-22.8%

-4.4%

27.5%

Source: Piraeus Port Authority SA, edited by NAI Hellas

Railways The new freight centre (Athens West) of TRAINOSE (subsidiary of the Hellenic Railways Organization) in Thriassio is expected to complete by the end of 2015. The 257 mil € investment includes sorting stations, container management stations, terminals, customs office and warehouses. TRAINOSE and the Piraeus Port Authority have reached an agreement for the construction of two railway stations in the port of Piraeus; one for container transportation and one for car transportation. The 17 kilometer railway route will link Piraeus Port with the Thriassio freight centre and the national railway network where 1.7 mil TEU per annum are estimated to be transported to SE Europe via the national railway network. Cosco and Hewlett-Packard along with other SE Asian companies have reached an agreement for a logistics centre in the modern freight centre in Triassio. To ease the process of the previous mentioned plans, the Greek Government is preparing to sell 49% of the publicly owned TRAINOSE in order to privatize the company. The strategic location of the new freight centre in Thriassio in terms of road network, rail linkage and access to Greece's biggest port has raised an international investment appetite for the area.

15

16

Hotels & Leisure

In 2012 Greek Tourism contributed to GDP by 16.4% and to employment by 18.3%. The Association of Greek Tourism Enterprises reported that income from tourism in the year reached 10.4 bil € coming from 16.9 mil visitors. Greece holds a market share in Europe of 2.9% and 1.5% globally, offering 9,670 hotels spread around the country. Traditionally 80% of visitors to Greece are for holiday; on the contrary only 6.8% travel to Greece on business. The number of tourists arriving in Greece has been growing rapidly since the 2004 Olympic Games of Athens and it is estimated that c.5% more tourists visited Greece in 2013 compared to 2012.

International Tourist Arrivals 2000-2012 Year Arrivals % change 2000

12,378,282

n/a

2001

13,019,202

5.2%

2002

12,556,494

-3.6%

2003

12,468,411

-0.7%

2004

11,735,556

-5.9%

2005

14,388,182

22.6%

2006

15,226,241

5.8%

2007

16,165,265

6.2%

2008

15,938,806

-1.4%

2009

14,914,537

-6.4%

2010

15,007,493

0.6%

2011

16,427,247

9.5%

2012

16,946,543

3.2%

2013E

17,500,000

3.3%

2014F

18,500,000

5.7%

Source: Hellenic Statistical Authority, processed by NAI Hellas

The continuing increase in the number of foreign visitors to Greece created a need for more hotel accommodation. Therefore, the number of hotel units in Greece has been growing since 2004; it is worth noting that between 2000-2012 the number of hotel units in Greece increased by almost 20%.

Tourism Receipts according to travel purpose in 2011

Holiday Academic Visiting Family Business Reasons Other Reasons

Source: The Association of Greek Tourism Enterprises, processed by NAI Hellas

All Type Hotel Evolution (Δ% change 2000-2012) 30% 25% 20% 15% 10% 5% 0% No. of Hotels

No. of Rooms

No. of Beds

Source: Hellenic Chamber of Hotels, processed by NAI Hellas

Evolution in Hotel Numbers by Category 2000-2012 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2003 5* No. Hotels

2004

2005

2006

4* No. Hotels

Source: Hellenic Chamber of Hotels, processed by NAI Hellas

2007

2008

3* No. Hotels

2009

2010 2* No. Hotels

2011

2012 1* No. Hotels

Hotels & Leisure

The 2008 recession had an effect on tourism, as shown in the graphs below. Since the crisis started in 2008, while arrivals increased steadily to 18 mil. a year, tourism receipts published have remained stable at around 10 mil. €, suggesting people are spending less and stay less time.

Greek Tourism Receipts 2000-2012 (bil.€) 14 12 10 8 6 4 2 0 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: The Association of Greek Tourism Enterprises, processed by NAI Hellas

Non-Residents’ Overnight Stay in Greece - All Type Hotels (mil.) 165 160 155 150 145 140 135 130 125 2005

2006

2007

2008

2009

2010

2011

2012

Source: The Association of Greek Tourism Enterprises, processed by NAI Hellas

The years 2009 and 2010 were the most difficult for the Tourism Industry in Greece. However the market appears to be recovering and Tourism Receipts increased in 2012 by 3.2% compared to 2011 according to the World Tourism Organization (UNTWO), which further continued in 2013. Travel balance for the period Jan-May 2013 presented a surplus of 306 mil. € compared to the same period in 2012 according to the Bank of Greece which mainly comes from an increase in tourism receipts of 15.4% in H1 of 2013.

Greek Tourism Ranking based on International Tourism Receipts 2007-2012 Country Country Ranking Year Ranking Europe World 2012

23

11

2011

19

9

2010

21

10

2009

15

8

2008

12

8

2007

12

8

Source: World Tourism Organization, processed by NAI Hellas

The average occupancy of hotels in Greece before the recession ranged from 45% to 50%. After 2009 occupancy fell as low as 34% in 2012. In 2013 however, occupancy reached almost 40% and is expected to increase further in 2014.

Occupancy Rates of Greek Hotels 60% 50% 40% 30% 20% 10% 0%

Source: Hellenic Chamber of Hotels, processed by NAI Hellas

17

18

Hotels & Leisure

The annual Revenue per Available Room (RevPAR) in a 5* Hotel is estimated to exceed 30,000€ from 2013 onwards and over 20,000 € for a 4* Hotel room.

Change in RevPAR of Greek Hotels 35,000 € 30,000 € 25,000 € 20,000 € 15,000 € 10,000 € 5,000 € 0€ 2008

2009

2010

2011

RevPAR 5* Hotels

2012

2013E

2014F

RevPAR 4* Hotels

Source: NAI Hellas

Moreover, the Average Daily Rate (ADR) of a 5* Hotel room in 2013 is estimated to reach 150€ while for a 4* Hotel room the rate is estimated to exceed 90€.

ADR of Greek Hotels 180 € 160 € 140 € 120 € 100 € 80 € 60 € 40 € 20 € 0€ 2008

2009

2010

2011

RevPAR 5* Hotels

2012

2013E

2014F

RevPAR 4* Hotels

Source: NAI Hellas

Lastly, the implied EBITDA multiplier for a 5* Hotel is estimated to increase to 10.5 in 2013 compared to 9 in the years 2010, 2011 and 2012. Likewise, the implied EBITDA multiplier for a 4* Hotel is estimated to reach 10 in 2013 compared to 8 in the years 2010, 2011 and 2012.

EBITDA multiplier in Greek Hotels 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 2008

2009

2010

5* Hotels Source: NAI Hellas

2011

2012

4* Hotels

2013E

2014F

Opportunities in the Greek R.E. Market

Hotels & Leisure

Refurbishment & Re-Development

Grade A Office @ discount

Investment Opportunities

Prime Logistics @ discount

RECOVERY 2014 is the year of stabilization in capital and rental values.

Prime Retail @ discount

GROWTH Growth will emerge as a result of the new base of values established.

INVESTMENT The investment opportunity lies in buying property at current low prices and benefiting from the rise in capital and rental values to come with recovery.

19

Deloitte Athens Headquarters

21 The taxation of real estate in Greece The past years the legislative framework of the taxation of real estate ownership in Greece has significantly changed. As from 1.1.2014 onwards new types of taxes are applicable both for the acquisition of real property and its ownership. Investing in real estate in Greece requires careful design and planning from the very beginning. Different rules apply for individual and corporate investors, while the scope of the investment (whether short term or long term) merit different approach in the design phase. The following paragraphs aim to outline the main tax aspects of real property acquisition and ownership in Greece and to provide the potential investors with an overview of the key points of the applicable legislation. Acquisition of the real property Upon acquisition of real property located in Greece, the potential investor will be liable for the payment of either Real Estate Transfer Tax at 3% (for land and “old” buildings on the higher of the tax value of the property or the value depicted in the notarial deed) or Value Added Tax at 23% (for the supply of “new” buildings). If the investor is an individual Greek tax resident, he should also consider the imputed income provisions that require the taxpayer to be able to prove that he has the funds available to acquire the property in question.

Transfer of real estate

Investor Real Estate Transfer Tax

Value Added Tax

Ownership of real property Taxes on the ownership of real property may be divided in two Real Property exploitation main categories: -Taxation of rental income -Capital ownership taxes For individuals, the annual rental income up to €12,000 is taxed Stamp tax at 11% and any income above €12,000 at 33%. For corporate Income tax or VAT for on rental investors, the rental income is deemed as business income, commercial income taxed at the prevailing 26% rate. It is also noted that commercial leases leases are either subject to 23% VAT (if such an election is made and allowed) or to 3.6% stamp tax. Residential leases are exempt from both VAT and stamp tax. The Capital ownership tax is Annual Real Property Tax comprised by the Main Tax and the Supplementary Tax. The Main Tax is computed on a per property basis, whereas the Supplementary Tax is computed on the total tax value of the property held. The Main Tax is computed taking into account a variety of factors (such as the address of the property, its use, the floor and the total surface) and the Supplementary Tax for individuals range from 0.1% for total property value of €300,000 to 1% for total property value exceeding €1MN. For corporate owners, the tax is 0.5% on the total value of the property which is not self-used by the owner. Finally, it is underlined that for individual Greek tax resident owners, imputed income is also computed for the real property self-used. In addition, there is a special property tax (the so called “off-shore” tax) which applies to corporate owners. Several exemptions apply, the most usual being based on disclosure of the ultimate individual owner. Disposal of real property A Greek tax resident individual owner selling real property is subject to a 15% tax on the capital gain derived from the sale. Certain exceptions apply for low capital gains or for real estate held for a long period of time. The same tax applies if the object of the sale is a company, whose value significantly comprises from real estate (>50%). For corporate owners, the gain from the sale of real property is deemed as business income and is subject to the prevailing 26% Corporate Income Tax rate. The change of ownership due to a donation or inheritance is subject to the special donation or inheritance tax imposed under Greek law. For further information please contact: Thomas Leventis, Tax Partner [direct: +30 210 6781262 / [email protected]] Kostas Roumpis, Tax Manager [direct: +30 210 6781272 / [email protected]]

22 Acquisition of Residence Permits through Real Estate Ownership The application of articles 16 (B) and 20 (B) of the Greek Immigration and Social Integration Code

Guide to Residence Permits for Real Estate investors in Greece [Article 20 of the Greek Immigration and Social Integration Code (“Immigration Code”)] The Greek State introduced a procedure for granting five year renewable residence permits to citizens of non EU member States who invest in real estate in Greece, the value of which is at least 250,000€.

Third country citizens that either personally or through a legal entity: - Own Real Estate property of 250,000€ minimum value; - Have a time-sharing contract of 250,000€ minimum value; - Have a 10 year at minimum lease of hotel accomodation or furnished tourist accomodations (houses) in tourist accomodation complexes of 250,000€ minimum value; Can obtain a five year renewable residence permit for them as well as their spouse and children.

Residence permit is valid for 5 years but can be renewed for the same duration as long as the real estate property remains in the ownership of the applicant or the said leases are active.

As per article 16 (B) of the Immigration Code, a strategic investor, (who invests from 3 mil.€ to 100 mil.€ depending on the type of investment) can be granted up to 10 residence permits for individuals key to the investment who may be escorted by their family members. Such residence permits shall have a 10 year renewable duration.

Residence permit allows access to the 26 Schengen member states for 3 months every 6 months.

Schengen Area as of 1/7/2013

EU Schengen States

Non - EU Schengen States

Non - EU Schengen States

Schengen candidate States

For further information please contact: Spyros Alexandris, Partner [direct: +30 210 3318170 / [email protected]]

Contacts Thomas Ziogas Business Development Manager [email protected] Eleni Makri Research [email protected] Tim Hughes Agency [email protected] George Smalis Valuation [email protected] NAI Hellas/AVENT S.A. is a full service commercial real estate brokerage and consultancy firm, member of NAI Global the world's largest network of independent commercial real estate service providers.

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