Sofia Office Market | H2 2012 OFFICE MARKET OVERVIEW Sofia office stock growth rate continued declining in 2H 2012 determined by already high competition and slowly recovering economy. The heavy burden of the huge volume of new office schemes completions – especially in the period 2009-2010 – discourages investors’ sentiments due to the highly uncertain opportunities for new projects’ rent out within a reasonable horizon of time. STOCK AND NEW SUPPLY Sofia office stock grew by 132,000 sq.m (9% YoY) to 1.63 million sq.m in 2H 2012. The biggest increase in terms of location was registered by NCL – 77,000 sq.m (12%) YoY and in terms of office quality – by office stock Class A – 100,000 sq.m (17%) YoY. As a result of the disproportion of the new additions in terms of submarkets the share of office stock in NCL increased by 1% YoY to 45% (737,000 sq.m) at the expense of CBD (18%, 289,000 sq.m in 2H 2012, compared to 19% in 2H 2011), while EB remained stable at 37% (603,000). Similarly, the share of office stock Class A increased by 3% YoY to 42% (684,000 sq.m) at the expense of office stock Class B (945,000 sq.m). We expect that this trend will continue, given the limited availability of suitable plots at reasonable prices and the lack of sufficient parking space. Moreover, several areas have already established as business zones: Business Park Sofia, Tsarigradsko Shousse Blvd., the area around Sofia Airport, Nikola Vaptsarov Blvd. and the southern part of Bulgaria Blvd. Some of the major projects that were completed in 2H 2012 include Bulgaria Mall (25,000 sq.m office space), Sofia Airport Centre Business Office (17,500 sq.m) and Galchev Holding Corporate Office (4,165 sq.m). There are approximately 250,000 sq.m of office space in pipeline in different stages of completion. Most of the projects expected to enter the market in the next couple of years are announced as Class A, situated mainly in the NCL and EB submarkets. No significant office schemes were launched in 2H 2012. DEMAND Relocations to higher quality and/or more attractive locations remained the main driving force on the demand side of the market – a general trend that has been observed during the last couple of years. Given the limited number of new market entries we expect that relocations will become even more important in the near future. Multinational companies from the pharmaceutical, IT and banking industries remained the main drivers of demand. We are observing an increase in enquiries and relocations of mid-size local businesses trying to make use of the improved cost-benefit terms of newly constructed business centers. Such tenants are generally looking to relocate from lower-quality premises, usually in central locations, to high-quality offices in communicative locations for approximately the same rental levels. Market Trends Sofia office stock surpassed 1.6 million sq.m in 2H 2012 The share of office stock Class A continued growing and reached ca. 41% Class A and Class B office space rental levels remained stable Vacancy rate increased by 140 bps to 28.8% Prime yield declined to 9.5% in 2H 2012 Relocations are the main driver on the demand side of the market Outsourcing and automobile equipment production companies are among the most active Purely office buildings are the most attractive to tenants Amenities and auxiliary facilities are important for successful projects www.eltaconsult.com Elta Consult

Sofia Office Stock and Vacancy Rate Sofia Office Market | H2 2012 In any event, availability of parking space and/or proximity of Metro stations is a crucial factor of tenants decision-making. Tenant preferences towards desired location are changing with the development of new office clusters. Until 2011 demand was focused on the central business district and the area surrounding Business Park Sofia. In H1 2012 we observe strong preference on Tsarigradsko Shosse Blvd. and the office cluster of Sofia Park in Mladost district. Pressed by increasing competition, investors offer different packages of incentives to attract tenants from lower class projects such as grace periods, coverage of relocation, fit-out costs and stepped rent. Emphasis is put on relocation costs and energy efficiency of the project. Another new trend on the market is landlords’ attempts to increase occupancy rates by breaking down larger premises (500 – 1,000 sq.m) to several smaller ones (150 – 250 sq.m) in order to better meet tenants’ requirements. International and local mid-size companies have increased interest in offices offering auxiliary services and/or amenities – retail areas, restaurants, dry cleaning, green areas, etc. have competitive advantage. RENTAL LEVELS In spite of the increasing supply and lacking demand, both Class A and Class B rental levels remained stable in 2H 2012. Class A projects in the CBD are usually offered for EUR 10 / sq.m to EUR 12 / sq.m. base rent, while prime projects in EB and NCL submarkets have ask rents between EUR 7 / sq.m and EUR 10 / sq.m. Service charge is in the range of EUR 1.5 / sq.m to EUR 2.5 / sq.m, depending on the quality of the project; most of the premises have an open book policy. Class B offices on central locations normally have asking base rents of EUR 5 to EUR 7 / sq.m, while premises in the periphery and close to the entrance boulevards have levels of EUR 4 – EUR 6 / sq.m. with service charge between EUR 0.5 and EUR 1 / sq.m (naturally, the service charge for offices Class B includes less services, usually associated with the environment surrounding the building and up-keep of common areas). VACANCY Following a period of slight decrease in 2H 2011, Sofia office market vacancy rate increased to 28.8% due to new supply significantly exceeding take-up. Both less new supply and better absorption rates in the CBD determine the lower vacancy rate in the submarket which decreased from ca. 18% in 2H 2011 to 17% in 2H 2012. Sofia Office Stock and Vacancy Rate Source: Elta consult Sofia Total Office Stock by Submarket – H1 2012 Source: Elta Consult Sofia Airport Centre Photo: Sofia Airport Centre Elta consult www.eltaconsult.com

Sofia Office Market | H2 2012 YIELD OUTLOOK In contrast, the significantly higher new supply in NCL and EB submarkets provided for an increase in vacancy rates to levels around 35%, with the notable exception of the new established business clusters – Tsarigradsko Shousse Blvd., Business Park Sofia, Nikola Vaptsarov Blvd. and Bulgaria Blvd. where vacancy rates are lower at levels around 25%. YIELD Neighboring and European economies struggle with boasted fiscal deficits as compared to Bulgaria’s public debt equal to less than 17% of GDP. This, in addition to the lowest corporate tax (10% flat) and production costs in the EU makes Bulgaria an attractive outsourcing prospect. As a result, there is a double FDI inflow in Bulgaria observed YoY in 1H 2012 (latest available data). Production of automobile components, technological support and call centers (outsourcing in general) are among the economic sectors that were the most attractive to investors. Office space sell prices follow a general trend of slower decrease YoY compared to rents, thus pushing Sofia office market’s prime yield down to levels around 9.5%- 9.75% in H2 2012. Although this represents a decline by ca. 50 BPS YoY, prime yield is still much higher compared to the figures that were observed during the peak years 2006 - 2008 (ca. 7.5%, even lower in some cases). Banks have accumulated significant number of office projects as bad loans and have begun their marketing as distressed assets. We expect that this trend will develop in the near and mid future because the currently high asking prices still restrain investors’ interest. OUTLOOK Sofia’s office market does not show signs for anything more than cautious optimism yet. The gap between tenants’ and investors’ expectations is still present, causing a sense of a instability. Competition will continue increasing putting pressure on landlords, yet we are of the opinion that investors have more or less reached the maximum concessions they are ready to make. Relocation will continue driving demand although we expect certain new market entries. Tenants are expected to continue trying to benefit from the favorable market. We believe that the office premises that are most likely to be successful are located in purely administrative buildings offering auxiliary service and located in highly communicative locations. The zones around the new lines of the Metro are likely to face absorption. Some of the newly built Class B offices also remain attractive to tenants as back offices but the high competition puts pressure on landlords in order to maintain their buildings’ attractiveness. Investors and tenants would search for office premises who can provide them with savings on both rental levels and utility expenses. Sofia Office Stock Class and Type Shares Source: Elta consult (e) expected Bulgaria Mall Source: Bulgaria Mall Notable transactions in H2 2012 Tenant Rented area (sq.m.) Business Center Paraflow Communications 1,000 Twins Centre Source: Elta consult www.eltaconsult.com; properties.eltaconsult.com Elta consult

Sofia Office Market |H2 2012 Sofia Sub Markets Map Elta consult NOTES Stock: Our report aims at projects over 2,000 sq m GEA completed after the year 1995. Areas: The figures quoted for the buildings relate to Gross External Area (GEA) as Net Lettable Area (NLA) is hard to obtain due to the lack of transparency on the market. Prime property: An indicator of the quality characteristics of an office building, conforming to international Class A standards, in the most desirable locations. Prime Rent: Rental value representing an average of marketed rents for Class A office buildings in the most desirable locations. For more information regarding the Sofia Office Market, please contact: Research & Valuation I Elta Consult AD Valeri Leviev - Managing Director valeri.leviev@eltaconsult.com Reseach Department Maxim Jianski - Analyst maxim.jianski@eltaconsult.com Office Space Andrey Tepeshanov – Key Account Manager andrey.tepeshanov@eltaconsult.com 28 Hristo Botev Blvd. 1000 Sofia, Bulgaria Tel + 359 2 987 7647 Fax + 359 2 462 7320 Elta consult www.eltaconsult.com; properties.eltaconsult.com