Events Having Significant Impact on 2019 Financial Results

In conjunction with the publication of the 2019 consolidated annual report, which has been scheduled for 12 March 2020, the Management Board of Develia S.A., “the Issuer”, inform that:

I.

The Develia Group have recognised in the 2019 financial results amounts resulting from a substantial change in the EUR exchange rate and having a significant impact on the gross profit or loss within the period, i.e.:

1. For 2019 cumulatively (a period from 01/01/2019 to 31/12/2019):
   • A decrease in the fair value of investment property, the valuation of which is made in EUR and translated into PLN, in an amount of PLN 18,056,000. This amount will be disclosed in the consolidated statement of comprehensive income under “Profit/(Loss) on Investment Property”;
   • A decrease in the measurement of loan liabilities resulting from loans taken out in EUR for the construction of investment property in an amount of PLN 12,320,000. This amount will be disclosed in the consolidated statement of comprehensive income under “Financial income”.

The impact of the aforementioned change in the EUR exchange rate (as at 31 December 2019, the EUR exchange rate stood at PLN 4.2585, which meant a decrease by PLN 0.0415 compared to the EUR exchange rate published on 31 December 2018, which amounted to PLN 4.3000), on the 2019 consolidated gross profit or loss of the Group totalled PLN 5,736,000 and resulted in a reduction in the consolidated gross profit by the said amount.

2. For Q4 2019 cumulatively (a period from 01/10/2019
   to 31/12/2019):
   • A decrease in the fair value of investment property, the valuation of which is made in EUR and translated into PLN, in an amount of PLN 38,620,000. This amount will be disclosed in the consolidated statement of comprehensive income under “Profit/(Loss) on Investment Property”;
   • A decrease in the measurement of loan liabilities resulting from loans taken out in EUR for the construction of investment property in an amount of PLN 15,365,000. This amount will be disclosed in the consolidated statement of comprehensive income under “Financial income”.

The impact of the aforementioned change in the EUR exchange rate (as at 31 December 2019, the EUR exchange rate stood at PLN 4.2585, which meant a decrease by PLN 0.1151 compared to the EUR exchange rate published on 30 September 2019, which amounted to PLN 4.3736), on the consolidated gross profit or loss of the Group for Q4 2019 totalled PLN 23,255,000 and resulted in a reduction in the consolidated gross profit by the said amount.

The change in the EUR exchange rate is of a non-monetary nature and has no bearing on the current position and operating activities of Develia companies.

II.

The Develia Group have recognised in the 2019 financial results significant amounts resulting from a substantial change in the fair value of investment property and having a significant impact on the gross profit or loss in the period, i.e.:

• Due to the fact that an occupancy permit had been obtained for the Wola Retro Building in Warsaw, the fair value valuation of the “Wola Retro” investment property was recognised. As at 31/12/2019, the fair value of the property amounted to EUR 71,020,000, whereas the impact of the recognition of the valuation on the gross profit or loss totalled EUR 12,437,000 (PLN 52,963,000), of which EUR 1,526,000 (PLN 6,498,000) was recognised in the result for Q4 2019;
• Due to the fact that the situation on the Wrocław’s local retail real estate market has changed and having considered a revision of estimates pertaining to the net operating result of Arkady Wrocławskie S.A., the fair value valuation of the investment property Arkady Wrocławskie dropped and as at 31/12/2019 amounted to EUR 54,000,000, which means a decrease in the property value in an amount of EUR 15,340,000 (PLN 65,325,000), of which EUR 7,060,000 (PLN 30,065,000) was recognised in the result for Q4 2019;
• A change in the value of the other investment property amounted to EUR 830,000 (PLN 3,535,000).

The impact of the aforesaid change to the fair value of investment property in EUR on the 2019 consolidated gross profit or loss of the Group amounted to PLN 15,897,000, resulting in a reduction in the consolidated gross profit by the said amount.

In 2019, the Group made expenditures on investment property in a total amount of PLN 17,613,000. The said amount was recognised under “Profit/(Loss) on Investment Property” and resulted in a reduction in the consolidated gross profit.

In 2019, the Group accounted for linearisation of revenues from lease in an amount of PLN 5,742,000. The said amount was recognised under “Profit/(Loss) on Investment Property” and resulted in a reduction in the consolidated gross profit.

Furthermore, the Group recognised in the 2019 financial results material amounts arising from purchase and sales agreements concluded (transaction costs and other expenses associated directly with the aforesaid transactions), under which the following investment property was disposed of:

• Silesia Star in Katowice and Retro Office House in Wrocław in an aggregate amount of PLN 29,112,000;
• Wola Center in Warsaw in an amount of PLN 4,814,000.

The foregoing costs in the aggregate amount of PLN 33,926,000 were recognised under “Profit/(Loss) on Investment Property”  and resulted in a reduction in the consolidated gross profit.

The following figures relate to the fair value of investment property of the Group as at 31 December 2019:

• Arkady Wrocławskie – EUR 54,000,000;
• Wola Center – EUR 101,900,000;
• Sky Tower – EUR 120,970,000;
• Wola Retro – EUR 71,020,000.

The following figures relate to the fair value of investment property of the Group as at 30 September 2019:

• Arkady Wrocławskie – EUR 61,060,000;
• Wola Center – EUR 101,900,000;
• Sky Tower – EUR 121,400,000;
• Wola Retro – EUR 67,900,000.

The following figures relate to the fair value of investment property of the Group as at 31 December 2018:

• Arkady Wrocławskie – EUR 69,340,000;
• Wola Center – EUR 102,300,000;
• Sky Tower – EUR 121,400,000;
• Silesia Star – EUR 54,375,000;
• Retro Office House – EUR 58,800,000;
• Wola Retro – EUR 42,500,000.

The changes to valuations presented above will be disclosed in the consolidated statement of comprehensive income under “Profit/(Loss) on Investment Property”.

The impact of the recognition of changes referred to in section II on the consolidated gross profit or loss of the Group (excluding the impact of the change in the EUR exchange rate described in section I above) totalled PLN 73,178,000, resulting in a reduction in the consolidated gross profit by the said amount.

III.

Develia S.A. recognised in the 2019 financial results substantial amounts having a significant impact on the financial gross profit or loss in the period, in respect of:

• Dividends received and share in profit, the total amount of which, as disclosed in the statement of comprehensive income for 2019, was PLN 234,596,000. An amount of PLN 54,518,000 was recognised in the company’s result for Q4 2019;
• A change in the value of write-downs of the Issuer’s shares in companies in an amount of PLN 4,496,000. The said amount will increase the Issuer’s separate financial result for 2019. An amount of PLN 7,715,000 was recognised in the company’s result for Q4 2019, leading to the financial result being increased.

The foregoing items have no effect on the consolidated financial statements of the Develia Group.

This information, according to the Issuer’s Management Board, constitutes inside information within the meaning of Article 17(1) of the European Parliament and of the Council (EU) No. 596/2014 of 16 April 2014 on market abuse.