GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE...GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE A SNAPSHOT ON THE IMPACT OF THE PANDEMIC AND THE EMERGING OPPORTUNITIES IN THE SECTOR MAY 2020

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE A SNAPSHOT ON THE IMPACT OF THE PANDEMIC AND THE EMERGING OPPORTUNITIES IN THE SECTOR

MAY 2020

©2020 Arbitrage Real Estate. All Rights Reserved

GREEK LOGISTICS AND TRANSPORT INFRASTRUCTURECONTENT


GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE P. 3

THE NPL OPPORTUNITY P.15

2

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE

©2020 Arbitrage Real Estate. All Rights Reserved 3

Freight transport across the EU have shown a relativelyfast growth following the general increase in global tradeand the share of investment in warehouses and askingprices per sqm are increasing.

Developments in national freight transport sector areinterrelated to the transport infrastructure (road, rail, seaand air) technical standards, interoperability andinstitutional framework.

Globally, there is a transformation of warehouses todistribution centers and the old model of largecentralized warehouses is changing into parallel channelsof many smaller warehouses (omni-channeling) drivenpartly by e-retail and the need for high-speed deliveryrequiring intermediate urban distribution points.

Lower availability of logistics assets with large area hasopened the door for new space usage technologies andleads to partnerships and co-locations.

Major changes and development solutions expected inlogistics real estate due to the incorporation ofsustainable design, new tools and automation.

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEGLOBAL MARKET TRENDS

4Source: Arbitrage RE


GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEHOW THE PANDEMIC REVEALED THE IMPORTANCE OF SMART LOGISTICS

The pandemic will accelerate a series of changes that have begun toemerge in the supply chain ιn Greece. In fact, it will create new models,both in the supply chain and in stock procurement related services.

The pandemic will accelerate the digital transformation of the industry. Thedigital based operations and paperless transactions are here to stay.

The industrial manufacturing and logistics sectors will need to develop newoperating models that respond better to crises, such as the one weexperienced, with more domestic production and on-sourcing of essentialgoods to meet domestic demand and orders.

Most likely, the pandemic will mark the "end of an era" for linear supplychains, in which all processes and systems are concentrated within eachcompany's facilities, because it lacks many alternatives and efficiencyoptions.

For supply chains to withstand crises, they will need sooner or later flexible,interconnected ecosystems, involving different companies that produceon behalf of brand owners and co-creators of products. Today'scompetitors might also become partners.

Businesses in the industry will need to adapt strategy to "demand sensing"and buying trends from the end consumer, instead of relying only towholesale demand.

Applying blockchain to the supply chain, which requires large investments,will not only optimize storage costs, but above all service andcompetitiveness.

©2020 Arbitrage Real Estate. All Rights ReservedSource: Arbitrage RE, ΕΥ, Hellenic Logistics Association 5

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATETHE PANDEMIC STRENGTHENED E-COMMERCE WHICH IS CHANGING LOGISTICS

Due to the pandemic, a big part of society has changed its consumerbehavior. The new reality of “home consumption” has led to the furthergrowth of e-commerce.

A significant share of consumers, who turned to e-commerce in theprevious lockdown period, is expected not to return proportionally tophysical retail stores after the end of the pandemic crisis.

As a result, more "last mile" logistics will be needed and also to runefficiently. The urban centres will require smarter distribution centers,environmentally friendly with "green" couriers.

The health crisis has also highlighted the need for more productstockpiling and thus for technologically advanced and flexible centralwarehouses, so that supply chains can increase their efficiency as a resultof massive e-commerce adoption and demand peaks.

Domestic businesses are trying to cope with the new reality of e-commerce. This could lead to the reopening of old and vacated industrialand warehouse buildings as well as big box retail assets with parkingspaces for electric light good vehicles with charging infrastructure.

Local supply chains are expected to further adapt and play a connectingrole with those companies that create and store products, the domestice-commerce platforms that connect products with the end consumersand the IT service providers that manage the chain's operations.

In summary, e-commerce will adjust logistics industry and its real estatedynamics.


Source: Arbitrage RE, Hellenic Logistics Association, Greek eCommerce Association (GRECA)6

Greece’s strategically placed in the Orient / East and Mediterranean transport network route

Source: European Commission – Analysis: Arbitrage RE

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATETRANS-EUROPEAN TRANSPORT NETWORK

7©2020 Arbitrage Real Estate. All Rights Reserved

Source: Ministry of Infrastructure, TrainOSE, Hellenic Civil Aviation Authority - Analysis: Arbitrage RE

Greece’s motorway network has beenunder an extensive infrastructure upgradeduring the last 20 years and the majority ofthe major projects have been completed.Several additional motorway projects arecurrently either under construction orunder design/ planning.

The main freight railway axis connectsPiraeus port with the city of Patras and tothe main European rail network throughThessaloniki and Eidomeni border station.Expansion of the national strategic railwaynetwork and its connection with industrialareas is in the pipeline.

Large infrastructure projects are beingcarried out at the port of Piraeus, as partof COSCO investment plan aiming totransform it into a major European freighthub and logistics center, as well as apowerful cruise home port. Α contract hasalso been signed with a consortium for theexpansion of Thessaloniki portinfrastructure, while the legal framework iscurrently under discussion for the 30 yearsconcession and upgrade of 10 regionalports.

In the domestic airports sector, majordevelopments relate to the upgrade andoperational concession of 14 regionalairports to Fraport Greece, the renewal ofthe "Eletherios Venizelos” operationalcontract for a further 20 years and theratification by the Parliament of thecontract for the construction of the newairport in Kasteli (Crete). A recentdevelopment is also the launch of theconcession procedure for the remaining23 regional Airports.

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEFREIGHT TRANSPORT NETWORK INFRASTRUCTURE


Source: Ministry of Development, General Secretariat for Industry – Analysis: Arbitrage RE

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEDESIGNATED AND NON-DESIGNATED INDUSTRIAL AREAS IN GREECE


*Incl. Oinofyta area in Viotia region

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEINDUSTRIAL AND WAREHOUSE AREAS IN ATTICA*

Indicative commercial information


Source: Arbitrage RE

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEINDUSTRIAL AND WAREHOUSE AREAS IN THESSALONIKI

Indicative commercial information

Source: Arbitrage RE11©2020 Arbitrage Real Estate. All Rights Reserved

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATEEVOLUTION OF LOGISTICS ASSETS PRIME YIELDS AND RENTS

Source: Arbitrage RE12

6

7

8

9

10

11

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020P

%Prime Yields – Logistics, Athens

0

1

2

3

4

5

6

7

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020P

€/m

2/m

onth

Prime Rents [€/m2/m] – Logistics, Athens


Recent activity is coming from medical services, consumer healthcare and householdgoods distributors.

In addition, there was also rental interest from the traditional 3PL and supply chain playersfollowed by supermarkets, electrical equipment and construction materials companies.

There were also requests involving occupiers related to light manufacturing and assemblingservices as well as from car dealerships and educational equipment

Leasing activity

25% of companies using logistics assets operate in the consumer products sector, followed bytransport and 3rd party logistics (3PL) providers (24%) and retailers (11%).

Shipping and Port Operation related companies occupy 5% of the spaces, while businesses inpower sector (mostly oil & gas) occupy 4%, close to telecoms and technology companies(3%).

Mining products & metals, chemicals, healthcare & pharma and diversified industrial productsoccupy each 2% of the available space, followed by agricultural products sector (1%).

Major users and tenants

The acquisition interest in and around Attica comes mainly from Greek REICs and otherdomestic real estate funds and investors.

Active buyers were corporate owner-occupiers active in light manufacturing, consumergoods wholesalers, pharmaceuticals, food storage and 3PL service

In Thessaloniki, interest came mainly from expanding industrial occupiers and localcompanies active in imports and wholesale trading.

Sales activity

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATERECENT ACTIVITY IN THE MAIN MARKETS UNTIL MARCH 2020

Source: Arbitrage RE


Strengths

• Greece's geographical location within the Eastern Mediterranean corridor

• The privatizations and upgrades of ports and airports• The planned and on-going road network upgrades

and railway network expansion• The presence of COSCO in the port of Piraeus and its

development into an international transit container hub

• The durability of the hypermarkets and essential household goods markets

• Strengthening of the e-commerce market

Weaknesses

• Logistics still an immature market with major disparities across companies in the sector

• Lack of large and high-quality industrial properties• Lack of suitable infrastructure, land and local labor

shortages in industrial areas • Land use and slow licensing process for the

development of modern flexible storage spaces in the urban fabric.

• Fragmented ownership and a lot of small 3PL business players with mostly corporate owned-occupied facilities

Opportunities

• Public and private investment in new transit infrastructure and expansion of railway lines to connect with key ports and transit centers

• urban (last mile) distribution centers to meet the demand for faster delivery of goods due to the continued growth of e-commerce

• Investment in modern warehouses and last mile logistics that will utilize a corporate fleet of electric mini van trucks

• More onshoring in local supply chains and further domestic production of essential goods to meet the demand of the domestic market in the first place

• Development of high-tech multi-storey structures with efficient storage systems and implementation of new automated technologies for smarter storage

Threats

• Anemic economic recovery after the pandemic, low growth rates thereafter and trade activity

• Low quality building stock and risk of devaluation and obsolescence of collateralized industrial real estate in non-performing loans (NPLs)

• Shortage of local and targeted institutional funds for investment

• The startup risk and related labor costs linked to the development of local urban distribution chains

• Lack of a modern institutional framework for the liberalization of freight transport sector

• Environmental urban issues (minimum emission zones, traffic congestion

GREEK LOGISTICS AND INDUSTRIAL REAL ESTATESWOT ANALYSIS

Source: Arbitrage RE 14©2020 Arbitrage Real Estate. All Rights Reserved

THE NPL OPPORTUNITY

©2020 Arbitrage Real Estate. All Rights Reserved 15

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NPLs in Greek Banks

THE NPL OPPORTUNITYTHE EVOLUTION OF ΝΟΝ PERFORMING LOANS IN GREECE


Note: The figure does not include Neptune, Icon και Cairo portfolio transactions. Out of the total figure, c.€25bn are currently managed by servicers Source: European Central Bank, Bank of Greece

In €

bn

€35bn bought, written–off or converted to REOs*

€10bn (15%) increase expected

Forecast

16

THE NPL OPPORTUNITYBREAKDOWN OF # REAL ESTATE COLLATERALS IN SOLD CORPORATE NPLs


GREEK CORPORATE NPLS | RE COLLATERAL AND REOs

RE CategoryAsset Count (#) Per Portfolio & RE Category

Amoeba Jupiter (NPL) Jupiter (REO) Kairos Symbol Neptune IconHospitality 33 87 4 24 141 26 66

Industrial/Logistics 48 35 8 54 1,023 434 526

Land 341 556 - 288 4,251 1,395 1,784

Office 186 99 7 91 317 175 249

Other 234 187 8 259 315 232 1,005

Residential 304 653 21 541 1,478 1,391 1,656

Retail 106 144 28 163 1,025 444 526

Total 1,252 1,761 76 1,420 8,550 4,097 5,812

2% 2% 2% 2% 2% 2%9% 9% 9% 9% 9% 9%

38% 38% 38% 38% 38%

5% 5% 5% 5%

26% 26% 26%

11% 11%

10%

100%

100%

100%

100%

Hospitality Industrial/Logistics Land Office Residential Retail Other Total

% Number Breakdown per RE Category

Note; For Neptune and Icon NPL portfolios, there are preferred bidders in exclusive talks with the BanksSource: Arbitrage RE

17

THE NPL OPPORTUNITYVALUE BREAKDOWN OF REAL ESTATE COLLATERALS IN SOLD CORPORATE NPLs


GREEK NPLS | RE COLLATERALS

RE Category Asset Count (#) % of Assets per RE Category Value (€) % of Value per RE

Category

Hospitality 381 2% 676,000,000 15%

Industrial/Logistics 2,128 9% 1,198,700,000 26%

Land 8,615 38% 624,500,000 14%

Office 1,124 5% 345,000,000 8%

Residential 6,044 26% 870,700,000 19%

Retail 2,436 11% 582,650,000 13%

Other 2,240 10% 272,850,000 6%

Total 22,968 100% 4,570,400,000 100%

15%

26%

14%

8%

19%

13%

6%

100%

Hospitality Industrial/Logistics Land Office Residential Retail Other Total

% Value Breakdown per RE Category

Note; For Neptune and Icon NPL portfolios, there are preferred bidders in exclusive talks with the BanksSource: Arbitrage RE

18

THE NPL OPPORTUNITYCORPORATE NPLS COULD LEAD TO INDUSTRIAL REAL ESTATE OPPORTUNITIES


Discounted prices in most industrial and warehouse real estate assets, including land withpotential for industrial development

Opportunity for investors to buy well located and priced industrial and warehouse real estateassets with potential to be renovated and converted to modern facilities

Expected asset price appreciations over the next 2-3 years in a good recovery scenario.

The industrial assets opportunity

Value-add upside will come from retrofitting and upgrading to higher standards, repositioning aslast-mile logistics and/or (re)developing where necessary to capture the upside on sale.

Professional REO management will play a significant role to maintain, lease up and hold the “starassets” for a period rather than exiting within a very short timeframe.

A tax efficient institutional and corporate structure (Industrial REIT) will become a complimentarystrategy to maximise net capital gains

Need for proficient asset management

Non-performing loans (NPLs) remain a huge headache for the systemic banks with α projectedc.€80bn clogging their books by the end of 2020. More than 60% collateralised by real estate.

The active management of the transacted or to be transferred corporate NPL portfolios (such asAmoeba, Jupiter, Symbol, Neptune, Icon etc) will generate extra real estate supply (>€10 bn)

On top of this, growing supply is coming from the systemic banks’ REOs (>€5.0bn), which will keepon increasing due to the continuation of the auction repossessions.

NPLs and supply

19

THE GREEK REAL ESTATE MARKETOUR PUBLIC REPORTS IN EN AND GR


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This presentation is commercial sensitive. It contains information on the Greek logistics and industrial real estate market as wellas related transport infrastructure. It contains our views and market data from publicly available information and our owndatabases. Focused has been placed on the impact of the pandemic and the related emerging opportunities in the sector.

No party is entitled to refer to any information, fact or data included herein in any external document or communicationwithout sourcing Arbitrage Real Estate and thus you accept liability if that occurs.

DISCLAIMER


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GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE...GREEK LOGISTICS AND INDUSTRIAL REAL ESTATE A SNAPSHOT ON THE IMPACT OF THE PANDEMIC AND THE EMERGING OPPORTUNITIES IN THE SECTOR MAY 2020