CORESI URBAN REGENERATION PROJECT Brasov, Romania December 2009

Executive summary. Centerra Capital Partners (Centerra), a Guernsey-based property asset manager backed by Cheyne Capital, manages an industrial property of approximately 1.2 million sqm in Brasov, a city of 300,000 inhabitants in central Romania. Due to its proximity to the city centre, Centerras vision for the site is a new urban centre of Brasov encompassing all the vital city functions: retail, offices, residential, leisure, educational and civic spaces combined in harmonious synergy. This regeneration project, one of the largest in Europe, would total 1.35 million sqm of mixed-use development over time, requiring investments of over 1 Bn phased in time to meet the progressive demand for the different functions, commercial, residential and offices. Centerras aim is to create a framework, deliverable over 10-15 years, to promote a market-led mixed use development of a new urban centre of the city. Centerra believes this is the best way to create value in its investment. To prove this concept and to make this framework deliverable, Centerra intends to execute the first phases of this development over the next few years, either alone or in partnership with other developers specialised on certain type of development. Each stage of the development will be commercially viable in itself as to attract new partners for development and financing. The sites new identity (the name Coresi) is distinctively local as it is the name of the person who printed the first book in Romanian in the 16th century in Brasov. The intention is to transform the old tractor factory into a new vibrant city quarter and sustainable community. Centerra believes that a sustainable and socially responsible development is what will create value in the long term in their investment. Centerra is positioning Coresi as a model development in Romania. With the advice of several world class consultants, DTZ (real estate advisory), YRM (architecture), NormanDisneyYoung (sustainability and engineering), BuroHappold (utilities, structures and traffic) and EC Harris (costing), Centerra created a masterplan which blends commercial parts with social elements including a university campus, city hospital, administrative and cultural buildings, all using state-of-the-art energy efficient design in both building and operations. For more information about the masterplan please consult www.coresibrasov.ro. Brasov. Located in Transylvania in the centre of Romania and founded in the 12th century, Brasov is one of the countrys largest cities and also one of its oldest. Brasov is one of Romanias main tourist destinations given its proximity to Poiana Brasov, Romanias foremost winter resort, Bran (known outside Romania for Draculas castle) and being the centre the Siebenbrgen area inhabited by German colonists since the Middle Ages. Those colonists built many fortresses and old towns over time that still exist today. The city of 280,000 people is in the centre of a region with several towns in its close proximity, totalling 600,000 people. Brasov attracts another 600,000 people annually who stay at least one night in the citys hotels. Renowned for the outstanding beauty of the surrounding mountainous area as well as for its industrial prowess during the communist period, Brasov is experiencing a period of strong economic growth following a period of decline from its industrial heyday. Its industrial heritage

and skills of the local workforce, as well as the strong local universities have attracted an increasing number of foreign firms, many of them from German-speaking countries. Several industrial, pharmaceutical, food processing as well as many IT companies have located there in recent years. While the economic crisis is affecting Brasov, the premises are set for a sustainable strong growth of the citys economy in the long term.

Acquisition overview. In its communist heyday, Tractorul UTB was one of the largest stateowned companies employing 25,000 people and manufacturing 100,000 tractors a year. Following the fall of communism and after many years of heavy losses and huge cumulated debts, the Romanian government stopped tractor production and put Tractorul UTB in voluntary liquidation. In July 2007, the companys assets were sold in a public, open-cry auction. Flavus SRL, a company managed by Centerra, won this auction and acquired all the Tractorul UTB assets comprising the land (1.2 million sqm), buildings (approximately 500,000 sqm), equipment and intellectual property for a total consideration of 77 million (grossly corresponding to 64/sqm). Centerras rationale for the acquisition was the development potential for the 120ha of land centrally located in Brasov. In April 2008, the European Commission, who investigated the transaction over suspicions of state-aid to promote the manufacturing of tractors, reached the conclusion that no state-aid was involved (there is no obligation to manufacture tractors), that the sale was conducted in an open, transparent and widely publicised auction, and that the Romanian government has obtained the market price for the Tractorul assets.

Transaction structure. Flavus Investitii SRL (Romania), owner of all the assets, is in turn 100% owned by Flavus Investments LTD (Cyprus), the majority owner of which is Cheyne New Europe Fund I, a fund managed by London-based Cheyne Capital.

Progress since the acquisition. Since the acquisition, Centerra has achieved several milestones. Most importantly, Centerra: Obtained the clear bill of health from the European Commission, clearing the way to the development. Fended off spurious lawsuit aiming to annul the acquisition of the site by Flavus, and which was one of the main risks in the transaction. Converted initial negative press based on spurious and ignorant rumours into positive PR and goodwill from the political class and the public, easing the way of the development. Developed the masterplan for the site, rooted in the vision of a new urban centre for Brasov and in the future demand for residential, office, commercial and leisure space. This masterplan was presented to the city and the press, attracting a great deal of positive PR and goodwill, which translate into a competitive advantage and speed of permit approvals. Cleared the site of hazardous materials which were properly disposed of. Undertook phase 1 environmental study and adapted development phasing accordingly. Sold usable plant equipment and thousands of tons of scrap metal (presently at a rate of 3,000 tons a month) generating millions of euros of revenues. Rented almost 10,000 sqm of offices and 20,000 sqm of industrial space, generating significant revenues. This has been done consistent with the development strategy: office tenants committed to moving into new buildings as they are built, providing a critical mass for new tenants; industrial tenants on renewable short leases so that they can be moved as the

development progresses. Several high-profile office tenants include IBM, CGS (a US call centre employing 700 and growing), Fresenius (a German clinic) and Freudenberg (a German automotive company). Demolished the 23ha site of the shopping centre (retail park and mall) Finalised the PUZ (zoning permit) based on the Masterplan for the entire 120ha. The zoning of the entire area for a mixed-use urban centre in itself has created significant value in Centerras investment. Concluded agreement with an experienced shopping centre letting agent and developer (see below) to develop the first phase of the regeneration project, which is the 90,000 sqm GLA shopping centre. Letting well under way with confirmed interest from anchors. Concept design finalised, and detailed design to start shortly. Assembled a highly experienced in-house development team that includes development, letting, architecture, engineering, and project management expertise. Retail project well under way: of the Phase 1 (50,000 sqm GLA) the hypermarket (14,000 sqm GLA) and DIY (9,500 sqm GLA) anchors will be signed by the end of 2009. Of the remainder gallery and mid-size units, 35% of the area will be signed by the end of 2009.

Development strategy. Centerra intends to play a long-term land management role by dividing Flavus into several land-owning companies, each focused on a single use (retail, residential, office). On a case-by-case basis, Centerra will either develop alone each plot or, alternatively, it will co-opt experienced and specialised development partners in a development joint-venture. This strategy will allow Centerra to participate actively in the development while partnering with best-of-breed developers on some of the key functions but retaining control over the overall development of the entire site according to the masterplan. Centerra aims to sell certain areas, such as for example the hotel/conference area or the area for the university campus if the conditions are favourable. Centerra intents to start the development with a shopping centre (see below) capitalising on the need for a city of this size of retail space that is currently either insufficient or non-existent. This will come with the development of certain infrastructure (such as the East-West axis), the development of which it is intended will be financed by EU infrastructure and regional development funds. Centerras projected build for residential (7,000 units over 10-15 years) and offices (150,000 sqm over the same time frame) is based on detailed analysis of the local market. The phasing of the project has been thought out to reduce the risk of the development. Consequently, Phase 1 comprises the shopping centre (itself possibly subdivided in 2 phases), about 20-30,000 sqm of offices (of which we have already let 10,000 sqm in existing buildings with the option to move to the newly developed buildings) and 400 apartments. The infrastructure (roads, utilities, canalisation, access and a bridge over the railway to more directly connect the site to the city) and the entire site will be developed based on sustainable principles, in compliance and even above Western European standards. Centerra aims, and the masterplan is designed to achieve, for a LEED rating of Gold. The roads and bridges will be built with the citys involvement but led by Centerra. The energy strategy contemplates the creation of a centralised CHP unit in Phase 2 or 3 as well as on-site renewable energy units. It is envisioned that utilities provision for the entire Coresi city (gas, electricity, heating) will be managed by Flavus Utility, a subsidiary of Flavus.

Master planning and re-zoning. Functional uses. The master planning exercise was carried with an extended consultation with city and local government authorities and citizen organisations so as to maximise the chances for zoning such an extensive area. The masterplan was developed with input from a market absorption study by the European Urban Regeneration team of DTZ, and drawing on other regeneration projects throughout Europe. The masterplan was developed by UK-based firms YRM retained for detailed master planning, BuroHappold for utilities, traffic and structures, and NormanDisneyYoung for sustainability engineering. The masterplan was developed from a series of strategic design moves for the site and its surrounding area of influence. These moves, which comprise of a series of strong urban interventions, are designed to provide the site with a robust framework for the creation of a new quarter for the city of Brasov. It is planned for the site to comprise commercial areas, residential blocks, an office and technology park, a university compound, social and administrative buildings, a city hospital all interlinked by urban squares and parks. Major circulation routes are separated with vehicles running East/West and pedestrian routes North/South. Key axis and gateways are emphasized by the height or social use of the buildings. The development - by virtue of location and mix of functions adds a new urban centre to Brasovs existing medieval and modern financial centre. Situated equidistant from the physical central point, it mirrors the old town centre in its significance for the urban development and its diversity of amenities, such as the park, high-streets and squares. The new quarter will offer spaces and functions that are desirable for a town of regional importance, which could not be accommodated in the medieval town structure. The masterplan provides areas for the expo and business centre, the retail zone and the healthcare campus, satisfying existing and future market demands in an urban context. The mix of housing and social amenities aims to ensure a vibrant and lively community, without which no urban development can succeed. In Appendix are the location of the site in Brasov (Appendix 1), the masterplan (Appendix 2) and forecasted development mix (Appendix 3). The masterplan, finalised in July 2008 was then translated into a re-zoning application by a team of local architects. Since then, we have obtained all the required authorisations from utilities and all government bodies and we recently obtained the zoning permit (PUZ in Romanian) for the entire site. Converting the large industrial area in the proximity of the centre of Brasov into an urban area zoned according to the masterplan and with built in flexibility for building various urban functions is a major success, and one which will add significant value to Center ras investment. Coresi Shopping Centre. Centerra is already well under way in the development of the shopping centre area in the North-West part of the site. This shopping centre is the main priority of the redevelopment of the site because it will create value in the entire site by bringing traffic and creating a strong point of attraction on the site. Additionally, the infrastructure around the shopping centre, in addition to facilitating access to the latter, will create high value areas for further developments of residential, office and leisure space on the site. The full layout of the Coresi Shopping Centre in the context of the Masterplan is illustrated in Appendix 5 below. The letting agent is Krammer Wagner, an Austrian firm with significant experience in the development of malls and retail parks - www.krammer-wagner.at.

Phase 1 of the project entails the development of a 50,000 GLA Retail Park which will include a hypermarket (Auchan), DIY store (OBI), a furniture store (e.g., Kika, Mobexpert, etc.), a large sports store (e.g., Decathlon) and several mid-size units (e.g, Kika, Peacocks, Takko, etc.) as well as a gallery of other retail stores (sports, convenience, cafs, etc.). There will be 2,100 above ground and 350 underground parking spaces. As of 31st December 2009, Centerra has signed a partnership agreement with Auchan to become the key anchor of Coresi Shopping City, with a hypermarket of 16,000 sqm. Additionally, several mid-size and smal retailers have signed up to let space in the 11,200 sqm gallery in front of the hypermarket, totalling 36% of the available GLA. Phase 1 construction will start in the spring 2010 as soon as the construction permit has been obtained. The planned opening is end of summer 2011. In a close Phase 2, Centerra will develop a 40,000 GLA Mall on two floors linked with the Retail Park and anchored by fashion retailers such as Zara, New Yorker, Peek & Cloppenburg, C&A, etc. The shopping centre will include a leisure centre that will include a multiplex cinema, a casino, a family centre, and a games and bowling alley. The shopping centre will include a total of 3,500 parkings over and underground. Centerra has retained the services of L35 - a Spanish architecture firm, renowned for their shopping centre design and many developed projects which are commercial successes, to concept-design the Coresi Shopping Centre. L35 (www.l35.com) are working as leaders of a group of local detailed design architects and engineering firms who will design the shopping centre. For full details on the various players assisting Centerra in this project, please refer to Appendix 4 below.

Appendix 1. The site (in yellow) in the context of Brasov and surroundings

Appendix 2. Masterplan

Appendix 3. Masterplan development mix

Retail Mall Big Box High Street Sub Total Retail Office Administrative Residential Hotel/Conference Exhibition Leisure/Sport Social Buildings Light industry

Built area (sqm) 40,000 50,000 20,000 110,000 150,000 20,000 750,000 15,000 40,000 10,000 50,000 100,000

Total

1,245,000

Appendix 4. Key players and advisors

Investor: Cheyne Capital, London; family offices Owner: Flavus Investitii srl, Brasov Developer: Centerra Management srl, Bucharest Master plan architects: YRM, London Bucharest Master plan sustainability engineers: Norman Disney Young, London Master plan civil engineers: Buro Happold, London Master plan project cost control: EC Harris, Bucharest Shopping centre concept architects: L35 Architectos, Madrid Landscape concept: Benavides Laperche, Madrid Lighting scheme: Kondos & Kondos, New York Shopping centre detail architects: Arhi Grup, Bucharest MEP engineers: MC General Construct, Bucharest & Ekium, Bucharest Structural engineers: Popp & Asociatii, Bucharest / Cereng SRL Brasov Graphic Design: Fileni & Fileni, Buenos Aires Letting agents: Krammer & Wagner, Vienna - Bucharest

Appendix 5. Layout of Shopping Centre in the context of the Masterplan

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