Develia S A : Company strategy 2024-2028

Company Strategy

2024-2028

2024-2028 Strategy - Agenda

Agenda

Strategy Components and Objectives

Develia and the Market Landscape

Strategy

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2024-2028 Strategy - Strategy Components and Objectives

Strategy Components and Objectives

The purpose of this document is to highlight Develia's growth potential based on an analysis of the company, the market and the competition. The presentation shows long-term goals and the potential to build shareholder value by 2028.

Main components of the strategy:

• Keeping the company resources focused on the dynamic development of the broader apartment market, including further strengthening of the position in the current regional markets, with the option to enter selected new markets with preference through partnerships or M&A
• The core segment within the apartment development business will remain popular, with the intention to clearly emphasise the added value of the product through eco-friendly solutions, functionality, modern technologies and blending into the surrounding areas. The portfolio will also include carefully selected investments in the upscale and premium segments to offer a variety of choices and respond to a wider range of market needs
• Competence building in the forward-looking PRS/PBSA segment (apartments
  for rent and student accommodation), with the option of operational involvement in the construction and management of a PRS/PBSA platform
• Completion of divestment of assets held on the balance sheet in the office and retail segments and the Malin project

Objectives:

• Market share growth to 7-8% in the current markets of operation in the apartment market
• Apartment sales growth > 11% per annum (CAGR) in 2024-2028
• Annual sales of over 4,500 units
• Increasing the land bank base for further development
• Growth in the PRS segment as part of business diversification
• Completion of divestment in the commercial sector
• Ensuring attractive returns on capital at the Group level
• Generate dividends of 1.35 billion over the years 2024 to 2028, or 75% of adjusted net profit

The aim of our growth strategy is to increase the value of the company and increase	3
the dividend potential and ensure dynamic growth in the 2024-2028 time frame.

2024-2028 Strategy - Management

Management Board

Andrzej Oślizło, Chairman of the

Management Board

Andrzej Oślizło has a degree from the University of Economics in Katowice (Economics) and the Silesian University of Technology in Gliwice (IT). He graduated from the European University in Montreux, Switzerland, with an MBA. He has been managing business ventures for over twenty years. He specialises in corporate management, investment, mergers and acquisitions, and strategy and business development.

In his career, he has successfully served as chairman and board member of companies in such sectors as: ICT, TSL, aviation, finance and banking (including Schenker, LOT, Aviva, Expander Advisors, Burietta - Inelo Group). His professional experience also includes private equity funds.

Paweł Ruszczak, Vice-President of the

Management Board

Paweł Ruszczak holds a degree from the Warsaw School

of Economics. He specialises in corporate financial management. He has been involved in the property development sector for more than 15 years, having held such role as Financial Director at Orco Poland, a Polish company of the Orco Property Group, and as Financial Director and Member of the Management Board of Archicom.

Mariusz Poławski, Vice-President

of the Management Board

Mariusz Polawski holds a degree in Management from the University of Warsaw. He has also taken courses on project economics, management, psychology of leadership and corporate governance. He has nearly 20 years of experience in management positions. Since 2003, he has been involved with the Marvipol Capital Group as Managing Director, Chief Operating Officer, Member of the Management Board and Vice- President of the Management Board. For the past 7 years, he has been primarily responsible for the residential and warehouse sector, including such projects as end-to-end execution

and commercialisation of development projects. Member of the management board of the Warsaw and Wrocław branches of the Polish Association of Developers.

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2024-2028 Strategy - Develia and the Market Landscape

1. Develia

and the Market

Landscape

5

2024-2028 Strategy - Develia and the Market Landscape

Implementation of the 2021-2025 Strategy

TOP 5

apartment developers in Poland

Overall

debt level of the company below industry benchmarks

Supporting growth through M&A and partnerships

Market-oriented levels of profitability through efficient multi-site operations

• Develia is one of the leading apartment developers in Poland. In line with its strategy, it has significantly increased the scale of its operations from around 1,400 units per year in 2020 to nearly 2,700 in 2023, reaching the Top 5. The sales target set in the 2021-2025 Strategy is expected to be achieved one year ahead of schedule
• In order to meet sales targets, the strategy aimed to expand the portfolio and land bank while keeping the net debt/equity ratio below 0.5
• Significant increase in apartment market share from 2.6% in 2020 to 4.7% in 2023 in the current markets of operation
• Divestments were made in the commercial segment, including the sale of Sky Tower and Wola Retro in a difficult market landscape, with the capital raised invested in the apartment segment. Operational efficiency was significantly improved - ROE c. 18% compared to 7% in 2020
• Although there has been a significant increase in the scale of operations and the expansion of a land bank, the company has been sharing profits with shareholders - the dividend yield in the years covered by the strategy reached approximately 11%. The land bank and portfolio at the end of 2023 is over 12,500 units compared to 8,600 units at the end of 2020
• The company confirmed that it has the resources and know-how to support its growth with M&A transactions (purchase of the Polish Nexity companies) and partnerships (e.g. JV with Grupo Lar Polska and Hillwood Polska)
• The team will deliver the strategic objectives of the 2021-2025 Strategy one year ahead of the plan

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2024-2028 Strategy		Low quality of	Renewable
Demand	energy
	housing
	outweighing supply	in Poland	Continued GDP
	growth in Poland
	consistently
		ahead of the EU
	increases price
		average
	pressure in the
	market

Context

The mortgage market has		The role of renting as
more room to grow with	Sales of nearly 2,700 units in 2023 and market
an effect of the
the cutting of interest	share in major cities of 4.7% compared to 2.6%	sharing economy
rates during the years of	in 2020.	constantly grows
the new strategy
	Gradual expansion of the portfolio and land bank, also using the funds
	raised from successful divestments of the commercial portfolio. Land	Demography,
Government schemes to	bank of more than 10,000 units at the end of 2023.
social trends,
support buyers, efforts to
	urbanisation
free up land for residential
Gradual return on equity (ROE) growth > 15% per year
development
Changing customer
expectations,		PropTech and
increasing prosperity,		modern technologies
demand related to	The company carries out development investments	in construction
storage of value

and the role of investors	using its own resources, has made its first M&A (Nexity), and expands its partnerships
in the apartment market

War in Ukraine,

geopolitical risks,

opportunities

related

to migration

Limited land supply,

planning reform and its

impact on land

availability

Increased commitment to building long-term relationships

with customers and strengthening brand recognition

Actions taken to prepare for non-financial ESG reporting obligations, changing construction standards, as well as growing environmental awareness among customers

Efforts to create unique aspects of the apartment portfolio to differentiate from other developers

digitisation of the sales processes

Adaptation of ESG standards as a trend setting factor on the property market

Frequent changes		Reallocation of	7
in legislation and
	assets will
lengthy
administrative	Deglobalization	continue
Climate
processes

2024-2028 Strategy

Prospects for

the apartment market

• Scale - the market covering 7 cities and 60,000 apartments per year, with extremely high fragmentation in local markets
• Production volume - 3 million square metres of apartments built by developers per year for the main markets identified
• Development market turnover (7 cities) - PLN 36 billion (with average net price of PLN 12,000)
• Despite rising debt levels, the level of household leveraging is low, which, with the increase in average wages, leaves some room in the households
• Key components of growth with regard to building market share:
• • Pipeline of land purchased, securing land
    at reasonable prices, time to prepare land for listing
  • Property market consolidations
  • Ensuring stable sources of off-balance sheet financing

Volume of annual sales in the markets of 7 Polish cities,

pcs.

1. 000

1. 000

1. 000

1. 000
   0

2016 2017 2018 2019 2020 2021 2022 2023

Source: Otodom

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2024-2028 Strategy

Apartment Market Outlook to 2030

Strong market fundamentals

1.5-3		Strong	Changing	Low
	demand
million
Urbanisation	related to	family	household
apartment
	storage of	model	leveraging
shortage
	value

• Economics - low-cost apartments in relation to wages/prices in EU, decreasing interest rates, government programmes supporting supply and demand in the market, Poland catching up with western Europe, increasing purchasing power
• Demographics - the decrease in population does not affect major urban centres, increase in urbanisation, increase in importance of foreign migration to Poland, war in Ukraine - influx of Ukrainians to Poland
• Resources - poor quality of existing inventory, apartment deficit depending on estimates of 1.5 to 3 million apartments, poor indicators compared to EU with a tendency to level off
• Construction - Poland is the 4th largest residential construction market in Europe

Greater opportunities/market risks

• Land - low supply, no prospects for massive land release during this strategy years
• Planning changes - impact on land availability and prices
• Inflation - wage pressures/general contractor cost risks
• Zero carbon - impact on construction costs
• Credit - compared to the EU, the leveraging of the residential sector is still low, high percentage of cash purchases
• Human resources - shortage of good workers on the labour market
• Green finance - potentially cheaper corporate debt finance and green

Stimulants

Destimulants

Low

house

prices Migration compared

to the EU

Land

availability

Zero carbon

and costs

GDP growth	Scale of
the
based on
Polish
consumption
market

Impact of	Inflation of
ESG	construction
on costs	material costs

Limits related
to human	Red tape
resources/per
sonnel

Fragmentation

and market

consolidation

Wage

pressure/inc

rease in general contractor costs

Green

funding

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mortgages for consumers

Develia's 2024-2028 Strategy - Develia and the Market Landscape

Segment Dynamics and Attractiveness

• Apartment segment - demand outweighs supply (housing gap of approx. 1.5 million units), good development prospects up to 2028, continuation of demand support policy will have positive impact on housing prices and creditworthiness, transfer of capital from deposits to the real estate sector as a storage of value (safe haven).
  Plans to release public sector lands
• Warehouses - the warehouse market is currently one of the few commercial market segments with good prospects for further growth in demand for modern warehouses, sorting and parcel facilities, thanks to developments in the logistics sector and the diversification of supply chains
• PRS - this sector is in its infancy in Poland and has a chance of rapid growth, including potential interest from western funds, but also their growing ESG expectations, with an opportunity of recurring revenue once interest rates stabilise in Europe
• Student Dormitories - a new segment with great potential for development of small commercial plots. This asset is highly sought after by investment funds at the moment mainly due to the lack of rent regulation in western European markets
• Retail - we observe a further shift of distribution channels to the internet at the expense of brick and mortar shops. There is a trend of closing unprofitable locations - transformation towards apartments
• Offices - downturn caused by COVID, increasing role of remote working, search for rental savings

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