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Residential and Commercial Construction Segment

Residential and commercial construction is carried out by the Parent Company Unibep SA

It covers the territory of Poland and Eastern Europe (Belarus, Ukraine).

It is the Group’s largest business segment generating approximately 50% of revenue. On the domestic market, the company specialises mainly in residential construction. However, as a result of activities aimed at diversification of operations in recent years, retail and service, public utility and military construction has become an increasingly important part of our business.

FOR YEARS, UNIBEP SA’S POSITION IN THE CENTRAL POLISH MARKET HAS BEEN STABLE AND WELL-ESTABLISHED, WHICH IS CONFIRMED BY NUMEROUS RANKINGS PREPARED BY EXPERTS AND INDUSTRY INSTITUTIONS

In the domestic market, the company specialises mainly in residential construction, which is focused in Warsaw and Poznań, but also Cracow, Katowice, Łódź and Szczecin markets. In the energy and public utility construction sector, in 2021 we expanded our area of operations to include the Kujawsko-Pomorskie and Silesian Voivodeships. We carry out many projects for investors who once again put their trust in us, allowing us to work on further projects. These include OKAM Capital, Yareal, Victoria Dom and the Finnish developer YIT Development. This aspect not only demonstrates our technical competence, but above all confirms our ability to build long-term good relations with our customers.

Significant achievements of the general contracting business in 2021 include primarily the building of a historic order portfolio in terms of sales for 2022 with potential for 2023. This achievement deserves to be clearly highlighted especially in view of the ongoing pandemic, inflation, rising prices for construction materials and labour costs, as well as recent events in Ukraine. In 2021, we commissioned 15 construction projects in Poland. Of these, the Unique Tower – an approximately 100-metre high skyscraper with a usable floor area of 24,100 square metres – deserves special mention. The building offers flats for rent and larger apartments on the top floors. The project is one of the more prestigious construction projects carried out by Unibep SA with a net value of PLN 79.5 million. Another project important for our company, completed in 2021, is the Nordic Sadyba housing estate – a complex of residential buildings in the Mokotów district of Warsaw. The 11-storey blocks contain 281 residential units, 12 commercial premises and 342 underground parking spaces. The total remuneration received by Unibep for the implementation of the project amounted to approximately PLN 100 million net.

15

national area construction sites put into operation in 2021.

Most of the new contracts that Unibep SA concluded in 2021 were in the residential market. Two projects completed in Warsaw: Nova Sfera (PLN 154.7 million net) and Osiedle Ursus Factory 6/7 (PLN 120.0 million net), both commissioned by Victoria Dom, were the most important in terms of contract value. The contract concluded with MDR Katowice 2 sp. z o.o. should also be mentioned. It concerns the construction of a housing estate at Korczaka Street in Katowice and its value is PLN 132.2 million net.

The contract for the construction of the Campus of the Academy of Music in Bydgoszcz, which was won in a public tender, deserves special mention. It is one of the biggest contracts for the implementation of this type of project that Unibep SA has signed in its entire history. The contract was concluded in January 2022, at the end of 2021 we were informed that our tender was the most advantageous. The new eight-storey building of the Academy of Music will house facilities such as four concert halls, three auxiliary halls, as well as teaching rooms, a restaurant and a dormitory. The entire project will be located on a 3-hectare site. Importantly, the building was designed to passive standard, with a strong emphasis on the use of renewable energy sources and maximum energy efficiency. In this respect it will certainly be the most modern facility of its kind in Poland. The design of the new campus of the Academy of Music in Bydgoszcz is also very demanding and ambitious in terms of ensuring acoustic comfort in the building. Unibep has experience in the construction of this type of facilities. We were the general contractor on the Podlasie Opera and Philharmonic and the Świętokrzyska Philharmonic projects.

More and more projects are also appearing in the area of military construction. Events such as geopolitical crises and trends created by major powers have necessitated the renovation, modernisation or expansion of Polish military facilities. Current events in Ukraine – the war declared by Russia on a democratic and independent country – reinforce the belief that the trend towards militarisation and related construction projects will intensify in the coming years. At this point, it is worth mentioning Unibep SA’s projects for the army. In 2019, we signed a contract with Wojskowe Zakłady Elektroniczne S.A., with its registered office in Zielonka, for the construction of a Maintenance Centre for NSM Missiles. The facility was successfully completed. The new complex enables Wojskowe Zakłady Elektroniczne to assemble, modernise and certify missiles which are the primary armament of the Maritime Missile Unit. The net value of the project is PLN 28.5 million. In 2021 we concluded a contract for the construction of a complex of buildings with accompanying infrastructure for the needs of the Military Unit in Węgorzewo (PLN 128.9 million net). We are also working on the construction of the Polish Army Museum in Ossów. Our company has the relevant safety certificates to carry out construction work for the military.

Unibep SA consistently implements the decision made in previous years to continue activities related to the development of BIM technology. This is the future of the construction industry and we must be part of this change. The first facilities using this technology have either been commissioned or are under construction. One example is the Unique Tower apartment building completed in 2021, located in Warsaw’s Wola district at 51 Grzybowska Street. It consists of 3 towers, the highest of which is almost 100 metres high. There is another ambitious project designed in BIM also worth mentioning, the Copernican Revolution Lab in Warsaw which is a public utility building. We also use BIM technology in the design of housing estates. One such estate is the project called Fama Jeżyce, which is being constructed on a nearly 8-hectare site of the former Wiepofama production plant in Poznań. Ultimately, the entire residential complex will comprise 2,500 flats. Our experience and competence in this area allow Unibep SA to acquire complex and technically ambitious projects.

In territorial terms, the Warsaw market is still the most important, followed by Poznań. Our presence in the latter is mainly related to activities as part of the Group’s property development segment, where Unibep SA is the primary general contractor. The company is also active in other regions of Poland and intends to further develop its activities there.

The procurement market has adapted to the conditions caused by the pandemic. The initial turbuManagement Report on the Unibep Group’s Activities in 2021 | Bielsk Podlaski, 7 April 2022 | 30 lence has subsided and the situation has stabilised. The industry has not been badly affected.

What is important for general contracting is the situation that followed the outbreak of war in Ukraine. It creates uncertainty and carries risks for the smooth and efficient continuation of operations. This situation may cause an outflow of workers from Ukraine, who were employed mainly by subcontractors cooperating with Unibep SA. As a consequence, we cannot rule out situations where it will be difficult to keep deadlines or milestones. 2021 saw a noticeable increase in the prices of basic construction materials (steel, concrete, mineral wool, polystyrene). Prices for services were also rising. The upward trend continues. The situation in Ukraine is only exacerbating the upward spiral in prices. To some extent, this may be accompanied by sanctions related to the import of construction materials from Russia and Belarus. The rise in prices can influence government policy and credit and guarantee policies of financial institutions. The willingness of investors to make new investments may diminish and their launch may be postponed, as was the case in 2020 after the introduction of the state of epidemic in our country.

In export markets, the company constructs residential, retail, office and sports buildings, hotels and logistics centres. The export of construction services is conducted by the Parent Company Unibep SA as well as the companies and representative offices present in the countries where operations are carried out. In 2021, we commissioned only one facility in the area of construction exports, a shopping centre in Kharkiv, Ukraine.

Has been focused on the eastern markets: Belarusian (since 2010) and Ukrainian (since 2017). In these markets, three shopping centres were completed in the past years: in Grodno, Kiev, and Kharkiv. Taking into account all of Unibep SA’s activities in Belarus so far, one of the most important projects executed by the company in this country was the four-star Victoria Business Centre hotel in Minsk. The facility, with an area of approximately 29 thousand square metres, has 255 suites, a banquet hall, three conference rooms, a spa area with a swimming pool, a bar and a restaurant for 300 guests. The hotel is also accompanied by a multi-storey car park for 300 cars. In turn, among the projects carried out by Unibep SA in Ukraine, the construction of a modern shopping centre with an area of about 52 thousand m2 in Kharkiv deserves special mention. The total value of the contract was approximately EUR 44.8 million net, which was equivalent to approximately PLN 191.0 million net.

Unibep SA does not currently carry out any projects in the eastern markets. The Management Board of Unibep SA already last year decided to withdraw in practice from the Belarusian market, resulting in an agreement to terminate two contracts concluded with the municipal company Akwa Minsk. The contracts concerned the construction of two sports and recreation complexes in Minsk. The reason for this decision is the unstable socio- economic situation in Belarus, which does not guarantee the safety of business there. At the same time, the Management Board of Unibep SA declares that the company still wants to be active in the Ukrainian market and wants to carry out the projects for which contracts have been signed, of course as long as the geopolitical situation in the region allows it. Back in mid-December 2021, we signed a conditional contract for the construction of a shopping and entertainment centre in Zaporizhzhia, Ukraine, for approximately PLN 260 million net. In view of the above, the decision was made to retain the Unibep representative office in Lviv. In 2021, we also concluded a conditional contract for the construction of an office complex with a shopping and entertainment centre in Lviv. The conditions for the contract to enter into force have not been met. The war in Ukraine means that we will not continue the construction of the Shehyni border crossing and that we will not fulfil our acquisition intentions in the near term.