25 / 26
STANDARD MARKET PRACTICE
Basis of measurement/Valuation method
Whether the Property is under construction, Residual method is used in the valuation.
Due to the fact that the Property is planned for development/building is under construction, the Mixed
approach and Residual method is used in our valuation.
Market transparency
The property market is transparent with regards to property titles but a degree of opacity persists with
regards to the availability of market information. The information on historical freehold and perpetual
usufruct (public ground lease) transactions registered as notarised deeds is freely accessible to the relevant
property valuers, but there is no public record of lease transactions.
Rent payment
Rent is payable monthly in advance, and is quoted without VAT (sales tax).
Rent escalation/Rent review
Annual
Tenants’ covenant
Covenant strength is very important within the Polish market. Rental deposit, bank or parent company’s guarantee equivalent to
3-6 months’ rent, service charge, marketing costs and VAT is expected from all tenants.
Service charge
Within shopping centres service charge payments are common and will include repairs, cleaning and security.
Property taxes and other costs
Tax on sales: Revenues generated on the sale of real estate are subject to the standard taxation rules of Polish corporate income
tax. Effectively, only the “capital gain” is taxed at 19%. The revenue from the sale of real estate must be valued at the price set
in the sale contract. Costs incurred by the buyer for the acquisition of real estate, such as the purchase price, transaction costs
including advisory fees, civil law transaction tax (if applicable), form the initial value of the real estate and are recognised as tax
deductible costs through depreciation write-offs or upon sale. The assets of the business or part
sold will be subject to civil law transaction tax payable by the buyer at the rate appropriate
for a particular item (2% for land, buildings and other tangible property). Operating tax: Real
estate tax is charged to the owner of the land or buildings and infrastructure that are used for
business activities. The local authorities set the real estate tax rates and collect the revenues.
Agents’ fees
8-12% of annual rent.
Incentives
Incentives include capital contributions toward shop-fitting and rent free periods, negotiated
between the parties. Anchor tenants can expect a minimum of 3 months’ rent free or a fit-out
contribution.
Lease length and terms
Typical lease contract period is 5 to 10 years with an option to extend. Most rents are denominated in EUR and paid in zlotys,
but service charges and other payments (e.g., marketing fees) are often denominated in the local currency. Rents are typically
the subject of annual indexation by the European Eurostat Index.
Selling a lease
Sale and lease back transactions are increasingly popular in Poland. There,
however is no consistent market practice and it has bot been a subject of a
separate regulation; such transactions effectively consist of two separate
agreements. tenants can expect a minimum of 3 months’ rent free or a fit-out
contribution.