Vrchlického Residence

We offer you participation in mezzanine loan provided for the purpose of financing part of the project costs of Stage III of the residential project Rezidence Vrchlického in Jihlava. During the construction of the third and final stage of the project, the previous Stage I+II will be completed. All stages are being implemented by a single project company, therefore the repayment of the loan is dependent on the successful implementation of the entire project. A total of 119 residential units, 117 garage parking spaces will be constructed within all stages. Phase I+II of the project is at an advanced stage of construction (as of 31 December 2021, the project was at 57.4% of the project cost with occupancy expected in July 2022) and has pre-sales in excess of 100% of the minimum required proceeds. The Upvest loan is structured such that if, as of 31 October 2022, among other things

then the Developer's obligation under the Upvest Loan is to fully repay the proceeds of Stage I+II. However, if the Developer satisfies the above conditions as at 31 October 2022, then a portion of the principal amount of the Upvest Loan of R9 million will be repaid. The balance of the Upvest Loan will be repaid from the proceeds of Stage I+II and the remaining balance of the Upvest Loan will be repaid from the proceeds of Stage III after repayment of the Senior Lender. The remaining proceeds may then be used to repay the partner's borrowings or to repay additions to other capital funds of the project company. Throughout the term of the loan relationship, the borrower is required to maintain a minimum equity of $26 million in the project. CZK. To repay the loan from Upvest, 81% of the sales of Stage I+II at the minimum required yields are sufficient, but if the conditions for repayment of the loan from the proceeds of Stage III are met, the developer needs to make sales of 77% of the minimum proceeds of Stage III. Construction of Phase III of the project commenced in October 2021 and sales commenced in January 2022. Construction work for Phase I+II commenced in March 2021. The general contractor for the project is Geosan Group and the senior lender is Unicredit Bank Czech Republic and Slovakia, a.s. At the time of entering into the loan agreement with Upvest, the project has contracted the main costs of the project budget, mainly construction costs at a fixed price based on the works contract.

The loan is secured by a notarial deed for direct execution and acknowledgement of debt. Interest is not payable during the term of the loan and is payable together with the principal no later than the final maturity date and will be subordinated, together with the principal of the loan, to the Senior Lender's loan used for the completion of Stage I+II and, if the loan is repaid from the proceeds of Stage III, will be subordinated to the Senior Lender's loan used to finance the costs of Stage III. The expected maturity is as follows: CZK 9 million (26%) of the principal and all accrued interest to date on the loan from the proceeds of Stage I+II upon repayment of the Senior Lender within an expected 6 month horizon, the remaining CZK 26 million (74%) and all accrued interest from the sale of the Stage III units within an expected 18 month horizon. Unless the above conditions are met, the Upvest loan must be repaid in full from the proceeds of Stages I and II after repayment of the senior lender's loan to finance the first two stages.

The developer is obliged under the loan agreement to, among other things, comply with the maximum debt to value (LTV) and maximum debt to cost (LTC) ratios for the project. This maximum limit was set at 85% for LTV and 90% for LTC (taking into account the pre-sales of the project). The maximum predicted LTV over the course of the loan relationship would be 77,1 % and the LTC 83 %.

Legal due diligence did not identify any facts that would jeopardise the granting of the loan. Emphasis was placed on assessing the contractual relationships of the project company, the validity of the public permits for construction, the construction contract and other potential legal risks, including a detailed review of historical litigation involving the project company.

Technical due diligence did not identify any facts that would jeopardise the granting of the loan. The main focus of this review was to check the final building permit, the works contract, the evaluation of the construction cost according to the works contract, the project schedule and other potential technical risks. Prior to the disbursement of the loan, the technical consultant will again check the project for constructability and compliance with the project schedule and financial plan.

From the conclusions Sensitivity analysis shows that even with a decline in sales prices Stage III up to 23.2% below the minimum yields under the loan agreement and without any change in other assumptions, Upvest can be expected to repay the loan, including accessories. Even if the implementation of Phase III is extended by 12 months beyond the expected repayment date of the Upvest loan, the project remains profitable on the basis of ROIC at 1.06x.

Among risks of this investment opportunity include the legal risks associated with the project's history, which are described in more detail in the section Legal due diligence and have been assessed by Upvest's legal advisors as low, with a non-final decision in favour of RVD Jihlava, the project company, and a non-final order to discontinue the appeal proceedings in respect of the dispute challenging the ownership of the real estate. The condition for Upvest to draw down the loan is that this decision is legally binding. Possible risks are also a drop in market prices of flats, an increase in costs, especially financial costs due to the rising PRIBOR reference rate or an extension of the project implementation schedule. However, this is not an exhaustive list of the project's risks, of which there are many more. If certain risks are realised in a manner that prevents the developer from meeting the conditions of Upvest remaining in the project until the completion of Stage III, then mitigation of the risks should occur through repayment of the Upvest Loan, including the facilities, from the proceeds of Stage I+II upon repayment of the Senior Lender.

Reporting to investors will be on a quarterly basis.

Participation in mezzanine loan to finance the development project Rezidence Vrchlického in Jihlava.

The developer of the project is RVD Jihlava s.r.o., which is backed by Mr. Ing. PSJ has a long history of implementing a number of residential development projects, administrative and business centres, commercial centres and industrial parks. Originally, the Rezidence Vrchlického project was part of PSJ's projects, specifically the development part of the holding. PSJ a.s. is currently in bankruptcy and its assets have been declared bankrupt, however, the sole shareholder of the project company is Mr. František Vaculík and the project company is not part of the PSJ group.

The developer will use a mezzanine loan from Upvest for the purpose of financing part of the project costs. The loan is provided for the duration of the construction period of Stage III of the project. This construction commenced in the last quarter of 2021 and will run for a certain period of time in parallel with the completion of the previous Stage I+II, which is expected to be completed and approved in June/July 2022. In the event that the conditions defined below are fulfilled no later than 31 October 2022, only the interest accrued on the Upvest loan and the principal of CZK 9 million will be repaid from the proceeds of Stage I+II upon repayment of the senior lender. In the event that these conditions are not met, the entire Upvest loan including interest will be repaid upon repayment of the senior lender from the proceeds of Stage I+II.

The Upvest loan will be secured by a notarial deed of direct execution and acknowledgement of debt. Interest will be payable together with the principal. Repayment of principal is expected to be made in two installments upon completion of Phase I+II and then upon completion of Phase III after repayment of the Senior Lender, no later than the Final Maturity Date.