Warehouses De Pauw : Written questions General Meeting 27 April 2022

WRITTEN QUESTIONS FOLLOWING THE ANNUAL GENERAL MEETING HELD ON 27

The written questions we received (originally in Dutch) are reproduced below and answered. Please note that the Dutch Association of Stockholders asked all questions.

Agenda item 1: Report of the Board of Directors on the course of business in 2021

1. In the strategy section of its annual report, WDP discusses trends, such as 'omnichannel', a new way of shopping that also makes other demands on the design of distribution centres.

A. To what extent is the existing WDP property prepared for this trend?

The WDP property portfolio is well prepared for the changes taking place in the logistics property world with its pure-play strategy as developer and end investor. This enables WDP to implement a building standard with a view to long-term rentals, the (technical) standards of which meet the requirements of today and tomorrow. This is also reflected in the average age of the property portfolio, which is only 7.1 years as of 31 March 2022.

Technological developments, including e-commerce, have had a significant impact on the consumption patterns of consumers. Companies are being forced to quickly transition to omnichannel sales strategies, which in turn is changing the supply chain and influencing the demand for storage space. So, an efficient supply chain also forms the basis for these online purchases, with real estate as one of the crucial elements. There is no such thing as an 'omnichannel' warehouse. The high-quality standards that WDP applies to its buildings ensure that a large proportion of its property portfolio can be used for omnichannel activities. Obviously, an efficient flow of goods is paramount for the customer, both inside and outside the building. For example, high bay warehouses, multi-layer distribution centres, or cross-dock warehouses are all suitable for omnichannel.

Thanks to the continuing (and accelerating) popularity of omnichannel, there is increasing investment in automation (by our customer) where WDP can offer added value in, among other things, the choice of location and the provision of modern sites with the right technical standards.

WDP offers a wide range of properties that support current sectoral trends. Specifically for omnichannel, WDP offers services, such as XXL distribution, warehouses with cold storage high-bay and multi-level, cross-docking, and urban logistics. The share of dedicated e-commerce clocked in at 11% on 31 March 2022. Moreover, over 50% of the portfolio is suitable for urban logistics.

B. Can WDP indicate whether investments are required to adapt the design of the centres and, if so, what would be the magnitude of such investments?

Omnichannel buildings fit in perfectly with WDP's construction standard and do not require any direct special investments on the part of WDP as the end investor. In fact, the customer implements the specific omnichannel needed (such as IT, operations, automation, and product flow).

Omnichannel buildings fit perfectly within WDP's strategy of offering the full spectrum of logistics property. This also makes WDP more flexible regarding the customer's wishes. We never deviate from our high-end construction standard for all types of warehouses (including omnichannel) with a view to functionality and long-term rental as well as reuse for renting. We are flexible. However, when the request is building specifically, this must be reflected in a rent improvement. Moreover, in the case of tenant-specific investments that have no value for the next customer/tenant, the customer must repay it. Usually, the customer is responsible for the investments in the warehouses, such as automated storage systems, conveyor belts, self-driving mobile robots, etc. - the high cost, longer payback period, and complexity of these investments have led to a trend toward longer leases in recent years. For ongoing projects (as of 31 March 2022), the average duration of the ongoing contracts is 11 years, which enhances the visibility of long-term cash flows.

C. Is it conceivable that, for part of the property, there is no (longer any) economic rationale for modernisation?

WDP believes that this does not constitute a risk for the time being. The current property portfolio takes into account modern industry standards with the latest developments in sustainability. As a result, most (technological) solutions can be implemented without impacting functionality.

There will be upward pressure on rental prices due to the increasing shortage of readily available land. Over time, WDP can continue to modernise profitably. In other words, WDP mainly sees opportunities for future redevelopment.

Moreover, the immediate availability of modern and suitable properties is expected to decrease further due to the scarcity of land, which only provides more opportunities for the existing portfolio.

WDP always strives to create added value within its existing property portfolio where WDP does not employ an active cash-recycling strategy but wishes to realise the value internally (through modernisation, among other things). WDP will only disinvest when a building or land no longer offers added value and functionality for the logistics property sector and thus in terms of zoning there is no place for logistics.

2.

To what extent does WDP negatively impacted by the high prices for building materials, current supply chain disruptions, and labour scarcity? How great is the risk that WDP will have to postpone or even cancel planned projects soon given that the required minimum return can no longer be achieved?

WDP does not expect any postponement of construction projects. However, it is currently experiencing a delay in delivery times (combined with higher building costs). In other words, the current situation is deferred income. On average, a development process takes six months for the permit process and nine months for the construction period. The latter has increased from 12 to 15 months due to the multiple supply chain issues we have experienced over the past 24 months.

The current war in Ukraine and rising energy prices has increased building costs further by 10% to 25% since the start of the year due to bottlenecks in the supply of construction materials. This will have a temporary impact on development returns. Moreover, this also impacts the average lead time of construction projects yet to be started. The current difficult supply situation increases pressure on the average lead time to 15 months. However, the existing pipeline in progress (of about 662 million euros by 31 March 2022) is largely protected. WDP is currently in a transitional phase where projects, which had been in negotiation for several months (based on the offers and price quotations at the time), must be closed, even though, in the meantime, we have entered an inflationary environment. For these projects, WDP expects that costs will be borne by WDP, the customer, and the contractor. Nevertheless, WDP is sticking to its average expected development yield of 5% in Western Europe and 7% in Romania. However, it cannot be ruled out that it will dip below this temporarily. This is partly compensated by higher indexation of the rental agreements and also the low interest rate of the recently issued financing.

For new projects still to be negotiated, higher building costs will have to be accompanied by higher rents, especially given the growing scarcity of land.