1

For the year ended 31 December

CONSOLIDATED

ANNUAL REPORT

2

0

2

2

Leipzig

01

Board of Directors’ Report

Board of Directors’ report

EPRA Performance Measures

Alternative Performance Measures

Report of the Rèviseur d’Enterprises Agréé

(Independent Auditor)

02

Consolidated financial statements

Consolidated statement of profit or loss

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements

Contents

IMPRINT

4

65

76

86

92

93

94

96

98

100

2

01

Board of Directors’ Report

3

4

in €’000 unless

otherwise indicated

Dec 2022

Change

Dec 2021

Total Assets

11,131,328

-4%

11,561,992

Investment Property

9,529,608

2%

9,339,489

Total Equity

5,914,155

2%

5,802,586

Loan-to-Value

36%

0%

36%

Equity Ratio

53%

3%

50%

BALANCE SHEET HIGHLIGHTS

OPERATIONAL HIGHLIGHTS

Key Financials

in €’000 unless

otherwise indicated

FY 2022

Change

FY 2021

Net Rental Income

396,041

6%

374,550

Adjusted EBITDA

308,100

3%

298,589

FFO I

192,219

3%

186,326

FFO I per share (in €)

1.14

3%

1.11

EBITDA

423,290

-57%

994,223

Profit for the year

179,103

-71%

617,089

EPS (basic) (in €)

0.77

-75%

3.12

EPS (diluted) (in €)

0.76

-74%

2.90

5

In €‘000 unless otherwise indicated

2022

2021

EPRA NRV

5,322,769

5,228,882

EPRA NRV per share

(in €)

30.8

31.7

EPRA NTA

5,115,704

5,020,190

EPRA NTA per share

(in €)

29.6

30.4

EPRA NDV

4,642,313

3,853,263

EPRA NDV per share

(in €)

26.9

23.3

EPRA Earnings

182,702

173,884

EPRA Earnings per share

(in €)

1.09

1.04

EPRA LTV

46%

46%

EPRA Net initial yield

(NIY)

3.2%

3.2%

EPRA "topped-up" NIY

3.2%

3.2%

EPRA Vacancy

4.2%

5.1%

EPRA Cost Ratio

(incl. direct vacancy costs)

22.9%

21.4%

EPRA Cost Ratio

(excl. direct vacancy costs)

20.9%

19.5%

EPRA PERFORMANCE MEASURES

6

Operational Performance Highlights

Solid Like-For-Like Rental Growth

Strong Recurring Operational Profitability

Robust Portfolio Fundamentals

6.7%

2021

2021

2021

2022

2022

2022

Dec 2019

Dec 2021

Dec 2022

Dec 2020

Dec 2019

Dec 2021

Dec 2022

Dec 2020

2020

2020

2020

Dec 2019

Dec 2021

Dec 2022

Dec 2020

6.8

4.2%

5.1%

6.2%

7.4

182

1.07

8.2

192

1.14

8.1

186

1.11

2.9%

0.7%

0.9%

0.9%

2.2%

0.7%

2.2%

0.6%

300

308

299

7

Well Positioned In Current Environment With High Headroom To Bond Covenants

Financial Profile Optimisation Highlights

LONG AVERAGE DEBT MATURITY

PROACTIVE DEBT MANAGEMENT

STRONG LIQUIDITY POSITION

UNENCUMBERED ASSETS

1,200

1,000

800

600

400

200

0

Debt Maturity Schedule

Strong Financial Profile Maintained

Bank Debt

Straight Bonds

(EPRA LTV: 46%

)

€429m

€300m

€8.7bn

88%

of value

8

Letter Of The

Management Board

Dear Stakeholders,

The year 2022 brought about a new set of challenges, coupled with new opportunities. The

inflationary environment and increasing interest rates have weighed on macro-economic con-

ditions and created uncertainty across the economy. We entered 2022 in a solid financial

position and continue to strengthen our operations despite the negative macroeconomic con-

ditions. We have seen our operations and letting performance keep its positive momentum

resulting in a record low vacancy of 4.2% as of the end of 2022.

The population of Germany increased significantly in 2022 driven by an influx of Ukrainian refu-

gees which drove further demand for housing. Increased inflation, particularly in energy prices

as well as material shortages such as steel used in construction, put pressure on construction

costs and increased replacement costs to high levels. Furthermore, the current market envi-

ronment is discouraging new developments and the creation of new supply, exacerbating the

supply-demand imbalance. The completion of new housing supply remains well below what is

targeted and required, while new supply is also forecasted to reduce further as high cost and

uncertainty deter the commencement of new projects.

In 2022, we continued to emphasize corporate social responsibility as a core pillar of our

business practices. The Company offers a wide array of activities and services that are aimed

at improving tenant satisfaction. This includes both online and in person tenant activities,

tenant benefits, accessibility renovations for elderly tenants. Some of the tenant activities

that were organized this year include autumn festivals which among others, included bouncy

castles, photo booths, and more across numerous locations. GCP also reintroduced its digital

advent calendar event where small giſts that include GCP loyalty points and hotel stay prizes

were given out each day. Furthermore, GCP has continued to support local initiatives and

organizations in portfolio locations, both directly as well as through the GCP foundation.

Some examples include supporting a wide variety of youth sports teams, art and culture

initiatives, providing resources to youth educational initiatives, and more. Furthermore, in

cooperation with our affiliates and business partners, we have been able to provide our te-

nants with a unique benefit, providing up to 30% discount on hotel accommodation with

special discounts on food and drinks. We also value the next generation of workers and as a

result have in 2022 given opportunities to 47 apprentices and student workers in order to give

them relevant skills and work experience. Throughout 2022, we have also continued to make

targeted investments that leverage our real estate expertise to deliver projects that impro-

ved asset quality and directly impacted tenant satisfaction. The Company renovated facades

and playgrounds, installed energy efficient windows and insulation, upgraded elevators and

provided space and supported a bookcase installation that offers free reading material to

the community, among other projects. We have also continued to prioritize and improve our

tenant service experience through the 24/7 service centre and GCP tenant App. Our service

centre employs customer care agents that offer individualized support such as corresponding

in several languages to ensure that tenant needs are being met in an appropriate and timely

manner. The team’s hard work has been recognized as our service centre was once again

awarded “fairest customer service” by focus money and TÜV has recertified it for ISO 9001

in February 2022 and for Service Quality in March 2022. Finally, we continue to make stri-

des in digitalizing our customer service contact points which have shortened wait times and

increased convenience. Our GCP tenant App allows existing and prospective tenants to sign

leases, upload documentation, and initiate and track service requests. As a result of these

efforts, more tenant service requests continue to move online as is demonstrated by the rate

of tenants contacting us via GCP App, Chat or E-Mail having increased to 29% in 2022 from

21% in 2021. We will continue to leverage digitalization as a method of improving company

efficiency and tenant service quality which will in turn increase tenant satisfaction and will

aid us in further increasing occupancy.

We have continued on our path to meet our target to reduce CO

2

emissions by 40% by 2030.

Throughout 2022, we have worked on further integrating business processes such as climate

9

reporting, environmental data collection, and building energy audits to develop a more com-

prehensive carbon reduction pathway, incorporating the energy department’s expertise into

the capex planning to determine where targeted investment in energy efficiency and on-site

renewable measures generate the greatest emissions reductions. As result of these impro-

ved capacities, the Company has been able to optimize the execution of targeted moderniza-

tion projects that include installing green heating systems, adding energy efficient windows,

better insulating facades and roofs, and more. As an example, the Company is currently fully

refurbishing an 80-unit residential asset in Cologne to drastically improve its emission profile.

The building is being installed with new thermal pumps to support heat and warm water pro-

duction, a new PV system on the roof, energy efficient windows, and new insulation along the

roof, cellar ceiling, and walls. This investment will reduce the CO

2

emissions of the property

by 65% per annum and raise the EPC energy rating label from “E” to “A”. Investments into

reducing CO

2

emissions is supported by government grants. The Company sees the govern-

ment as an important counterparty in the process of reducing emissions, with the speed of

future progress in reducing emissions also being dependent on government involvement and

funding. The Company has also continued working on switching energy contracts to renewa-

ble or climate-neutral energy sources, prioritizing Power Purchase Agreements (PPAs) which

guarantee additional renewable capacity in local energy grids, while encouraging tenants to

lower their own consumption of energy and switch to more renewable sources of energy. As

a result of this hard work, the Company has received a low risk ESG rating by Sustainalytics

and is ranked in the top 7th percentile of the global universe of companies and in the top 23rd

percentile of real estate peers.

The year 2022 brought about new challenges for the real estate sector, mostly relating to

inflation and increasing interest rates as central banks around the world tightened monetary

policy in response to higher prices. As a result of this monetary policy tightening, the cost of

issuing new debt has increased substantially and volatility in financial market conditions have

made issuances less attractive. We took proactive debt optimization measures in 2022, using

our strong cash balance at the beginning of the period for the repayment of over €615 million

in debt which included redeeming the €450 million Series F convertible bonds and prepay-

ing over €165 million in shorter maturity secured financing. As a result, we have ensured

that the debt maturity profile remains clean until Q2 2024 shielding the Company from the

near-term impact of higher interest rates. Furthermore, our liquidity position which consists

of approximately €429 million in cash and liquid assets covers our debt maturities until mid-

2025. In 2022, we were also able to leverage our high ratio of unencumbered assets of 88%,

representing €8.7 billion in assets, to raise approximately €135 million in new bank debt at

relatively attractive terms. The strong operational performance of the business also substan-

tially covers interest payments as is exemplified by our strong ICR of 6.6x. Towards the end

of 2022, we announced our decision not to call the €200 million perpetual notes series which

had their first call date in January 2023. The Company continues to see the perpetual notes

as an integral part of its capital structure, and would wish to call the notes, as it has done in

the past. As the cost of a potential replacement with a new issuance was significantly higher

than the coupon reset price of the notes, the Company has decided to not call these notes at

that point of time. The Company will continue to assess all the options for the perpetual notes

and can call the notes at every interest payment date.

The inflationary impacts have also had an impact on the operational costs side of the busi-

ness. Cost inflation has been a factor in increasing personnel expenses, IT costs, external

services, and overhead expenses. We have mitigated some of the impact of these increases

by continuing to improve the efficiency of business processes as can be seen by our extensive

digitalization of tenant leasing and maintenance processes. Total construction costs have

also increased substantially, and we have responded by reducing the level of capex under-

taken throughout the portfolio and only selecting to move forward with capex projects that

present the highest returns. Finally, strong inflation in energy costs have also been impacting

our tenants with regard to affordability. We have taken a proactive approach to responding to

this challenge by communicating with tenants and providing resources though a widespread

information campaign. The campaign consisted of informational videos, flyers, posters, social

media outreach, information on GCP’s service center, and more. We also increased pre-pay-

ments where possible and sent out letters to tenants for voluntary early increases in service

charges that have been widely accepted in order to smoothen the impacts of these higher

energy prices and mitigate potential high service charge arrears. We note that our monthly

median net rent level remains affordable. We don’t believe there will be a material negative

impact on collection rates but have conservatively made a provision for a potential weaker

scenario.

Despite macro-economic headwinds, we are proud to present a strong operational perfor-

mance with solid rental growth and continued decreasing vacancy reaching a record low va-

cancy of 4.2% as of December 2022 compared to 5.1% as of December 2021 and 6.7% as of

December 2019. This has been the result of the combined effort of all of GCP’s departments

and highlights the strong progress the Company has made in recent years. Furthermore,

strong rental performance has resulted in like-for-like rental growth of 2.9% as of December

2022. We achieved net rental income of €396 million at the end of 2022, increasing by 6% as

compared to €375 million at the end of 2021. FFO I was €192 million, increasing 3% year over

year as a result of the strong like-for-like rental growth and net acquisitions in past periods as

well as from the impact of acquisitions in 2022, with only limited impact from disposals which

were mostly executed towards the end of Q4. FFO I per share increased by 3% to €1.14 as of

end of December 2022 compared to €1.11 as of end of December 2021. In 2022 we recorded

10

a slight revaluation gain, which is mostly the result of higher gains in the first half of the year

which mostly reverted in the fourth quarter. For the coming year we expect that negative

pressures will outweigh the positive developments of the portfolio to a certain extent, which

we expect will result in limited devaluation. As of the end of December 2022, the Company’s

EPRA NTA amounted to €5.1 billion or €29.6 per share.

As of January 2023, Idan Hadad was named GCP`s Chief Financial Officer (CFO) of the Com-

pany. Mr. Hadad brings a decade of experience in the field of financial management, including

accounting and taxes, compliance and risk management, cash and budget management, pay-

ments control and collection. Mr. Hadad joined the group in 2015 as the corporate controller

and has led the group’s accounting and financial reporting department and will continue to

bring his expertise and commitment in this new role.

We want to thank all our stakeholders for their continued trust in GCP. The management

board recognizes the hard work and dedication that employees have demonstrated over

2022, which helped once again, raise the bar for the speed and quality of services provided

to tenants. We look forward to achieving our new 2023 goals and targets and to create value

for all our stakeholders.

Luxembourg, March 16, 2023

Christian Windfuhr

Chairman and member

of the Board of Directors

Member of the

Board of Directors

Member of the

Board of Directors

CEO

CFO

11

12

The Company

Grand City Properties S.A. and its investees (the “Company”, “GCP” or the “Group”)

Board of Directors (the “Board”) hereby submits the annual report as of December 31,

2022.

The figures presented in this Board of Director’s Report are based on the consolidated

financial statements as of December 31, 2022, unless stated otherwise.

GCP is a specialist in residential real estate, investing in value-add opportunities in den-

sely populated areas predominantly in Germany as well as London. The Group’s portfo-

lio, excluding assets held for sale and properties under development, as of December

2022 consists of 64k units (hereinaſter “GCP portfolio” or “the Portfolio”) located in

densely populated areas with a focus on Berlin, Germany’s capital, North Rhine-West-

phalia, Germany’s most populous federal state, the metropolitan regions of Dresden,

Leipzig and Halle and other densely populated areas as well as London.

GCP is focused on assets in densely populated urban locations with robust and sustai-

nable economic and demographic fundamentals, and with multiple value-add drivers

that it can pursue using its skills and capabilities such as vacancy reduction, increasing

rents to market levels, improving operating cost efficiency, increasing market visibility,

identifying potential for high-return capex investments, and spotting potential for sig-

nificant benefits from the Company’s scale. GCP’s management has vast experience in

the German real estate market with a long track record of success in repositioning pro-

perties using its tenant management capabilities, tenant service reputation, and highly

professional and specialised employees.

In addition, GCP’s economies of scale allow for considerable benefits of a strong bargai-

ning position, a centralised management platform supported by centralised IT/soſtware

systems, and a network of professional connections.

This strategy enables the Company to create significant value in its portfolio and gene-

rate stable and increasing cash flows.

13

Portfolio

inhabitants per sqkm (2020)*

* based on data from Statistisches Bundesamt

1,000 - 4,790

300 - 1,000

150 - 300

100 - 150

36 - 100

Attractive portfolio concentrated in densely populated

metropolitan areas with value-add potential

14

Diversified Portfolio With Distinct Economic Drivers

December 2022

Value (in €M)

Area (in k sqm)

EPRA vacancy

Annualised

net rent (in €M)

In-place rent

per sqm (in €)

Number of units

Value per sqm

(in €)

Rental yield

NRW

2,031

1,226

4.2%

93

6.3

17,917

1,657

4.6%

Berlin

2,177

618

4.1%

66

9.0

8,442

3,520

3.1%

Dresden/Leipzig/Halle

1,252

815

3.5%

54

5.7

13,997

1,535

4.3%

Mannheim/KL/Frankfurt/Mainz

439

176

3.3%

19

8.7

3,013

2,500

4.2%

Nuremberg/Fürth/Munich

303

80

6.1%

9

10.2

1,430

3,796

3.1%

Hamburg/Bremen

430

263

5.7%

21

6.8

3,996

1,631

4.8%

London

1,673

203

3.8%

78

33.3

3,840

8,262

4.7%

Others

981

688

4.9%

53

6.8

11,646

1,426

5.4%

Development rights and new buildings *

244

Total

9,530

4,069

4.2%

393

8.2

64,281

2,282

4.2%

Total December 2021

9,339

4,096

5.1%

383

8.1

64,937

2,205

4.2%

*of which pre marketed buildings in London amount to €30m

Portfolio overview

GCP has assembled a portfolio of high-quality assets in

densely populated metropolitan regions, benefiting from

diversification among dynamic markets with positive eco-

nomic fundamentals and demographic developments.

Industrial center

of Germany.

Political center & Start-up hub.

Dynamic economy driven by

technology and education

with robust demographic

fundamentals.

Leading global city

attracting innovation

and high-quality talent.

Hamburg/Bremen

Nuremberg/Fürth/Munich

Mannheim/KL/

Frankfurt/Mainz

Others

70

%

of the Berlin portfolio is located in top tier neigh-

bourhoods: Charlottenburg, Wilmersdorf, Mitte,

Kreuzberg, Friedrichshain, Lichtenberg, Neukölln,

Schöneberg, Steglitz and Potsdam.

Berlin - GCP’s Largest Location

Quality locations in top tier Berlin neighborhoods

24

%

of GCP’s

portfolio

30

%

is well located primarily in Reinickendorf,

Treptow, Köpenick and Marzahn-Hellers-

dorf.

KEY DRIVERS

North Rhine-Westphalia (NRW)

Well positioned in the largest metropolitan area in Germany

3%

Marl

1%

Herne

1%

Recklinghausen

1%

Mönchengladbach

4%

Solingen

3%

Gelsenkirchen

5%

Erkrath

4%

Bochum

18%

Others

9%

Duisburg

6%

Wuppertal

6%

Essen

27%

Cologne

7%

Dortmund

5%

Bonn

The portfolio distribution in NRW is focused on cities with strong fundamentals within

the region. 27% of the NRW portfolio is located in Cologne, the largest city in NRW, 9% in

Duisburg, 7% in Dortmund, 6% in Essen, 6% in Wuppertal, and 5% in Bonn.

December

2022

Value

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualised

net rent

(in €M)

In-place

rent per

sqm (in €)

Number

of units

Value

per sqm

(in €)

Rental

yield

NRW

2,031

1,226

4.2%

93

6.3

17,917

1,657

4.6%

1.

Cologne

2.

Duisburg

3.

Dortmund

4.

Essen

5.

Wuppertal

6.

Bonn

7.

Erkrath

8.

Bochum

9.

Solingen

10. Gelsenkirchen

11. Marl

12. Herne

13. Recklinghausen

14. Mönchengladbach

inhabitants per sqkm (2020)*

300 - 1.000

150 - 300

100 - 150

1000 - 4.790

* Based on data from Statistiches Bundesamt

Population Density In NRW

KEY DRIVERS DRIVING

INCREASED LETTING DEMAND

.

.

December

2022

Value

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualised

net rent

(in €M)

In-place

rent per

sqm (in €)

Number

of units

Value

per sqm

(in €)

Rental

yield

London*

1,673

203

3.8%

78

33.3

3,840

8,262

4.7%

London Portfolio

Located in strong middle class neighborhoods

Zone 1

Zone 2

Zone 3

Zone 4

Zone 5

Zone 6

underground station

overground/train station

asset location

airport

Quality East Portfolio

Located in the growing and dynamic cities of Dresden, Leipzig and Halle

51%

Leipzig

28%

Dresden

21%

Halle

KEY DRIVERS

Strong demographic fundamentals, with

increasing urbanization over last decade and

young population compared to surrounding

regions, with Leipzig expected to be among

the cities leading population growth in

Germany through 2030.

University cities with a wide appeal

attracting students from around the world.

Leipzig’s university, founded in 1409, is one

of Europe’s oldest.

December

2022

Value

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualised

net rent

(in €M)

In-place

rent per

sqm (in €)

Number

of units

Value

per sqm

(in €)

Rental

yield

Dresden/

Leipzig/

Halle

1,252

815

3.5%

54

5.7

13,997

1,535

4.3%

Quality North Portfolio

The North portfolio is focused on the major urban centers of

Hamburg and Bremen – the largest cities in the north of Germany.

37%

Hamburg

63%

Bremen

KEY DRIVERS

December

2022

Value

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualised

net rent

(in €M)

In-place

rent per

sqm (in €)

Number

of units

Value

per sqm

(in €)

Rental

yield

Hamburg/

Bremen

430

263

5.7%

21

6.8

3,996

1,631

4.8%

21

Strong Financial Position

CONSERVATIVE FINANCIAL POLICY

GCP follows a financial policy in order to maintain and improve its strong

capital structure:

■

LTV limit at 45%

■

Debt to debt plus equity ratio at 45% (or lower) on a sustainable basis

■

Maintaining conservative financial ratios with a strong ICR

■

Unencumbered assets above 50% of total assets

■

Long debt maturity profile

■

Good mix of long-term unsecured bonds and non-recourse bank loans

■

Maintaining credit lines from several banks which are not subject to

Material Adverse Effect clauses

■

Dividend distribution of 75% of FFO I per share*

The Company has a conservative financial approach, maintaining a strong

liquidity position providing for valuable financial flexibility. The strong

liquidity position is reflected by €429 billion in cash and liquid assets at

year-end 2022.

INTEREST HEDGING STRUCTURE

GCP’s bank loans are spread across many loans from many different financial

institutions that are non-recourse and have no cross-collateral or cross-de-

fault provisions.

In accordance with the Company’s conservative capital structure, as of De-

cember 2022 95% of its interest is hedged. Over the course of 2023 several

fixed rate hedging mature, which is expected to result in a hedging ratio of

91% assuming the Company will not re-hedge the instruments.

As part of GCP’s conservative financial policy, bonds issued in foreign curren-

cies are hedged to Euro until maturity.

GCP holds an investment-grade credit ratings from both Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s), with current long-term issuer ratings of BBB+ and Baa1, respec-

tively. Additionally, S&P assigned GCP a short-term rating of A-2. In 2021, GCP terminated its contract with Moody’s as part of cost savings measures.

However, Moody’s maintains its

public rating on GCP on an unsolicited basis.

CREDIT RATING

LOAN-TO-VALUE

GCP strategically maintains its strong financial profile characterised by long debt maturi-

ties, high proportion of hedged interest rates, excellent financial coverage ratios, and a low

LTV. The LTV as of December 31, 2022 is at 36%, well below the management limit of 45%.

Low Leverage (Loan-To-Value)

45% Board of Director’s limit

INTEREST COVER RATIO

GCP’s financial flexibility remains strong over time due to its high profitability, which

is reflected in a high interest cover ratio. For the year of 2022, the Interest Cover Ratio

was 6.6x

ICR

6.6x

Dec 2021

Dec 2022

UNENCUMBERED ASSETS

The Company maintains as part of its conservative financial policy a high proportion of unencumbered assets

to provide additional financial flexibility and contribute to a strong credit profile, with €8.7 billion in unencum-

bered assets as of December 2022, representing 88% of the total portfolio value.

An important component of GCP’s financial structure is a strong diversification of funding sources, reducing the

reliance on any single source and resulting in a diversified financing mix. This is enabled by the Company’s wide

reach and proven track record in issuing instruments across various capital markets: straight bonds, convertible

bonds, perpetual notes and equity capital. Moreover, GCP’s diversity is further improved through issuances in

various currencies, issuing straight bonds in CHF, JPY and HKD. The nominal amount of all foreign currency

issuances are swapped into Euro until maturity. Issuances in various currencies increase the investor base and

provide expansion into a wider range of markets to attract funding.

In addition, the Company maintains lasting relationships with dozens of banks and financial institutions,

providing for access to bank financing.

FINANCING SOURCES MIX

3

%

3

%

Dec

2021

57%

60%

36

%

37

%

Dec

2022

Bank debt

Straight bonds

Convertible bond

Equity

Perpetual Notes

Dec 2021

€8.4 BN

€8.7 BN

Dec 2022

24

Company Strategy

And Business Model

Repositioning + Capex Increase: Rent +

occupancy. Decrease operating costs and

non-recoverable costs. Improve tenant

satisfaction. Centralised IT/software

Deal-sourcing network

established since 2004.

Due Diligence & negotiation of

best possible deal terms

Acquisition.

Yield & Value increase.

Capital recycling through disposals and

channeling proceeds into quality properties

and/or debt repayments

Focus on

long term hold

TAKE

OVER

4

5

6

25

FOCUS ON EXTRACTING VALUE-ADD POTENTIAL IN ATTRACTIVE, DENSELY

POPULATED REGIONS, WHILE KEEPING A CONSERVATIVE FINANCIAL

POLICY AND INVESTMENT-GRADE RATING

GCP’s investment focus is on the German and London residential markets that it perceives to

benefit from favorable fundamentals that will support stable profit and growth opportunities

for the foreseeable future. The Group’s current portfolio is predominantly focused on Berlin,

North Rhine-Westphalia, the metropolitan regions of Leipzig, Dresden and Halle and London,

as well as other major cities and urban centers in Germany.

The Company follows a selective

acquisition criteria and benefits from internal growth potential from the acquisitions of high

cash flow generating and under-rented properties with vacancy reduction potential.

CASH FLOW IMPROVEMENTS THROUGH FOCUS ON

RENTAL INCOME AND COST DISCIPLINE

GCP seeks to maximise cash flows from its portfolio through the effective management of its

assets by increasing rent, occupancy, and cost efficiency. This process is initiated during the

due diligence phase of each acquisition, through the development of a specific plan for each

asset. Once taken over, and the initial business plan is realised, GCP regularly assesses the

merits of ongoing improvements to its properties to further enhance the yield on its portfolio

by increasing the quality and appearance of the properties, raising rents and further increa-

sing occupancy. GCP also applies significant scrutiny to its costs, systematically reviewing

ways to increase efficiency and thus increase cash flows.

MAXIMISE TENANT SATISFACTION

Tenant satisfaction is a key pillar of the GCP strategy and helps explain the Company’s suc-

cess since its foundation. GCP primarily meets customer service requests in two different

ways. Firstly, through the GCP service center, our customer care agents individualise solu-

tions for each tenant and provide 24/7 support in several different languages. Tenants are

ensured prompt responses to queries and can expect to hear back within a maximum timefra-

me of 24 hours. Furthermore, urgent requests are taken care of within a time frame of under

an hour. As a result of this quick and personalised customer support system, the service

center has been validated independently and well rated. Focus Money rated the GCP service

center’s customer service as “fairest customer service” once again and TÜV Nord recognised

the GCP service center by recertifying it for ‘service quality’ in February 2022. TÜV Hessen

also recertified the GCP service center for ISO 9001:2015, its quality management system,

in March 2022. The second major point of contact is through the Company developed GCP

tenant App which further digitalises, quickens, and improves processes, thereby positively

impacting tenant satisfaction. Through the GCP App, prospective and existing tenants can

access tools such as apartment search as well as service and maintenance requests. The

App allows tenants to view the status and receive updates on these requests, thus increa-

sing the transparency of the process. These efforts have been well received by tenants as

more requests happen digitally with the rate of tenants contacting the Company via GCP App,

Chat or E-Mail increasing to 29% in 2022 from 21% in 2021. The Company has also establis-

hed a tenant loyalty program which allows tenants to gather points by paying rent on time,

renting duration, and through participation in activities and programs. The Company places

strong emphasis on enhancing the living quality and environment of its tenants through vari-

ous measures. GCP strives to develop a holistic sense of community amongst its tenants by

installing playgrounds, improving accessibility at the properties, organising family-friendly

events, supporting local associations as well as through various other initiatives. Some of the

Company’s regularly organised tenant events include Santa Claus celebrations for Christmas,

Easter egg-searching events as well as other events such as the dozens of “GCP Autumn Par-

ties” that were organised in 2022. The Company has also worked towards providing children

with study areas, supporting local organisations that promote creativity, organising youth

programs, mother-baby groups, and senior citizen meeting points, among many others, to

establish a pleasant environment within the community. GCP also identifies opportunities to

work with local authorities to improve the existing infrastructure in the community, contribu-

ting to a better living environment and making neighbourhoods more desirable.

OPERATIONS SUPPORTED BY CENTRALISED IT/SOFTWARE

The Group’s integrated centralised IT/soſtware plays a significant role in enabling GCP to

achieve its efficiency objectives. The key to this system is the detailed information that it

provides not only on the portfolio but also on existing and prospective tenants, which staff

can access on and off the road. This all-encompassing data processing enables the Group to

track and respond to market rent trends, spot opportunities for rent increases, and manage

re-letting risks on a daily basis. Implementation of digital processes for letting activities allow

for paperless signing of leases, improving the speed and efficiency of the letting process for

GCP and tenants while integrated service request through GCP’s tenancy app improve the

efficiency and transparency of maintenance and service requests for tenants. GCP’s IT/soſt-

ware provides management with the detailed information necessary to monitor everything

from costs to staff performance.

26

27

Capital Markets

INVESTOR RELATIONS ACTIVITIES SUPPORTING

THE STRONG CAPITAL MARKETS POSITION

The Company continues to proactively present its business strategy and thus enhance per-

ception, as well as awareness, of the Company among capital market investors. GCP seizes

opportunities to present a platform for open dialogue, meeting hundreds of investors in do-

zens of conferences around the globe as well as hosting investors at the Company’s offices

or via video conferences. The improved perception leads to a better understanding of GCP’s

business model, operating platform and competitive advantage, and leads to strong confi-

dence from investors. GCP’s strong position in equity capital markets is reflected through its

membership in key stock market indices, including the SDAX of the Deutsche Börse, the FTSE

EPRA/NAREIT Global Index series, GPR 250, GPR Europe ESG+, DIMAX and the MSCI index

series. These index memberships are the result of many years of success in equity markets

and the strong investor perception of the Company.

Placement

Frankfurt Stock Exchange

Market segment

Prime Standard

First listing

Q2 2012

Number of shares

Number of shares, excluding

suspended voting rights, base

for KPI calculations

Shareholder structure

Freefloat

39%

Aroundtown SA

(through Edolaxia Group)

Treasury Shares

2%

Nominal share capital

17,618,789.90 EUR

ISIN

LU0775917882

WKN

A1JXCV

Symbol

GYC

Key index memberships

SDAX

FTSE EPRA/NAREIT Index Series

MSCI Index Series

GPR 250

DIMAX

Market capitalisation

1.5 bn EUR

59%

28

VAST AND PROVEN TRACK RECORD IN CAPITAL MARKETS

The Company has established over the years an impressive track record in capital markets,

continuously accessing various markets through its strong relationships with leading invest-

ment banks in the market. Supported by two investment-grade credit ratings (BBB+ from

S&P and Baa1 from Moody’s), GCP is able to quickly and efficiently source funds at attractive

interest rates, significantly contributing to its low average cost of debt (of currently 1.3%).

Since 2012, GCP has issued approx. €9 billion through dozens of issuances of straight bonds,

convertible bonds, equity and perpetual notes. The Company launched an EMTN programme,

providing significant convenience and flexibility by enabling the issuance in a short of time of

financial instruments of various kinds, sizes, currencies and maturities. Through its strong ac-

cess to capital markets, GCP is able to proactively and effectively manage its debt structure,

contributing to current cash and liquid assets covering debt maturities until mid-2025 and a

long average debt maturity of 5.9 years.

ANALYST RECOMMENDATIONS

DZ Bank

19.09.2022

First Berlin

17.11.2022

Kepler Cheuvreux

28.11.2022

HSBC

27.01.2023

Berenberg

09.12.2022

UBS

07.03.2023

J.P. Morgan

09.12.2022

Oddo BHF

03.02.23

Goldman

Sachs

24.01.23

Societe

Generale

24.01.23

Deutsche Bank

19.01.23

Kempen & co

08.02.23

Barclays

30.11.2022

Bank of America

Securities

18.01.23

8

9.3

9.1

18.9

16.8

16

15

13

10.9

10.5

10

11.75

11

12

Citigroup

02.08.2022

26.2

29

30

25

20

15

10

5

0

2022

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

issue price €2.75

Grand City Properties

320%

MDAX

(rebased) 151%

FTSE EPRA/NAREIT Germany

(rebased) 50%

SHARE PRICE PERFORMANCE AND TOTAL RETURN COMPARISON SINCE FIRST EQUITY PLACEMENT (19.07.2012)

30

GCP’s

goals and targets are intertwined with the health and viability of local communities,

its employees, and the avoidance of the worst impacts of climate change. As a result, the

Company prioritises improving the sustainable nature of its operations and properties and

maintains a high standard of responsibility towards all of its stakeholders, including tenants,

employees, shareholders, creditors, suppliers, the environment as well as the broader com-

munities in which the Company operates. One of GCP’s core principles is to create affordable

communities where people wish to live and stay. By acting on core ESG principles to improve

social, institutional, and environmental conditions in its portfolio locations, GCP can make

positive impacts while also supporting the Company’s long-term business interests.

GCP considers ESG to be pivotal to the overall success of the organisation and as a result has

created and integrated wide reaching ESG policies into the different functions of the Compa-

ny. The various efforts and initiatives undertaken in 2022, as well as the Company’s future

targets are extensively displayed in sustainability reporting that consists of an externally

assured non-financial report as well as topic-specific sustainability documents that cover all

material issues. These will be available for download later in 2023 under the sustainability

section of the Company’s website. GCP’s maintains its reporting processes in line with the

EPRA sBPR (Sustainability Best Practice Recommendations) guidelines and has the published

non-financial data also externally assured under the ISAE 3000 standard.

GCP’s commitment to sustainability measures was recognised in February 2022 by Sustaina-

lytics, a leading sustainability rating agency, which ranked GCP in the top 7th percentile of

the global universe of companies and in the 23rd percentile of real estate peers. GCP ranked

by S&P Global’s corporate sustainability assessment (CSA) in the top 7th percentile on real

estate companies globally and was rated industry-best in the sub-category “Customer Rela-

tionship Management”, reflecting the strong focus on tenant satisfaction.

Furthermore, for the sixth year in a row, in September 2022, GCP was awarded the EPRA BPR

Gold Award as well as the EPRA Sustainability Best Practices Recommendations (sBPR) Gold

Award for its EPRA sBPR reporting, underlining the Company’s commitment to the highest

standards of transparency and reporting.

Environment, Social and Governance

ESG

31

32

Environmental Responsibility

GCP takes its environmental responsibility seriously and recognises its role in contributing to

national and global efforts to limit the worst impacts of climate change and promote sustai-

nable development that is in the best interests of all stakeholders. As a result, the Company

has set a target to achieve a 40% reduction in CO

2

emissions by 2030 against a 2019 baseli-

ne. A Group-wide energy performance policy has established a management framework to

achieve this target. This framework covers all assets and corporate offices and encompasses

monitoring and review, benchmarking, energy optimisation, auditing and target setting-pro-

cesses for energy, use of fossil fuels, and CO

2

emissions.

GCP has worked to further integrate climate reporting, environmental data collection, and

building energy audits into existing business practices to enable a data driven approach when

making business decisions. Technical due diligence studies use this improved sustainability

data to identify actions that could be pursued based on an economic business case, higher te-

nant satisfaction, and environmental benefits. The Company carefully considers the environ-

mental aspects of the entire repositioning process and consistently improves upon different

environmental measures in this respect. The Company sees the implementation of environ-

mentally friendly measures as both an important environmental issue as well as an integral

part of the optimisation of its cost structure and maximising tenant satisfaction.

GCP assigns considerable resources to ensure the proper oversight of various initiatives in

connection with the safeguarding of the environment. Management reviews of the environ-

mental policies are coupled with the ongoing monitoring of the environmental performance

such as the use of energy, waste and water along with the reduction of carbon emissions and

waste management. Through the year 2022, the Company continued to switch electricity

obtained by the company to renewables or climate-neutral energy sources, thereby reducing

GCP’s carbon-footprint, supporting the goal to reduce CO₂ emissions by 40% until 2030. GCP

has further continued its efforts towards moving to climate-neutral gas systems to reduce its

environmental footprint and is also working towards furthering electromobility by expanding

its charging station infrastructure and transitioning its fleet towards electric vehicles.

Looking ahead, GCP will continue to analyse its properties for the potential implementation

of on-site renewable energy systems like solar PV and heat pumps or CHP (Combined Heat

and Power) systems that use energy more efficiently. The Company has targets to achieve

100% electricity supply from renewables and climate-neutral gas supply for all assets where

it has operational influence, for example through switching all procured electricity to Power

Purchase Agreements (PPA) sourcing renewable electricity generated from wind, hydroelec-

tric and solar PV sources by 2027.

Although GCP does not control its tenants’ energy consumption, the Company strives to pro-

vide its tenants with consistent and relevant information about their energy consumption

through the progressive installation of sub-metering systems. This provides tenants with a

greater awareness and incentive to reduce energy use which has been especially valuable

in the face of historically high energy and heating costs in 2022. The Company has also re-

sponded to this challenge by launching a widespread information campaign which consisted

of informational videos, flyers, posters, social media outreach, information on GCP’s service

center, and more. The information campaign shows practical habits and ways that tenants

can save energy and establishes a clear link between resource efficiency, costs savings, and

environmental benefits. For example, the Company has provided a guide to heating on its

website which demonstrates how to maximise the heating potential of a space while mini-

mising energy usage. Other online resources include guides on how to optimise electricity

Grand City Properties’

Sustainable Business

Strategy demonstrates

that sustainability is being

integrated across all the

operations of the business to

help tackle global challenges

such as climate change and

biodiversity loss and make

a positive difference for

our tenants and their local

communities.

“

usage, how to separate waste properly, and a tips and tricks page that shows how to approach

leaky faucets, drains, toilet bowls, and more. GCP has stayed in constant communication with

its tenants through this time and has worked to answer questions and has offered the option

of early increases in service charges to mitigate potential high service charge arrears. Going

forward, GCP will continue to maintain an open dialogue with its tenants and continue to pro-

vide informational resources to help increase efficiency.

GCP is also committed to maintaining and enhancing the biodiversity across the portfolio. The

Company portfolio is composed of many properties that have substantial amounts of green

space that will remain undeveloped and can play an important role in protecting urban biodi-

versity as well as contributing positively to tenants’ well-being and satisfaction. Furthermore,

the Company’s business model means it undertakes little amount of construction projects,

and specifically green field developments where untouched land is developed, and therefore

has a relatively small impact on biodiversity loss. GCP has a policy outlining its commitment to

biodiversity and has started implementing measures to foster biodiversity across the portfo-

lio, like biodiversity-enhancing plantations, sourcing certified and/or recycled wood products,

refraining from using pesticides and herbicides across the portfolio that could harm natural

life, and setting up insect hotels and bird houses. Where possible the Company aims to involve

local stakeholders in these activities, such as cooperation with kindergartens and day care

centers when installing bird houses and insect hotels, which further contributes to environ-

mental awareness through education.

GCP’s Green Procurement Policy defines the basis on which various contracting decisions

should be made and is communicated to all employees with purchasing responsibilities. Sup-

pliers are expected to reduce negative impact on the environment and position their opera-

tions towards the ISO 14001 environmental management standard. The Company maintains

a proactive approach and regularly engages with suppliers to identify areas of improvement

with regards to sustainability and the environment.

33

34

Social responsibility

TENANTS & THE SOCIETY

As an asset owner and a property manager, GCP acknowledges its impact and role in main-

taining the quality of life of the communities in which it is involved. The Company strives to

maintain positive relationships with local communities and works to support a vibrant and

friendly environment. GCP has worked to achieve this by renovating or adding community

spaces like playgrounds, BBQ areas, and fitness trails, organising community events, suppor-

ting charitable projects, and by getting GCP employees involved in communities.

The Company focuses its efforts with charitable projects involving children, education, sports

and the elderly through the GCP Foundation which is run by a committee of GCP managers

and overseen by an independent Board of Trustees. The GCP Foundation focuses its support

on several local non-profit organisations that provide educational assistance and general care

for children living in the local community, local creative centers, and community-orientated

grocery stores in the Company’s portfolio locations. In 2022, the GCP foundation continued to

provide direct financial support. Some examples of the charitable contributions made by the

GCP foundation include providing financial support for “füreinander eV” to fund child learning

workshops and their 2022 Christmas party, “Kiek in – Soziale Diensten gGmbH” to help with

the purchase of new sports and play equipment for kids, “beroma eG” which is a cooperative

that runs a local grocery store so that they could buy an e-car to help with food deliveries,

and many more.

GCP also maintains a policy of providing suitable vacant units rent-free for social and charita-

ble purposes. Currently, 14 units are being provided for this purpose. The Company also helps

charitable organisations using these spaces by providing furniture, equipment, and funds for

operations. GCP employees also got themselves positively involved in local communities by

participating in GCP’s 2022 Social Days.

GCP believes in the positive impact that team sports can have on the development of young

people and the local community and therefore acts to directly support them. As part of this

strategy, GCP sponsors several local sports clubs such as the football teams FC Azadi Bo-

chum, VfB Frohnhausen Essen, FSV Werdohl and SSV Buer Gelsenkirchen as well as the

volleyball team TV Hörde Dortmund, among others.

GCP places a high value on direct interaction and dialogue with its tenants and to that end

35

EMPLOYEES & DIVERSITY

GCP greatly values its employees and offers them various opportunities for personal develop-

ment and internal advancement. The Company continues to encourage employees to take ad-

vantage of GCP’s in-house training academy which include courses to improve technical skills,

language courses, productivity courses, and more. GCP’s Leadership Excellence Program and

employee support are further examples of such opportunities and have been effective in buil-

ding leadership qualities. Through the 12-month GCP Leadership Excellence Program, talented

employees across seniority levels get to build up their competencies within a managerial posi-

tion by learning how to approach and tackle complex problems. As a commitment to high emp-

loyee satisfaction and retention, GCP is pursuing a goal to decrease the employee turnover rate

to below 10% and be among the top ten most attractive employers in the German residential

real estate sector by 2030.

GCP celebrates its cultural diversity and views it as essential to its success. The Company va-

lues and respects perspectives of its employees from different nationalities, ages, genders,

ethnicities, races, cultures, religions, ideologies, sexual identities, and physical abilities. Discri-

mination based on any of these aspects is strictly prohibited within the Company. All employees

are provided with a diversity training upon joining the organisation. The Company’s commit-

ment to diversity is overseen by a Diversity Committee, made up of representation across dif-

ferent levels of the organisation.

36

The Company’s ESG Steering Committee is made up of the heads of all relevant departments

and is chaired by the Chairman of the Board of Directors, Mr Christian Windfuhr. The commit-

tee is responsible for providing oversight and strategic guidance with regards to ESG topics

and discusses developments in regular committee meetings and provides direction to the

Sustainability Department.

GCP emphasises the importance of corporate governance with a high standard of transpa-

rency, executed by the Board of Directors with a majority of independent directors and the

management. The Company directs its efforts in maintaining the high trust it receives from

its shareholders and bondholders. GCP is proud of the high confidence of its investors, which

is reflected in the impressive placement of funds by major global investment banks. GCP’s

shares and bonds are regularly placed with international leading institutional investors and

major global investment and sovereign funds.

In order to maintain high corporate governance and transparency standards, the Company

has implemented the Advisory Board, the Risk Committee, the Audit Committee, the Nomi-

nation Committee and the Remuneration Committee.

Furthermore, the Company ensures that its Board of Directors and its senior executives have

vast experience and skills in the areas relevant to its business. The Company has quarterly

reporting standards and updates its corporate presentation on a regular basis.

The Company has a very strict Code of Conduct which applies to all business partnerships

as well as employees. The Code of Conduct addresses issues related to corruption, conflicts

of interest, bribery, human rights abuses as well as discrimination based on a range of fac-

tors such as age, gender, ethnicity, race, culture, religion, ideology, sexual identity, physical

disabilities among others. The Code also clearly lays down a reporting framework for any

violations. Additionally, it also provides for investigations and disciplinary measures as may

be required in case of violations. The Code has been recently updated with a focus on impro-

ved transparency in its reporting lines, which is now supported by the whistleblower system.

The Company is not subject to any compulsory corporate governance code of conduct or

respective statutory legal provisions. In particular, the Company is currently not required to

adhere to the “Ten Principles of Corporate Governance” of the Luxembourg Stock Exchange

or to the German Corporate Governance Code, the latter which are only applicable to listed

companies incorporated in Germany, apart from for recommendations C.10 (with sole refe-

rence to its applicability to the Chair of the Audit Committee), D.3, D.9 and D.11 of the German

Corporate Governance Code (Deutscher Corporate Governance Kodex). GCP has therefore is-

sued a declaration that it does not deviate from the aforementioned recommendations of the

German Corporate Governance Code. In general, the Company already complies with most of

the principles and continues to take steps to implement environmental, social and corporate

governance best practices throughout its business.

ANNUAL GENERAL MEETING

The Annual General Meeting (“AGM”) of the shareholders of Grand City Properties S.A. for

2023

is intended to take place on June 28, 2023 in Luxembourg.

COMPLIANCE, CODE OF CONDUCT AND DATA PROTECTION

The Company considers reputational risk as a significant risk and has therefore incorporated

a high compliance with statutory laws as well as Company guidelines into the corporate ma-

nagement and culture. Employees are provided with initial as well as on-going training rela-

ted to issues connected with the Code of Conduct. The GCP compliance and risk management

framework includes the corresponding internal audit procedures and covers all areas of the

business including acquisitions, asset management, administrative and operative functions.

Internally, the Company’s Code of Conduct for Employees is a mandatory component for all

employment contracts and includes policies such as, Anti-Corruption Policy, Anti-discrimina-

tion Policy, Whistle-blowing Policy, Data Protection Declaration, User Policy for dealing with

digital content & devices as well as a Green Procurement Policy. Externally, business part-

ners are required to adhere to the strict Code of Conduct for Business Partners. This Code of

Conduct lays out the legal and ethical framework to be followed and includes references to a

number of important issues such as prohibition of corruption and bribery, conflicts of interest,

health and safety of employees, environmental protection, money laundering practices, re-

spect of basic human rights of employees, prevention of child labour as well as forced labour,

data protection and recognition of employees’ rights pertaining to freedom of association.

The Company´s Code of Conduct includes the prohibition of insider dealing. The Company is

subject to several obligations under Regulation (EU) No. 596/2014 (Market Abuse Regula-

tion, “MAR”), as amended. Therefore, it has set up a company´s insider register and a process

to ensure that persons on such list acknowledge their duties and are aware of sanctions.

The Company notifies pursuant to Article 19 para. 5 subpara. 1 sentence 1 of MAR all person

ESG Steering Committee

Corporate governance

37

discharging managerial responsibilities of their obligations in the context of managers’ trans-

actions. Memorandums, notifications and information are distributed regularly.

One of GCP’s important objectives has been to ensure the best-possible protection of per-

sonal data from manipulation or abuse. In this regard, various modern IT systems with high

standards of data privacy are a key technical solution utilised by the Company. At the same

time, staff are sensitised to the topic of data protection through video training modules as

well as seminars with legal experts. Displaying its proactive nature, the Company has also

prepared clearly communicated standard operating procedures (SOPs) which assist all stake-

holders in their daily operations involving data as well as ensure the effective protection of

data.

BOARD OF DIRECTORS

The Company is administered by a Board of Directors that is vested with the powers to per-

form and manage in the Company’s best interests.

The Board of Directors represents the shareholders as a whole and makes decisions solely in

the Company’s best interests and independently of any conflicts of interest. The Board of Di-

rectors and senior management regularly evaluate the effective fulfillment of their remit and

compliance with strong corporate governance standards. This evaluation is also performed

by the Audit Committee and the Risk Committee.

The members of the Board of Directors are elected by the shareholders at the AGM for a term

not exceeding six years and are eligible for re-election aſter such term. The directors may be

dismissed with or without any cause at any time and at the sole discretion of the shareholders

at the AGM. The Board of Directors, a majority of whom are independent, resolves on matters

on the basis of a simple majority, in accordance with the articles of association. The Board

of Directors chooses amongst the directors a chairperson who shall have a casting vote. The

renewal of the mandates of Ms. Simone Runge-Brandner and Mr. Daniel Malkin as indepen-

dent directors has been approved at the AGM in 2021 until the AGM in 2023. Mr. Christian

Windfuhr has been appointed and confirmed as executive director at the AGM in 2021 until

the AGM in 2023.

MEMBERS OF THE BOARD OF DIRECTORS

CEO

The Board of Directors resolved to delegate the daily management of the Company to Mr.

Refael Zamir, as Daily Manager (administrateur-délégué) of the Company since October 2020,

under the endorsed denomination (Zusatzbezeichnung) Chief Executive Officer (CEO) for an

undetermined period.

CFO

The Board of Directors resolved to delegate the daily management of the Company to Mr Idan

Hadad, as Daily Manager (administrateur-délégué) of the Company since January 2023, under

the endorsed denomination (Zusatzbezeichnung) Chief Financial Officer (CFO).

ADVISORY BOARD

The Board of Directors established an Advisory Board to provide expert advice and assistan-

ce to the Board of Directors. The Board of Directors decides on the composition, tasks, and

term of the Advisory Board as well as the appointment and dismissal of its members. The

Advisory Board has no statutory powers under Luxembourg law or the articles of association

of the Company but applies rules adopted by the Board of Directors. The Advisory Board is

an important source of guidance for the Board of Directors when making strategic decisions.

Members of the Board of Directors

Name

Position

Mr. Christian Windfuhr

Director, Chairman

Ms. Simone Runge-Brandner

Independent Director

Mr. Daniel Malkin

Independent Director

38

AUDIT COMMITTEE

The Board of Directors established an Audit Committee and decides on the composition, tasks

and term of the Audit Committee as well as the appointment and dismissal of its members.

The Audit Committee shall be composed by at least two members who shall be independent

non-executive directors. The responsibilities of the Audit Committee relate to the integrity

of the consolidated financial statements, including reporting to the Board of Directors on its

activities and the adequacy of internal systems controlling the financial reporting processes,

and monitoring the accounting processes.

The Audit Committee provides guidance to the Board of Directors on the auditing of the Con-

solidated Annual Report of the Company and, in particular, shall monitor the independence

of the approved independent auditor, the additional services rendered by such auditor, the

issuing of the audit mandate to the auditor, the determination of auditing focal points, and

the fee agreement with the auditor.

RISK COMMITTEE AND RISK OFFICER

The Board of Directors established a Risk Committee to assist and provide expert advice to

the Board of Directors in fulfilling its oversight responsibilities relating to the different types

of risks the Company is exposed to, recommend a risk management structure including its

organization and processes, as well as assess and monitor effectiveness of the overall risk

management to ensure that main risks are properly identified. The Risk Committee shall be

composed of at least two members of the Board, of which at least half shall be independent,

and is supported by the Risk Officer. The Risk Officer’s responsibilities are determined and

monitored by the Risk Committee and are guided by the Risk Committee as part of its over-

sight role pursuant to the Rules of Procedure of the Risk Committee, with the objective of

bringing a systematic and disciplined approach to evaluate and improve the culture, capabili-

ties, and practices integrated with strategy-setting and execution. The Risk Committee pro-

vides advice on actions of compliance, in particular by reviewing the Company’s procedures

for detecting risk, the effectiveness of the Company’s risk management and internal control

systems and by assessing the scope and effectiveness of the systems established by the

management to identify, assess and monitor risks.

REMUNERATION COMMITTEE

The Board of Directors established a Remuneration Committee. The Remuneration commit-

tee shall be composed exclusively by Non Executive directors. The Remuneration Committee

shall submit proposals regarding the remuneration of executive managers to the Board of

Directors, ensuring that these proposals are in accordance with the remuneration policy ad-

opted by the Company and the performance evaluation results of the persons concerned. To

that end, the committee shall be informed of the total remuneration paid to each member of

the executive management by other companies affiliated with the group.

NOMINATION COMMITTEE

The Board of Directors established a Nomination Committee. The majority of the members

of the Nomination Committee shall be Non-Executive Directors. For every significant position

to be filled, the committee will make an evaluation of the existing and required skills, know-

ledge and experience. Based on this assessment, a description of the role, together with the

skills, knowledge and experience required shall be drawn up. As such, the committee shall

act in the best interests of the Company, and among others, prepare plans for succession of

Directors, evaluate existing and required skills, knowledge, and experience, consider pro-

posals from shareholders, the Board of Directors and executive management, and suggest

candidates to the Board of Directors.

ESG COMMITTEE

The Board of Directors established an ESG Committee to supervise the company´s ESG pro-

cesses. In addition, the Committee reviews and assesses the company’s contribution to sus-

tainable development. The ESG Committee shall be composed by at least two members of

the Board of Directors. The chairman of the Committee shall be independent.

INTERNAL CONTROLS AND RISK MANAGEMENT SYSTEMS

The Company closely monitors and manages potential risks and sets appropriate measures

in order to mitigate the occurrence of possible failures to a minimum. The risk management

is led by the Risk Committee, which constructs the risk management structure, organisation,

and processes. The Risk Committee monitors the effectiveness of risk management functions

throughout the organisation, ensures that infrastructure, resources, and systems are in place

for risk management and are adequate to maintain a satisfactory level of risk management

discipline. The Company categorises the risk management systems into two main categories:

internal risk mitigation and external risk mitigation.

39

INTERNAL RISK MITIGATION

Internal controls are constructed from five main elements:

●

Risk assessment

– set by the Risk Committee, supported by the Risk Officer, and guided

by an ongoing analysis of the organisational structure and by identifying potential

weaknesses.

●

Control discipline

– based on the organisational structure and supported by employee

and management commitments. The discipline is founded on the foundations of integrity

and ethical values.

●

Control features

– the Company sets physical controls, compliance checks, and

verifications such as cross departmental checks. Grand City Properties S.A. puts strong

emphasis on separation of duties, as approval and payments are done by at least two

separate parties. Payment verification is cross checked and confirmed with the budget

and the contract. Any payment exceeding a certain set threshold amount requires

additional approval by the head of the department as a condition for payment.

●

Monitoring procedures

– the Company monitors and tests unusual entries, mainly

through a detailed monthly actual vs. budget analysis and check. Strong and

sustainable control and organisational systems reduce the probability of errors

and mistakes significantly. The management places significant value in constantly

improving all measures, adjusting to market changes and organisational dynamics.

●

ESG risk-related expenditures

– the Group has included identification of potential

financial liabilities and future expenditures linked to ESG risks in the organisational risk

assessment. Future expenditures on ESG matters and opportunities are included in the

financial budget.

EXTERNAL RISK MITIGATION

Through ordinary course of business, the Company is exposed to various external risks. The

Risk Committee is constantly determining whether the infrastructure, resources, and sys-

tems are in place and adequate to maintain a satisfactory level of risk. The potential risks and

exposures are related, inter alia, to volatility of interest rate risks, liquidity risks, credit risks,

regulatory and legal risks, collection and tenant deficiencies, the need for unexpected capital

investments, and market downturn risk.

Grand City Properties S.A. sets direct and specific guidelines and boundaries to mitigate and

address each risk, hedging and reducing to a minimum the occurrence of failure or potential

default.

For information regarding the external risks please see pages 148, 149 and 150 (Note 26.3.5)

SHAREHOLDERS’ RIGHTS

The Company respects the rights of all shareholders and ensures that they receive equal

treatment. All shareholders have equal voting rights and all corporate publications are trans-

mitted through general publication channels and are also available in a specific section on the

Company’s website. The Company discloses its share ownership and additionally discloses

any shareholder position above 5% when it is informed by the respective shareholder. Shares

held and/or acquired by the Company, either directly or through subsidiaries, pursuant to its

buy-back program, are suspended from their voting rights.

The shareholders of Grand City Properties S.A. exercise their voting rights at each General

Meeting of the shareholders, whereby each share is granted one vote. The AGM of the share-

holders takes place within 6 months aſter the end of the financial year at the registered office

of the Company, or at such other place as may be specified in the notice of the meeting. At the

AGM of the shareholders the Board of Directors presents, among others, the management

report as well as the statutory and consolidated financial statements to the shareholders.

The AGM resolves, among others, on the statutory and consolidated financial statements of

Grand City Properties S.A., the allocation of the statutory financial results, the appointment

of the approved independent auditor, and the discharge to the (re-)election of the members

of the Board of Directors. The convening notice for the AGM of the shareholders contains the

agenda and is publicly announced in the Recueil électronique des sociétés et associations in

Luxembourg (RESA), in a Luxembourg newspaper and on the Company’s website at least

thirty days before the AGM and in accordance with applicable Luxembourg law.

COMPLIANCE TO THE TRANSPARENCY LAW

The Company is in line with the Transparency Law (as defined below) and in particular in rela-

tion to the disclosure requirements i.e. disclosure to the public of regulated information wit-

hin the meaning of article 1 (10) (the “Regulated Information”) of the Transparency Law. The

Company provides public equal and timely access to such Regulated Information and fulfils

the complex disclosure obligations. The quarterly and annual financial reports and investor

presentations, press releases and ad-hoc notifications are available in the English language

on the Company´s website. In addition, the Company provides on its website information

about the organisation, its management and upcoming and past shareholder meetings, such

as its AGMs. The Company´s website further provides a financial calendar announcing the fi-

40

nancial reporting dates as well as other important events. The financial calendar is published

before the beginning of a calendar year and is regularly updated.

INFORMATION ACCORDING TO ARTICLE 11(2)

OF THE LUXEMBOURG TAKEOVER LAW

The following disclosure is provided pursuant to article 11 of the Luxembourg law of 19 May

2006 transposing Directive 2004/25/EC of the European Parliament and of the Council of 21

April 2004 on takeover bids, as amended (the

“Takeover Law”

):

a.

With regard to article 11 (1) (a) and (c) of the Takeover Law (capital structure), the

relevant information is available on pages 27, 40, and note 18 on pages 132, 133, 134

of this annual report. In addition, the Company’s shareholding structure showing each

shareholder owning 5% or more of the Company’s share capital is available on page 27

of this annual report and on the Company’s website, where the shareholding structure

is updated on a regular basis.

c.

In accordance with the requirements of Article 11 (1) c of the Takeover Law, the following

significant shareholdings were reported to the Company, as of 31 December 2022:

d.

With regard to article 11 (1) (d) of the Takeover Law, each ordinary share of the Company

gives right to one vote according to article 8 of the Articles of Association. There are no

special control rights attaching to the shares. The voting rights attached to shares ac-

quired by the Company, either directly or indirectly through subsidiaries, pursuant to the

buy-back-program are suspended.

e.

With regard to article 11 (1) (e) of the Takeover Law, control rights related to the issue of

shares are directly exercised by the relevant employees. The key terms and conditions

in relation to the Company’s incentive share plan are described on pages 134, 135, note

19 of this annual report.

f.

With regard to article 11 (1) (f) of the Takeover Law, the Articles of Association impose no

voting rights limitations. However, the sanction of suspension of voting rights automati-

cally applies, subject to the Luxembourg law of 11 January 2008 on transparency require-

ments for issuers, as amended (the

“Transparency Law”

) to any shareholder (or group of

shareholders) who has (or have) crossed the thresholds set out in the Transparency Law

but have not notified the Company accordingly. In this case, the exercise of voting rights

relating to the shares exceeding the fraction that should have been notified is suspended.

The suspension of the exercise of voting rights is liſted the moment the shareholder ma-

kes the notification.

g.

With regard to article 11 (1) (g) of the Takeover Law, as of December 31, 2022, the Compa-

ny was not aware of any agreements between shareholders that would lead to a restric-

tion on the transfer of shares or voting rights.

h.

With regard to article 11 (1) (h) of the Takeover Law, according to article 9 of the Articles

of Association, the members of the board of directors of the Company (the

“Board”

)

shall be elected by the shareholders at their AGM by a simple majority vote of the shares

present or represented. The term of the office of the members of the Board shall not

exceed six years, but they are eligible for re-election aſter such term. Any member of the

Board may be removed from office with or without specifying a reason at any time. In the

event of a vacancy in the office of a member of the Board because of death, retirement

or otherwise, this vacancy may be filled out on a temporary basis until the next meeting

of shareholders, by observing the applicable legal prescriptions. Further details on the

rules governing the appointment and replacement of a member of the Board are set out

in page 37 of this annual report.

According to article 18 of the Articles of Association, any amendment to the Articles of

Association made by the general meeting of shareholders shall be adopted with a quo-

rum and majority pursuant to article 450-3 of the law of 10 August 1915 on commercial

companies, as amended (the

“1915 Law”

).

i.

With regard to article 11 (1) (i) of the Takeover Law, the Board of Directors is endowed with

wide-ranging powers to exercise all administrative tasks in the interest of the Company

including the establishment of an Advisory Board, an Audit Committee, a Risk Commit-

tee, a Remuneration Committee Nomination Committee and an ESG Committee. Further

details on the powers of the Board are described on page 37, 38 of this annual report.

According to article 5.1 of the Articles of Association, the Company may redeem its own

shares to the extent and under the terms permitted by law. The shareholders’ meeting

Shareholder name

Amount of Shares

Percentage of voting rights

1)

41

held on 24 June 2020 authorised the Board, with the option to delegate, to buy-back,

either directly or through a subsidiary of the Company, shares of the Company for a period

of five (5) years not exceeding 20% of the aggregate nominal amount of the Company’s

issued share capital. Further details on the Company’s share buy-back program are de-

scribed on pages 132 of this annual report.

k.

With regard to article 11 (1) (k) of the Takeover Law, there are no agreements between

the Company and members of the Board or employees according to which, in the event

of a takeover bid, the Company may be held liable for compensation arrangements if the

employment relationship is terminated without good reason or due to a takeover bid.

Duisburg

50

Notes on business

performance

51

Consolidated income statement data

For the year ended 31 December

2022

2021

€’000

Revenue

582,505

524,629

Net rental income

396,041

374,550

Operating and other income

186,464

150,079

Property revaluations and capital gains

117,761

694,844

Share in profit from investments in equity-accounted investees

-

3,952

Property operating expenses

(266,287)

(218,064)

Administrative and other expenses

(10,689)

(11,138)

Depreciation and amortisation

(10,488)

(8,235)

Operating profit

412,802

985,988

Adjusted EBITDA

308,100

298,589

Finance expenses

(46,914)

(46,450)

Other financial results

(137,133)

(148,640)

Current tax expenses

(39,120)

(39,227)

Deferred tax expenses

(10,532)

(134,582)

Profit for the year

179,103

617,089

FFO I

192,219

186,326

FFO II

200,822

287,549

52

REVENUE

For the year 2022, GCP recorded revenues amounting to €583 million, increasing by 11% as

compared to €525 million in 2021. Total revenue is made up of net rental income and opera-

ting and other income.

Net rental income amounted to €396 million for the year 2022, increasing by 6% as compa-

red to the €375 million recorded in 2021. The growth in net rental income was primarily the

result of the full impact of acquisitions and disposals made in 2021 and the partial impact of

acquisitions made in 2022 as well as the strong operational performance reflected by the

like-for-like rental growth of 2.9%.

The increase in net rental income was positively impacted by the expansion of the portfolio

through strategic acquisitions executed primarily in H1 2022 and 2021. In 2022, GCP made ap-

prox. €250 million in accretive acquisitions signed at the beginning of the year and that were

closed at the end of the second quarter and consisted of approx. 1,000 units located in Berlin

and London. These acquisitions only had a partial impact on net rental income in the current

period but will have a full impact in future periods, helping to further drive growth. During

the period, there were immaterial disposals in the amount of approx. €18 million. Net rental

income also grew as a result of the full impact of the €700 million in acquisitions executed in

2021 but offset by €360 million in disposals across the same period. As of December 2022,

the annualised net rental income amounted to €393 million.

The strong increase in the net rental income in 2022 was also the result of the strong ope-

rational performance of the portfolio. In 2022, GCP recorded like-for-like rental growth of

2.9%, which comprised of 2.2% from in-place rent growth and 0.7% from occupancy increa-

ses. The strong letting performance resulted in portfolio vacancy reaching a historic low of

4.2% as of December 2022 decreasing substantially from 5.1% as of December 2021 and

6.7% as of December 2019. The consistent reduction of the portfolio’s vacancy is the result of

the Company’s portfolio being located in fundamentally strong metropolitan areas which are

characterised by a large supply and demand gap as well as the Company’s strong in-house

operational and letting team, which enabled GCP to utilize this imbalance and drive the ope-

rational performance of its portfolio. The portfolio’s average in-place rent increased to €8.2/

sqm as of December 2022 from €8.1/sqm as of December 2021, driven by rent increase and

re-letting at higher rent across the portfolio’s locations.

The operating and other income line item is primarily composed of income related to reco-

verable operating expenses from tenants. In 2022, operating and other income amounted to

€186 million as compared to €150 million in 2021. The increase in operating and other income

was primarily the result of cost inflation on recoverable expenses such as for utilities, the

larger portfolio as compared to 2021, and a reduction in vacancy. This increase was partially

offset through efforts to increase the efficiency of the portfolio by disposing of higher cost-

structure assets, acquiring leaner cost-structure assets, and targeted capex investments that

increase the efficiency of existing assets.

PROPERTY REVALUATIONS AND CAPITAL GAINS

In 2022, GCP recorded property revaluations and capital gains in the amount of €118 million,

lower as compared to the €695 million recorded in 2021. The property revaluations and capital

gains line item are primarily composed of property revaluations which amounted to €115 million

in 2022, lower as compared to €631 million in 2021. On a like-for-like basis, excluding capex, the

portfolio value increased by 1% for the full year 2022.

In the fourth quarter of 2022, property revaluations turned slightly negative and partially offset

the gains that had been recorded earlier in 2022.

Revaluation gains were negatively impacted

For the year ended 31 December

2022

2021

€’000

Net rental income

396,041

374,550

Operating and other income

186,464

150,079

Revenue

582,505

524,629

For the year ended 31 December

2022

2021

€’000

Property revaluations

115,039

631,152

Capital gains

2,722

63,692

Property revaluations and capital gains

117,761

694,844

53

by increasing interest rates which have resulted in higher discount and cap rates, thereby resul-

ting in yield expansion. These negative factors were offset by a strong operational improvement

driven by like-for-like rental growth and a reduction in vacancy across the portfolio. The portfo-

lio is well diversified in fundamentally strong metropolitan areas with unique economic drivers

were demand for residential space remains strong. In Q4 2022, excluding capex, the portfolio

value decreased by 1%. As of December 2022, the portfolio had an average value of €2,282/

sqm representing a rental yield of 4.2%, as compared to €2,315/sqm and 4.2% as at September

2022 and €2,205/sqm and 4.2% as at December 2021. The Company’s portfolio valuations

remain on average significantly below replacements costs.

GCP’s portfolio value is externally appraised by independent, professional, and certified valua-

tors at least once a year. As part of the annual audit for the year 2022, the portfolio has been

reviewed completely.

Capitals gains make up the remainder of the property revaluation and capital gains line item

and amounted to €3 million in 2022 as compared to €64 million in 2021. In 2022, the Com-

pany sold €18 million of properties reflecting a premium of 17% over book value as compared

to approx. €360 million in 2021.

The 2022 disposals consisted primarily of non-core and

development assets as well as a small number of condominiums, mostly in Berlin. The reali-

sed disposal gains over costs totalled €9 million and reflected a 87% profit margin, including

transaction costs and capex spent.

DISPOSAL ANALYSIS

Through GCP’s wide deal sourcing network, the Company regularly receives offers to sell its

assets. The Company continuously reviews such offers as well as other potential disposal

opportunities within the portfolio and prioritises the sale of non-core and mature proper-

ties whose upside potential has been mostly realised. The Company takes an opportunistic

approach to such offers and looks to crystallise gains for these properties while sharpening

the portfolio’s focus on properties in core locations with value-add potential. Proceeds from

gains are channelled into further value creation measures, or in the current environment,

bolster the Company’s liquidity position. The reduction in disposals volume reflects the tough

environment in the transaction market as a result of uncertainties in the market which started

in the first half of 2022. In addition, during the fourth quarter of 2022, the Company signed

additional disposals in the amount of over €170 million mostly in Berlin and London and com-

prising of assets reclassified on the balance sheet as held for sale.

For the year ended 31 December

2022

2021

€’000

Acquisition cost including capex

of disposed properties

9,881

256,691

Total revaluation gains on disposed properties

since acquisition

5,881

37,531

Book Value (IFRS)

15,762

294,222

Disposal value net of transaction costs

18,484

357,914

Capital gain

2,722

63,692

Premium over net book value

17%

22%

Disposal value net of transaction costs

18,484

357,914

Acquisition cost including capex of

disposed properties

(9,881)

(256,691)

Realised profit from disposal

8,603

101,223

Disposal profit margin on investment property

87%

39%

54

PROPERTY OPERATING EXPENSES

In 2022, GCP recorded property operating expenses in the amount of €266 million, higher as

compared to the €218 million recorded in 2021.

Property operating expenses are mostly composed of purchased services that are related

to various ancillary services, most of which are recoverable from tenants. Some examples

of these purchased services include utility and service costs such as heating, water, waste

management, property cleaning services, and more. In 2022, the cost of purchased services

increased by 30% year over year. This increase is primarily as a result of cost inflation that

increased prices across the board but had the greatest impact on heating and energy prices.

The Company has been proactive in this matter by launching an information campaign across

all channels on how to effectively save energy and reduce costs, increasing pre-payments

where possible, and sending out letters to tenants for early voluntary increases of the ser-

vices charges to avoid large one-time payments. Furthermore, GCP recorded appropriate

provisions to address the potential impact on collections. Some of the increase in purchased

services can also be attributed to the increase in the average size of the portfolio and lower

vacancy, while increases were partially offset by optimization efforts that have resulted in the

portfolio having an overall leaner cost structure.

The Company has continued to deliver on its responsibility of maintaining high levels of te-

nant satisfaction by providing timely and high-quality services, all while extracting efficien-

cies. GCP offers 24/7 support through its service center where tenant care agents offer indi-

vidualised support in several languages to ensure that tenant needs are being met quickly and

effectively. The Company has also developed the GCP tenant App which digitalises recurring

requests such as property searching, signing leases, uploading documentation, and initiating

and tracking service requests. In 2022, GCP has continued to digitalise its operational sup-

port services to create greater efficiencies for both tenants and the Company, thereby redu-

cing costs and increasing tenant satisfaction.

In 2022, GCP recorded Personnel expenses in the amount of €24 million, higher as compa-

red to €22 million in 2021. These expenses increased primarily as a result of cost inflation,

driven by the continued tight labour market. Other operating costs are mostly composed of

expenses incurred in the letting process and include promotional and marketing activities,

transportation, and communication expenses. In 2022, Other operating costs amounted to

€32 million, higher in comparison to 2021 and helped drive strong letting momentum which

further decreased the vacancy rate.

MAINTENANCE AND CAPEX

GCP regularly assesses the quality of its assets and carries out a wide variety of targeted main-

tenance and refurbishment projects to sustain the quality and the value proposition of the port-

folio. The Company also makes specific investments to improve the quality of the portfolio

which enhances the offering. These projects improve the quality of life for tenants and thereby

increase tenant satisfaction, reducing turnover, lowering vacancy, and increasing rents.

In 2022, GCP recorded maintenance and refurbishment expenses in the amount of €22 mil-

lion or €5.2 per average sqm, as compared to €22 million or €5.5 per average sqm in 2021.

Maintenance and refurbishment expenses are made up of costs incurred on projects that

maintain asset quality and are generally associated with regular and recurring property up-

keep. Maintenance and refurbishment costs remained stable as cost savings through scale

and increased efficiency offset higher personnel and material costs due to cost inflation. The

Company offers digitalised service requests through the tenant App which allows tenants to

place service requests, monitor the status of their maintenance and service requests, and

provide supporting documentation, making the process more efficient. Tenants also have the

ability to speak to GCP’s tenant care agents about service requests through the GCP service

center. The Company’s improved tenant service capabilities have increased tenant satisfac-

tion and reduced turnover, thereby helping to reduce vacancy to an all-time low of 4.2%.

GCP recorded repositioning capex in the amount of €71 million or €17.3 per average sqm in

2022, as compared to €63 million or €16 per average sqm in 2021. Repositioning capex is

composed of targeted capital expenditures that focus on increasing the quality and offerings

of assets in the portfolio. Examples of these targeted improvements include apartment re-

novations, improvements to corridors and staircases, façade refits, and more. Repositioning

For the year ended 31 December

2022

2021

€’000

Purchased services

(187,631)

(144,727)

(*)

Maintenance and refurbishment

(21,723)

(22,449)

Personnel expenses

(24,458)

(22,059)

Other operating costs

(32,475)

(28,829)

(*)

Property operating expenses

(266,287)

(218,064)

(*)

Reclassifed

55

capex also targets improvements to community areas surrounding the property which serves

to increase the value proposition of assets located near them. Examples of these kind of re-

positioning capex projects investments include the additions or renovation of playgrounds,

barbeque pits, study rooms and other common meeting areas. Repositioning capex serves

to improve the value proposition of GCP’s assets which increases the rent potential while

facilitating the reletting process and reducing vacancy.

In 2022, GCP recorded approximately €10 million in mo-

dernisation investments, as compared to €3 million in

2021. Due to the relatively small investment in 2021 the

figure had been included within the repositioning capex

in 2021. The 2022 modernisation figure is not included

in the 2022 repositioning capex. Modernisation projects

are carried on a targeted basis and include measures

such as adding of balconies and installing elevators as

well as energetic modernisation measures such as in-

stalling green energy and heating systems and increa-

sing energy efficiency through better insulation and win-

dows. These modernisation measures are in addition to

repositioning capex and are aimed at further improving

the quality of the portfolio and increasing rents.

As part of the Company’s plan to reduce CO

2

emissions by 40% by 2030, GCP expects to

allocate greater resources to undertake more projects targeted at reducing emissions in up-

coming periods, which is expected to have an impact on both the modernisation investments

and repositioning capex. These projects will also have the added benefits of reducing the cost

structure of assets in the portfolio, thereby reducing future operating costs.

The Company invested approximately €59 million in pre-letting modifications in 2022, as

compared to €42 million in 2021. Pre-letting modifications are made up of activities that are

outside the scope of repositioning capex and include the completion of properties acquired

that are in the final stages of development, large refurbishment projects, and the creation

of significant new lettable areas. This line item is mostly composed of assets in London and

Berlin that were acquired at attractive prices while being in the final stages of development.

Previous delays attributable to shortages of construction personnel and material have been

largely resolved and completed units are being let out further supporting rental growth in

upcoming periods.

As a result of these completions, less re-letting modification expenses are expected for fu-

ture periods.

ADMINISTRATIVE AND OTHER EXPENSES

In 2022, GCP recorded administrative and other expenses in the amount of €10.7 million,

slightly lower as compared to €11.1 million in 2021. Administrative and other expenses are

mostly made up of expenses related to administrative personnel, legal and professional

consultancy fees, audit and accounting costs, marketing fees, and other expenses. These

expenses were impacted by cost inflation that has particularly increased legal and profes-

sional consultancy fees but was offset by lower marketing and other expenses spending and

increased efficiencies.

FINANCE EXPENSES

In 2022, GCP recorded finance expenses in the amount of €47 million, 1% higher as compared

to €46 million in 2021. The Company’s cost of debt is 1.3% with an average debt maturity of

5.9 years as of December 2022, as compared to 1% cost of debt and an average debt maturity

of 6 years as of December 2021. The increase in the cost of debt is primarily the result of debt

refinancing measures undertaken in 2022 and higher interest rates that increased variable debt

financing costs. Higher finance expenses were offset by a lower debt balance in 2022. In 2022,

Repositioning capex / avg sqm

Maintenance / avg sqm

MAINTENANCE &

CAPEX DEVELOPMENT

(€/SQM)

For the year ended 31 December

2022

2021

€’000

Personnel expenses

(4,509)

(4,587)

Audit and accounting costs

(2,856)

(2,693)

Legal and professional consultancy fees

(2,437)

(1,913)

Marketing and other expenses

(887)

(1,945)

For the year ended 31 December

2022

2021

€’000

56

the Company redeemed €450 million of its Series F convertible bonds with a low coupon of

0.25% and repaid €165 million in near-term maturity bank loans. Furthermore, GCP also raised

€135 million in new secured debt financing at financing rates that are higher than GCP’s current

cost of debt. The Company’s debt profile remains conservative with 95% of debt being fixed or

interest hedged as of December 2022, which is expected to decrease slightly in the coming year

to 91%. Operational profitability substantially covers debt servicing needs as exemplified by an

ICR of 6.6x as of December 2022. The Company’s high ratio of unencumbered assets of 88%

provides further opportunities to raise secured financing and investment-grade credit ratings

from S&P (BBB+/Stable) and Moody’s (Baa1/Stable, unsolicited) allows GCP to tap capital mar-

kets on an opportunistic basis if the market conditions improve.

OTHER FINANCIAL RESULTS

GCP recorded negative other financial results in the amount of €137 million in 2022, as

compared to a negative of €149 million in 2021. Other financial results are mainly composed

of the net change in the fair value of financial assets and liabilities, traded securities and

derivative instruments, and also include costs connected to pre-payments, bank financing,

hedging fees and other costs related to maintaining and optimising GCP’s debt profile. The

changes in other financial results consisted among others of one-off payments, as well as

the result of fair value adjustments due to volatility in financial markets as well as fluctua-

tions in rates. Finance-related costs incurred reduced by €5m in comparison to the costs

in 2021. Those costs have allowed GCP to proactively manage its financial platform as to

not have any maturities until Q2 2024. Finance-related costs were also incurred in raising

€135 million in new secured debt financing and purchasing hedging instruments that have

resulted in a 95% hedge ratio.

TAXATION

The total tax expenses item is composed of current tax expenses and deferred tax expenses.

In 2022, GCP recorded total tax expenses of €50 million as compared to €174 million in 2021.

The Company recorded current tax expenses of €39 million in 2022, as compared to €39

million in 2021. The current tax expenses item is mostly made up of corporate and property

taxes that trend in-line with GCP’s underlying business.

GCP recorded deferred tax expenses of €11 million in 2022, as compared to €135 million in

2021. Deferred tax expenses are primarily composed of non-cash tax expenses related to the

theoretical tax amount due on revaluation gains in the event of a sale. The lower expense in

2022 is primarily the result of lower revaluation gains recorded in 2022 as compared to 2021

as well as the impact of the revaluation of derivatives and loss carried forward, offsetting

some of the negative other financial result.

For the year ended 31 December

2022

2021

€’000

Change in fair value of financial

assets and liabilities, net

(115,925)

(122,553)

Finance-related costs

(21,208)

(26,087)

Other financial results

(137,133)

(148,640)

For the year ended 31 December

2022

2021

€’000

Current tax expenses

(39,120)

(39,227)

Deferred tax expenses

(10,532)

(134,582)

Total tax expenses

(49,652)

(173,809)

57

PROFIT FOR THE YEAR

For the year ended December 31, 2022, GCP recorded a profit of €179 million, lower as com-

pared to €617 million for the year ended December 31, 2022. The lower profit is primarily the

result of lower revaluation gains recorded in 2022 as compared to 2021, offset by the higher

operational profitability which grew as a result of net acquisitions and the strong like-for-like

rental growth of 2.9%. This was further offset by lower expenses for other financial results

and deferred taxes.

EARNINGS PER SHARE

In 2022, GCP recorded basic earnings per share in the amount of €0.77 and diluted earnings

per share in the amount of €0.76, lower as compared to €3.12 and €2.90 respectively for the

year 2021. The decrease for both metrics was primarily the result of the lower profit attributa-

ble to the owners of the Company for the year primarily as a result of lower revaluation gains

and the slightly higher average share count as compared to the previous period. The small

increase in the average share count was primarily as a result of the high acceptance ratio of

the scrip dividend, which allowed the company to retain cash.

The diluted earnings per share reflects the various dilutive effects. The primary reason for the

substantial decrease in the average number of diluted shares in 2022 as compared to 2021 is

the full redemption of the Series F convertible bonds in cash in March 2022. From 2023, and

as long as the Company does not have diluted instruments, the basic and diluted earnings per

share will not be materially different.

TOTAL COMPREHENSIVE INCOME

In 2022, total comprehensive income amounted to €166 million as compared to €647 million

in 2021. This decrease is primarily the result of the lower profit for the year and the other

comprehensive loss of €13 million in 2022 as compared to the other comprehensive gain of

€30 million in 2021. The other comprehensive loss in 2022 is mainly the result of foreign cur-

rency translation effects of foreign operations, offset by hedging activities and the positive

revaluation of owner-occupied property.

For the year ended 31 December

2022

2021

€’000

Profit for the year

179,103

617,089

Profit attributable to the owners of the Company

129,214

523,522

Profit attributable to the perpetual notes investors

24,750

25,042

Profit attributable to non-controlling interests

25,139

68,525

For the year ended 31 December

2022

2021

Basic earnings per share (in €)

0.77

3.12

Diluted earnings per share (in €)

0.76

2.90

Weighted average number of ordinary

shares (basic) in thousands

168,170

167,551

Weighted average number of ordinary

shares (diluted) in thousands

171,591

181,588

For the year ended 31 December

2022

2021

€’000

Profit for the year

179,103

617,089

Total other comprehensive income (loss)

for the year, net of tax

(12,883)

29,644

Total comprehensive income for the year

166,220

646,733

58

ADJUSTED EBITDA AND FUNDS FROM OPERATIONS (FFO I, FFO II)

The adjusted EBITDA is an industry standard figure displaying the Company’s recurring

operational profits before interest, tax expenses, depreciation, and amortisation, exclu-

ding the effects of property revaluations, capital gains, and other non-operational income

statement items such as share of non-recurring profits from investment in equity-accoun-

ted investees, equity settled share-based payments and other adjustments. GCP recorded

adjusted EBITDA in the amount of €308 million in 2022, increasing 3% as compared to the

€299 million recorded in 2021.

Funds From Operations I (FFO I) is an industry-wide standard measure of the recurring

operational cash flow of a real estate company, oſten utilised as a key bottom line industry

performance indicator. FFO I is calculated by deducting from the adjusted EBITDA, finance

expenses, current tax expenses, the contribution to minorities, and the share of profit attri-

butable to the Company’s perpetual notes investors, while adding to the FFO I the operational

contributions from joint ventures. GCP generated FFO I in the amount of €192 million in 2022,

increasing by 3% as compared to the €186 million generated in 2021.

The increase in adjusted EBITDA and FFO I was primarily a result of the impact of acquisi-

tions made in 2021 and 2022 and the solid operational result driven by strong like-for-like

rental growth, offset by disposals and higher operating expenses from cost inflation. GCP

made accretive acquisitions in the amount approx. €250 million in 2022 and €700 million

in 2021, offset by disposals of non-core assets in the amount of approx. €18 million in 2022

and €360 million in 2021, which helped drive the current recorded growth. GCP’s recorded

solid like-for-like rental growth of 2.9% with in-place rent increases contributing 2.2% and

occupancy increases contributing 0.7%. The strong letting performance in 2022 has reduced

GCP’s vacancy rate to 4.2%, an all-time low. Increased efficiencies driven by GCP’s scale and

digitalisation efforts that improved the Company’s operating platform helped offset some of

the cost inflation on operational expenses.

For the year ended 31 December

2022

2021

€’000

Operating profit

412,802

985,988

Depreciation and amortisation

10,488

8,235

EBITDA

423,290

994,223

Property revaluations and capital gains

(117,761)

(694,844)

Share of profit from investments inquity-accounted

investees

-

(3,952)

Equity settled share-based payments and other

adjustments

2,571

3,162

Adjusted EBITDA

308,100

298,589

Finance expenses

(46,914)

(46,450)

Current tax expenses

(39,120)

(39,227)

Contribution from / (to) joint ventures and

minorities, net

(5,097)

(1,544)

Adjustment for perpetual notes attribution

(24,750)

(25,042)

FFO I

192,219

186,326

Weighted average number of ordinary shares

(basic) in thousands, including impact from

share-based payments

168,396

167,704

FFO I per share (in €)

1.14

1.11

Result from disposal of properties

8,603

101,223

FFO II

200,822

287,549

59

FFO I PER SHARE

For the year 2022, The Company recorded an FFO I per share in the amount of €1.14, increa-

sing 3% as compared to €1.11 per share recorded for the year 2021, in line with the increase in

FFO I. The per share metrics were also impacted by the slightly higher average share count as

compared to the previous period as a result of the high participation rate in the scrip dividends.

FFO II

FFO II is a supplementary performance measure that includes the disposal effects on top of

FFO I. The result from disposal of properties refers to the excess amount of the sale price to

the cost price plus capex of disposed properties. Throughout 2022, GCP recorded an FFO II

in the amount of €201 million, lower as compared to the €288 million generated in 2021. The

decrease in FFO II is primarily due to the significantly lower disposal volume in 2022 as com-

pared to 2021, offset by the increase in FFO I across the same period. GCP crystallised gains

by disposing non-core and mature assets, mostly development rights and condominiums in

Berlin, in the amount of €18 million. Disposals were executed at a profit over total costs (in-

cluding capex) of 87%, securing gains of €9 million.

ADJUSTED FUNDS FROM OPERATIONS (AFFO)

Adjusted Funds from Operations (AFFO) is another indicator for the Company’s recurring

operational cash flow and is derived by subtracting the repositioning capex from the Com-

pany’s FFO I. GCP includes in the AFFO calculation repositioning capex which is targeted at

value creation and improving the asset quality of the portfolio, which GCP deems as being

relevant for its AFFO calculation. In 2022, the Company recorded AFFO in the amount of

€122 million, as compared to €123 million in 2021. The slightly lower AFFO is mostly attri-

butable to the increase in repositioning capex, which offset the higher FFO I contribution

between the two periods.

For the year ended 31 December

2022

2021

€’000

FFO I

192,219

186,326

Repositioning capex

(70,535)

(63,084)

AFFO

121,684

123,242

FFO I DEVELOPMENT

(IN € MILLIONS)

FFO I PER SHARE

ANNUAL DEVELOPMENT

(IN €)

60

CASH FLOW

In 2022, GCP generated net cash provided by operating activities in the amount of €216 mil-

lion, as compared to €217 million in 2021. The change in operating cash flow was positively

impacted by the solid operational result driven by the net acquisitions executed in 2021 and

2022 and like-for-like rental growth. On the other hand, the change in operating cash flow

was negatively impacted by cost inflation which significantly increased operational costs,

specifically regarding energy and heating costs which are mostly recoverable from tenants.

GCP has proactively approached these higher cost of living and service charges for tenants

by reaching out to them with information campaigns and staggered pre-payment plans and

conservatively making a provision in the event of lower collections. Finally, also as a result

of continued elevated energy prices, the timing difference between the actual consumption

cost of the heating expenses recovered from tenants and the settlement of the payments

by tenants has continued to lead to a higher working capital, further offsetting growth in

operating cash flow.

The Company recorded net cash used in investing activities in the amount of €168 million

in 2022, as compared to €198 million in 2021. The net cash used in investing activities was

mostly spent on accretive acquisitions and capex projects that will increase future rental

income and positively impact operational cash generation in upcoming periods. GCP leve-

raged its wide deal sourcing network to acquire a loan-to-own project which made up a

large proportion of the acquisition value in the period while only having a limited impact on

cashflow. A smaller amount of disposals in the amount of €18 million, combined with the

net repayment of loans-to-own assets offset the net cash used in investing activities. As a

result of the increasing cost of capital, GCP has become more selective in pursuing acqui-

sitions and capex projects and only undertakes those that offer the greatest value creation

opportunities and returns.

In 2022, GCP recorded net cash used in financing activities in the amount of €617 million, as

compared to €537 million in 2021. The increase in net cash used in financing activities was

primarily a result of the repayment of €165 million in secured financing and redemption of the

€450 million Series F convertible bonds in Q1 2022 which helped to extend the debt maturity

schedule. Net cash used in financing activities also increased as a result of slightly higher cash

dividends that were paid out in July 2022. The net cash used in financing activities was offset

by €135 million in several new secured financing raised at rates of 1%-1.5% margin over Euri-

bor which is significantly below that of capital markets and which also helps further extend

the debt maturity profile. As of December 2022, GCP’s cost of debt remains low at 1.3% and

the average debt maturity remains long at 5.9 years. The Company also has no maturities

until Q2 2024 and cash and liquid assets cover debt maturities until mid-2025.

In 2022, GCP recorded a net decrease in cash and cash equivalents in the amount of €568

million, as compared to a net decrease of €519 million in 2021. The change in 2022 was

mostly the result of the net cash used in financing activities. The Company’s ability to deli-

ver stable and increasing operational cashflows demonstrates its ability to service its debt

as is further exemplified by its strong ICR of 6.6x as of December 2022.

For the year ended 31 December

2022

2021

€’000

Net cash provided by operating activities

216,115

217,060

Net cash used in investing activities

(167,689)

(198,455)

Net cash used in financing activities

(616,755)

(537,187)

Net decrease in cash and cash equivalents

(568,329)

(518,582)

Changes in cash and cash equivalents held-

for-sale and effects of foreign exchange rate

(2,222)

1,869

Cash and cash equivalents as on 1 January

895,486

1,412,199

Cash and cash equivalents as on

31 December

324,935

895,486

61

ASSETS

GCP’s total assets amounted to €11.1 billion as of December 2022, 4% lower as compared

to total assets of €11.6 billion as of December 2021. The decrease was primarily as a result

of lower cash and liquid assets which was mainly used for repayment of debts offset by the

slightly higher investment property balance.

As of December 2022, the Company recorded non-current assets totalling €10 billion, 1%

higher as compared to €9.9 billion as of December 2021. Non-current assets are mostly com-

posed of the investment property line item which amounted to €9.5 billion as of December

2022, as compared to €9.3 billion as of December 2021. The increase in the investment pro-

perty balance was primarily due to approx. €250 million in accretive acquisitions which con-

sisted of approx. 1,000 units in Berlin and London executed in 2022. In 2022, GCP disposed

€18 million of mostly non-core and development assets, as well as condominiums in Berlin.

Furthermore, in addition to the closed disposals, the Company classified approx. €230 mil-

lion of investment properties as assets held for sale in 2022, further offsetting the increase

in the Investment property item.

The non-current asset balance is also made up of tenant deposits which had a balance of €44

million and are used as a security for rent payments. The balance further includes long-term

financial investments which are made up of co-investments in attractive deals which had a

balance of approximately €50 million and are held with the expectation for long term yield.

Also included are investments where the Company holds a minority position in real estate

portfolios which had a balance of approximately €30 million.

The loans-to-own balance was approximately €90 million (including short term) as of De-

cember 2022, lower as compared to December 2021 as a result of net repayments and a

conversion into investment property of an asset which the Company was able to acquire at a

discount. Loans-to-own assets are asset-backed interest bearing loans, which under specific

circumstances, have the embedded option to acquire the underlying asset at a discount. The-

se assets further add to the Company’s wide deal sourcing network and provide opportuni-

ties to make attractive investments that create shareholder value.

As of December 2022, GCP recorded current assets in the amount of €1.1 billion, lower as

compared to €1.7 billion as of year-end 2021. The reduction in the cash and liquid assets ba-

lance was used to make debt repayments of approximately €615 million with additional cash

used to make accretive acquisitions as well as the dividend cash payment of €56 million. This

was offset by positive operational cashflow generation, €135 million in new secured financing

raised, and the result from disposals. The Company maintains a strong liquidity position of

€429 million in cash and liquid assets which represent 11% of total debt and cover debt ma-

turities until Q2 2025.

Current assets are also comprised of trade and other receivables and assets held for sale.

As of the end of December 2022, trade and other receivables had a balance amounting to

€353 million, of which over €250 million is comprised of operational receivables such as

rent, operating costs and other receivables. The operating cost receivables are composed of

services such heating, cleaning services, insurance, waste, and sewage and are settled once

per year against the advances received from tenants which are captured in the short-term

liabilities. GCP has seen a significant increase in these operating cost receivables as result of

cost inflation, which has had the largest impact on heating and energy prices. The Company

has responded by launching information campaigns on how to save energy, offering volun-

tarily increases to ancillary prepayments as to avoid a large payment at the settlement date.

Assets held for sale represent properties intended for disposal within the next 12 months and

amounted to €344 million as of the end of December 2022. In the fourth quarter of 2022,

GCP signed the disposal of over €170 million of properties marked as held for sale primarily

in London and Berlin, which it expects to close in the coming periods.

Dec 2022

Dec 2021

€’000

Non-current assets

9,997,258

9,882,834

Investment property

9,529,608

9,339,489

Current assets

1,134,070

1,679,158

Cash and liquid assets (including those

recorded under held for sale)

429,127

1,108,004

Total Assets

11,131,328

11,561,992

62

MAIN VALUATION PARAMETERS

LIABILITIES

Total liabilities at the end of December 2022 amounted to €5.2 billion, a decrease of 9%

as compared to €5.8 billion at the end of December 2021. The decrease in total liabilities is

primarily a result of debt repayments and regular amortisation, offset by new secured debt

financing and higher deferred tax liabilities. Total liabilities are also made up of other long-

term liabilities and derivative financial instruments as well as current liabilities.

Throughout 2022, GCP has continued to take proactive debt optimisation measures to main-

tain the Company’s conservative debt profile. The Company repaid over €615 million in debt

which included redeeming the €450 million Series F convertible bonds and repaying €165

million in bank loans. Furthermore, GCP raised a total of €135 million in new bank debt. The

new secured financing was signed at rates that remain below current capital market rates, at

an average margin range of 1%-1.5% and partially capped. GCP retains financial flexibility and

can leverage its large pool of unencumbered assets representing a total value of €8.7 billion,

or 88% of total investment properties, to secure additional secured financing and actively ma-

nage its financial platform. As of the end of December 2022, GCP’s current of cost of debt re-

mains low at 1.3% with an average debt maturity of 5.9 years. The increase in the cost of debt

compared to December 2021 is a result of the repayment of Series F bond which carried a low

coupon of 0.25%, new bank financing raised at a higher rate than the current low cost of debt,

and higher interest rates having an impact on variable debt financing costs. The Company’s

debt profile remains predominantly fixed with 95% of debt being fixed or interest hedged. In

2023, some fixed rate hedging matures, which is expected to result in a hedging ratio of 91%

assuming the Company does not re-hedge the instruments, pre-pays hedged debt early or

raises variable debt. This will result in approx €4 million more interest expenses in 2023. The

Company remains well positioned with no maturities until Q2 2024 and sufficient liquidity to

cover maturities until mid-2025.

As of December 2022, GCP recorded deferred tax liabilities in the amount of €796 million,

higher as compared to €766 million at December 2021. Deferred tax takes into account the

theoretical disposal of investment properties in the form of asset deals with a tax rate applied

based on the nominal tax rate in the jurisdiction of the property. The increase in deferred tax

liabilities is in line with the revaluation gains recorded in the period. At year-end 2022, the

deferred tax liabilities represented 15% of total liabilities.

Main Average Valuation Parameters

2022

2021

Rent multiple

23.6

23.6

Value per sqm

€ 2,282

€ 2,205

Market rental growth p.a.

1.8%

1.7%

Management cost per unit p.a.

€ 291

€ 269

Ongoing maintenance cost per sqm

€ 10.2

€ 9.2

Average discount rate

4.8%

4.8%

Average cap rate

3.8%

3.9%

(1)

including short-term derivative financial instruments

(2)

excluding current liabilities included in the items above

Dec 2022

Dec 2021

€’000

Short and long term Loans and borrowings

323,280

358,249

Straight & Convertible Bonds

3,612,105

4,091,880

Deferred tax liabilities

(including those under held for sale)

795,905

766,142

Other long-term liabilities and derivative financial

instruments

201,905

261,221

Current liabilities

283,978

281,914

Total Liabilities

5,217,173

5,759,406

63

EQUITY

As of December 2022, GCP recorded total equity in the amount of €5.9 billion, increasing 2%

as compared to the €5.8 billion as of year-end 2021. The increase in equity was primarily the

result of the profit generated by the Company which totalled €179 million in 2022. This in-

crease was offset by the dividend which totalled €0.834 per share and which itself was offset

by the high take-up ratio of approx. 70% of the scrip dividend. The Company’s strong capital

structure, exemplified by its equity ratio of 53% as of December 2022, higher as compared to

50% as of December 2021.

Equity attributable to perpetual notes investors totalled €1.2 billion as of year-end 2022,

stable as compared to year-end 2021. At the end of 2022, GCP announced its decision not to

call the €200 million perpetual notes series which had its first call date in January 2023. The

Company made this decision mainly because the coupon reset price of the notes was signifi-

cantly lower than the cost of a potential replacement with a new issuance and also because

of the high uncertainty in the capital market which might result in deteriorating access to

capital.

The reset coupon amounted to 6.332% which will result in an annualised €7.2 million

higher coupon for this series going forward. GCP views its perpetual notes as an integral part

of its capital structure and has the ability to call the notes at every interest payment date. The

voluntary decision on whether to call or not call the perpetual notes is at the sole discretion

of the Company and is further supporting the classification of the perpetual notes as equity

according to IFRS. Going forward, the Company will continue to assess all its options regar-

ding its perpetual notes.

Non-controlling interests amounted to €666 million as of December 2022, compared to €615

million as of December 2021. The increase is primarily the result of the profit generated in the

period attributed to non-controlling interests and as a result of acquisitions.

DEBT FINANCING KPIS

GCP maintains a conservative financial profile as an integral part of its business strategy

which is exemplified by strong debt financing KPIs namely a low LTV, a high ratio of unencum-

bered assets, and solid coverage ratios.

As of the end of December 2022, GCP had an LTV ratio of 36%, stable as compared to 36%

as of December 2021 and well below the internal board-mandated limit of 45% and the

limits imposed by the Company’s bond covenants. The Company also maintained strong co-

verage ratios as a result of the strong operational growth and profitability and the debt pro-

file optimization efforts which kept interest expenses relatively stable. In 2022, GCP had

a solid ICR of 6.6x and a DSCR of 6.1x as compared to 6.4x and 5.9x respectively in 2021.

These metrics demonstrate the ability of the business to service its debts. The Company

also maintains significant financial flexibility through its large portfolio of unencumbered

assets reflecting €8.7 billion in value and representing 88% of total investment property

value which give the option of raising cheaper secured financing rates as compared to pu-

blic debt market rates.

Dec 2022

Dec 2021

€’000

Total Equity

5,914,155

5,802,586

of which equity attributable to the owners of the Company

4,020,773

3,960,034

of which equity attributable to perpetual notes investors

1,227,743

1,227,743

of which non-controlling interests

665,639

614,809

(1)

including advanced payments and deposits and excluding right-of-use assets

Dec 2022

Dec 2021

Investment property

9,492,946

9,305,042

Investment properties of assets

held-for-sale

327,586

99,329

Total value

9,820,532

9,404,371

Total debt

3,935,385

4,450,129

Cash and liquid assets (including

those under held for sale)

429,127

1,108,004

Net debt

3,506,258

3,342,125

LTV

36%

36%

64

The Company’s strong debt financing KPI’s and con-

servative financial platform continues to allow it to

benefit from broad access to both public and private

capital markets, further supported by its invest-

ment grade credit ratings from S&P (BBB+/Stable)

and unsolicited rating by Moody’s (Baa1/Stable).

The EPRA LTV calculation is addressed further in the

EPRA Performance Measures section of the Board of

Director‘s Report.

LOW LEVERAGE WITH

ROBUST PROFITABILITY

36%

Dec 2021

Dec 2022

36%

Dec 2022

Dec 2021

€’000

Unencumbered Assets

8,664,533

8,352,924

Total Investment properties

(including those under held for sale)

9,860,461

9,442,026

Unencumbered Assets Ratio

88%

88%

For the year ended 31 December

2022

2021

€’000

Adjusted EBITDA

308,100

298,589

Finance Expenses

46,914

46,450

Interest Coverage Ratio

6.6x

6.4x

For the year ended 31 December

2022

2021

€’000

Adjusted EBITDA

308,100

298,589

Finance Expenses

46,914

46,450

3,766

4,328

Debt Service Coverage Ratio

6.1x

5.9x

65

EPRA Performance Measures

The European Public Real Estate Association (EPRA) is the widely recognised market

standard guidance and benchmark provider for the European real estate industry. EPRA’s

Best Practices Recommendations prescribe the ongoing reporting of a set of perfor-

mance metrics which are meant to enhance the quality of reporting by bridging the gap

between the regulated IFRS reporting presented and specific analysis relevant to the

European real estate industry. These standardised EPRA Performance Measures provide

additional perspective on earnings, balance sheet and operational metrics, and facilitate

for the simple and effective comparison of performance-related information across dif-

ferent companies.

2022

2021

In €‘000 unless otherwise indicated

EPRA NRV

5,322,769

5,228,882

EPRA NRV per share (in €)

30.8

31.7

EPRA NTA

5,115,704

5,020,190

EPRA NTA per share (in €)

29.6

30.4

EPRA NDV

4,642,313

3,853,263

EPRA NDV per share (in €)

26.9

23.3

EPRA Earnings

182,702

173,884

EPRA Earnings per share (in €)

1.09

1.04

EPRA LTV

46%

46%

EPRA Net initial yield (NIY)

3.2%

3.2%

EPRA "topped-up" NIY

3.2%

3.2%

EPRA Vacancy

4.2%

5.1%

EPRA Cost Ratio (incl. direct vacancy costs)

22.9%

21.4%

EPRA Cost Ratio (excl. direct vacancy costs)

20.9%

19.5%

Cologne

66

The Net Asset Value is a key performance measure used in the real estate industry. Due to the

evolving nature of ownership structures, balance sheet financing as well as the inclusion of

non-operating activities leading to entities being relatively more actively managed, EPRA has

provided three different metrics to reflect this nature of property companies. The EPRA Net

Asset Value Metrics are defined by EPRA and include the Net Reinstatement Value (NRV),

Net Tangible Assets (NTA) and Net Disposal Value (NDV).

EPRA Net Reinstatement Value (NRV)

assumes that entities never sell assets and aims to

represent the value required to rebuild the entity. The EPRA NRV measure provides stake-

holders with the value of net assets on a long-term basis and excludes assets and liabilities

that are not expected to materialise. Furthermore, real estate transfer taxes are added back,

since the intention of this metric is to reflect what would be required to reinstate the Com-

pany through existing investment markets and the Company’s current capital and financing

structures.

EPRA Net Tangible Assets (NTA)

assumes that entities buy and sell assets, thereby crystal-

lising certain levels of unavoidable deferred tax. Therefore, the EPRA NTA measure excludes

the value of intangible assets while also taking into consideration the fact that companies

acquire and dispose assets and, in the process, realise certain levels of deferred tax liabilities.

EPRA Net Disposal Value (NDV)

represents the shareholders’ value under a disposal scena-

rio, where deferred tax, financial instruments and certain other adjustments are calculated

to the full extent of their liability, net of any resulting tax. Therefore, the EPRA NDV measure

is meant to provide stakeholders with the net asset value in the scenario that all assets are

disposed and/or liabilities are not held until maturity.

EPRA NET ASSET VALUE METRICS

in € ‘000 unless otherwise specified

EPRA NRV

EPRA NTA

EPRA NDV

EPRA NRV

EPRA NTA

EPRA NDV

Dec 2022

Dec 2021

Equity attributable to the owners of the Company

4,020,773

4,020,773

4,020,773

3,960,034

3,960,034

3,960,034

Deferred tax liabilities on investment property

778,490

(1)

664,886

(2)

-

754,069

(1)

636,405

(2)

-

Fair value measurements of derivative financial instruments

(3)

(19,106)

(19,106)

-

(3,078)

(3,078)

-

Intangible assets and goodwill

-

(11,002)

-

-

(14,717)

-

Real estate transfer tax

542,612

(1)

460,153

(2)

-

517,857

(1)

441,546

(2)

-

Net fair value of debt

-

-

621,540

-

-

(106,771)

NAV

5,322,769

5,115,704

4,642,313

5,228,882

5,020,190

3,853,263

Basic number of shares including in-the-money

dilution effects (in thousands)

172,607

165,133

NAV per share (in €)

30.8

29.6

26.9

31.7

30.4

23.3

67

EPRA NRV

As of December 2022, the Company recorded an EPRA NRV in the amount of €5.3 billion or

€30.8 per share, increasing 2% and decreasing 3% respectively, as compared to €5.2 billion

and €31.7 as of year-end 2021. The NRV metric adds back the full amount of deferred tax and

real estate transfer tax as it assumes that entities never sell assets and aims to represent

the value required to rebuild the Company. The increase in the absolute NRV metric is the

result of the increase in the equity attributable to the owners of the Company as a result of

the positive operational result and revaluation gains and the slightly higher deferred tax and

real estate transfer tax amount, offset by the payment of the cash dividend. The per share

NRV decreased as a result of higher number of basic shares outstanding primarily from the

issuance of the scrip dividend in 2022 which allowed GCP to retain cash.

EPRA NTA

GCP reported EPRA NTA in the amount of €5.1 billion or €29.6 per share as of December

2022, as compared to €5 billion and €30.4 per share as of December 2021. The increase is

primarily the result of the positive operational result and revaluation gains which increased

equity and higher deferred tax liabilities and real estate transfer tax that increased in line

with revaluation gains. This increase was offset by the payment of the cash dividend. The per

share NTA decreased as a result of higher number of basic shares outstanding.

The EPRA NTA portrays the normal business environment where company’s buy and sell

assets thereby incurring a certain amount of unavoidable deferred tax and triggering the real

estate transfer tax which reduces the net disposal price of the properties sold. To represent

this normal business environment, GCP has classified its portfolio into three categories of

properties which it may not hold long-term, for which it conservatively excludes deferred tax

liabilities and real estate transfer taxes. These three categories are outlined below:

•

Investment properties held for sale:

These properties are actively managed for sale

and the Company expects to dispose them within 12 months.

•

Properties classified in its portfolio as “Other”:

This portfolio may be disposed on

an opportunistic basis and is composed of assets located in cities which do not lie in

GCP’s core portfolio locations and therefore are conservatively classified as properties

which may be disposed. On the other hand, it is also likely that they could remain in the

portfolio for the long term. The Company will continue to evaluate the probability of

these properties being disposed or held long term in upcoming periods and make the

necessary adjustments.

*

all investment properties, excluding investment properties held-for-sale, investment properties in cities

classified as „Others“ and development rights in Germany

€’000

Portfolio to be held long term*

8,334,317

85%

100%

Investment properties held-for-sale

330,853

3%

0%

Portfolio cities classified as "Others"

981,186

10%

0%

Development rights in Germany

214,105

2%

0%

Total (including assets classified

as held-for-sale)

9,860,461

100%

100%

68

EPRA NDV

As of December 2022, EPRA NDV amounted to €4.6 billion or €26.9 per

share, increasing 20% and 15% respectively, as compared to €3.9 billion

and €23.3 per share at the end of December 2021. The EPRA NDV repre-

sents the Company’s NAV under a theoretical scenario where all assets

are disposed and all liabilities settled, and therefore does not add back

any deferred tax liabilities or real estate transfer tax. The increase in the

EPRA NDV is mostly the result of the lower net fair value of debt induced

by significantly higher interest rates and the higher equity attributable to

the owners of the Company. The net fair value of debt adjustment reflects

the difference between the book value and fair value of the Company’s

outstanding debt. In the EPRA NDV scenario, the debt would be settled at

fair market value, i.e. below book value, and the difference to book value

is therefore added back. The relative soſter growth in the per share NDV

metric is the result of the higher basic share count as a result of the impact

from the scrip dividend issuance in 2022.

EPRA NAV METRICS DEVELOPMENT

(IN €)

EPRA NAV METRICS DEVELOPMENT (IN € MILLIONS)

EPRA NDV P.S

EPRA NDV

EPRA NTA P.S

EPRA NTA

69

The EPRA Earnings indicator is intended to serve as a key

indicator of the fundamental operational profits within the

context of a real estate company and is intended to mea-

sure the extent to which the Company’s dividend distributi-

on is covered by its operational income. GCP also provides

a reconciliation of the EPRA Earnings to the FFO I, another

widely recognised and key performance measure, as it be-

lieves FFO I to be a better measure of recurring operational

profits which is further supported by the fact that its divi-

dend payout policy is based on the FFO I metric.

In 2022, GCP recorded EPRA Earnings in the amount of

€183 million or €1.09 per share, both increasing 5% as

compared to €174 million or €1.04 per share for the year

2021. The increase was primarily driven by acquisitions

made in past periods and the strong internal operational

result driven by the strong like-for-like rental growth of

2.9%, offset by disposals and higher operating expenses

as a result of cost inflation.

The bridge to FFO I adjusts for one-off expenses as well as

non-cash charges while taking out the adjustment for per-

petual notes attribution. FFO I also presents a strong ope-

rational result and increased by 3% as compared to 2021.

For the year ended 31 December

2022

2021

€’000

Earnings per IFRS income statement

179,103

617,089

Property revaluations and capital gains

(117,761)

(694,844)

Change in fair value of financial assets and liabilities, net

115,925

122,553

Deferred tax expenses

10,532

134,582

Share of profit from investments in equity-accounted investees

-

(3,952)

Contribution from joint ventures

-

1,949

Contribution to minorities

(5,097)

(3,493)

EPRA Earnings

182,702

173,884

Weighted average number of ordinary shares (basic) in thousands

168,170

167,551

EPRA Earnings per share (in €)

1.09

1.04

Bridge to FFO I

Add back: Depreciation

10,488

8,235

Add back:

Finance-related costs

21,208

26,087

Add back:

Equity settled share-based payments and other adjustments

2,571

3,162

Less: Adjustment for perpetual notes attribution

(24,750)

(25,042)

FFO I

192,219

186,326

Weighted average number of ordinary shares (basic) in thousands,

including impact from share-based payments

168,396

167,704

FFO I per share (in €)

1.14

1.11

EPRA EARNINGS

70

Dec 2022

Consolidated

(as reported)

Share of

Joint

Ventures

Share of

material

associates

Material

non-

controlling

interests

Proportionate

consolidation

€’000

Total debt

3,935,385

-

-

-

3,935,385

Equity attributable to

1,227,743

-

-

-

1,227,743

Net foreign currency

derivatives on debt

(44,276)

-

-

-

(44,276)

Net payables

-

-

-

-

-

EPRA Gross Debt

5,118,852

-

-

-

5,118,852

Less:

Cash and liquid assets

(including those under

held for sale)

(429,127)

-

-

-

(429,127)

EPRA Net Debt

4,689,725

-

-

-

4,689,725

Owner occupied

property

54,720

-

-

-

54,720

Investment property

(1)

9,492,946

-

-

-

9,492,946

Investment properties

of assets held-for-sale

(1)

327,586

-

-

-

327,586

Intangible assets

11,002

-

-

-

11,002

Financial assets

91,191

-

-

-

91,191

Net receivables

209,658

-

-

-

209,658

EPRA Net Assets

10,187,103

-

-

-

10,187,103

EPRA LTV

46%

46%

Dec 2021

Consolidated

(as reported)

Share of

Joint

Ventures

Share of

material

associates

Material

non-

controlling

interests

Proportionate

consolidation

€’000

Total debt

4,450,129

-

-

-

4,450,129

Equity attributable to

1,227,743

-

-

-

1,227,743

Net foreign currency

derivatives on debt

(27,973)

-

-

-

(27,973)

Net payables

-

-

-

-

-

EPRA Gross Debt

5,649,899

-

-

-

5,649,899

Less:

Cash and liquid assets

(including those under

held for sale)

(1,108,004)

-

-

-

(1,108,004)

EPRA Net Debt

4,541,895

-

-

-

4,541,895

Owner occupied

property

42,973

-

-

-

42,973

Investment property

(1)

9,305,042

-

-

-

9,305,042

Investment properties

of assets held-for-sale

(1)

99,329

-

-

-

99,329

Intangible assets

14,717

-

-

-

14,717

Financial assets

298,179

-

-

-

298,179

Net receivables

201,459

-

-

-

201,459

EPRA Net Assets

9,961,699

-

-

-

9,961,699

EPRA LTV

46%

46%

(1) including advanced payments and deposits and excluding right-of-use assets

EPRA LOAN TO VALUE (EPRA LTV)

EPRA LOAN TO VALUE (EPRA LTV)

The EPRA Loan-To-Value (LTV) is a metric which aims to assess the leverage of the share-

holder equity within a real estate company. The greatest difference between the EPRA LTV

and the Company calculated LTV metric is the wider categorization of liabilities in EPRA gross

debt and assets in EPRA net assets with the greatest impact coming from the inclusion of

the perpetual notes as debt. Under IFRS the Company’s perpetual notes are accounted for

as equity as a result of having no maturity date, being deeply subordinated to all debt types,

and not carrying covenants. EPRA LTV also adds net foreign currency derivatives on debt and

working capital adjustments, such as net payables, if applicable to EPRA Gross Debt and the

fair value of intangible assets, financial assets, and net receivables if applicable to EPRA net

assets. In its own LTV calculation, the Company does not make such adjustments. As a result,

GCP views its LTV calculation as a better measure of leverage, as it more closely matches the

LTV under its debt covenants. However, for enhanced transparency the Company will conti-

nue to present both metrics going forward.

GCP recorded an EPRA LTV of 46% as of December 2022, flat as compared to 46% as of De-

cember 2021. The greatest change between the two periods came from the use of cash which

reduced cash and liquid assets to repay debt which reduced the EPRA gross debt. In 2022,

the Company used cash to repay €615 million in debt which included redeeming the €450

million Series F convertible bonds in cash and repaying €165 million in near-term maturity

bank loans.

71

72

EPRA NET INITIAL YIELD (NIY) AND EPRA ‘TOPPED-UP’ NIY

The EPRA Net Initial Yield (NIY) is intended to serve as a standardised portfolio valuation

indicator. It is calculated by subtracting the passing non-recoverable operating costs from the

passing net rental income as of the end of the period and dividing the result by the fair value

of the full property portfolio (including held-for-sale properties and inventories – trading pro-

perties, excluding the value of properties classified as development rights and new buildings,

as these are non-income generating assets), plus an allowance for estimated purchasers’

costs. EPRA ‘topped-up’ NIY is an additional calculation that factors into consideration the

effects of rent-free periods and other lease incentives.

As of the end of December 2022, the Company’s portfolio had an EPRA NIY of 3.2%, stable

compared to December 2021. The increase in the end of period annualised net rental income,

driven by acquisitions and internal rent growth, was offset by an increase in the gross up

complete property portfolio valuation, driven by net acquisitions and some positive revalua-

tion gains, as well as from relatively higher operating costs.

Dec 2022

Dec 2021

€’000

Investment property

9,529,608

9,339,489

Investment properties of assets held-for-sale

330,853

102,537

Less: Classified as development rights and new buildings

(309,763)

(306,272)

Complete property portfolio

9,550,698

9,135,754

Allowance for estimated purchaser‘s costs

705,145

674,073

Gross up complete property portfolio valuation

10,255,843

9,809,827

End of period annualised net rental income

(including impact from assets held for sale)

404,720

384,848

Operating costs

(1)

(81,572)

(71,232)

Annualised net rent, aſter non-recoverable costs

323,148

313,616

Notional rent expiration of rent-free periods or other

lease incentives

N/A

N/A

Topped-up net annualised rent

323,148

313,616

EPRA NIY

3.2%

3.2%

EPRA “topped-up” NIY

3.2%

3.2%

Dec 2022

Dec 2021

€’000

Estimated rental value of vacant space (A)

17,147

20,650

December annualised net rent including vacancy

rented at ERV (B)

409,957

403,683

EPRA Vacancy Rate (A/B)

4.2%

5.1%

EPRA VACANCY

EPRA Vacancy is an operational measure that calculates a real estate company’s economic

vacancy rate as based on the prevailing market rental rates, as opposed to in-place rents and

physical vacancy. It is calculated by dividing the estimated market rental value of the vacant

spaces in the portfolio by the market rental value of the entire portfolio, including vacancy

rented at market rents.

As of December 2022, GCP had an EPRA Vacancy of 4.2% substantially lower as compared

to 5.1% as of December 2021 and 6.2% as of December 2020. The Company has a strong

track record of reducing vacancy which has contributed 0.7% to the total like-for-like rental

growth of 2.9% in 2022. The reduction in the vacancy rate is the result of the strong letting

performance reflecting the strong demand in GCP’s portfolio locations.

73

74

EPRA COST RATIOS

The EPRA Cost Ratios provide a detailed analysis of a Company’s operating costs structure and provide for increased comparability across companies. The cost ratio is derived by dividing the Com-

pany’s direct administrative expenses and property operating expenses (including non-recoverable service charges) by the rental income for the year, excluding ground rents. The ratio is calculated

both including and excluding the direct vacancy costs.

As of the end of December 2022, GCP’s EPRA Cost Ratios, both including and excluding direct vacancy costs, stood at 22.9% and 20.9% respectively as compared to 21.4% and 19.5% as of the end

of December 2021. The increase in the EPRA cost ratios is primarily the result of the higher EPRA costs, mostly from higher property net operating expenses from cost inflation which outpaced the

growth in the rental income. The rental income increased primarily as a result of net acquisitions and the like-for-like growth. The slightly higher direct vacancy costs in 2022 as compared to 2021

was primarily as a result of the substantial increase in the vacancy costs mostly as a result of the higher energy costs but offset by the strong letting performance which reduced the vacancy rate

to 4.2% as of the end of December 2022.

For the year ended 31 December

2022

2021

€’000

Property operating expenses, net

58,100

45,536

Maintenance and refurbishment

21,723

22,449

Administrative and other expenses

10,689

11,138

Share of expenses from investments in equity accounted investees

*

-

2,599

EPRA Costs (including direct vacancy costs)

90,512

81,722

Direct vacancy costs

(7,644)

(7,369)

EPRA Costs (excluding direct vacancy costs)

82,868

74,353

Revenue

582,505

524,629

Less: operating and other income

(186,464)

(150,079)

Add: Share of net rental income from equity-accounted investees

-

6,796

Rental income, net

396,041

381,346

EPRA Cost Ratio (including direct vacancy costs)

22.9%

21.4%

EPRA Cost Ratio (excluding direct vacancy costs)

20.9%

19.5%

75

* excluding the impact of acquiring a controlling stake in an existing investee and consolidating a portfolio of

approx. €280 million, previously held as an equity accounted investee

EPRA CAPITAL EXPENDITURE

GCP recorded EPRA property-related capex in the amount of €417 million in 2022, as com-

pared to €585 million in 2021. EPRA property-related capex is comprised of expenditures on

acquisitions, repositioning capex, pre-letting modifications and others, as well as moderni-

sation. The modernisation line item was split from repositioning capex in 2022 and as result

will be presented as its own line item in the future. The decrease in EPRA property-related

capex was primarily a result of the smaller volume of acquisitions made in 2022 and offset

by higher expenditures on pre-letting modifications and others, repositioning capex and mo-

dernisation. Acquisition costs represent the gross expenditure related to the acquisition of

investment properties, including transaction costs, and was the largest component of the

EPRA property-related capex amounting to €278 million in 2022.

GCP also recorded €71 million of expenditures on repositioning capex which is comprised of in-

vestments that focus on increasing the quality and offerings of assets in the portfolio and their

surrounding areas. Examples of these investments include apartment renovations, improve-

ments to corridors and staircases, façade refits and the additions or renovation of playgrounds,

barbeque pits, study rooms and other common meeting areas. Modernisation measures total-

led €10 million by themselves in 2022, as compared to €3 million in 2021, when the number

was included in the repositioning capex as the amount was relatively immaterial, and included

measures such as installing green energy and heating systems and adding better insulation and

windows, among others. The Company also recorded €59 million pre-letting modifications and

others in 2022 which were expenditures related to the final preparation of new buildings, as

well as the re-opening of converted and refurbished properties which are in the pre-let stage

and are being prepared for leasing.

For the year ended 31 December

2022

2021

€’000

Acquisitions

277,668

479,976

*

Pre-letting modifications and others

58,928

42,339

Repositioning capex

70,535

63,084

Modernisation

10,184

-

76

Alternative Performance Measures

In this section, GCP provides an overview of the use of its alternative performance measures.

For enhanced transparency and more industry specific comparative basis, the Company provides market and industry standard performance indicators. GCP provides a set of measures that

can be utilised to assess the Company’s operational earnings, net asset value of the Company, leverage position, debt and interest coverage abilities as well as liquidity headroom. The

following measurements apply to the real estate industry’s specifications and include adjustments where necessary that are in compliance with the standards.

RECONCILIATION OF ADJUSTED EBITDA

The adjusted EBITDA is an industry standard figure indicative

of the Company’s recurring operational profits before inter-

est and tax expenses, excluding the effects of capital gains,

revaluations, and other non-operational income statement

items such as profits from disposal of buildings, share of pro-

fit from investment in equity-accounted investees and other

adjustments. GCP starts from its

and adds

back the item

to arrive at the

value. Non-recurring and non-operational items are

deducted such as the

. Further adjustments

are labelled as

which are subtracted since these are non-cash

expenses.

Adjusted EBITDA reconciliation

(=)

EBITDA

(=) Adjusted EBITDA

FFO I reconciliation

(=) (A) FFO I

(=) (A/B) FFO I per share

FFO II Reconciliation

(=) FFO II

RECONCILIATION OF FUNDS FROM

OPERATIONS I (FFO I)

Funds From Operations I (FFO I) is an industry-wide standard

measure of the recurring operational cash flow of a real es-

tate company, oſten utilised as a key industry performance

indicator. It is calculated by deducting the

,

to the

To arrive at the

the

is divided by the

which reflects the impact

of the

adjustment in the

RECONCILIATION OF FUNDS FROM

OPERATIONS II (FFO II)

FFO II additionally incorporates on top of the

the r

, calculated as the difference between

the disposal values and the property acquisition costs plus

capex, reflecting the economic profit generated on the sale of

the assets. Although, property disposals are non-recurring,

disposal activities provide further cash inflow that increase

the liquidity levels. As a result, this measure is an indicator

to evaluate operational cash flow of a company including the

effects of disposals.

77

LOAN-TO-VALUE Reconciliation

(+) Investment property

(1)

(+) Investment properties of assets held for sale

(2)

(+) Investment in equity-accounted investees

(=) (A) Total value

(+) Total debt

(3)

(-) Cash and liquid assets

(4)

(=) (B) Net debt

(=) (B/A) LTV

Equity Ratio Reconciliation

(A) Total Equity

(B) Total Assets

(=) (A/B) Equity Ratio

Unencumbered Assets Ratio reconciliation

(A) Unencumbered assets

(B) Total investment properties*

(=) (A/B) Unencumbered Assets Ratio

AFFO reconciliation

FFO I

(-) Repositioning capex

(=) AFFO

RECONCILIATION OF LOAN-TO-VALUE (LTV)

LTV ratio is an acknowledged measurement of the leverage

position of a given firm in the real estate industry. This ratio

highlights to which extent financial liabilities are covered by

the Company’s real estate asset value as well as how much

headroom of the fair value of real estate portfolio is available

compared to the net debt. Following the industry specificati-

ons, GCP calculates the LTV ratio by dividing the total net debt

to the total value at the balance sheet date. Total value of the

portfolio is a combination of the

which

includes the

. For the calculation of net debt,

total

are deducted from the

Total loan and borrowings include the

and

while Straight bonds and Convertible bonds include

Cash and liquid assets is the sum of

and

RECONCILIATION OF UNENCUMBERED

ASSETS RATIO

The unencumbered assets ratio is a liquidity measure as it

reflects the Company’s ability to raise secure debt over these

assets and thus provides an additional layer of financial flexi-

bility and liquidity. Moreover, the unencumbered assets ratio

is important for unsecured bondholders, providing them with

an asset backed security. Hence, the larger the ratio is, the

more flexibility a firm has in terms of headroom and comfort

to its debtholders. Unencumbered assets ratio is calculated

by dividing the

of the

portfolio by the

which is the sum

of

and

RECONCILIATION OF ADJUSTED FUNDS FROM

OPERATIONS (AFFO)

The Adjusted Funds From Operations (AFFO) is an additional

measure of comparison which factors into the FFO I, the Com-

pany’s repositioning capex, which targets value enhancement

and quality increase in the portfolio. Modernisation and pre-

letting capex are not included in the AFFO as it is considered

as an additional investment program, similar to the property

acquisitions, which is conducted at the Company’s discretion.

Therefore, in line with the industry practices, GCP deducts

the

from the

to arrive at the

.

As a result, AFFO is another widely used indicator which tries

to assess residual cash flow for the shareholders by adjusting

FFO I for recurring expenditures that are capitalised.

RECONCILIATION OF EQUITY RATIO

Equity Ratio is the ratio of Total Equity divided by Total As-

sets, each as indicated in the consolidated financial state-

ments. GCP believes that the Equity Ratio is useful for in-

vestors primarily to indicate the long-term solvency position

of the Company. The Equity Ratio is calculated by dividing the

by the

, both as per the consolidated

financial statements of the Company.

78

ICR Reconciliation

(A) Adjusted EBITDA

(B) Finance expenses

(=) (A/B) ICR

DSCR Reconciliation

(A) Adjusted EBITDA

(B) Finance expenses

(C) Amortisation of loans from financial institutions

(=) [A/(B+C)] DSCR

RECONCILIATION OF ICR AND DSCR

Two widely recognised debt metrics Interest Coverage Ratio

(ICR) and Debt Service Coverage Ratio (DSCR) are utilised to

demonstrate the strength of GCP’s credit profile. These me-

trics are oſten used to see the extent to which interest and

debt servicing are covered by recurring operational profits

and provides implications on how much of cash flow is avai-

lable aſter debt obligations. Therefore, ICR is calculated by

dividing the

by the

and

DSCR is calculated by dividing the

by the

plus the

With this ratio, GCP is able to show that with its

high profitability and long-term oriented conservative financi-

al structure, GCP consistently exhibits high debt cover ratios.

RECONCILIATION OF NET DEBT-TO-EBITDA

AND NET DEBT-TO-EBITDA INCLUDING

PERPETUAL NOTES

The Net debt-to-EBITDA is another acknowledged measure-

ment of the leverage position of a given firm in the real estate

industry. This ratio highlights the ratio of financial liabilities

to the Company’s recurring operational profits and thereby

indicates how much of the Company’s recurring operational

profits are available to debt holders. Therefore, GCP calcu-

lates the

ratio by dividing the total

as at the balance sheet date by the

for the period. The

is computed by adjusting the

(as previously

defined) to reflect a theoretical full year figure, based on the

periods result, this is done by dividing the figure by ¼ in the

first three-month period, ½ in the first six-month period and

¾ in the nine-month period. For the full year figure no adjust-

ment is made.

NET DEBT-TO-EBITDA Reconciliation

(A) Net debt

(B) Adjusted EBITDA (annualised)

(=) (A/B) Net debt-to-EBITDA

GCP additionally provides the

ratio by

adding

as

at the balance sheet date to the

. While GCP’s per-

petual notes are 100% equity instruments under IFRS, credit

rating agencies, including S&P, generally apply an adjustment

to such instruments and consider these as 50% equity and

50% debt. Furthermore, some equity holders may find an

adjustment that adds the full balance of perpetual notes to

the net debt as relevant. For enhanced transparency GCP the-

refore additionally provides this metric including the full ba-

lance sheet amount of Equity attributable to perpetual notes

investors.

NET DEBT-TO-EBITDA

including perpetual notes Reconciliation

(A) Net debt

(B) Equity attributable to perpetual notes investors

(C) Adjusted EBITDA (annualised)

(=) [(A+B)/C)] NET DEBT-TO-EBITDA including perpetual notes

79

EPRA EARNINGS

The EPRA Earnings indicator is intended to serve as a key in-

dicator of the underlying operational profits for the year in the

context of a real estate company, intended to measure the ex-

tent to which the Company’s dividend distribution is covered

by its operational income. GCP computes EPRA Earnings by

excluding from its IFRS Earnings,

To arrive at the

the

is divided by the

GCP also provides a reconciliation of the EPRA Earnings to

the FFO I, another widely-recognized and key performance

measure, as it believes it to be a better measure of recurring

operational profits and given that its dividend payout policy is

based on the FFO I, supporting its importance and relevance.

EPRA Earnings Reconciliation

EPRA Earnings

Earnings per IFRS income statement

Excluding:

(+/-) Property revaluations and capital gains

(+/-) Result on the disposal of buildings

(+/-) Change in fair value of financial assets and liabilities, net

(+) Deferred tax expenses

(+/-) Share in profit from investment in equity-accounted investees

(+/-) Contribution from joint ventures

(+/-) Contribution to minorities

(=) (A) EPRA Earnings

(B) Weighted average number of ordinary shares (basic)

in thousands

(=) (A/B) EPRA Earnings per share

Bridge to FFO I

Excluding:

(+) Depreciation

(+) Finance-related costs

(+/-) Other adjustments

(-) Adjustment for perpetual notes attribution

(=) (C) FFO I

(D) Weighted average number of ordinary shares (basic) in thou-

sands, including impact from share-based payments

(=) (C/D) FFO I per share

RECONCILIATION OF THE NET REINSTATEMENT

VALUE ACCORDING TO EPRA (EPRA NRV)

The Net Reinstatement Value measure provides stakeholders

with the value of net assets on a long-term basis and exclu-

des assets and liabilities that are not expected materialise.

Furthermore, real estate transfer taxes are added back, since

the intention of this metric is to reflect what would be re-

quired to reinstate the Company through existing investment

markets and the Company’s current capital and financing

structures.

The reconciliation of the EPRA NRV starts from the

and adds back

Further, the

EPRA NRV includes

in order to derive

the

and provide the reader with a perspective of

what would be required to reinstate the Company at a given

point of time. To arrive at the

the

is divided by the

EPRA NRV Reconciliation

Equity attributable to the owners of the Company

(+) Deferred tax liabilities

(+/-) Fair value measurements of derivative financial

instruments, net

(+) Real Estate Transfer Tax

(=) (A) EPRA NRV

(B) Basic number of shares including in-the-money

dilution effects (in thousands)

(=) (A/B) EPRA NRV per share

80

RECONCILIATION OF THE NET DISPOSAL VALUE

ACCORDING TO EPRA (EPRA NDV)

The Net Disposal Value measure is meant to provide stake-

holders with the net asset value in the scenario that all assets

are disposed and/or liabilities are not held until maturity. In

this measure of net asset value, deferred tax liabilities, fair

value measurements of financial instruments and certain

other adjustments are considered to the full extent of their

liabilities, without including any optimisation of real estate

transfer tax.

Accordingly, to arrive at the EPRA NDV the starting point is

the

and

includes the

The adjustment is the dif-

ference between the market value of debt and book value of

debt. To arrive at the

per share the

is

divided by the

EPRA NDV Reconciliation

Equity attributable to the owners of the Company

(+/-) Net fair value of debt

(=) (A) EPRA NDV

(B) Basic number of shares including in-the-money dilution

effects (in thousands)

(=) (A/B) EPRA NDV per share

EPRA NTA Reconciliation

Equity attributable to the owners of the Company

(+) Deferred tax liabilities

(+/-) Fair value measurements of derivative financial instruments, net

(-) Intangible assets and goodwill

(+) Real Estate Transfer Tax

(=) (A) EPRA NTA

(B) Basic number of shares including in-the-money dilution

effects (in thousands)

(=) (A/B) EPRA NTA per share

RECONCILIATION OF THE NET TANGIBLE ASSETS

ACCORDING TO EPRA (EPRA NTA)

The Net Tangible Assets measure excludes the value of intan-

gible assets while also taking into consideration the fact that

companies acquire and dispose assets and, in the process,

realise certain levels of deferred tax liabilities. Additionally,

to the extent that tax optimisation is demonstrable, a corre-

sponding portion of real estate transfer taxes are excluded to

arrive at the Net Tangible Assets.

The reconciliation of the EPRA NTA begins at the

and adds back

excluding deferred

tax liabilities related to the assets which are considered non-

core, assets expected to be disposed within the following 12

months and the development rights in Germany. In addition,

is subtracted

and

are considered for this measure of valuation by EPRA.

Further, the EPRA NTA adds back a portion of the

tax excluding real estate transfer tax related to as-

sets which are considered non-core, assets expected to be

disposed within the following 12 months and development

rights in Germany. To arrive at the

the

is divided by the Basic

81

EPRA VACANCY RATE

EPRA Vacancy rate is a key disclosure that provides for the

comparable and consistent reporting of vacancy across com-

panies. EPRA Vacancy rate is expressed as a percentage,

being the

divi-

ded by the

,

EPRA NIY and ‘topped-up’ NIY reconciliation

EPRA Net Initial Yield (NIY) and EPRA ‘topped-up’ NIY

(+) Investment property

(+) Investment properties – share of JV

(+) Investment properties of assets held for sale

(+) Inventories - trading properties

(-) Classified as development rights and new buildings

(=) Complete property portfolio

(+) Allowance for estimated purchasers’ costs

(=) (A) Gross up complete property portfolio valuation

(+) End of period annualised net rental income

(1)

(-) Operating costs

(2)

(=) (B) Annualised net rent, after non-recoverable costs

(+) Notional rent expiration of rent-free periods or other lease

incentives

(=) (C) Topped-up net annualised rent

(=) (B/A) EPRA NIY

(=) (C/A) EPRA “topped-up” NIY

EPRA Vacancy rate reconciliation

(A) ERV of vacant space, for a given month

(=) (A/B) EPRA Vacancy rate

EPRA NET INITIAL YIELD (NIY) AND EPRA‚

TOPPED-UP‘ NIY

The EPRA Net Initial Yield (NIY) is intended to serve as a stan-

dardised portfolio valuation indicator. It is calculated by sub-

tracting the passing non-recoverable operating costs from

the passing net rental income as of the end of the period,

and dividing the result by the fair value of the full property

portfolio (including held-for-sale properties and inventories

– trading properties) plus an allowance for estimated purcha-

sers’ costs. EPRA ‘topped-up’ NIY is an additional calculation

that factors into consideration the effects of rent-free periods

and other lease incentives.

The fair value of the full property portfolio is the sum of

Pro-

perties classified as development rights and new buildings

are subtracted, as these are non-income generating assets

and therefore not relevant to the NIY calculation. In addition,

this sum is grossed up with an

The

is arrived by

subtracting

based

on cost margins for comparability.

82

EPRA COST RATIOS

EPRA Cost Ratio is a key measure to enable meaningful mea-

surement of the changes in a company’s operating costs as

well as comparability between companies. EPRA Costs (in-

cluding direct vacancy costs) is the sum of non-recoverable

and the

related to the above.

EPRA Costs (excluding direct vacancy costs) eliminate direct

vacancy costs from the EPRA Costs (including direct vacancy

costs).

EPRA Cost Ratios reconciliation

EPRA Cost Ratios

(+) Operational expenses

(+) Maintenance and refurbishment

(+) Administrative and other expenses

(+) Share of expenses from investments in equity

accounted investees*

(=) (A) EPRA Costs (including direct vacancy costs)

(-) Direct vacancy costs

(=) (B) EPRA Costs (excluding direct vacancy costs)

Rental and operating income

(-) Operating income

(+) Share of net rental income from equity-accounted investees

(=) (C) Rental income, net

(=) (A/C) EPRA Cost Ratio (including direct vacancy costs)

(=) (B/C) EPRA Cost Ratio (excluding direct vacancy costs)

* including share of operating expenses recovered from tenants

EPRA CAPITAL EXPENDITURE

The EPRA capital expenditure disclosure is based on EPRA

guidelines, which aims to provide a detailed analysis of the

Company’s capital expenditures.

represent the amount spent for the purchase

of investment properties including capitalized transaction

costs.

refer to costs related to

snagging and the final preparation of new buildings as well as

re-opening of converted/refurbished buildings prior to leasing.

comprise of costs involved in impro-

ving the long-term asset quality.

refers to capex carried on a targeted basis

aimed at further improving the quality of the portfolio and

increasing rents.

EPRA LOAN-TO-VALUE (EPRA LTV)

The EPRA Loan-To-Value (EPRA LTV) is a key metric which

aims to assess the leverage of the shareholder equity wit-

hin a real estate company. The main difference between the

EPRA LTV and the Company calculated LTV metric is the

wider categorization of liabilities in EPRA gross debt and

assets in EPRA net assets with the largest impact coming

from the inclusion of the perpetual notes as debt. The

is calculated by dividing the

by

is composed of

subtracted by

.

is

calculated from

which is the sum of the

current and non-current portions of

,

and adds to this

and

(if applicable).

is calculated by adding together

and

(each excluding right-of-use assets),

and

(if

applicable).

or

are

net of

, and whichever item is greater is applicable to the

calculation.

Additional items which are included in the calculation, but

are currently not applicable to GCP include

(in EPRA Gross Debt),

(in EPRA Gross Assets), and the

(applicable to both

assets and liabilities) which would be added to the EPRA LTV

calculation if applicable.

EPRA capital expenditure

(A) Acquisitions

(=) [(A) + (B) + (C) + (D)] EPRA capital expenditure

83

EPRA Loan-To-Value (EPRA LTV) Calculation

(+) Total financial debt

(1)

(+) Foreign currency derivatives

(+) Equity attributable to perpetual notes investors

(+) Net Payables

(3)

(=) EPRA Gross Debt

(-) Cash and liquid assets

(1)

(=) (A) Net debt

(+) Owner-occupied property

(+)

Investment property

(2)

(+) Investment properties of assets held-for-sale

(2)

(+) Intangible assets

(+) Financial assets

(+) Net receivables

(3)

(=) (B) EPRA Net Assets

(=) (A/B) EPRA LTV

(1)

Including balances held-for-sale

(2)

Including advance payments and deposits and excluding right of use assets

(3)

Net receivables to be used when receivables are greater than payables and net paya-

bles to be used when payables are greater than receivables.

84

Dresden

85

RESPONSIBILITY STATEMENT

To the best of our knowledge, the consolidated annual report of Grand

City Properties S.A., prepared in accordance with the applicable repor-

ting principles for financial statements, give a true and fair view of the

assets, liabilities, financial position and profit and loss of the Group

and the management report of the Group includes a fair view of the

development of the business, and describes the main opportunities,

risks, and uncertainties associated with the Group.

DISCLAIMER

The financial data and results of the Group are affected by financial

and operating results of its subsidiaries. Significance of the information

presented in this report is examined from the perspective of the Com-

pany including its portfolio with the joint ventures. In several cases,

additional information and details are provided in order to present a

comprehensive representation of the subject described, which in the

Group’s view is essential to this report.

Luxembourg, 16 March 2023

Christian Windfuhr

Chairman and member

of the Board of Directors

Simone Runge-Brandner

Member of the

Board of Directors

Daniel Malkin

Member of the

Board of Directors

86

37, Boulevard Joseph II,

L-1840 Luxembourg

Grand Duchy of Luxembourg

REPORT OF THE REVISEUR

D’ENTREPRISES AGREE

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of Grand City Properties S.A. and its

subsidiaries (the "Group"), which comprise the consolidated statement of financial position

as at 31 December 2022, and the consolidated statement of profit or loss, consolidated

statement of comprehensive income, consolidated statement of changes in equity and con-

solidated statement of cash flows for the year then ended, and notes to the consolidated

financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of

the consolidated financial position of the Group as at 31 December 2022 and of its consolidated

financial performance and its consolidated cash flows for the year then ended in accordance

with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July

2016 on the audit profession (“Law of 23 July 2016”) and with International Standards on Audit-

ing (“ISAs”) as adopted for Luxembourg by the Commission de Surveillance du Secteur Finan-

cier (“CSSF”). Our responsibilities under the EU Regulation N° 537/2014, the Law of 23 July 2016

and ISAs as adopted for Luxembourg by the CSSF are further described in the « Responsibilities

of the “réviseur d'entreprises agréé” for the audit of the consolidated financial statements »

section of our report. We are also independent of the Group in accordance with the International

Code of Ethics for Professional Accountants, including International Independence Standards,

issued by the International Ethics Standards Board for Accountants (“IESBA Code”) as adopted

for Luxembourg by the CSSF together with the ethical requirements that are relevant to our

audit of the consolidated financial statements, and have fulfilled our other ethical responsibili-

ties under those ethical requirements. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most sig-

nificance in our audit of the consolidated financial statements of the current period. These

matters were addressed in the context of the audit of the consolidated financial statements

as a whole, and in forming our opinion thereon, and we do not provide a separate opinion

on these matters.

Valuation of Investment Properties

Refer to notes 16 and 25.2 to the consolidated financial statements for related disclosures.

In notes 2.3, 3.12 and 3.14 to the consolidated financial statements you find the correspond-

ing significant accounting judgements, estimates and assumptions, and the accounting pol-

icies, respectively.

87

a) Why the matter was considered to be one of most significance in our audit of the

consolidated financial statements

As at 31 December 2022 the Group held a portfolio of investment properties with a fair

value of TEUR 9,529,608 (31 December 2021: TEUR 9,339,489) and investment properties

within assets classified as held for sale with a fair value of TEUR 330,853 (31 December

2021: TEUR 102,537).

The valuation of investment properties is a significant judgement area and is underpinned

by a number of assumptions.

The fair value measurement of investment property is inherently subjective and requires

valuation experts and the Group’s management to use certain assumptions regarding dis-

count and capitalization rates on the Group’s assets, future rent, occupancy rates, con-

tract renewal terms, the probability of leasing vacant areas, asset operating expenses,

the tenants’ financial stability and the implications of any investments made for future

development purposes in order to assess the future expected cash flows from the assets.

Any change in the assumptions used to measure the investment property could cause a

significant change on the resulting fair value.

The Group uses external valuation reports issued by external independent professionally

qualified valuers to determine the fair value of its investment properties.

The external valuers were engaged by management and performed their work in compliance

with the Royal Institute of Chartered Surveyors Valuation – Professional Standards, TEGoVA

European Valuations Standards and IVSC International Valuation Standard. The valuers used

by the Group have the necessary experience of the markets in which the Group operates. In

determining a property’s valuation, the external valuers take into account property-specific

characteristics and information such as the current tenancy agreements and rental income.

They apply assumptions for yields and estimated market rent, which are influenced by pre-

vailing market yields and comparable market transactions, to arrive at the final valuation.

The significance of the estimates and judgments involved, coupled with the fact that only

a small percentage difference in individual property valuations, when aggregated, could

result in a material misstatement in the consolidated statement of profit or loss and consol-

idated statement of financial position, warrants specific audit focus in this area.

b) How the matter was addressed during the audit

Our procedures over valuation of investment properties included but were not limited to

the following:

−

We tested the design and implementation of the key controls around the determination

and monitoring of the fair value measurement of the investment properties;

−

We assessed the competence, capabilities, qualifications, independence and integrity of

the external valuers and read their terms of engagement with the Company to determine

whether there were any matters that might have affected their objectivity or may have

imposed scope limitations on their work;

−

Through the involvement of our own property valuation specialists, on a sample basis, we

assessed that the valuation approach applied by the external valuer was in accordance

with relevant valuation and accounting standards and suitable for use in determining the

carrying value in the consolidated statement of financial position;

−

Through the involvement of our own property valuation specialists, on a sample basis, we

tested the integrity, accuracy and completeness of inputs used by the external valuers, as

well as appropriateness of valuation parameters used, such as discount and capitalisation

rates, market rents per square meter and capital expenditure, vacancy rates, comparable

price per square meter and development cost;

−

Through the involvement of our own property valuation specialists, on a sample basis, we

assessed the valuation process, significant assumptions and critical judgement areas by

benchmarking these to external industry data and comparable property transactions, in

particular the yields applied; and

−

We considered the adequacy of the disclosures in the consolidated financial statements,

and the Group’s descriptions regarding the inherent degree of subjectivity and the key

assumptions in estimates.

Other information

The Board of Directors is responsible for the other information. The other information

comprises the information stated in the consolidated annual report including the Board of

Directors’ report, EPRA Performance Measures, Alternative Performance Measures, the

Corporate Governance Statement and Corporate Social Responsibility Statement but does

not include the consolidated financial statements and our report of the “réviseur d'entre-

prises agréé” thereon.

Our opinion on the consolidated financial statements does not cover the other information

and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is

to read the other information and, in doing so, consider whether the other information is

materially inconsistent with the consolidated financial statements or our knowledge ob-

88

tained in the audit or otherwise appears to be materially misstated. If, based on the work

we have performed, we conclude that there is a material misstatement of this other infor-

mation, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and Those Charged with Governance

for the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of the con-

solidated financial statements in accordance with IFRSs as adopted by the European Union,

and for such internal control as the Board of Directors determines is necessary to enable

the preparation of consolidated financial statements that are free from material misstate-

ment, whether due to fraud or error.

The Board of Directors is responsible for presenting and marking up the consolidated finan-

cial statements in compliance with the requirements set out in the Delegated Regulation

2019/815 on European Single Electronic Format (“ESEF Regulation”).

In preparing the consolidated financial statements, the Board of Directors is responsible

for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going concern basis of accounting unless

the Board of Directors either intends to liquidate the Group or to cease operations, or has

no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial report-

ing process.

Responsibilities of the réviseur d'entreprises agréé for the audit of the consol-

idated financial statements

The objectives of our audit are to obtain reasonable assurance about whether the consol-

idated financial statements as a whole are free from material misstatement, whether due

to fraud or error, and to issue a report of the “réviseur d'entreprises agréé” that includes

our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with the EU Regulation N° 537/2014, the Law of

23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect

a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of these

consolidated financial statements.

Our responsibility is to assess whether the consolidated financial statements have been

prepared in all material respects with the requirements laid down in the ESEF Regulation.

As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July

2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judg-

ment and maintain professional skepticism throughout the audit. We also

−

Identify and assess the risks of material misstatement of the consolidated financial

statements, whether due to fraud or error, design and perform audit procedures re-

sponsive to those risks, and obtain audit evidence that is sufficient and appropriate

to provide a basis for our opinion. The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of inter-

nal control.

−

Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of ex-

pressing an opinion on the effectiveness of the Group’s internal control.

−

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Board of Directors.

−

Conclude on the appropriateness of the Board of Directors' use of the going concern

basis of accounting and, based on the audit evidence obtained, whether a material un-

certainty exists related to events or conditions that may cast significant doubt on the

Group’s ability to continue as a going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in our report of the “réviseur d'entreprises

agréé” to the related disclosures in the consolidated financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the au-

dit evidence obtained up to the date of our report of the “réviseur d'entreprises agréé”.

However, future events or conditions may cause the Group to cease to continue as a

going concern.

−

Evaluate the overall presentation, structure and content of the consolidated financial

statements, including the disclosures, and whether the consolidated financial state-

ments represent the underlying transactions and events in a manner that achieves fair

presentation.

−

Obtain sufficient appropriate audit evidence regarding the financial information of the

entities and business activities within the Group to express an opinion on the consoli-

dated financial statements. We are responsible for the direction, supervision and perfor-

mance of the Group audit. We remain solely responsible for our audit opinion.

89

We communicate with those charged with governance regarding, among other matters, the

planned scope and timing of the audit and significant audit findings, including any signifi-

cant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have com-

plied with relevant ethical requirements regarding independence, and to communicate

with them all relationships and other matters that may reasonably be thought to bear

on our independence, and where applicable, actions taken to eliminate threats or safe-

guards applied.

From the matters communicated with those charged with governance, we determine those

matters that were of most significance in the audit of the consolidated financial statements

of the current period and are therefore the key audit matters. We describe these matters in

our report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirements

We have been appointed as “réviseur d'entreprises agréé” by the General Meeting of Share-

holders on 29 June 2022 and the duration of our uninterrupted engagement, including pre-

vious renewals and reappointments, is eleven years.

The Board of Directors’ Report is consistent with the consolidated financial statements and

has been prepared in accordance with applicable legal requirements.

The Corporate Governance Statement is included in the Board of Directors’ Report. The in-

formation required by Article 68ter paragraph (1) letters c) and d) of the law of 19 December

2002 on the commercial and companies register and on the accounting records and annual

accounts of undertakings, as amended, is consistent with the consolidated financial state-

ments and has been prepared in accordance with applicable legal requirements.

We confirm that the audit opinion is consistent with the additional report to the audit com-

mittee or equivalent.

We confirm that the prohibited non-audit services referred to in the EU Regulation N°

537/2014 were not provided and that we remained independent of the Group in conducting

the audit.

We have checked the compliance of the consolidated financial statements of the Group as

at 31 December 2022 with relevant statutory requirements set out in the ESEF Regulation

that are applicable to consolidated financial statements.

For the Group it relates to:

1.

Consolidated financial statements prepared in a valid xHTML format;

2. The XBRL markup of the consolidated financial statements using the core taxonomy and

the common rules on markups specified in the ESEF Regulation.

In our opinion, the consolidated financial statements of Grand City Properties S.A. as at

31 December 2022, identified as 5299002QLUYKK2WBMB18-2022-12-31-en.zip, have been

prepared, in all material respects, in compliance with the requirements laid down in the

ESEF Regulation.

Our audit report only refers to the consolidated financial statements of Grand City Proper-

ties S.A. as at 31 December 2022, identified as 5299002QLUYKK2WBMB18-2022-12-31-en.

zip, prepared and presented in accordance with the requirements laid down in the ESEF

Regulation, which is the only authoritative version.

KPMG Audit S.à r.l.

Cabinet de révision agréé

Alessandro Raone

Partner

Luxembourg, 16 March 2023

02

Consolidated financial statements

90

91

92

Consolidated statement of profit or loss

For the year ended 31 December

2022

2021

Note

€’000

Revenue

6

582,505

524,629

Property revaluations and capital gains

7

117,761

694,844

Share of profit from investments in equity-accounted investees

14

-

3,952

Property operating expenses

8

(266,287)

(218,064)

Administrative and other expenses

9

(10,689)

(11,138)

Depreciation and amortisation

15

(10,488)

(8,235)

Operating profit

412,802

985,988

Finance expenses

10.1

(46,914)

(46,450)

Other financial results

10.2

(137,133)

(148,640)

Profit before tax

228,755

790,898

Current tax expenses

11.2

(39,120)

(39,227)

Deferred tax expenses

11.3

(10,532)

(134,582)

Profit for the year

179,103

617,089

Profit attributable to:

Owners of the Company

129,214

523,522

Perpetual notes investors

24,750

25,042

Non-controlling interests

25,139

68,525

179,103

617,089

Net earnings per share attributable to the owners of the Company (in euro):

Basic earnings per share

12.1

0.77

3.12

Diluted earnings per share

12.2

0.76

2.90

93

Consolidated statement of comprehensive income

For the year ended 31 December

2022

2021

€’000

Profit for the year

179,103

617,089

Other comprehensive income

Items that will not be reclassified to profit or loss in subsequent periods, net of tax:

Gains on owner-occupied property revaluation

10,974

-

Items that may be reclassified to profit or loss in subsequent periods, net of tax:

Foreign currency translation, net of investment hedges of foreign operations

(32,855)

(6,715)

Net change in cost of hedging

8,998

36,359

Total other comprehensive income (loss) for the year, net of tax

(12,883)

29,644

Total comprehensive income for the year

166,220

646,733

Total comprehensive income attributable to:

Owners of the Company

114,676

553,166

Perpetual notes investors

24,750

25,042

Non-controlling interests

26,794

68,525

166,220

646,733

94

Consolidated statement of financial position

As at 31 December

2022

2021

Note

€’000

ASSETS

Investment property

16

9,529,608

9,339,489

Property and equipment

15

66,206

55,626

Intangible assets and goodwill

15

11,002

14,717

Advance payment and deposits

20,760

24,255

Derivative financial assets

27

53,814

37,504

Other non-current assets

13

262,094

359,831

Deferred tax assets

11.3

53,774

51,412

Non-current assets

9,997,258

9,882,834

Cash and cash equivalents

324,935

895,486

Financial assets at fair value through profit or loss

102,429

211,913

Trade and other receivables

17

353,125

452,048

Derivative financial assets

27

9,390

6,129

Assets held-for-sale

25.2

344,191

113,582

Current assets

1,134,070

1,679,158

Total assets

11,131,328

11,561,992

EQUITY

Share capital

18.1

17,619

17,619

Treasury shares

18.4

(83,872)

(248,009)

Share premium and other reserves

18.5/18.6

258,609

408,371

Retained earnings

3,828,417

3,782,053

Total equity attributable to the owners of the Company

4,020,773

3,960,034

Equity attributable to perpetual notes investors

18.8

1,227,743

1,227,743

Total equity attributable to the owners of the Company and perpetual

notes investors

5,248,516

5,187,777

Non-controlling interests

18.9

665,639

614,809

Total equity

5,914,155

5,802,586

95

Consolidated statement of financial position

Christian Windfuhr

Chairman and member of the Board of Directors

Simone Runge-Brandner

Member of the Board of Directors

Daniel Malkin

Member of the Board of Directors

As at 31 December

2022

2021

Note

€’000

LIABILITIES

Loans and borrowings

20.1

318,772

353,073

Straight bonds

20.2

3,612,105

3,642,285

Derivative financial liabilities

27

37,092

76,200

Other non-current liabilities

22

151,868

154,330

Deferred tax liabilities

11.3

788,605

760,472

Non-current liabilities

4,908,442

4,986,360

Current portion of long term loans

20.1

4,508

5,176

Bond redemption

20.2

-

449,595

Trade and other payables

21

225,338

215,757

Derivative financial liabilities

27

12,945

30,691

Tax payable

17,493

18,541

Provisions for other liabilities and charges

23

32,102

39,778

Liabilities held-for-sale

25.2

16,345

13,508

Current liabilities

308,731

773,046

Total liabilities

5,217,173

5,759,406

Total equity and liabilities

11,131,328

11,561,992

The Board of Directors of Grand City Properties S.A. authorised these consolidated financial statements to be issued on 16 March 2023.

96

Equity attributable to the owners of the Company

€’000

Share

capital

Treasury

shares

Share

premium

Equity

component

of

convertible

bond

Cost of

hedging

reserve

Foreign

exchange

translation

reserves,

net

Revaluation

surplus

reserve, net

Other

reserves

Retained

Earnings

Total equity

attributable

to the

owners of

the Company

Equity attributable

to perpetual notes

investors

Equity

attributable

to owners of

the Company

and perpetual

notes in-

vestors

Non-

controlling

interests

Total Equity

Balance as at 31

December 2021

17,619

(248,009)

443,779

16,157

11,103

(39,658)

-

(23,010)

3,782,053

3,960,034

1,227,743

5,187,777

614,809

5,802,586

Profit for the year

-

-

-

-

-

-

-

-

129,214

129,214

24,750

153,964

25,139

179,103

Other comprehensive

Income (loss) for the year

-

-

-

-

8,998

(27,903)

4,367

-

-

(14,538)

-

(14,538)

1,655

(12,883)

Total comprehensive

income (loss) for the

period

-

-

-

-

8,998

(27,903)

4,367

-

129,214

114,676

24,750

139,426

26,794

166,220

Share-based payment

-

74

-

-

-

-

-

2,356

(27)

2,403

-

2,403

-

2,403

Dividend distribution

to the owners of the

Company

(1)

-

-

(137,580)

-

-

-

-

-

-

(137,580)

-

(137,580)

-

(137,580)

Scrip dividend

(2)

-

164,063

-

-

-

-

-

-

(82,823)

81,240

-

81,240

-

81,240

Initial consolidation,

deconsolidation, transac-

tions with non-controlling

interests and dividend

distributions to non-con-

trolling interests

-

-

-

-

-

-

-

-

-

-

-

-

24,036

24,036

Payments to perpetual

notes investors

-

-

-

-

-

-

-

-

-

-

(24,750)

(24,750)

-

(24,750)

Redemption of

convertible bond

(3)

-

-

16,157

(16,157)

-

-

-

-

-

-

-

-

-

-

Balance at 31

December 2022

17,619

(83,872)

322,356

-

20,101

(67,561)

4,367

(20,654)

3,828,417

4,020,773

1,227,743

5,248,516

665,639

5,914,155

(1) for additional information see note 18.7

(2) for additional information see note 18.4(c)

(3) for additional information see note 20.2(i)

Consolidated statement of changes in equity

97

Consolidated statement of changes in equity

Equity attributable to the owners of the Company

€’000

Share capital

Treasury

shares

Share

premium

Equity

component of

convertible

bond

Cost of

hedging

reserve

Foreign

exchange

translation

reserves, net

Other

reserves

Retained

Earnings

Total equity

attributable

to the

owners of

the Company

Equity

attributable

to perpetual

notes

investors

Equity

attributable

to owners of

the Compa-

ny and per-

petual notes

investors

Non-

controlling

interests

Total Equity

Balance as at 31 December 2020

17,186

-

497,187

12,657

(25,256)

(32,943)

(12,405)

3,257,423

3,713,849

1,306,092

5,019,941

534,987

5,554,928

Profit for the year

-

-

-

-

-

-

-

523,522

523,522

25,042

548,564

68,525

617,089

Other comprehensive

income (loss) for the year

-

-

-

-

36,359

(6,715)

-

-

29,644

-

29,644

-

29,644

Total comprehensive income

(loss) for the period

-

-

-

-

36,359

(6,715)

-

523,522

553,166

25,042

578,208

68,525

646,733

Share-based payment

-

397

-

-

-

-

914

(365)

946

-

946

-

946

Dividend distribution to the

owners of the Company

-

-

(136,433)

-

-

-

-

-

(136,433)

-

(136,433)

-

(136,433)

Scrip dividend

433

-

82,280

-

-

-

-

-

82,713

-

82,713

-

82,713

Share buy-back

-

(271,781)

-

-

-

-

-

-

(271,781)

-

(271,781)

-

(271,781)

Capital increase

-

23,375

745

-

-

-

(7,017)

-

17,103

-

17,103

-

17,103

Initial consolidation, decon-

solidation, transactions with

non-controlling interests

and dividend distributions to

non-controlling interests

-

-

-

-

-

-

-

1,473

1,473

-

1,473

11,297

12,770

Payments to perpetual notes

investors

-

-

-

-

-

-

-

-

-

(19,485)

(19,485)

-

(19,485)

Repayment to perpetual notes

investors

-

-

-

-

-

-

(4,502)

-

(4,502)

(83,906)

(88,408)

-

(88,408)

Issuance of convertible bond

-

-

-

3,500

-

-

-

-

3,500

-

3,500

-

3,500

Balance as at 31 December 2021

17,619

(248,009)

443,779

16,157

11,103

(39,658)

(23,010)

3,782,053

3,960,034

1,227,743

5,187,777

614,809

5,802,586

98

Consolidated statement of cash flows

For the year ended 31 December

2022

2021

Note

€’000

Profit for the year

179,103

617,089

ADJUSTMENTS FOR THE PROFIT:

Depreciation and amortisation

15

10,488

8,235

Property revaluations and other capital gains

7

(117,761)

(694,844)

Share of profit from investments in equity-accounted investees

14

-

(3,952)

Net finance expenses

10

184,047

195,090

Tax and deferred tax expenses

11

49,652

173,809

Equity settled share-based payment

19

2,571

3,162

Change in working capital

(61,132)

(44,830)

246,968

253,759

Tax paid

(30,853)

(36,699)

Net cash provided by operating activities

216,115

217,060

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of equipment and intangible assets, net

15

(4,533)

(8,367)

Acquisition of investment property, capex and advance payments, net

(260,263)

(480,305)

Disposal of investment property, net

18,484

14,989

Acquisition of investees and loans, net of cash acquired

(3,667)

(9,388)

Disposal of investees, net of cash disposed

-

342,802

Disposal of (investment in) financial and other assets

82,290

(58,186)

Net cash used in investing activities

(167,689)

(198,455)

99

Consolidated statement of cash flows

For the year ended 31 December

2022

2021

Note

€’000

CASH FLOWS FROM FINANCING ACTIVITIES:

Amortisation of loans from financial institutions

20.3

(3,766)

(4,328)

Proceeds (repayments) of loans from financial institutions, net

20.3

(32,560)

(288,320)

Proceeds from straight and convertible bonds, net

20.3

-

1,149,078

Payment to perpetual notes investors, net

18.8

(24,750)

(107,893)

Redemption and buy-back of straight and convertible bonds

20.3

(450,000)

(927,119)

Capital increase

18.6

-

17,103

Share buy-back

18.4

-

(271,781)

Transactions with non-controlling interests and dividends paid to non-con-

trolling interests

(1,998)

(417)

Dividend distributed to the shareholders of the Company

18.7

(56,340)

(53,720)

Interest and other financial expenses, net

20.3

(47,341)

(49,790)

Net cash used in financing activities

(616,755)

(537,187)

Net decrease in cash and cash equivalents

(568,329)

(518,582)

Change in cash and cash equivalents held-for-sale

25.2

(1,158)

(216)

Cash and cash equivalents at the beginning of the year

895,486

1,412,199

Effect of foreign exchange rate changes

(1,064)

2,085

Cash and cash equivalents at the end of the year

324,935

895,486

100

Notes to the consolidated

financial statements