2023
CONSOLIDATED
ANNUAL REPORT
For the year ended 31 December
Berlin
Cologne
01
Board of Directors’ Report
The Company & Portfolio
14
Non-Financial Report
34
General Information
35
Environmental Information
42
EU Taxonomy
70
Social Information
74
Governance Information
88
EPRA sBPR Data Preparation
100
Business Performance & Analysis
102
Notes on Business Performance
103
EPRA Performance Measures
117
Alternative Performance Measures
128
Independent Limited Assurance Report (Independent Auditor)
138
02
Consolidated financial statements
Consolidated Statement of Profit or Loss
144
Consolidated Statement of Comprehensive Income
145
Consolidated Statement of Financial Position
146
C
onsolidated Statement of Changes in Equity
148
Consolidated Statement of Cash Flows
150
Notes to the Consolidated Financial Statements
152
Report of the Rèviseur d’Enterprises Agréé (Independent Auditor)
208
Contents
IMPRINT
Publisher: Grand City Properties S.A.
37, Boulevard Joseph II
|
L-1840 Luxembourg
phone:
+352 28 77 87 86
e-mail:
info@grandcity.lu
|
www.grandcityproperties.com
Berlin
01
Board of Directors’ Report
GRAND CITY PROPERTIES S.A.
I
Board of Directors' Report
6
KEY FINANCIALS
in €’000 unless
otherwise indicated
Dec 2023
Change
Dec 2022
Total Assets
10,918,147
-2%
11,131,328
Investment Property
8,629,083
-9%
9,529,608
Cash and liquid assets
(including those under held for sale)
1,230,483
187%
429,127
Total Equity
5,230,109
-12%
5,914,155
Loan-to-Value
37%
1%
36%
Balance sheet highlights
P&L highlights
in €’000 unless
otherwise indicated
FY 2023
Change
FY 2022
Net Rental Income
411,313
4%
396,041
Adjusted EBITDA
319,647
4%
308,100
FFO I
183,936
-4%
192,219
FFO I per share (in €)
1.07
-6%
1.14
EBITDA
(572,232)
-235%
423,290
Profit (loss) for the year
(638,068)
-456%
179,103
Basic earnings (loss)
per share
(in €)
(3.18)
-513%
0.77
Diluted earnings (loss)
per share
(in €)
(3.17)
-517%
0.76
7
In €‘000 unless otherwise indicated
2023
2022
EPRA NRV
4,606,481
5,322,769
EPRA NRV per share
(in €)
26.7
30.8
EPRA NTA
*
4,013,761
4,655,551
EPRA NTA per share
*
(in €)
23.2
27.0
EPRA NDV
3,745,313
4,642,313
EPRA NDV per share
(in €)
21.7
26.9
EPRA Earnings
187,378
182,702
EPRA Earnings per share
(in €)
1.09
1.09
EPRA LTV
48%
46%
EPRA Net initial yield
(NIY)
3.6%
3.2%
EPRA "topped-up" NIY
3.6%
3.2%
EPRA Vacancy
3.8%
4.2%
EPRA Cost Ratio
(incl. direct vacancy costs)
22.7%
22.9%
EPRA Cost Ratio
(excl. direct vacancy costs)
20.8%
20.9%
EPRA Performance measures
London
(*) updated methodology to exclude RETT
7
GRAND CITY PROPERTIES S.A.
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Solid Like-For-Like Rental Growth
Strong Recurring Operational Profitability
Robust Portfolio Fundamentals
6.2%
2022
2022
2022
2023
2023
2023
Dec 2020
Dec 2022
Dec 2023
Dec 2021
Dec 2020
Dec 2022
Dec 2023
Dec 2021
2021
2021
2021
In-place rent
(in €/sqm)
FFO I
(in € millions)
Adjusted EBITDA
FFO I per share
(in €)
Vacancy
Like-For-Like development
Dec 2020
Dec 2022
Dec 2023
Dec 2021
CAGR
5.1%
7.4
3.8%
4.2%
5.1%
8.1
186
1.11
8.6
184
1.07
8.2
192
1.14
-6%
-4%
Total net rent growth
Dec 2023
+3.3%
L-F-L
In-place rent growth
Dec 2023
+3.1%
L-F-L
Occupancy growth
Dec 2023
+0.2%
L-F-L
-2.4%
299
320
308
+4%
Occupancy growth
Total net rent growth
In place rent growth
HIGHLIGHTS
OPERATIONAL PERFORMANCE HIGHLIGHTS
1.8%
2.8%
2.9%
3.3%
0.9%
2.2%
2.2%
3.1%
0.9%
0.6%
0.7%
0.2%
GRAND CITY PROPERTIES S.A.
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Well Positioned In Current Environment With High Headroom To Bond Covenants
HIGHLIGHTS
FINANCIAL PROFILE OPTIMISATION HIGHLIGHTS
1,400
1,200
1,000
800
600
400
200
0
Debt Maturity Schedule
Strong Financial
Profile Maintained
Bank Debt
Straight Bonds
EUR MILLIONS
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
>2038
LOW COST
OF DEBT
1.9%
DEC 2023
ICR
5.6x
2023
CREDIT RATING S&P
BBB+
NEGATIVE
DEC 2023
5.3
years
DEC 2023
37%
DEC 2023
New bank debt in 2023 with
average term of >7.5 years.
88% of debt is fixed or
interest hedged.
Leverage remained
broadly stable compared
to Dec 22 despite portfolio
devaluations due to
successful delevering
efforts.
€6.6bn
75%
of value
DEC 2023
Large pool of
unencumbered assets
provides access to relatively
attractive bank financing.
>€190m
2023 SIGNED
>€300m
*
2023 COMPLETED
€550m
TOTAL BANK FINANCING RAISED IN 2023
Cash and liquid assets amount
to 28% of total debt and
including signed disposals
cover next three years of debt
maturities until the end of
2026, additionally supported
by undrawn RCF.
Debt covered as of
December 2022
Additional debt
maturities covered
in 2023 as a result of
strategic measures to
strengthen liquidity
December 2023 Cash
and liquid assets +
signed disposals cover
debt maturities until the
end of 2026
€1.2bn
CASH AND LIQUID ASSETS
DEC 2023
(*) of which ~€180m signed in 2022.
DISPOSALS
LOW LOAN TO VALUE RATIO
LONG AVERAGE DEBT MATURITY
UNENCUMBERED ASSETS
NEW BANK FINANCING
STRONG LIQUIDITY POSITION
GRAND CITY PROPERTIES S.A.
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Dear Stakeholders,
The year 2023 has been marked by two main, and to some extent opposing, trends. On the one hand
we experienced strong positive developments in underlying operational trends supporting high letting
demand for all over our regions, while at the same time the sharp increase in interest rates had negative
impacts on transaction volumes, and funding became more expensive.
We have capitalized on the platform we have built over the previous years, allowing us to benefit from
strong underlying market dynamics and progressively strengthen our operations. Our operational and
letting performance have consistently demonstrated positive momentum due to strong and further
increasing tenant demand, resulting in a high rental like for like of 3.3% and a record low vacancy rate
for the Company of 3.8% as of the conclusion of 2023. Furthermore, the housing shortage in Germany
persists, widening the imbalance between supply and demand. The current macroeconomic conditions
are not helpful to encourage new developments, exacerbating the shortage of supply and widening
the supply-demand imbalance further. As a result, we see significant increases in market rental levels
and lower vacancies, but also reduced tenant turnover across our locations in Germany and in London.
These operational tailwinds have allowed us to continue to grow our operational platform, reflected
in adjusted EBITDA increasing by 4% to €320 million in 2023, despite the negative impact from asset
disposals and cost inflation.
Throughout the year, central banks globally implemented tighter monetary policies in response
to heightened prices, with the European Central Bank increasing rates six times. The year started
with uncertainties in the market, mainly around the availability of funding options as capital market
volatility increased significantly considering steep interest rate hikes within a short time which also
resulted in several banks getting into distress. In order to adequately and efficiently deal with the
challenges in the new dynamic economic environment and to strengthen and preserve the Company’s
position, the Company invested a lot of effort during the year while focusing on increasing our
cash liquidity. We not only preserved but we also increased our liquidity position, which included a
number of active actions among others, suspending the dividend payment in 2023, following eight
consecutive dividend payments since 2015, the decision not to exercise our option to voluntarily call
perpetual notes as they have no payment obligation, disposing properties in Germany as well as in
London and raising secured mortgage financing from a variety of financial institutions which provides
more favourable terms as compared to capital market funding. As a combined result of these actions,
we have strengthened our liquidity position significantly to €1.2 billion, up from €0.4 billion as of
December 2022, which including signed disposals closed aſter December 2023 comfortably covers all
debt maturities until the end of 2026. We believe that the Company handled the market turbulence
with precaution and high responsibility and is well equipped to face such challenges going forward.
2023 was a transitional year in which, in the shadow of the uncertainty regarding inflation and interest
rates, many real estate investors halted their investment in the sector. As a result, the entire sector
carried out significantly lower transaction volumes than in previous years. The transactions that did
take place were accompanied by complex challenges such as prolonged due diligence phases, greater
difficulty in obtaining financing for many buyers, as well as large differences in price expectations
between buyers and sellers. During the year 2023, the Company successfully carried out several
disposal transactions, closing a total amount of over €300 million, which include deals signed in
2022. In 2023 the Company has signed disposals amounting to over €190 million in 2023, of which
approx. €70 million have not yet closed as of December 2023, of which some have closed as of the
date of this report and the remainder is expected to close in the coming periods.
LETTER FROM THE BOARD AND THE MANAGEMENT
GRAND CITY PROPERTIES S.A.
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In 2023, we made the decision not to call the €200 million and €350 million perpetual notes series
which had their first call date in January and October, respectively. The choice to refrain from calling
the perpetual notes in the uncertain economic environment was a difficult but carefully considered
decision, involving a thorough analysis of various alternative options and their implications. We view
the perpetual notes as an important component of GCP’s capital structure and have historically opted
to call the notes. However, given that the potential cost of a replacement was considerably higher
than the coupon reset rates of the notes, we made the decision not to call the notes in 2023. The
perpetual notes are an important equity buffer, especially in turbulent times, supporting the high
bond covenant headroom and thus provide an additional layer of protection to the Company.
We
continue to evaluate all options for the perpetual notes and retain the flexibility to call them at each
interest payment date going forward.
The steep increase in interest rates also had an adverse impact on property valuations, which resulted
in a decreased demand from real estate buyers and pressure on the values and leverage of real estate
companies. GCP was also impacted by the negative property revaluations. We recorded negative
property revaluations of approx. €880 million, reflecting a negative like-for-like revaluation of 9%
compared to the end of 2022, driven by higher discount and cap rates as a result of higher interest rates.
As we saw strong operational growth in the year, this was able to offset part of the yield expansion,
thereby reducing the negative impact on the revaluation result. Through our continuous efforts, which
included continued disposals of properties, in combination with buying back our bonds at discount and
suspending our dividends in 2023, we were able to maintain the stability of our low leverage, which
stood at 37%, compared to 36% as of the end of both 2022 and 2021 and significantly below our internal
policy of 45%. We maintain a conservative financial profile characterized by a limited exposure to
variable rates through a 88% hedge ratio, long average debt maturity of 5.3 years, and a low cost of
debt of 1.9%. The strong operational performance of the business also substantially covers interest
payments as is exemplified by our strong ICR of 5.6x. While we believe that the market conditions will
remain difficult and uncertain in 2024 as well, we have seen volatility easing by the end of 2023, with
interest rates potentially peaking and expected to decrease throughout 2024, which would support the
real estate industries’ funding options, valuations and transactions.
In 2023, we continued to emphasize corporate social responsibility as a fundamental pillar of our
business practices, which puts our service in a strong competitive position. For example, the GCP Tenant
Satisfaction Policy guides our approach through every stage of the tenant lifecycle, ensuring we monitor
satisfaction, address requests, and continuously improve our methods. Tenant satisfaction surveys are
being conducted to assess our performance, for example related to interactions with our service centre.
In 2023, the outcome of these surveys was again very positive, with a service score of 4.7 out of 5,
with all subcategories scoring above the high minimum target of 4.5 which we set for ourselves. Our
commitment to enhance tenant satisfaction is evident in a diverse range of activities and services we
provide. These encompass both online and in-person tenant engagement initiatives, tenant benefits
programs, and co-working offerings. Among the various tenant activities organized this year, a notable
example includes autumn festivals held across multiple locations. These festivals featured attractions
such as bouncy castles, photo booths, and more, contributing to a vibrant community atmosphere.
Additionally, we reintroduced our digital advent calendar event, where daily giveaways, including GCP
loyalty points and hotel stay prizes, were distributed, fostering a sense of appreciation and connection
with our tenants.
In addition, as part of our approach to enhance the digitalization and self-service options for our tenants,
we continued in 2023 by providing more services to tenants through the GCP app and Portal. Our GCP
tenant app allows existing and prospective tenants to sign leases, upload documentation, and initiate
and track service requests. We continuously look to improve and add upon the functionalities, such
as by including information on monthly energy consumption. Additionally, we further enhanced our
digitalisation and automation services by implementing an artificial intelligence voice bot designed
to address peak call times and minimize waiting periods. These initiatives have led to a notable shiſt
in customer service requests towards online channels, reaching a level of 37% in 2023 compared to
28% in 2022. In a focused push toward digitalization, we have successfully transitioned our postal
communication with tenants to Deutsche Post DHL's GOGREEN Plus services, emphasizing hybrid
E-Post solutions. Beginning in early 2023, all correspondence, from leaflets to crucial notices, is now
efficiently transmitted through a hybrid mix of digital channels, including email. Prioritizing E-Post not
only enhances efficiency and reduces costs but also empowers tenants to reduce carbon emissions
solidifying our position as a forward-thinking organization embracing the benefits of hybrid digital
communication. We remain committed to harnessing digitalization to enhance efficiency and elevate
the quality of our customer service. This strategic focus not only boosts tenant satisfaction but also
contributes to our goal of increasing occupancy. 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
Quality Management and for Service Quality.
GRAND CITY PROPERTIES S.A.
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Another key component of our corporate social responsibility relates to our employees. In recent years
we have increased our focus on becoming a top employer in the real estate sector. Due to the high
level of engagement across the organisation we are now seeing positive momentum in this regard.
For example, we received the "Most Wanted Start 2024" award from the weekly newspaper "Der Zeit"
in cooperation with Kununu. This award relates to GCP’s apprenticeship program, which focusses on
providing young people with the opportunity to get practical on the job experience within different roles
in the real estate industry, and highlights the positive views and experiences that our apprentices have
had during their apprenticeship. Through this program, GCP supports the development of practical skill
and experience for younger generations across our locations, which is very important to us.
We also continued our support of local initiatives and organizations, both directly and through the GCP
foundation. We supported a wide variety of local initiatives and youth sports teams, such as providing
funds to support refugees, providing scholarships for students, buying material for children courses
and more. In 2023, we continued making strategic investments, aiming to enhance asset quality and
directly influence tenant satisfaction. We renovated facades and playgrounds, installed energy efficient
windows and insulation, upgraded elevators, installed modern mailbox systems and supported a
bookcase installation that offers free reading material to the community, among other projects. These
initiatives underscore our commitment to improving the overall living experience for our tenants through
targeted and impactful enhancements, while contributing to easing societal issues by providing a high
quality but affordable living environment.
As part of our ESG strategy, we have set a target to reduce our CO
2
emissions by 40% in 2030 compared
to 2019 levels. Over the course of 2023, our efforts have focused on enhancing the incorporation of
business procedures, including climate reporting, environmental data gathering, and building energy
assessments. These initiatives aim to create a more thorough carbon reduction strategy by integrating
the specialized knowledge of the energy department into capital expenditure planning. This involves
identifying strategic areas for targeted investments in energy efficiency and on-site renewable measures
to achieve optimal emissions reductions. Accordingly, we have successfully identified and executed
targeted modernization projects such as the replacement of heating systems, insulating facades and
roofs and installing energy efficient windows. While we do not directly control the energy consumption
of our tenants, we continued projects that provide tenants with information and incentives to lower
their own consumption of energy or switch to more renewable sources of energy. We continued working
on switching energy contracts to renewable or climate-neutral energy sources, while encouraging
tenants to lower their own consumption of energy and switch to more renewable sources of energy.
We welcome recent agreement between the EU parliament and Council, calling for member states to
increase grants, which we believe will further support us and society as a whole to shiſt to a more
sustainable housing stock.
As a result of this hard work, we have received a low risk ESG rating by Sustainalytics and are
ranked in the top 8 percent of the global universe of companies.
Additionally, we scored 58 in
S&P Global’s corporate sustainability assessment (CSA), placing us in the top 6
th
percentile of real
estate companies globally.
We express our gratitude to all our stakeholders for their ongoing trust in GCP. The management
acknowledges the hard work and dedication exhibited by our employees throughout 2023,
contributing to raising the standards for the speed and quality of services offered while providing
GCP with the flexibility and adaptability needed to effectively navigate the current market
environment. We eagerly anticipate achieving our new goals and targets in 2024, ensuring the
sustainable creation of long-term value for all our stakeholders.
Luxembourg, March 13, 2024
Christian Windfuhr
Chairman and member
of the Board of Directors
Simone Runge-Brandner
Member of the
Board of Directors
Markus Leininger
Member of the
Board of Directors
Refael Zamir
CEO
Idan Hadad
CFO
GRAND CITY PROPERTIES S.A.
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Duisburg
GRAND CITY PROPERTIES S.A.
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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 31 December 2023.
The figures presented in this Board of Director’s Report are based on the consolidated
financial statements as of 31 December 2023, unless stated otherwise.
GCP is a specialist in residential real estate, investing in value-add opportunities in
densely populated areas predominantly in Germany as well as London. The Group’s
portfolio, excluding assets held for sale and properties under development, as
of December 2023 consists of 63k units (hereinaſter “GCP portfolio” or “the
Portfolio”) located in densely populated areas with a focus on Berlin, Germany’s
capital, North Rhine-Westphalia, 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 sustainable 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 significant 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 properties 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
bargaining 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
generate stable and increasing cash flows.
Leipzig
THE COMPANY
GRAND CITY PROPERTIES S.A.
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Population density
in Germany
Attractive Portfolio concentrated in
densely populated metropolitan areas
with value-add potential
GCP’s
well-balanced
and
diversified
portfolio
is
composed of properties in attractive micro-locations
with identified value creation potential primarily located in
major German cities and urban centers as well as in London.
The Group’s well-allocated portfolio provides for strong
geographic and tenant diversification and benefits from
economies of scale, supporting the risk-averse portfolio
approach. GCP’s focus on densely populated areas is mirrored by
23% of the Portfolio being located in Berlin, 21% in NRW, 14% in
the metropolitan region of Dresden, Leipzig and Halle, and 19% in
London, four clusters with their own distinct economic drivers. The
portfolio also includes additional holdings in other major urban centres
with strong fundamentals such as, Nuremberg, Munich, Mannheim,
Frankfurt, Hamburg and Bremen.
London
Dresden
Berlin
Mainz
NRW
Leipzig
Fürth
Munich
Nuremberg
Halle
Frankfurt
Mannheim
Kaiserslautern
Hamburg
Bremen
Dresden
inhabitants per sqkm (2021)*
* based on data from Statistisches Bundesamt
1,000 - 4,790
300 - 1,000
150 - 300
100 - 150
36 - 100
PORTFOLIO
GRAND CITY PROPERTIES S.A.
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DIVERSIFIED PORTFOLIO WITH DISTINCT ECONOMIC DRIVERS
(1)
rental yield is calculated by dividing the Annualised net rent by the Investment property value,
excluding properties classified as development rights & invest. For more details please see page 129 of the Alternative performance measures section of this report.
December 2023
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
(1)
NRW
1,790
1,193
4.3%
93
6.5
17,436
1,501
5.2%
Berlin
1,939
625
4.3%
69
9.2
8,492
3,102
3.5%
Dresden/Leipzig/Halle
1,152
816
2.9%
56
5.9
13,997
1,412
4.9%
Mannheim/KL/Frankfurt/Mainz
389
177
3.5%
19
8.9
3,013
2,191
4.9%
Nuremberg/Fürth/Munich
289
80
6.2%
9
10.6
1,430
3,624
3.3%
Hamburg/Bremen
385
264
3.5%
22
7.1
3,996
1,457
5.7%
London
1,653
189
3.1%
84
37.9
3,549
8,757
5.1%
Others
881
676
4.5%
54
6.9
11,390
1,302
6.1%
Development rights & invest
151
Total
8,629
4,020
3.8%
406
8.6
63,303
2,109
4.8%
Portfolio overview
GCP has assembled a portfolio of high-quality
assets in densely populated metropolitan
regions, benefiting from diversification among
dynamic markets with positive economic
fundamentals and demographic developments.
21%
NRW
Industrial center of Germany.
23%
BERLIN
Political & Start-up hub.
14%
DRESDEN/
LEIPZIG/HALLE
Dynamic economy driven by
technology and education with
robust demographic fundamentals.
19%
LONDON
Leading global city attracting
innovation and high-quality talent.
5%
Hamburg/Bremen
3%
Nuremberg/Fürth/Munich
5%
Mannheim/KL Frankfurt/Mainz
10%
Others
GRAND CITY PROPERTIES S.A.
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(1)
rental yield is calculated by dividing the Annualised net rent by the Investment property value,
excluding properties classified as development rights & invest. For more details please see page 129 of the Alternative performance measures section of this report.
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
(1)
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 & invest
244
Total
9,530
4,069
4.2%
393
8.2
64,281
2,282
4.2%
Essen
GRAND CITY PROPERTIES S.A.
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Dresden
GRAND CITY PROPERTIES S.A.
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70
%
of the Berlin portfolio is located
in top tier neighbourhoods: Char-
lottenburg, Wilmersdorf, Mitte,
Kreuzberg, Friedrichshain, Licht-
enberg, Neukölln, Schöneberg,
Steglitz and Potsdam.
30
%
is well located primarily in
Reinickendorf, Treptow, Köpe-
nick and Marzahn-Hellersdorf.
(1)
Colliers, Residential Investment Germany 2022/2023;
Pestel Institut, Bauen und Wohnen 2024 in Deutschland
Largest city by
population in Germany.
German capital and centre of national
political decision making.
Berlin is the leading start-up location
in Germany, attracting high quality,
global talent.
Berlin continues to have the lowest
home ownership rate in Germany.
Chronic supply demand imbalance with
estimated shortfall of over 100,000
apartments, which continues to widen as new
supply falls well short of demand.
(1)
December
2023
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
Berlin
1,939
625
4.3%
69
9.2
8,492
3,102
3.5%
Key drivers
BERLIN - GCP’S LARGEST LOCATION
Quality locations in top tier Berlin neighborhoods
23%
OF GCP’S
PORTFOLIO
Mitte
Pankow
Reinickendorf
Spandau
Charlottenburg-
Wilmersdorf
Steglitz-
Zehlendorf
Tempelhof-
Schöneberg
Friedrichshain-
Kreuzberg
Neukölln
Treptow-
Köpenick
Marzahn-
Hellersdorf
Lichtenberg
Schönefeld
Teltow
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3%
Marl
1%
Herne
1%
Mönchengladbach
3%
Solingen
4%
Gelsenkirchen
5%
Erkrath
3%
Bochum
18%
Others
10%
Duisburg
6%
Wuppertal
6%
Essen
27%
Cologne
8%
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, 10% in Duisburg, 8% in Dortmund, 6% in Essen, 6% in Wuppertal,
and 5% in Bonn.
4th
largest city
in Germany
Both the most populous
and densely populated state
in Germany.
Home to many of Germany’s leading
companies, of Germany's top 50
grossing corporations, 19 are based in
North Rhine-Westphalia.
Number 1
in the environmental economy
across Germany.
Industrial center of Germany
contributing 21% to the national GDP.
December
2023
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
1,790
1,193
4.3%
93
6.5
17,436
1,501
5.2%
Key drivers
NORTH RHINE-WESTPHALIA (NRW)
Well positioned in the largest metropolitan area in Germany
21%
OF GCP’S
PORTFOLIO
Source: NRW.Global Business
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1.
Cologne
2.
Duisburg
3.
Dortmund
4.
Essen
5.
Wuppertal
6.
Bonn
7.
Erkrath
8.
Gelsenkirchen
9.
Solingen
10. Bochum
11. Marl
12. Herne
13. Mönchengladbach
300 - 1.000
150 - 300
100 - 150
1000 - 4.790
* Based on data from Statistiches Bundesamt
Dense and diversified transport
and logistics network:
▶
Densest rail network in Germany with about 6,000 kilometers
of tracks.
▶
Well connected to global maritime trade through 120 ports
which include the world’s largest inland port in Duisburg.
▶
Well connected to global air travel with two major international
airports (Düsseldorf Airport and Cologne Bonn Airport) and
four other airports which connect the region to all major
domestic destinations as well as many international cities.
▶
More than 2,200 km of highways and 17,600 km of federal and
provincial roads that seamlessly link into the wider European
highway network.
3
11
4
2
5
7
9
1
13
12
8
10
POPULATION DENSITY IN NRW
6
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Zone 1
Zone 2
Zone 3
Zone 4
Zone 5
Zone 6
underground station
overground/train station
asset location
airport
The total London portfolio, including
high quality assets, social housing
as well as pre-marketed units,
amounts to approx. 3,600 units and
approx. € 1.7 billion in value.
Over 80% of the portfolio is situated
within a short walking distance to an
underground/overground station
Hillingdon
Harrow
Ealing
Hounslow
Richmond
upon
Thames
Kingston
upon
Thames
Merton
Wandsworth
Sutton
Croydon
Bromley
Lambeth
Southwark
Lewisham
Greenwich
Bexley
Havering
Barking and
Dagenham
Redbridge
Newham
Tower
Hamlets
Waltham
Forest
Hackney
Isling-
ton
Camden
City
Westminster
Brent
Barnet
Enfield
Haringey
Hammersmith and
Fulham
Kensington and
Chelsea
Key drivers
Large number of higher education
universities including some of the oldest
and world-famous colleges resulting in
access to high quality talent.
Positive demographic fundamentals
with a very high population density
and a low median age
Leading fintech hub with strengths
in areas for growth potential such
as, blockchain, digital banking and
alternative lending among others.
Leaner regulatory environment
provides faster repositioning
turnaround times and ability to achieve
market rent potential
December
2023
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
1,653
189
3.1%
84
37.9
3,549
8,757
5.1%
LONDON PORTFOLIO
Located in strong middle class neighborhoods
19%
of GCP’s
portfolio
The map represents over 90% of the London Portfolio
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Key drivers
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
2023
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
1,152
816
2.9%
56
5.9
13,997
1,412
4.9%
QUALITY EAST PORTFOLIO
Located in the growing and dynamic
cities of Dresden, Leipzig and Halle
50%
Leipzig
29%
Dresden
21%
Halle
Strong demographic fundamentals,
with increasing urbanisation 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.
Dresden is a leading hub for the
technology industry in Europe, with
a strong presence in semiconductors,
communication technology, and
software development.
Leipzig & Dresden
are the largest cities
in eastern Germany
aſter Berlin
14%
of GCP’s
portfolio
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Hamburg is Germany’s
2nd largest city by population.
December
2023
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
385
264
3.5%
22
7.1
3,996
1,457
5.7%
Key drivers
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.
36%
Hamburg
64%
Bremen
Hamburg port is
a leading driver
of the regional economy.
Bremen’s ports are important logistical
hubs in Germany and much of
Germany’s trade is executed through
the city’s ports.
Bremen is an industrial hub with a
strong connection to well known local
research institutes.
5%
of GCP’s
portfolio
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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
€1.2 billion in cash and liquid assets at year-end 2023.
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-default provisions.
In accordance with the Company’s conservative capital structure, as of December 2023, 88%
of its interest is hedged.
As part of GCP’s conservative financial policy, bonds issued in foreign currencies are hedged to
Euro until maturity.
Interest hedging structure
December 2023
12%
Variable
10%
Capped
* due to the current market environment, the decision will be taken subject to
market condition
88%
Interest
Hedging Ratio
78%
Fixed & Swapped
STRONG FINANCIAL POSITION
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GCP’s financial flexibility remains strong
over time due to its high profitability, which
is reflected in consistently high debt cover
ratios. For the year of 2023, the Interest Cover
Ratio was 5.6x.
ICR
5.6x
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+ (negative) and Baa1 (negative), respectively. Additionally, S&P
assigned GCP a short-term rating of A-2. Since 2021 Moody's maintains its public rating on GCP on an unsolicited basis.
CREDIT RATING
GCP strategically maintains its strong financial profile characterised by
long debt maturities, high proportion of hedged interest rates, excellent
financial coverage ratios, and a low LTV. The LTV as of December 31, 2023
is at 37%, well below the management limit of 45%.
LOAN-TO-VALUE
INTEREST COVER RATIO
Low Leverage (Loan-To-Value)
45% Board of Director’s limit
Dec 2022
36%
Dec 2023
37%
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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.
Dec
2022
Dec
2023
Bank debt
Straight bonds
Equity
Perpetual Notes
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 €6.6 billion in unencumbered
assets as of December 2023, representing 75% of the total portfolio value.
UNENCUMBERED ASSETS
FINANCING SOURCES MIX
Dec 2022
€8.7 BN
88%
of value
€6.6
BN
Dec 2023
75%
of value
3
%
60%
37
%
9
%
54%
37
%
GRAND CITY PROPERTIES S.A.
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Repositioning + Capex Increase:
Rent + occupancy. Decrease
operating costs and non-recoverable
costs. Improve tenant satisfaction.
Centralised IT/soſtware.
Capital recycling through disposals
and channeling proceeds into quality
properties and/or debt repayments.
Yield & Value increase.
04
06
05
Deal-sourcing network
established since 2004.
Due Diligence &
negotiation of best
possible deal terms.
Acquisition.
01
02
03
TAKE
OVER
Focus on
long term hold
%
COMPANY STRATEGY AND BUSINESS MODEL
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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 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 increasing
occupancy. GCP also applies significant scrutiny to its costs, systematically reviewing ways to
increase efficiency and thus increase cash flows.
Taking into account sustainability matters, understanding the interest of
key stakeholders and maximise tenant satisfaction
GCP’s strategy and business model take into account the varied interests and viewpoints
of
its stakeholders, including its valued employees, tenants, local communities and
municipalities in which GCP operates, suppliers and business partners, and investors,
which constitutes a significant aspect of its approach for achieving sustainable growth. GCP
understands that the support of its stakeholders is crucial for executing its strategic goals.
Therefore, in order to understand and address the needs and concerns of these stakeholders,
ongoing communication, active engagement, and a commitment to ethical business practices
are required. Regular feedback mechanisms, community involvement, and a proactive
approach to problem-solving contribute to building trust and long-lasting relationships
with all stakeholders. These practices are integrated throughout the business operations to
guarantee that the concerns and interests of stakeholders are acknowledged and addressed.
GCP’s upstream value chain consists of its investors, its construction and development
partners, and its suppliers. GCP takes the next position in its value chain, with its employees,
tenants, and local communities and municipalities making up its downstream value chain.
GCP’s business strategy also takes the sustainability matters identified as material during its
Double Materiality Assessment into account. Whether these relate to its own workforce, its
supply chain or the energy efficiency of its assets and other environmental matters, GCP adapts
its strategy and underlying processes where necessary to reflect the impacts and importance
of its material sustainability topics.
Tenant satisfaction is also a key pillar of the GCP strategy and helps explain the Company’s
success since its foundation. GCP primarily meets customer service requests in two different
ways. Firstly, through the GCP service center, customer care agents individualise solutions
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 timeframe 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 2023. TÜV Hessen also certifies the
GCP service center for ISO 9001:2015, its quality management system. 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 increasing 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 from 28% in 2022
to 37% in 2023. The Company has also established 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 various 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 Parties” that were organised in 2023.
The Company has also worked towards providing children with study areas, supporting local
organisations that promote creativity, organising youth programs, mother-baby groups, and
GRAND CITY PROPERTIES S.A.
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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, contributing to a better living environment and
making neighbourhoods more desirable.
Operations supported by centralised IT/soſtware
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/soſtware provides management with the detailed information necessary to monitor
everything from costs to staff performance.
Munich
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Investor relations activities supporting
the strong capital markets position
The Company continues to proactively present its business strategy and thus
enhance perception, 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 dozens 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 confidence 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 and GPR 250.
Placement
Frankfurt Stock Exchange
Market segment
Prime Standard
First listing
Q2 2012
Number of shares
(as of 31 December 2023)
176,187,899
ordinary shares
with a par value of
EUR 0.10 per share
Number of shares, excluding
suspended voting rights, base
for KPI calculations
(as of 31 December 2023)
172,356,233
ordinary shares
with a par value of
EUR 0.10 per share
Shareholder structure
(as of December 2023)
Freefloat
37%
Aroundtown SA
(through Edolaxia Group)
Treasury Shares
2%
Nominal share capital
(as of 31 December 2023)
17,618,789.90 EUR
ISIN
LU0775917882
WKN
A1JXCV
Symbol
GYC
Key index memberships
SDAX
FTSE EPRA/NAREIT Index Series
GPR 250
Market capitalisation
(as of 12 March 2024)
1.6 bn EUR
61%
CAPITAL MARKETS
GRAND CITY PROPERTIES S.A.
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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
investment banks in the market, supported by two investment-grade credit ratings (BBB+
Negative from S&P and Baa1 Negative from Moody’s). 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.
Analyst recommendations
Analyst coverage
19.2
14.2
12.6
12
12
11.5
10.5
10.4
10.1
10
9.3
9
8.4
8
7
UBS
15.11.2023
HSBC
30.01.2024
Kepler Cheuvreux
16.02.2024
First Berlin
16.11.2023
DZ Bank
15.11.2023
Societe Generale
15.01.2024
Deutsche Bank
22.11.2023
Oddo BHF
08.01.2024
Berenberg
11.01.2024
Barclays
15.11.2023
Kempen & co
05.02.2024
Jefferies
10.01.2024
Goldman Sachs
05.02.2024
Bank of America
Securities
18.01.2023
Citigroup
01.09.2023
GCP's shares are covered by several different equity research analysts on an
ongoing basis, who regularly publish updated equity research reports.
GRAND CITY PROPERTIES S.A.
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Leipzig
in €
30
25
20
15
10
5
0
2022
2023
2024
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
issue price €2.75
Grand City Properties
343%
SDAX
(rebased) 185%
FTSE EPRA/NAREIT Germany
(rebased) 97%
SHARE PRICE PERFORMANCE AND TOTAL RETURN COMPARISON SINCE FIRST EQUITY PLACEMENT (19.07.2012)
Berlin
NON-FINANCIAL REPORT
Preparation of the Non-Financial Report
The content of this report and selected metrics (described as reviewed with relevant data
tables) have been reviewed with limited assurance in accordance with the International
Standard on Assurance Engagements (ISAE) 3000 (Revised). A statement from the
independent auditors can be found on page 138.
GCP presents its performance measures in alignment with the European Public Real
Estate Association (EPRA) sustainability Best Practice Recommendations (sBPR)
standards throughout this report. Full estimation of value chain data, upstream and
downstream, has not been conducted. Value chain data is only included for tenant-
obtained energy consumption and water usage. Information regarding the preparation
of the data throughout the report can be found in
Appendix 1: Data Preparation.
As
well as EPRA sBPR, GCP also reports
in reference to the Global Reporting Initiative
(GRI), and conducts Sustainability Accounting Standards Board (SASB) mapping, which
are published in separate documents on our website.
In preparation for the first compliance window of the EU’s Corporate Sustainability Reporting
Directive (CSRD) in 2025, GCP structured and prepared this report to be in alignment with
the recommendations of the European Sustainability Reporting Standards (ESRS). This report
also includes information published in compliance with the EU Taxonomy, Regulation (EU)
2020/852 of the European Parliament.
The methodology used to prepare the Sustainability Statement is as below:
1. Identification of Stakeholders
The process began by identifying the internal stakeholders relevant to GCP, which involved
defining the purpose and scope of the Non-Financial Report and identifying captured
stakeholders. Subsequently, the identified stakeholders’ perspectives were assessed, and
relevant stakeholders were engaged further through a series of topical interviews.
Internal stakeholders include, but are not limited to, GCP employees from the following
departments: Human Resources, Occupational Health and Safety, Sustainability, Insurance,
Data Protection, Real Estate Management, Risk Management, Energy, Water and Management,
Rent Control and Increase, Finance, Advisory, and Compliance. Other stakeholders include
value chain workers, business partners, investors and tenants.
2. Problem Mapping
In total 13 interviews with key internal stakeholders were conducted to identify and map
financial and non-financial topics impacting GCP. These interviews were categorised according
to the ESRS standards and questions on these topics were addressed during the sessions.
3. Data Validation
The information obtained through the interviews was validated by cross-referencing
with other data sources, ensuring accuracy and reliability. This step helps in building a
comprehensive understanding of the materiality of issues. The outcome of the double
materiality assessment (DMA) was then used to prepare this report as much as possible in
accordance with the guidelines set out in the CSRD.
Double Materiality Assessment
GCP applies the principle of materiality as a guide to help identify the ESG risks,
opportunities and significant issues presented by the Company’s business model. ESG risks
are evaluated as part of regular risk assessments and risk planning. Financial budgets are
adjusted to account for material ESG risks. The DMA is a strategic framework designed
to evaluate and understand the dual impact of a company. On one front, it assesses the
impact on the company itself, delving into financial health, operational efficiency, and
employee wellbeing. Simultaneously, the assessment extends its gaze to the broader
horizon, examining the company's impact on people and the planet. This dual focus
enables a comprehensive understanding of not only financial implications but also social
responsibility, environmental impact, and the overall contribution to a sustainable and
ethical future.
GENERAL INFORMATION
GRAND CITY PROPERTIES S.A.
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35
In 2023, GCP undertook a review of its material topics as part of a comprehensive sustainability
risk assessment under the direction of the Sustainability Department. As part of its ongoing
commitment to sustainability and responsible business practices, it is critical to emphasise
the importance of the DMA for the development of the Company’s business. This assessment
is not just a procedural requirement, but a strategic imperative with far-reaching implications
for the Company’s success and relevance in an ever-evolving business landscape.
This DMA was performed in alignment with the GRI guidelines and best management
practices. As the assessment process was finalised by mid-June 2023, and the official CSRD
requirements were published at the end of August 2023, the methodology used for this
DMA was not fully aligned with the CSRD requirements and should therefore be considered
as a transitional assessment. GCP plans to conduct another DMA in 2024, aligned to CSRD
guidance and requirements. Nevertheless, the results of the assessment – a selection of
material topics – serves the purpose of this report and the disclosure of all the material
topics will be made accordingly.
The DMA was performed in four stages:
1.
Identification
of ESG topics through the review of a list of GRI material topics as well as
sector-specific material topics.
2.
Prioritisation
of the topics in order to select a short list of material topics that is used
for further investigation in the next steps of the process.
3.
Engagement
with a total of 59 internal stakeholders through both a digital survey (28
participants) as well as interview sessions (four interviews, 31 participants). Further
engagement with seven external stakeholders through a series of seven interviews.
External stakeholders extended to the upstream value chain with investors, and the
downstream value chain with tenants.
4.
Scoring methodology
was developed and implemented in order to make a final list of
material topics that would be used for the disclosure and reporting.
Interviews and a digital survey played a crucial role in the DMA process, providing
both a qualitative and quantitative dimension to the analysis. This approach ensured
a comprehensive exploration of relevant subjects, allowing for a more in-depth
understanding of the stakeholders' perspectives and insights as well as their perspectives
on ESG priorities and future areas of risk and opportunity for GCP which inform the
Company’s strategy.
The result of the DMA is represented in the materiality chart below. An analysis of the focus
areas for the organisation and potential commitment/KPIs that can be considered follows.
Energy and carbon emissions (2.54, 2.82)
are the highest priority for all stakeholders. They
believe this is where GCP's activities have the greatest impact on the environment. They also
believe that the transition to a low carbon economy is likely to have a high impact on the
business. Environmental Compliance (1.27, 2.08) is the other issue that was considered to
have a high impact on the business. General stakeholder consensus is that the subsequent
priorities are as follows: climate change and resilience (1.20, 1.45), governance (1.25, 1.52)
and people (i.e., diversity and equality (1.32, 1.54), human rights and ethics (1.40, 1.50) and
employment and skills (1.50, 1.32).
1.
Numeric results of the double materiality assessment: (2.54, 2.82) (Impact on people & planet, Impact on company)
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Environmental Compliance
(incl. supply chain)
Sustainable
Procurement
Biodiversity
Water
Use
Human Rights and Ethics
Diversity and Equality
Employment and Skills
Sustainability Governance
Climate Change and Resilience
Health
and
Safety
Energy and Carbon Emissions
Impact on Company
Impact on People & Planet
Governance
Environment
Social
Low
impact
Medium impact
High
impact
DOUBLE MATERIALITY ASSESSMENT
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Aſter the official publication of the ESRS requirements, the DMA’s material topics were assessed against the standards’ topics, sub-topics and sub-sub-topics. The following table shows an
overview of ESRS topics, sub-topics and sub-sub-topics, highlighting those that have been deemed material in the DMA. All the material topics will be addressed in more detail and according to
the ESRS requirements in the relevant chapters of this report.
Topical
ESRS
Sustainability matters covered in topical ESRS
Topic
Sub-topic
Sub-sub-topics
ESRS E1
Climate
Change
Integration of sustainability-related
performance in incentive schemes
Material impacts, risks and opportunities
and their interaction with strategy and
business model
Description of the process to identify
and assess material impacts, risks and
opportunities
Climate change adaptation
Climate change mitigation
Energy
ESRS E2
Pollution
Description of the processes to identify
and assess material impacts,
risks and opportunities
ESRS E3
Water and
Marine
Resources
Description of the processes to identify
and assess material impacts,
risks and opportunities
Water
Water consumption
ESRS E4
Biodiversity
and
Ecosystems
Description of the processes to identify
and assess material impacts,
risks and opportunities
Impacts on the state of species
Species population
size
ESRS E5
Circular
Economy
Description of the processes to identify
and assess material impacts,
risks and opportunities
Waste
Topical
ESRS
Sustainability matters covered in topical ESRS
Topic
Sub-topic
Sub-sub-topics
ESRS S1
Own
Workforce
Interests and views of stakeholders
Material impacts, risks and opportunities
and their interaction with strategy and
business model
Working conditions
Secure employment
Working time
Adequate wages
Health and safety
Equal treatment and opportunities for all
Gender equality and
equal pay
for work of equal
value
Training and skills
development
Employment and
inclusion
of persons with
disabilities
Measures against
violence
and harassment in
the workplace
Diversity
Other work-related rights
Child labour
Forced labour
Privacy
MATERIAL TOPICS
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The above table shows the individual ESRS standards and whether they are mandatory
or subject to materiality.
Topical
ESRS
Sustainability matters covered in topical ESRS
Topic
Sub-topic
Sub-sub-topics
ESRS S2
Workers in
the Value
Chain
Interests and views of stakeholders
Material impacts, risks and opportunities
and their interaction with strategy and
business model
ESRS S3
Affected
Communities
Interests and views of stakeholders
Material impacts, risks and opportunities
and their interaction with strategy and
business model
ESRS S4
Consumers
and
End-Users
Interests and views of stakeholders
Material impacts, risks and opportunities
and their interaction with strategy and
business model
Personal safety of consumers and/or
end-users
Health and safety
ESRS G1
Business
Conduct
The role of the administrative, manage-
ment and supervisory bodies
Description of the processes to identify
and assess material impacts, risks and
opportunities
Corporate culture
Protection of whistle-blowers
Political engagement and lobbying
activities
Management of relationships with sup-
pliers including payment practices
Prevention
and detection
including training
Corruption and bribery
Incidents
YES
YES
YES
LEGEND:
CSRD mandatory- mandatory for everyone
GCP mandatory- material topics scoring 1.41+ in DMA
Not mandatory- topics less than 1.41 in DMA, but GCP will report on this year
Standard
Topic
Mandatory or subject to Materiality?
ESRS 1
General Requirements
Mandatory - sets out the principles to be applied,
no reporting requirements
ESRS 2
General Disclosures
Mandatory
ESRS E1
Climate Change
Subject to materiality - detailed explanation to be
provided if this topic is deemed to be not material
ESRS E2
Pollution
Subject to materiality
ESRS E3
Water and Marine
Resources
Subject to materiality
ESRS E4
Biodiversity and Ecosystems
Subject to materiality
ESRS E5
Resource Use and Circular
Economy
Subject to materiality
ESRS S1
Own Workforce
Subject to materiality
ESRS S2
Workers in the Value Chain
Subject to materiality
ESRS S3
Affected Communities
Subject to materiality
ESRS S4
Consumers and End-Users
Subject to materiality
ESRS G1
Business Conduct
Subject to materiality
OVERVIEW OF THE EUROPEAN SUSTAINABILITY REPORTING STANDARDS (ESRS)
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GCP’s ESG Strategy
Established by the Board of Directors and monitored by the ESG Committee, GCP’s ESG
Strategy is guided by dedication to operating responsibly, creating value for the stakeholders,
and improving the environmental and social performance of the Company’s assets. The core
of our business model – investing in value-add opportunities instead of demolition and new
asset development – demonstrates our commitment to sustainable real estate. Overall, our
approach and success is underpinned by a set of comprehensive long-term targets which aim
to deliver tangible benefits for our stakeholders; our investors, tenants, building users, local
communities, employees and the environment.
GCP’s overarching ESG Strategy is detailed throughout this report and has been designed to
focus on the ESG topics which have been identified as relevant to our business. As a result of
our 2023 DMA, we have implemented several changes to ensure material impacts, risks and
opportunities are effectively addressed. Our Strategy is constantly evolving to meet the needs
of our stakeholders and to remain aligned with legislation and regulation that apply to us.
As described in our Company Strategy and Business Model section, we source and acquire
assets that follow our selective acquisition criteria and benefit from internal growth potential,
including assets that are underperforming in terms of ESG aspects. GCP refurbishes and
transforms them into quality homes in cities with growing populations, helping meet demand
for comfortable and sustainable homes. Our refurbishment-first approach underpins our
ESG Strategy as we recognise the benefits of renovating existing building stock rather than
demolishing and developing new assets. By using this approach, we minimise construction
waste during the development process as well as the energy consumption, biodiversity
impacts and noise pollution which would occur during a full construction project.
The guiding principle of our strategy is to raise assets’ environmental performance, and we
therefore preferably invest in buildings with development potential, even where this involves
more significant structural interventions. Fundamentally, the findings of the environmental
assessments undertaken as part of our due diligence enable us to develop comprehensive
asset environmental improvement plans, including a defined catalogue of measures which
are factored into the budget for asset repositioning.
Another pillar of our ESG strategy is tenant satisfaction. Our tenants are pivotal to our success.
We therefore ensure our tenants have access to our Service Centre which is available 24/7
for emergency support, and from 7am – 7pm on working days, as well as offering regular
communication of events and relevant information through our tenant app. Our Tenant
Satisfaction Policy further details our commitments to our tenants and how we ensure high-
quality customer service.
With regard to the satisfaction of its employees, GCP continues to engage with them through
various ways, providing training and professional development opportunities, as well as
channelling their feedback to further shape GCP as a welcoming and diverse company. We
also closely monitor our gender pay gap in an effort to increase transparency and conform to
widely accepted standards.
Furthermore, our Business Partner Code of Conduct and our Human Rights Policy set out
our commitments to act in accordance with internationally recognised standards of human
rights, and includes our expectations of our suppliers to ensure our value chain workers are
protected to the same standards we hold ourselves. Both policies were updated in 2023. In
general, GCP’s corporate governance and compliance with the ever evolving regulatory and
legal frameworks in the European Union have been of great importance to the Company and
at the core of our business.
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Cologne
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Cologne
Climate Change
Long-term Targets
•
Achieve a 40% reduction in
CO
2
intensity by 2030 against the 2019 baseline, measured in
CO
2
-equivalent emissions intensity (
CO
2
e/
m
2
)
•
Achieve a 20% reduction in energy intensity by 2030 against the 2019 baseline, measured
in kWh/
m
2
•
Switch electricity to Power Purchasing Agreements (PPAs) certified renewable electricity
from wind, hydro-electric and solar PV sources by 2027
•
Ensure our portfolio’s increasing resilience to climate-related risks through the
implementation of adaptation solutions and retrofitting of our assets
•
Continue building climate risk assessment capacities and data collection to allow asset
specific and forward-looking planning and actions
•
Follow technological developments in the real estate sector, as well as products and services
offered by prop-tech companies to adopt cutting-edge climate change adaptation solutions
2024 Goals
•
Set up a new database for environmental data, allowing semi-automated data collection
through a mobile app for facility managers
•
Source 7% of our procured energy from PPA renewables
•
Conduct energy assessments and energy retrofit plans of at least 300 properties
•
Continue to assess the Company’s portfolio stranding risk
•
Begin to expand our portfolio-level physical climate risk assessment to an asset-level to
further guide the implementation of asset-specific climate change adaptation solutions
•
Continue to implement climate change adaptation plans determined in 2022 and 2023
Climate Change Mitigation
Over recent years, from a global community standpoint, we have truly recognised the crucial
role we play in mitigating the negative effects of climate change. The Intergovernmental
Panel on Climate Change (IPCC) has made it clear that the international community must
limit global warming to +1.5°C in comparison to pre-industrial times. Without significant
reductions in greenhouse gas (GHG) emissions worldwide, this will not be possible. We
understand the gravity of the situation as demonstrated in the results of the DMA, which
identified energy and carbon emissions as the most material topic for our business. As
emissions from buildings and construction make up around 40% of annual global emissions,
we are undertaking significant mitigation efforts to drive this transition.
There is increasing pressure from investors, governments and regulators, and society for
urgent action to reduce the adverse impact of the built environment on climate change.
A key development which continues to drive change is the phased introduction of the EU
Taxonomy. This legislation requires large, listed companies like GCP to align their approach
with strict criteria across fundamental environmental objectives on climate change, water,
waste, pollution and biodiversity. Our second full assessment against the EU Taxonomy Key
Performance Indicators for the environmental objective Climate Change Mitigation can be
found in the EU Taxonomy section of this report.
ENVIRONMENTAL INFORMATION
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GCP Carbon Reduction Strategy
Our fundamental commitment to climate change mitigation is our target of a 40% reduction in
CO
2
emissions intensity by 2030, against our 2019 baseline. In order to achieve this ambitious goal,
we developed our Company-wide Environmental and Energy Policy, to establish how efficiency
and renewable energy projects will be targeted, identified, implemented and monitored.
Guiding our actions on this target is the GCP’s
CO
2
Pathway, which monitors our progress
towards achieving this 40% reduction target and forecasts the rate of reductions which
must be made to reach it. Data on current energy performance and EPC ratings are
combined with metrics on potential improvement measures to develop a model of the entire
portfolio. The suite of possible measures is determined from onsite audits, desk-based
energy simulations and EPC recommendations. Using this data, possible combinations of
energy efficiency measures and renewable energy systems are considered, to assess how
transition risks can be mitigated at each property. These insights are considered alongside
broader market and regulatory factors, to develop an action plan for investments which
aligns with the required carbon reduction.
The measures incorporated in the modelling of our
CO
2
pathway include upgrades to current
building fabric and systems and more sophisticated renewable energy measures such as air
source heat pumps and CHP systems. Further advanced technologies, such as micro wind
turbines, geothermal heat pumps, and hydrogen-based CHP systems will be investigated
further in the future. The potential efficiency improvement, carbon reductions and associated
costs of these measures are considered.
Cologne
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CARBON REDUCTION PATHWAY
Roof, façade,
and basement
insulation
Window
replacements
Improved energy efficiency
through better building envelopes.
Renewable energy systems and technological upgrading.
Air
conditioning
and ventilation
Air source
heat pumps
Solar PV
EV charging
Combined heat
and power
generation
LED systems
Smart meters
Smart energy management systems and hydraulic
balancing improve operational efficiency through
integrating systems and optimizing energy flows.
Sourcing local
renewable energy
through Power
Purchase
Agreements (PPA).
2019
Baseline
59.60 kg C0
2
e/m²/
year Intensity
Annual reduction
Average of 4%
reduction/year
2030 Target
40% cumulative
reduction
44
Our Energy Strategy focuses on:
•
Comprehensive due diligence at the acquisition stage, including energy efficiency aspects,
enabling us to develop asset improvement and refurbishment plans to achieve energy
efficiency improvements
•
Implementation of environmental management policies and procedures, including data collection,
digitalisation and reporting, preventative maintenance and ongoing operational improvement
•
Sustainable energy measures encompassing investment in solar and wind power systems,
combined heat and power (CHP), electric vehicle (EV) charging stations, smart meters and a
total energy management system
•
Progressively switching all electricity from Renewable Energy Certificates (RECs) to PPA
certified renewable energy by 2027
•
Collaborating with tenants as a part of our loyalty programs
Monitoring and Management
To maximise the improvement opportunities among our existing properties, we aim to complete
at least 300 energy audits each year. In 2023, we continued to conduct holistic site audits
which assess the condition of the envelope and supply systems of the building from which we
can identify appropriate energy efficiency actions and renewable energy system opportunities.
We initiated a pilot project aimed at conducting energy audits, developing asset-specific
retrofit/decarbonisation plans, and evaluate their compatibility and performance. Within the
scope of this initiative, we have executed pilot projects across 47 buildings in Germany. The
energy savings, carbon reductions and investment costs of these projects are modelled and
extrapolated to the full portfolio, to provide an integrated picture of our progress towards our
reduction targets. The outcome of this project will guide our decision to proceed with a broader
and more extensive implementation. In the future, we will enhance these assessments with
further digital modelling to simulate the effect of efficiency interventions.
Whereas our initial energy management approach has been to invest in onsite renewable
energy and efficient energy generating systems such as CHPs (see next section for more
information), we adjusted our approach in 2021 to align with the three-stage hierarchy in
the World Green Building Council’s Net Zero Carbon Buildings Commitment for operational
carbon. This has now become our strategy. This means when identifying energy interventions,
we first focus on ways to reduce and optimise the energy demand of our assets, then identify
opportunities to generate the required energy renewably and onsite, and finally source the
remaining energy demand through off-site renewable energy.
To ensure we prioritise these improvement plans correctly and monitor their effect to further
inform our modelling, good data coverage and reliability is essential. We have a long-term
goal of achieving full data coverage across our portfolio. We achieved 84% energy data
coverage for our like-for-like portfolio in 2023. To maximise the utility of this data, we have
initiated the development of a new database for environmental data, enabling semiautomated
data collection through a mobile app for facility managers. Although GCP does not directly
control tenants’ energy consumption, we do strive to provide our tenants with consistent and
relevant information about their energy consumption through the progressive installation
of sub-metering systems and smart meters. We have also used informational videos and
posters, as well as provided information through our Service Centre to inform of behavioural
changes that can be made by tenants to reduce energy consumption. This empowers our
tenants by providing awareness and incentive to reduce energy consumption, which has been
particularly valuable throughout 2023 due to the significant increase in energy costs.
Investments into Renewable and Efficient Energy Systems
The gradual global transition to a low-carbon economy has highlighted the importance
of investing in renewable and green energy infrastructure; in more recent years, we have
seen the real estate sector furthering efforts towards this too during construction and use
stages of buildings. Since 2019, GCP has been investing in renewable energy to ensure that
its properties remain competitive during the transition to electrification of properties and
transport, and to a more decentralised energy market focused on renewables. The significant
challenges to the European energy market in 2022 and 2023 have further underlined the
urgency of this transition, and the foresight of our investments.
Over the years, our investments have mostly focused on the following measures
•
The installation and operation of solar PV generation systems on rooſtops
•
The installation of highly efficient energy generating systems based on CHP
•
The installation of EV charging stations. This allows for conversion of the Company's fleet
to EVs, resulting in lower fleet cost and more reliable mobility as well as lower emissions
Together with a partner company, we implement efficient and renewable-based onsite
energy systems at our properties. Our partner also undertakes site visits to identify the
number of EV charging points that can be installed at each of our properties, for private or
public use. Note that given the regulatory changes in the past year, particularly regarding
the usage of gas or fuel-based systems, such as CHPs, we will likely phase out CHPs in the
mid-term.
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In terms of future additional activities, we are planning the installation of heat pumps, as well
as the implementation of electricity storage to support solar, EV chargers and heat pumps. This
will not only increase the energy efficiency of the asset but enable optimal management of
energy consumption and production. Also, this will provide the necessary infrastructure for fast
EV charging stations to serve GCP and its tenants. In 2024, we will focus more closely on the
implementation of smart meters combined with a total energy management system to optimise
efficiencies in terms of resource use and cost.
Renewable Power Purchasing Agreements
Beyond our investments in renewables and energy efficiency systems, we have set a goal to
switch all electricity from Renewable Energy Certificates (RECs) to PPA-certified renewable
electricity generated from wind, hydroelectric and solar PV sources by 2027. This means that
where it is not viable to generate energy onsite or not sufficient to meet building demand,
additional renewable energy will be sourced to minimise asset and portfolio carbon emissions.
In 2023, our purchased like-for-like electricity covered by RECs was 90% in comparison to 84%
in 2022.
Internal Carbon Pricing
We have applied an internal carbon price so we can identify the additional benefits of our
actions towards energy consumption and emissions reductions. We have used the German
pricing based on the Fuel Emissions Trading Act
2
as opposed to the wider market pricing. This
pricing was €30/tonne CO
2
through 2023, is set at €45/tonne CO
2
for 2024, and will increase
incrementally to a price corridor of €55-65/tonne CO
2
by 2026. From 2027 onward, it will
transition to a market-based system for which the rules are yet to be determined, for which
the Company assumes a price cap of €125/tonne CO
2
.
Climate Change Adaptation
It is clear that climate change poses major risks across all countries and sectors, arising from both
the physical impacts of climate change itself, and the potential impacts of the social transition
which will be required to mitigate it. This section of our report is structured according to the
recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), the leading
international standard for reporting on management of climate-related risks. GCP is aware that in
October 2023, it was announced that TCFD will be disbanded following the publication of the IFRS
S1 and IFRS S2 standards, which include TCFD’s recommendations, and will therefore be overseen
by the IFRS Foundation from 2024. This will be considered in next year’s report.
Governance
As with corporate governance, GCP’s Board of Directors and management team share overall
responsibility for climate-related risks. The Board of Directors and management team are also
responsible for regularly reviewing and updating our Environmental and Energy Policy, which
was most recently updated in 2023 and will come into effect in 2024. The policy addresses
and aims to manage the material impacts, risks and opportunities related to climate change
mitigation and adaptation. The key objectives captured within the policy are around metering
and monitoring systems, energy efficient systems, renewable energy systems, energy
storage systems, and EV charging infrastructure.
GCP’s Management and Building Resilience Taskforce are co-responsible for assessing and
managing climate-related risks. A distinction is made between climate risks affecting the
Company at the corporate level, for which Management is the risk owner, and climate risks
which impact our properties, which are owned by GCP’s Operational Department. In addition,
our Taskforce on Building Resilience formed in 2022 works cross-departmentally to address
climate risks across relevant business units, developing action plans and adaptation solutions
as necessary.
2.
Brennstoffemissionshandelgesetz (BEHG), https://www.gesetze-im-internet.de/behg/__10.html
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Risk Committee
Oversees risk management,
incl. climate risks
Management
Assessment and management
of climate-related risks
at corporate level
Sustainability
Department
& Risk Officer
Assessment of physical
and transitional climate risks
Operational Department
Assessment and management of
climate-related risks on a property level
Governance
Structure on
Climate Risks
Building Resilience
Taskforce
Inter-departmental platform for the
discussion and collaboration on climate risks
Develop KPI’s for climate risk &
action plans and adaptation solutions
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Strategy
In order to effectively manage climate-related risks, we firstly conduct risk assessments to
understand the impacts these risks could have. The Risk Committee oversees risk management
for the Company, and the potential impacts of climate change are considered as part of this
process. Assessment of physical and transitional climate risks is conducted by the Chief Risk
Officer in close collaboration with the Sustainability Department, and such assessments are
presented to the Committee annually at a minimum, as well as upon urgency throughout the
year. Following these assessments, we determine relevant and practicable measures to help
reduce risks and maximise potential opportunities.
Transition Risk
In order to understand the exposure of the Company to transition risks, the Sustainability
Department and Risk Committee have undertaken a comprehensive assessment of various
transitional risk factors. A summary of the identified risks is provided in the following
table, which also sets out the mitigation strategies being used to control these risks to our
organisation. In alignment with the recommendations of the TCFD, we also describe the
potential opportunities which the Company has identified in each of these factors.
The timeframes short-, medium- and long-term in this table refer to expectations in the next
1-3 years, 4-10 years, and 10+ years respectively. We have started the process of financially
quantifying climate-related physical and transition risk and will continue to bolster these
processes and our sources of information through 2024.
Berlin
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Risk Category
Description
Impacts and Timeframe
Mitigation Strategy
Opportunity
Policy
Climate-related regulations and laws are chan-
ging rapidly, placing stricter requirements and
expectations on the energy and emissions per-
formance. Carbon pricing schemes and energy
ratings such as the EU's energy performance
certificates (EPCs) are increasingly being imple
-
mented, and requirements for minimum ratings
that must be met to let units to tenants are co-
ming into force. Over time, existing regulations
may become more aggressive or new policy
tools may be implemented posing restrictions
on letting or preventing the sale of buildings
that do not comply with such minimum stan-
dards, leaving them "stranded".
Carbon pricing and enhanced emissions-repor-
ting obligations might result in higher opera-
ting and compliance costs. Stricter EPC requi
-
rements are set to be implemented throughout
EU member states with the recasting of the
Energy Performance of Buildings Directive
(EPBD) in 2023 - a trend expected to continue
over the mid to long-term. These standards may
require increased CapEx to bring properties up
to the required standard in order to prevent
their stranding. Market and investor pressure to
disclose GHG emissions, as well as a carbon re-
duction pathway to net-zero has increased and
will stay high in the mid to long-term.
(S, M, L)
GCP’s Carbon Reduction Pathway forms our
strategy for reducing the carbon intensity of
the portfolio. The Pathway explicitly considers
potential carbon taxes and energy efficiency
measures and will identify inefficient assets
which are high priority for action to mitigate
stranding risk. The Company is also taking the
CRREM methodology into consideration and
is informing itself with results of the CRREM
analyses conducted. At this time, GCP has ho
-
wever prioritized stranding definitions based
on EPCs and the EU’s climate commitments
embodied in the EPBD recast, which provides
a more straightforward guide for the Company
to prioritize inefficient assets for improvement
and for the renovation planning process itself,
although some uncertainty remains regarding
implementation at the national level.
A move to more efficient buildings may result
in lower operating costs, reduce stranding
risks and decrease exposure to variations in
the cost and availability of natural resources.
More efficient buildings may also attract hig
-
her valuations influenced by improved energy
performance and will be more attractive to in-
vestors, tenants and financial institutions due
to compliance with their sustainable reporting
requirements.
Legal
Companies may also become subject to lawsu-
its alleging failure to take sufficient actions to
reduce greenhouse gas emissions or to account
for or disclose known climate-related risks. Cli-
mate-related litigation may also result from er-
roneous non-financial reporting or misleading
sustainability claims, in cases of "greenwashing,"
while companies in the EU found to have made
misleading or false environmental claims could
face fines if the proposed EU Green Claims Di
-
rective is approved.
With stricter EU regulation, including the EU
Taxonomy and SFDR, the real estate sector
has already felt the pressure of environmen-
tal legislation. The significant gaps between
current regulations and the carbon budgets of
the Paris Agreement make further regulatory
tightening over the mid- to long-term likely. It
is also possible that the scope of these regula-
tions expands to take in more segments of the
Company's value chain, increasing potential
exposure and compliance costs. While clima-
te-related litigation has primarily targeted go-
vernments and fossil fuel companies to date,
it is possible that other sectors such as real
estate may be targeted over the medium-to-
long term.
(M, L)
Our dedicated Sustainability Department works
to ensure accurate and high-quality non-finan
-
cial reporting, while constantly monitoring
changes in regulations to identify gaps and
facilitate compliance.
This involves not only
monitoring current legislative initiatives but
also assessing the gaps between current policy
and science-based climate targets to anticipate
future changes.
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Risk Category
Description
Impacts and Timeframe
Mitigation Strategy
Opportunity
Market
Tenant preferences for low or zero-carbon
properties are likely to reduce demand for in-
efficient properties. Likewise, shifting investor
preferences for sustainable and resilient assets
could see valuations favour green buildings.
Market conditions may shift from "green premi-
ums" for low- or zero-carbon assets to "brown
discounts" in rent or valuation for assets with
high energy or carbon intensities
.
The age of German building stock, where the
Company primarily operates, combined with
our business model of managing existing buil-
dings, poses significant challenges in offering
low or zero-carbon properties through the level
of investment that is required. Inability to meet
tenant preferences may increase vacancies and
reduce revenues while inability to meet inves-
tor expectations may reduce access to capital.
Shifting market demand may put downward
pressure on the value of "brown" assets which
are not in line with market expectations, the-
reby reducing the availability of capital and
increasing the cost of debt. Increasing sustai-
nable finance regulation is forcing investors
to report on their sustainable actions, which
will increase these demands on the Company.
Regarding the impacts of capital expenditures
needed to improve the energy efficiency of as
-
sets, Germany has a clear legal framework that
enables limited rent adjustments for residential
tenants, which provides a financial incentive for
landlords that can be exercised in a way that
is transparent between landlords and tenants.
(M, L)
The Company is working with tenants to redu-
ce energy and utility consumption with tenant
awareness campaigns.
Given the legal limits placed on modernization
rent increases along with GCP’s internal consi
-
deration whether further limits are warranted
to ensure tenants are financially able to meet
increased rents, the Company is developing
renovation planning processes that enable full
realization of available grants from the German
government to mitigate any risks posed by the
potentially high levels of CapEx needed to im-
prove highly inefficient existing buildings to
the greatest extent possible.
The carbon reduction pathway prioritises the
most inefficient assets in the portfolio for as
-
sessment of possible interventions to determi-
ne economic feasibility of investments that will
protect or improve their value. This pathway
will be subject to ongoing development to en-
sure alignment to market standards.
GCP’s scale provides economic benefits which
result in competitive advantages in reposi-
tioning assets with development potential in
terms of energy efficiency or climate resilien
-
ce. This could result in growth opportunities
through the acquisition of such assets from
owners without such ability.
Low and zero-carbon buildings will be better
positioned to reflect shifting tenant preferen
-
ces, as well as investor demands, positively
impacting rents and access to capital. Green
assets may strengthen business resilience by
increasing revenue through new products and
services that meet market demands and may
improve access to capital and debt. Green bond
issuance,
sustainability-linked loans or energy
efficiency-related subsidies for buildings can
be used to improve the financial feasibility of
making the needed investments.
Energy
Energy markets are more prone to price fluc
-
tuations driven by supply crunches or swings
in energy demand. This leads to risks asso-
ciated with high energy and utility consump-
tion and over-reliance on fossil-fuel derived
energy supplies.
Energy market risks associated with a depen-
dence on fossil fuels were previously seen as
being relevant in the medium-to-long term,
but the Russian war in Ukraine and the ensu
-
ing rise in energy prices have brought these
risks to the present day. This has caused many
sectors, including the real estate sector to call
for speeding up the transition to a low-carbon
economy. Nonetheless, the current energy mix
of most grids are still primarily reliant on fos-
sil fuels, as renewable energy generation and
energy storage capacities have not reached the
required levels for decarbonisation.
(S, M, L)
The Company aims to reduce reliance on fos-
sil fuels through its target to procure 100% of
landlord-obtained electricity through power
purchase agreements (PPAs), as well as through
installation of onsite renewable energy sys-
tems.
Investments in energy efficiency through
our carbon reduction pathway and Energy
Investment Program will also reduce energy
costs, mitigating exposure to variations in price.
Increasing procurement of energy from re-
newable sources and a shift to decentralised
energy generation can reduce operational
costs, compliance costs and exposure to vola-
tile fossil fuel markets. Green bond issuance
or sustainability-linked loans can be used to
improve the financial feasibility of making the
needed investments.
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Risk Category
Description
Impacts and Timeframe
Mitigation Strategy
Opportunity
Technology
GCP recognises that current technologies are
insufficient to achieve the grid decarbonisation
needed to address climate change, and this is
expected to increase the pace of technological
development.
Insufficient monitoring of technological de
-
velopments or regulatory requirements may
lead to investment in technologies that beco-
me obsolete before the end of their use life.
Buildings with obsolete technology systems
may experience reduced demand and require
higher maintenance costs/CapEx requirements
to meet minimum efficiency standards and mo
-
dern work, leisure and residential trends.
(M, L)
The Energy and Operation Departments moni-
tor regulations and available technologies on
the market and their observed costs to main-
tain awareness of relevant and economical
technologies that can improve the energy or
carbon profiles of buildings. The energy-related
procedures underlying the new environmental
policy prescribe prioritisation of investment to-
wards proven and cost-effective technologies.
Opportunity to engage with and invest in prop-
tech companies to ensure modern, forward-
thinking and appropriate technological outfits
of the Company's properties.
Reputation
Companies seen as taking insufficient clima
-
te action or delaying climate action face in-
creasing scrutiny and criticism from tenants,
investors, the media, and society at large.
Additionally, current and future generations
of employees hold greater expectations for
companies to act to address climate change
Any deficiencies in the climate strategy of the
Company could expose it to criticism from so-
cietal actors, diminishing the Company's repu-
tation. Errors in non-financial reporting may be
seen as fraudulent or "greenwashing". Reputa
-
tional damage from inaction on climate change
may also reduce the ability to recruit and retain
talent in the medium- to long-term.
(S, M, L)
The Sustainability Department monitors best
practices and societal trends to identify and
act on gaps in the Company's climate strategy
and bringing them to the attention of relevant
internal stakeholders while working to ensure
high-quality sustainability disclosures. Clear
communication on the Company's sustainabi-
lity, climate risk actions and carbon reduction
targets will reassure employees, potential can-
didates and investors of the Company's con-
tinued efforts with regard to climate change
mitigation and adaptation.
Through meeting or exceeding requirements,
expectations, or best practices, the Company
may be able to positively improve its reputati-
on. This can also improve the Company's ability
to attract and retain critical talent.
Physical Climate Risk
To assess the materiality of various physical risks to our assets, in 2022 we conducted a city-level physical risk assessment through S&P Global Sustainable1 for each of our major strategic locations.
This was done across eight physical risks, with modelling conducted under four warming scenarios (SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5 from the CMIP6 consolidated climate models). From
this analysis, exposure scores were produced for each decade from 2020 to 2100 in several cities of strategic focus to GCP. These scores were weighted against the GDP of the areas assessed, and
the cities analysed cover around 76% of the value of our portfolio. This analysis informs the assessment of risk levels in various locations and scenarios provided below.
The following table presents the results of this risk analysis, describing the potential impacts and severity of each risk across the locations analysed and under two warming scenarios.
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Risk
Potential Impacts
Potential Business Impacts
Variation under Climate Scenarios
Variation by Location
Extreme
Heat
Deadly heat stress is a prominent risk across
our countries of operation, particularly in urban
areas with heat island effects. Other potential
chronic impacts include worsening air quality
due to wildfires, and the spread of disease vec
-
tors due to increased temperatures.
Under-adapted assets could become dangerous
or unliveable in situations of extreme heat, with
potential effects on occupancy or rent levels.
Household energy demand is likely to increa-
se to manage extreme temperatures. Increased
CapEx demands will be incurred to adapt to
these risks with measures such as green roof-
tops or use of water permeable material.
Divergence in degree of exposure between sce-
narios is only observed in the latter half of the
century. With actual extreme heat observations
outpacing modelled estimates of our current
warming path, our analysis indicates this risk
is highly likely to become material, regardless
of scenario.
Likely to be experienced at similar levels throug-
hout given urban geographies, indicating the
need for systemic adaptation plans in high-risk
locations. Munich has a high rate of increase of
exposure, as well as high absolute risk, alongside
other South German cities such as Nuremberg.
Drought
Decreased precipitation and increased tem-
peratures, particularly during extreme heat
events, could make water scarce across large
geographic areas. This may have wider in-
frastructural effects, including to local agri-
culture.
Under-adapted assets could become dange-
rous or unliveable in drought conditions, with
potential effects on occupancy or rent levels.
CapEx requirements may be required to adapt
high risk assets.
Divergence of risk level between the scena-
rios analysed is comparatively lower than for
other risks, with the level of exposure of the
Company's regions of operation high across all
warming paths assessed.
Drought risks are observed to be correlated by re-
gion, with the East German cities of Dresden, Leip-
zig and Halle, among the most exposed. Almost
all cities have near-maximum exposure scores by
the end of the century, indicating that the soluti-
ons adopted need to be systemic across locations.
Wildfire
Wildfire events can cause substantial damage
to life and property in short periods of time,
displacing communities and rendering wider
areas dangerous or unliveable. The resulting
smoke also severely worsens air quality, lea-
ding to potential chronic impacts.
Acute property damage could prove highly
costly to the business and dangerous to our
occupants. The potential chronic impacts
on air quality may also impact occupancy.
Heightened physical risk is also likely to im-
pact insurance premiums and vacancy rates.
Divergence of risk level between the scena-
rios analysed is comparatively lower than for
other risks, with the level of exposure of the
Company's regions of operation high across
all warming paths assessed.
Local geographical conditions drive wide va-
riations in exposure levels between cities. De-
spite the connection to heat and precipitation
levels, the results differ from the scores for
extreme heat and drought, indicating a need
to assess local risk drivers at asset-level.
Fluvial
Flood
Spontaneous flooding due to extreme preci
-
pitation can cause substantial damage, with
the impacts depending strongly on location
due to ground conditions and structural sta-
bility. Such flooding can also have collateral
impacts on infrastructure and transportation.
Acute property damage could prove highly
costly to the business and dangerous to our
occupants. Impacts are extremely dependent
on asset-level conditions, making it difficult
to assess the value at risk with any accuracy.
Heightened physical risk is also likely to impact
insurance premiums and vacancy rates.
Some cities see considerable differences in risk
scores between the SSP2-4.5 and SSP3-7.0 sce
-
narios, with greater magnitude of increase bet-
ween decades observed in the higher-warming
scenario. The rate of increase of risk rating is
most pronounced in the decades before 2050
in these more severe scenarios.
There are considerable differences in exposure
scores at city level, indicating the very location-
specific drivers of this risk. The cities with greatest
exposure include London and Hamburg.
London
also ranks among the cities with the greatest
rate of increase in exposure through 2050, along
with the cities of Frankfurt, Mannheim, Mainz, and
Wiesbaden, which are located near the confluen
-
ce of the Rhein and Main rivers.
The highly loca
-
tion dependent findings demonstrate the need to
conduct asset-level assessments of this risk.
Coastal
Flood
Rising sea levels may render coastal areas or
river flood basins unliveable. Impacts will be
widespread in affected locations, potentially
leading to displacement of communities or
substantial adaptation costs.
Surface water or river flooding could lead to
severe damage to real estate, potentially in-
curring substantial costs for repair and main-
tenance, and losses from assets being remo-
ved from operation. Heightened physical risk
is also likely to impact insurance premiums
and vacancy rates.
Differences between scenarios are signifi
-
cant by the end of the century, but are less
pronounced through to 2050, suggesting this
risk will be material regardless of actual war-
ming.
Naturally, this risk can only be assessed in
coastal cities, with the highest scores found
in Bremen and Hamburg. As the adaptation
solutions required cannot be implemented at
the scope of individual assets, in-depth consi-
deration of the adaptation plans of local go-
vernments will be required to understand the
value at risk of assets.
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Three risks are excluded from the table above, as they were deemed less relevant to our
portfolio following the analysis. Tropical cyclones are excluded, as our assets have no
potential exposure to such risks. Extreme cold is discounted as the scores against this risk
fall in all scenarios. This risk is part of the historical norm for the European areas in which
we operate, and so is not relevant as a climate risk. Finally, water stress is excluded, as the
analysis conducted indicated decreasing risk levels. However, we consider that this does
not incorporate the potential interrelations with other risks and is not sufficiently clear as
to the driving causes of the identified stress. While we consider our analysis conducted
in 2022 still valid in 2023, we understand that this physical climate risk assessment was
conducted on a portfolio-level so does not provide insight into specific assets at potential
risk. With the ambition to expand this to the asset-level as much as possible, we have
compared several physical climate risk assessment tools in the market and have selected
an international service provider. In 2024, we will launch an asset-specific analysis of
physical climate risks to obtain a more in-depth overview and to plan for the most relevant
adaptation solutions.
London
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CITY-LEVEL PHYSICAL
RISKS ANALYSIS
Medium scenario (SSP2-4.5)
Medium-high scenario (SSP3-7.0)
Frankfurt,
Average Decadal Growth Rate (2020-2050)
Munich,
Average Decadal Growth Rate (2020-2050)
Cologne,
Average Decadal Growth Rate (2020-2050)
Berlin,
Average Decadal Growth Rate (2020-2050)
Extreme Heat Increase (2020-2050)
Lowest
Highest
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The previous map shows the cities from the German portfolio included in the physical
risk assessment conducted through S&P Global Sustainable1.
The colour scale ranks the
cities according to their increasing exposure to extreme heat risk up until 2050 providing
an indication of which German cities should be prioritised when implementing adaptation
solutions.
The four bar charts demonstrate the growth rates in risk exposure through 2050,
comparing between the Medium (SSP2-4.5) and Medium-High (SSP3-7.0) scenarios,
for the strategically important cities of Berlin, Cologne, Frankfurt, and Munich.
The
differences between the scenarios, as well as the local risk variations indicate the need
for a carefully informed approach when developing adaptation plans at the city- and asset-
level.
Consideration of multiple scenarios is critical for ensuring any plans implemented are
robust and will enhance the resilience of our buildings.
Risk Management
A key priority in our current risk management efforts is the implementation of adaptation
solutions and action plans. The joint work of the CRO, the Sustainability Department and the
Building Resilience taskforce on this objective is presented to the Risk and ESG Committees
and reported to Management. These bodies are jointly responsible for approving and
overseeing the implementation of the risk management approach taken forward.
With climate change being felt across our countries of operations, it is GCP’s goal to
increase the long-term resilience of its portfolio against climate-related risks. Following
the common practice of distinguishing climate-related risks into physical and transition
risks, we further subdivide physical risks as being either chronic or acute, with regards to
the timescale of their impacts, and as being temperature-, wind-, water- or solid mass-
related, as laid out in the EU Taxonomy.
The Building Resilience Taskforce started the analysis on building resilience in 2022 and
continued throughout 2023. With a number of physical climate risks identified for the
portfolio (see section on Physical Climate Risk Assessment), the taskforce developed
several adaptation solutions to counter these risks and to make GCP’s assets more resilient
in the long run. In order to prioritise these measures, the Building Resilience Taskforce held
a working session to assess the materiality and feasibility to the stakeholder departments
within GCP. The results of this exercise were collated to identify those measures which
could deliver the greatest value for the required investment.
The outcome of this assessment process was a set of four adaptation programs which will
be prioritised at our assets. The identified solutions are:
•
Refurbishments – Review of materials chosen at sites which are at risk, and roof
maintenance works.
•
Tenant guidebook for extreme conditions – Creation of a behavioural guide for tenants
to deal with extreme climatic conditions, including definition of the internal and external
notification chain in such emergency circumstances.
•
Flood analysis and planning – Asset-level analysis of flooding and drought to determine
countermeasures. Development of flood scenario plans and emergency plans.
•
Tree planting program – Planting and maintenance of trees in public areas where this leads
to a positive effect, and unsealing spaces to create more green areas around buildings.
In line with the EU Taxonomy’s prescribed climate risks and vulnerability assessment,
it is the Company’s goal to implement these adaptation solutions over the course of the
next four years. These solutions will therefore guide our investment program to increase
the resilience of our assets to physical climate risks. The Sustainability Department will
continue to analyse the vulnerabilities of our assets to identify further opportunities for
adaptation in the future.
With the selection of a climate risk assessment tool at the end of 2023, GCP is well-equipped
to expand its portfolio-level risk assessment to an in-depth, asset-specific analysis in 2024.
This will allow the development of more tailored adaptation solutions for our individual
assets, which will be implemented in subsequent years.
Metrics: Climate Change
In order to assess and monitor the progress towards our climate change-related goals and
commitments, we regularly collect utility consumption data from our assets as shown in
table 1. This also allows us to calculate the greenhouse gas emissions associated with this
activity as presented in table 2. Due to restrictions around tenant data sharing, we are
unable to monitor tenant-obtained energy which is from renewable sources, as well as that
regarding fuels or district heating. The Company understands “energy generation from non-
renewable sources” to be electricity generated from its CHP systems, for which no data was
available for assets in the operational control portfolio.
Additionally, energy consumption
from nuclear sources is not reported as the Company’s energy procurement is linked to the
energy mix in its countries of operation.
While nuclear-produced energy could be present in
electricity not covered by REC or PPA contracts, the Company is not provided with the energy
mix for procured energy in its invoices received for these contracts, and as such figures could
not be reported.
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Absolute and like-for-like energy for managed assets
Energy reported in kWh
2023
2022
EPRA Code
Metric
Abs
LfL
Abs
LfL
Elec-Abs
Elec-LfL
Electricity consumed for landlord shared services
12,651,673
11,074,850
13,925,039
12,668,112
Total landlord-obtained electricity consumed
12,651,673
11,074,850
13,925,039
12,668,112
Proportion of landlord-obtained electricity generated offsite from renewable sources
79%
90%
84%
84%
Proportion of landlord-obtained electricity generated and consumed onsite from renewable sources
N/A
N/A
N/A
N/A
Total landloard-obtained electricity generated onsite from renewable sources and exported
369,205
369,205
N/A
N/A
Total tenant-obtained electricity consumed
119,260,354
105,464,625
155,876,902
105,464,625
Total electricity consumed
131,912,027
116,539,475
169,801,942
118,132,738
Total electricity consumption data coverage, by area (sqm)
3,055,382
2,713,154
3,653,672
2,713,154
Proportion of landlord-obtained electricity consumption and associated GHG emissions that is estimated
35%
36%
0%
0%
Proportion of tenant-obtained electricity consumption and associated GHG emissions that is estimated
100%
100%
100%
100%
Proportion of total electricity consumption and associated GHG emissions that is estimated
94%
94%
91%
89%
Fuels-Abs
Fuels LfL
Fuels (natural gas) consumed for landlord shared services
42,130,114
42,006,631
49,408,466
49,965,267
Fuels (oil) consumed for landlord shared services
2,787,201
2,787,201
2,931,359
2,601,134
Fuels (natural gas) allocated for tenant consumption
131,523,958
131,129,347
156,067,780
154,573,606
Fuels (oil) allocated for tenant consumption
8,684,373
8,684,373
9,307,863
8,037,384
Total landlord shared services fuels consumed
44,917,314
44,793,831
52,339,825
52,566,401
Total (landlord-obtained) fuels allocated for tenant consumption
140,208,331
139,813,720
165,375,643
162,610,990
Total (landlord-obtained) fuels consumed
185,125,645
184,607,551
217,715,468
215,177,391
Proportion of total (landlord-obtained) fuels from green sources
73%
73%
0%
71%
Total (landlord-obtained) fuels consumption data coverage, by area (sqm)
1,309,246
1,304,317
1,431,792
1,304,317
Proportion of total (landlord-obtained) fuel consumption and associated GHG emissions that is estimated
10%
10%
8%
6%
DH&C-Abs
DH&C-LfL
Total landlord-obtained district heating/cooling consumed
59,038,188
58,807,427
63,160,262
51,817,151
Total district heating/cooling allocated for tenant consumption
181,658,260
180,965,978
200,095,968
159,163,853
Total district heating/cooling consumed
240,696,447
239,773,405
263,256,230
210,981,004
Proportion of total (landlord-obtained) district heating and cooling from green sources (sqm)
0%
0%
0%
0%
Total (landlord-obtained) district heating/cooling consumption data coverage, by area (sqm)
2,006,433
1,999,890
2,221,880
1,999,890
Proportion of total (landlord-obtained) district heating/cooling consumption and associated GHG emissions
that is estimated
12%
12%
18%
13%
TABLE 1
2023 figures reviewed by auditor
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Absolute and like-for-like energy for managed assets
Energy reported in kWh
2023
2022
EPRA Code
Metric
Abs
LfL
Abs
LfL
Absolute and
like-for-like
energy
Total landlord shared services energy consumed
71,689,861
69,882,277
129,425,127
64,485,264
Total tenant-obtained/tenant allocated energy consumed
300,918,614
286,430,603
379,396,650
264,628,478
Total landlord-obtained energy consumed
438,473,766
435,455,806
494,896,738
438,826,508
Total energy consumption
557,734,120
540,920,432
650,773,640
544,291,133
Total energy consumption data coverage, by area (sqm)
3,055,382
3,049,084
3,653,672
3,049,084
Proportion of landlord-obtained energy consumption and associated GHG emissions that is estimated
12%
12%
13%
9%
Proportion of tenant-obtained energy consumption and associated GHG emissions that is estimated
100%
100%
100%
100%
Proportion of total energy consumption and associated GHG emissions that is estimated
31%
29%
34%
27%
Proportion of total energy generated offsite from renewable/green sources
33%
33%
27%
37%
Proportion of total energy generated onsite from renewable/green sources (consumed onsite or exported)
369,205
369,205
N/A
N/A
Total renewable/green energy consumption and generation
181,866,455
176,929,689
178,166,551
201,360,982
Total energy consumption from fossil sources
376,236,869
364,359,947
473,037,324
343,360,386
Total building energy intensity (kWh/sqm*year)
Energy-Int
Building energy intensity for heating energy consumed
128.57
128.58
131.64
129.09
Building energy intensity for all energy consumed
171.60
171.39
178.11
172.52
Mandatory Certificates (Energy Performance Certificates)
Cert-Tot
% of portfolio certified by floor are
88%
94%
91%
93%
•
In 2023, like-for-like landlord-obtained electricity
consumption decreased by 13%.
•
Like-for-like landlord-obtained district heating and cooling
consumption decreased by 14%, while like-for-like landlord-obtained fuels increased by 2%.
•
Total absolute energy intensity for 2023 decreased by 4% compared to 2022 .
TABLE 1
2023 figures reviewed by auditor
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Absolute and like-for-like GHG emissions for managed assets
GHG emissions reported in tonnes CO
2
e
2023
2022
EPRA Code
Metric
Abs
LfL
Abs
LfL
GHG-Dir-Abs
GHG-Dir-LfL
Direct GHG emissions (GHG Protocol Scope 1)
9,235
9,210
10,787
10,769
GHG-Indir-Abs
GHG-Indir-LfL
Indirect GHG emissions (GHG Protocol Scope 2; Location-based)
21,161
20,519
23,039
19,145
Indirect GHG emissions (GHG Protocol Scope 2; Market-based)
972
411
N/A
739
Indirect GHG emissions (GHG Protocol Scope 3 from tenant-controlled energy, Location-based)
124,858
119,535
148,167
117,975
Indirect GHG emissions (GHG Protocol Scope 3 from tenant-controlled energy, Market-based)
112,038
106,833
N/A
106,672
Absolute and
like-for-like GHG
emissions
Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Location-based)
155,254
149,265
181,994
147,889
Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Market-Based) based
122,245
116,454
N/A
117,374
Total GHG emissions data coverage, by area (sqm)
3,055,382
3,049,084
3,653,672
3,049,084
Building GHG intensity (kgCO
2
e/sqm*year)
GHG-Int
Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and 3; Location-based) (kgCO
2
e/sqm*year)
46.82
45.17
49.81
44.76
Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and 3; Market-based) (kgCO
2
e/sqm*year)
36.87
35.24
N/A
35.52
Material transition risk
EPRA Code
Units of Measure
Metric
2023
2022
Number
Percentage
Number
Percentage
N/A
Total numbers and
percentages
Estimated amount of potentially stranded assets (monetary value)
€2,992M
35%
N/A
N/A
Net rent from business activities at material transition risk
€146M
35%
N/A
N/A
•
Our like-for-like scope 1 emissions associated with building energy consumption decreased by 14% in 2023 compared to 2022.
•
Our like-for-like location-based scope 2 emissions increased by 7%, and our like-for-like location-based scope 3 emissions increased by 1%.
•
Our like-for-like market-based scope 2 emissions decreased by 44%, and our like-for-like market-based scope 3 emissions saw a 0% change.
•
Total like-for-like location-based scope 1, 2 and 3 emissions increased by 1% from 2022 to 2023.
•
Total like-for-like market-based scope 1, 2 and 3 emissions decreased by 1% from 2022 to 2023.
•
Total like-for-like location-based GHG intensity increased by 1% compared to that of 2022.
•
Total like-for-like market-based GHG intensity decreased by 1% compared to that of 2022.
As part of our risk management programme relating to the negative impacts of climate change, we monitor metrics relating to climate change transition risk as shown in table 3.
TABLE 2
TABLE 3
2023 figures reviewed by auditor
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Environmental Protection
Within GCP’s overarching goal of environmental protection, we include other closely
associated topics that were raised in our 2023 DMA but were not deemed material:
resource use and circular economy, water management, biodiversity and ecosystems, and
pollution. All these matters align with our long-term commitment to tenants and society
by ensuring that the resources we need to maintain a high quality of life are preserved and
that we regard environmental impacts in providing them.
We take our responsibility to safeguard the natural environment and reduce the adverse
impacts of our business activities very seriously.
Long-Term Targets
•
Focus on refurbishment over new construction and demolition
•
Promote tenant waste minimisation and separation
•
Professional and environmentally friendly waste disposal within our own activities, such
as renovation projects
•
Stronger consideration of biodiversity topics in refurbishment projects and upgrading of assets
•
Continue efforts towards sustainable water consumption, maintain a high level of water
quality, and lower water- and wastewater-related operating costs, and continue expansion
of digital water metering and corresponding digital monthly consumption information
•
Increasing the number of energy-efficiency measures
2024 Goals
•
Engage more closely with our contractors regarding the recycling of demolition waste
•
Improve data gathering on waste disposal and recycling rates
•
Conduct biodiversity projects across our assets to help understand improvement
opportunities
•
Pilot smart water metering initiative in Germany
Circular Economy
While the circular economy topic was not deemed material during our DMA, we do address
the transition to a circular economy in our EU Taxonomy analysis. In order to establish
quantitative targets for waste reduction and improved recycling rates, we must first gather
an accurate baseline of data across our assets. This will be a key focus for 2024 so we
can then establish feasible and calculated targets. To achieve this, we have entered into
an agreement for waste disposal with an established provider, streamlining our reporting
capabilities and control over the process.
We have not yet established a specific circular economy policy aimed to reduce impacts,
risks and opportunities; however, our goal is to reduce the total amount of waste produced
at our properties, and to increase the proportion of this waste which is recycled or reused
back into the circular economy. The above-mentioned agreement will also help increase
recycling rates. As with other sustainability measures, reductions in waste output and
landfill volume correspond to reductions in operating costs, alongside reducing our
environmental impact.
At GCP, there are two key ways in which waste is generated – waste linked to construction
and renovation projects and waste linked to the operation of the asset and the tenants
themselves.
Tenant Waste Management
To increase recycling rates, we are providing waste separation facilities on our sites, and
engaging with our tenants on their waste management practices. As with other sustainable
measures, reductions in waste output and landfill volume correspond to reductions in
operating costs, alongside reducing our environmental impact.
Most of the waste produced in the operation of our properties falls outside our direct control,
and so in order to reduce our environmental impact we engage with our tenants to reduce
their footprint. Our local technical teams and Service Centre are always available to support
tenants who seek our advice on these issues. This coordination and engagement between
stakeholders will be a crucial part of building a more circular, resource-efficient economy.
We also try to use the indirect influence that our properties can have on their tenants
to produce more sustainable outcomes. This is oſten done through awareness raising
activities; for example, GCP publishes leaflets and has produced information videos for
tenants with advice on more environmentally friendly behaviour such as recycling, efficient
heating practices whilst not wasting energy and how to ventilate apartments properly. In
2023, GCP also continued the previously rolled-out pilot for pay-by-volume waste systems,
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which monitored the volume of waste disposed by tenants and billed them accordingly.
These systems are yet to prove effective in inciting meaningful behavioural changes, for
example by drawing tenants’ attention to the cost-saving benefits of waste reduction. The
pilot did not yield significant evidence of the system’s impact on the actual volume of waste
disposed, so extending this initiative to further assets is not to be expected.
As another key example of our waste reduction projects, in 2023 GCP digitalised its postal
correspondence with tenants and switched to the new GOGREEN Plus services from
Deutsche Post DHL. This means that now all postal correspondence with GCP tenants,
including the energy consumption, is digitally transmitted to Deutsche Post, who offer a
climate-neutral hybrid mail dispatch, by email, SMS, fax or post. This substantially reduces
the waste generated in the production and delivery of leaflets while also supporting our
tenants in reducing their carbon footprint. Aligned to the waste reduction efforts, this year
we also continued expanding our digital invoicing and purchase order process, as well as
the digital signature of leases. Digital handover protocols are expected to be rolled out in
2024. We will continue to look for innovative partnerships and strategies to improve our
resource efficiency in future.
Recycling of Construction Waste
When it comes to waste production and disposal from construction work, we are more in
control of waste management and recycling. Whenever we undertake larger construction
and refurbishment projects, we conduct reviews of the type and quantity of waste
produced, to ensure lawful disposal of hazardous and non-recyclable waste streams and
to recycle as much as possible. The topic of circular economy is becoming more important
for the construction and real estate sector, not least due to the European Union’s EU
Taxonomy regulation, which has stipulated the goal of a 70% recycling rate for the sector.
We therefore aim to engage even more closely with our contractors regarding the recycling
of demolition waste and to improve data gathering on waste disposal and recycling rates.
In general, our goal is to preserve existing structures and materials and not to demolish
and build new. This is advantageous from an economic and ecological perspective.
Metrics: Circular Economy
Our approach to the circular economy is described in the section above. In order to track the
progress of our approach, we collect waste generation data from our assets and monitor
this year on year as will be presented in April. Due to restrictions around tenant data
sharing, we include tenant waste generation within our landlord-managed figures. It is
only possible, based on our waste collectors, to report recycled and non-recycled waste.
Dortmund
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Water Management
Water and marine resources was not deemed to be a material topic during our DMA,
however we recognise the importance of our water consumption and the negative
environmental impacts associated with poor water management. We therefore aim to
promote sustainable water use across our portfolio, and to comply with the high standards
for water quality and wastewater disposal set at EU and national level. The importance
of sustainable water usage has been highlighted by its inclusion as a core environmental
objective in the EU Taxonomy.
We seek to positively influence tenants’ water consumption, through engagement programs
and advanced measurement technologies. We are prioritising investment in smart water
meters to provide tenants with accurate information about their water usage. This data
is also used to identify inefficiencies and potential interventions from both a structural
and management perspective. Based on these insights, we seek to implement technical
improvements to reduce water consumption in our properties wherever feasible. Pilot
projects for this initiative are planned for Germany in 2024.
In 2023, we welcomed a Water Resource Specialist to our team, acknowledging that this
topic is of increasing importance and needs to be addressed separately from the Energy
Department who have previously managed water resources. A Water Management Policy
and Procedure were established to unite and improve water management efforts at
operationally controlled and owned assets, outlining our current water strategy, water
management, and water-related procedure principles. The Water Management Procedure
also provides further information to Asset and Property Managers on improving sustainable
water usage at assets in our portfolio.
Metrics: Water Management
Our water management strategy is described in the section above. In order to track the
progress of our approach, we collect water consumption data from our assets and monitor
this year on year as presented in table 4. Due to restrictions on tenant data sharing, we
include tenant submeters in our landlord-obtained water consumption figures.
Absolute and like-for-like water consumption for managed assets
Water reported in m
3
2023
2022
EPRA
Code
Metric
Abs
LfL
Abs
LfL
Water-
Abs
Water-
LfL
Total landlord-obtained water
consumed (including tenant
submeters)
2,789,468
2,735,329
2,694,813
2,419,501
Proportion of landlord-obtained
water consumption data that
is estimated (including tenant
submeters)
29%
30%
0%
5%
Total water consumption data
coverage, by area (sqm)
1,952,779
1,906,107
1,277,110
1,902,399
Total building water intensity
Water-Int
Building water intensity for all
water consumed (m
3
/m
2
*year)
1.43
1.44
2.11
1.27
TABLE 4
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Biodiversity and Ecosystems
While biodiversity and ecosystems was not identified as a material topic in our DMA, we
remain cognisant of the need to and benefits of contributing positively to biodiversity at our
sites. We have therefore established a clear, public Biodiversity Commitment which details
our approach to biodiversity protection and enhancement, which is planned to be updated in
2024 to include a more specific strategy and related goals considering EU Taxonomy aspects.
Our investment in outside areas also takes into consideration environmental aspects,
such as the design of green spaces that could provide the foundations for biodiversity
enhancement projects. One such example has been a project in Kley, Dortmund in 2022,
where we worked together with our facility management partner to transform the grass
lawn into a meadow with a bee hotel. The project seeks to enhance biodiversity and the
local ecosystem by nurturing healthy pollinators and diverse meadow flowers. For 2024,
we plan to conduct more biodiversity studies on and around the assets and implement more
biodiversity enhancement projects according to the improvement measures identified.
We also ensure that we refrain from using pesticides and herbicides at our assets and try to
include local community members when we install bird houses and insect hotels which not
only improves our community engagement, but also helps to educate our local community
on measures they can implement at home too.
Pollution
While pollution was not deemed to be a material topic during our DMA conducted earlier
this year, it is nevertheless a topic that we consider in our construction and refurbishment
projects, as well as in the operation of our assets.
As described in more detail in our EU
Taxonomy section of this report, we for instance require our suppliers and contractors
of Taxonomy-relevant projects to sign a questionnaire that confirms their non-usage of
pollutants and prohibited chemical substances by the European Union.
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Urban gardening project Cologne
EU Taxonomy
Introduction
The EU Taxonomy is a classification system for the identification of sustainable economic
activities. Its purpose is to offer companies, investors and policymakers a standard set of
definitions for which economic activities can be considered environmentally sustainable
in order to create security for investors, protect against greenwashing and encourage
investment into more sustainable activities. The EU Taxonomy is currently comprised of
six environmental objectives: Climate Change Mitigation; Climate Change Adaptation;
Sustainable Use and Protection of Water and Marine Resources; Transition to Circular
Economy; Pollution Prevention and Control; and the Protection and Restoration of
Biodiversity and Ecosystems. The technical screening criteria for the six EU Taxonomy
environmental objectives were scheduled for release over a multiyear timeframe. The
Climate Delegated Act covering the technical screening criteria for a substantial contribution
to Climate Change Mitigation and Climate Change Adaptation and the Do No Significant
Harm (DNSH) criteria for the remaining environmental objectives was approved in 2021 and
applied as of January 2022. The final Environmental Delegate Act adding the substantial
contribution criteria for the remaining four environmental objectives was approved in 2023
and will apply as of January 2024.
In 2022, GCP undertook for the first time an assessment of the Company’s EU Taxonomy-aligned
turnover (see Turnover KPI further below), capital expenditure (CapEx) and operating expenses
(OpEx) relating to the EU Taxonomy environmental objectives Climate Change Mitigation and
Climate Change Adaptation for the financial year ending 31st December 2022. Since then, GCP
has made further progress in implementing and adapting processes to gather critical data for
EU Taxonomy reporting. For instance, in 2023, a mid-year EU Taxonomy alignment exercise
was performed, covering eligible Capex under the environmental objective Climate Change
Mitigation. This allowed an earlier assessment of the status quo and provided an opportunity to
enhance process-optimisation for the final EU Taxonomy alignment assessment. This exercise
was performed by the Sustainability Department together with the Construction and Operation
Departments, as well as the Business and Group Controlling teams.
Furthermore, to deepen the knowledge and understanding of the EU Taxonomy and its
reporting requirements, several training sessions were conducted with the Construction
and Operation Departments as well as international offices throughout 2023. To ensure the
accessibility of information necessary for EU Taxonomy compliance, a construction contract
that incorporates provisions for contractors to deliver data pertinent to EU Taxonomy
reporting is currently being revised and updated. The application of the updated contract
is to be expected during 2024, incorporating the EU Taxonomy pollution prevention
questionnaire (to be signed by contractors), which covers the Do No Significant Harm
(DNSH) criteria on Pollution Prevention and Control. The improved contract also integrates
explicit provisions for waste disposal and recycling data, which covers Circular Economy
requirements under the DNSH criteria for climate change mitigation.
As a long-term target, GCP aims to optimise its Enterprise Resource Planning (ERP) system
for the comprehensive collection of EU Taxonomy data. In 2024, ongoing training sessions
will continue in conjunction with EU Taxonomy updates for the Construction and Operation
Departments, as well as international offices and the Financial Department.
Following strategies are in place to continuously improve the eligibility and/or alignment
with the EU Taxonomy:
•
Take substantial contribution and DNSH criteria of the EU Taxonomy into consideration
when making decisions regarding renovations and new development projects.
•
The emphasis is on Taxonomy-alignment of larger CapEx projects under 7.1 ‘Construction
of New Buildings’ and 7.2. ‘Renovation of Existing Buildings’ due to their materiality over
smaller projects.
•
Data collection improvements through better utilisation of our ERP System and closer
collaboration with our suppliers.
Methodology
Approach Taken to Determine Taxonomy-Eligible Activities
In order to determine EU Taxonomy eligibility, GCP first identified all activities undertaken by
the Company during an initial assessment conducted in 2021 involving multiple departments.
This initial assessment was conducted in 2021, managed by the Sustainability Department.
Subsequently, the Sustainability Department has reviewed the activities to determine
whether the list was still up to date. In 2022, we changed our reporting of photovoltaic
systems, which were previously reported under activity 4.1 (electricity generation using
solar photovoltaic technology) to reporting under activity 7.6 (installation, maintenance
and repair of renewable energy systems) following further clarification published by the
European Commission in December 2022. In 2023, GCP continued to follow the established
methodology.
Hence, the following seven EU Taxonomy-eligible activities were determined as relevant
for Climate Change Mitigation and Climate Change Adaptation:
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•
Construction of new buildings (7.1)
•
Renovation of existing buildings (7.2)
•
Installation, maintenance and repair of energy efficient equipment (7.3)
•
Installation, maintenance and repair of charging stations for electric vehicles in buildings
(and parking spaces attached to buildings) (7.4)
•
Installation, maintenance and repair of instruments and devices for measuring, regulation
and controlling energy performance of buildings (7.5)
•
Installation, maintenance and repair of renewable energy technologies (7.6)
•
Acquisition and ownership of buildings (7.7).
Despite the activities’ contribution to both objectives, GCP considers itself as contributing
more to Climate Change Mitigation than Climate Change Adaptation through the energy
efficiency improving renovations of its assets. As a consequence, the EU Taxonomy Key
Performance Indicators (KPIs) are reported with regard to Climate Change Mitigation only.
Nevertheless, with the refurbishment of our properties, they also become more climate
resilient. GCP has also adopted several specific adaptation solutions which will increase the
contribution to the second environmental objective in the upcoming years.
Furthermore, with the publication of the substantial contribution criteria for the four
remaining environmental objectives - Sustainable Use and Protection of Water and Marine
Resources; Transition to Circular Economy; Pollution Prevention and Control; and the
Protection and Restoration of Biodiversity and Ecosystems – in June 2023, clarified that
only Circular Economy provided additional economic activities for the real estate and
construction sector. These new activities are:
•
Construction of new buildings (3.1)
•
Renovation of existing buildings (3.2)
•
Demolition and wrecking of buildings and other structures (3.3)
•
Maintenance of roads and motorways (3.4)
•
Use of concrete in civil engineering (3.5)
Of these activities, only 3.1, 3.2 and 3.5 apply to GCP and are considered as eligible in 2023.
However, data availability of recycling data from waste disposal and management sites is
still a challenge for reporting with regards to DNSH Circular Economy under Climate Change
Mitigation. GCP therefore chose to continue improving fulfilment of the DNSH criteria for
Circular Economy under Climate Change Mitigation first before potentially reporting on the
substantial contribution under Circular Economy in the future. In 2024, GCP will continue
to work with suppliers to provide better recycling data.
Attributing Data to Economic Activities
Although our Construction and Operation Departments started to put into place processes
in 2022 that allow for the allocation of projects or activities to the relevant economic
activities, the majority of invoices in our ERP system had to be analysed and evaluated
manually for eligibility and alignment.
Using determined commodity codes relevant to each
identified economic activity based on information provided in guidelines and resources by
the European Commissions, the invoices could be allocated to the correct eligible economic
activity. This attribution process was necessary for CapEx mostly.
The majority of turnover is generated in relation to the activity ‘Acquisition and Ownership
of Buildings (7.7)’, in the form of rental income. The Company also derives a comparatively
small amount of other income that is not related to eligible economic activities. Additionally,
OpEx is reported as relating to activity 7.7, since it corresponds to the maintenance
measures at GCP’s properties.
Assessment of Aligned Activities
For an economic activity to be aligned with the EU Taxonomy, three requirements need to
be fulfilled:
1) it must make a substantial contribution to the achievement of one or more EU
environmental objectives (“substantial contribution”)
2) it does not significantly harm any other EU environmental objective (“do no significant
harm / DNSH”)
3) it is in compliance with minimum social standards on topics such as Human Rights,
Labor Standards and Anti-Corruption (“minimum social safeguards”)
Based on these requirements, checks for EU Taxonomy alignment relate to different
business levels at GCP. Whereas substantial contribution to climate change mitigation
is assessed at the individual asset or project level, the “do no significant harm” (DNSH)
criteria apply rather to the economic activity itself. The DNSH criteria for Climate Change
Adaptation and Circular Economy was conducted for GCP as a whole.
Compliance with minimum social safeguards was also evaluated for GCP at a company
level.
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Substantial Contribution Assessments
This section outlines the checks conducted for substantial contribution to Climate Change
Mitigation relevant to GCP’s eligible economic activities.
Starting with acquisition and ownership of buildings (7.7), this is the only activity for which
GCP reports turnover and OpEx. Turnover is only considered as making a substantial
contribution to 7.7 (acquisition and ownership of buildings) if the relevant buildings –
provided they were constructed before 31 December 2020 – have been assigned energy
efficiency class A (or better) or are among the top 15 percent of regional or national housing
stock in terms of primary energy demand. For buildings constructed aſter 31 December
2020, the same criteria for significant contribution to climate change mitigation apply as
for new constructions (7.1).
As GCP acquires existing buildings with renovation potential, they are mostly built before
31 December 2020.
Aſter thorough review of the available methodologies, the Company has adopted the
15% benchmark approach based on data published by a publicly available index, that has
been endorsed by the German Sustainable Building Council (DGNB), a non-profit focused
on making buildings more sustainable. The index uses average yearly primary energy
consumption data per asset type from its vast database of European clients’ consumption
data to establish top 15% and top 30% benchmarks for Germany, the UK, and other
countries. We note that this approach was adopted for the German portfolio only, whereas
for the London portfolio for which EPC ratings were readily available, the EPC rating
approach was followed.
Hence, aligned turnover and OpEx was only calculated in relation to the properties that fall
within the top 15% of building stock (German portfolio) or have an EPC rating A and above
(UK portfolio).
As for the substantial contribution criteria for the activity new construction (7.1), the
relevant building has to show a primary energy demand that is at least ten percent below
the national standard for nearly zero-energy buildings. In addition, for buildings larger than
5000m² further criteria have to be fulfilled upon completion in order to be aligned: tests
for airtightness and thermal integrity, as well as a life-cycle Global Warming Potential of
the building. At GCP, new constructions constitute a very small percentage of its business
activities.
The few development projects in 2023 are currently only in the planning phase and
therefore not able to produce all necessary documentation for the fulfilment of substantial
contribution criteria (Climate Change Mitigation) for new construction (7.1) or the various DNSH
criteria. They are therefore reported as eligible in this year’s report.
The substantial contribution criteria to Climate Change Mitigation for the renovation of
existing buildings (7.2) dictate that refurbishment results in at least a 30% reduction in
primary energy demand within three years or qualifies as a major renovation. GCP checked
compliance with these criteria by assessing whether the renovation project touches 25% of
the building envelope or more and meets the cost-optimal minimum energy performance
requirements as laid out in the German buildings energy act, Gebäudeenergiegesetz (GEG),
implementing the EU Directive 2010/31/EU. If this was the case, the CapEx
was considered as
aligned. If this was not the case, the CapEx was assessed under the substantial contribution
criteria for individual energy efficiency measures as described in 7.3 (Installation, maintenance
and repair of energy efficient equipment). Depending on the individual measure that was
conducted, compliance with the relevant technical criteria laid out in the GEG is evaluated.
Only if these were met CapEx allocated to 7.3 (Installation, maintenance and repair of energy
efficient equipment) is considered as meeting the substantial contribution criteria.
There are no additional technical screening criteria for activities 7.4 (Installation, maintenance
and repair of charging stations for electric vehicles in buildings (and parking spaces attached to
buildings)), 7.5 (Installation, maintenance and repair of instruments and devices for measuring,
regulation and controlling energy performance of buildings) and 7.6 (Installation, maintenance
and repair of renewable energy systems) beyond the list of individual measures described for
each activity. In 2023, GCP did incur CapEx for activities 7.5 and 7.6, however not for activity 7.4.
Do No Significant Harm Assessments
As mentioned above, in order for an economic activity to be aligned, the EU Taxonomy
employs the principle of ‘do no significant harm’ (DNSH). As such, in addition to making a
substantial contribution to one of the environmental objectives, it must be shown that each
activity does not significantly harm any of the other objectives, as defined by the Technical
Screening Criteria in the First Delegated Act to the EU Taxonomy.
Since all eligible activities were assessed for making a substantial contribution to Climate
Change Mitigation, the DNSH assessments were performed only for those that met the
technical criteria for substantial contribution. As data with regard to the fulfilment of
substantial contribution criteria was not readily available for our new construction (7.1)
projects, no further DNSH checks were conducted for this activity and is therefore reported
as eligible only in this year’s report.
Regarding activity 7.2 (Renovation of existing buildings), the substantial contribution
criteria to Climate Change Mitigation were met, which therefore required checks with
regard to compliance with four DNSH criteria: Climate Change Adaptation, Protection of
Water and Marine Resources, Circular Economy, Pollution.
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For activity 7.3 (Installation, maintenance and repair of energy efficient equipment), DNSH
criteria exist for the environmental objectives of Climate Change Adaptation and Pollution
Prevention, whereas for the activities 7.4 (Installation, maintenance and repair of charging
stations for electric vehicles in buildings (and parking spaces attached to buildings)), 7.5
(Installation, maintenance and repair of instruments and devices for measuring, regulation
and controlling energy performance of buildings), 7.6 (Installation, maintenance and repair
of renewable energy systems), and 7.7 (Acquisition and ownership of buildings) only
Climate Change Adaptation applies. Note that 7.4 is not reported for GCP as no CapEx
incurred in 2023 for this activity.
The assessments performed against these different DNSH criteria are discussed in turn below.
•
Climate Change Adaptation:
All economic activities in category 7 (construction and real
estate), require that a robust climate risk and vulnerability assessment is conducted
following the steps laid out in Appendix A of the Delegated Act.
3
Please refer to the section
on Climate Change Adaptation in this report for further information on this assessment
and the adoption of relevant adaptation solutions.
•
Protection of Water and Marine Resources:
Water appliances for bathrooms and
kitchens need to follow specifications on maximum water flow and flush volume outlined
in Appendix E of the EU Taxonomy Regulation. As GCP renovates only existing
residential
buildings, this DNSH does not apply.
•
Transition to a Circular Economy:
At least 70% by weight of non-hazardous construction
and demolition waste generated on the construction site are prepared for reuse,
recycling and other material recovery. GCP complies with national legislation on recycling
requirements, and so do its renovation projects in Germany. The German Circular Economy
Act Kreislaufwirtschaſtsgesetz (KrWG), which implements EU Directive 2008/98/EC on
waste, as well as its amending Directive 2018/851/EU10
4
, stipulates a recycling rate of
70% by weight for construction and demolition waste.
•
Pollution Prevention and Control
: In order to prevent pollution through toxic and
environmentally harming chemicals, non-financial undertakings are required to confirm that
a number of chemical substances mentioned in Appendix C of the EU Taxonomy Regulation
5
are not manufactured, placed on the market or being used in any economic activity. As this
DNSH criteria is relevant for three of our economic activities (7.1 (Construction of new
buildings), 7.2 (Renovation of existing buildings) and 7.3 (Installation, maintenance and
repair of energy efficient equipment)), the Company has created a questionnaire outlining
the specifications of Appendix C which has been sent to our largest contractors to confirm
non-usage of these chemicals in our building materials and at our construction sites. It has
been made clear in the European Commission’s FAQ document from December 2022 that
such proof must come from the supplier itself.
Minimum Social Safeguards
The EU Taxonomy states that activities may not qualify as environmentally sustainable
unless they comply with minimum social safeguards. This requires alignment with the
OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business
and Human Rights, as well as the fundamental conventions of the International Labor
Organization (ILO) and the International Bill of Human Rights.
GCP has several corporate policies in place that refer to these international standards and
frameworks to ensure alignment with these social minimum safeguards. These policies
include our Human Rights Policy, the Business Partner Code of Conduct and Employee
Code of Conduct, as well as the Anti-Corruption Policy. Further, the Company’s compliance
trainings for employees include topics of corruption and fair business.
To assess the alignment of this framework to the required minimum safeguards, in
particular on the topic of human rights, the Company has made reference to the report of
the Platform on Sustainable Finance of October 2022
6
, in which two criteria to determine
compliance with the safeguards were established. These are:
1) That the company has established adequate human rights due diligence (HRDD)
processes, as outlined in the UNGPs and OECD Guidelines for Multi-national Enterprises
(MNE).
2) That there are no indications that the Company does not adequately implement HRDD,
resulting in human rights abuses.
(3)
https://ec.europa.eu/sustainable-finance-taxonomy/assets/documents/CCM%20Appendix%20A.pdf
(4) https://www.bmuv.de/gesetz/kreislaufwirtschaftsgesetz
(5)
https://ec.europa.eu/sustainable-finance-taxonomy/assets/documents/CCM%20Appendix%20C.pdf
(6)
https://finance.ec.europa.eu/system/files/2022-10/221011-sustainable-finance-platform-finance-report-minimum-safeguards_en.pdf
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Demonstrating adequate HRDD for the purposes of the first criterion requires that the
following six key steps have been implemented:
GCP has addressed and implemented these six steps through embedding the topic of
Human Rights in its policies, including the Human Rights Policy, as well as Employee and
Business Partner Codes of Conduct and by conducting annual human rights online trainings
with its employees.
Taking into account adverse impacts on human rights in the Company’s materiality
assessments and risk management, which involves consideration of the risks associated
with our suppliers according to their economic sector and countries of operation.
GCP has
identified and addressed potential risks in the areas of construction and refurbishment/
maintenance of the business through a number of measures and processes. For instance,
based on their contract volume with GCP, their region of business operation and other
criteria, suppliers are categorized as low, medium or high-risk. Depending on their risk level,
an adequate due diligence process is conducted utilizing different sources of information.
Besides our desk-based due diligence checks, our construction and operation managers are
fulfilling their legal monitoring obligation during the execution of the project according to the
national law of the project location. Finally, through GCP’s whistle-blowing system that is
accessible to employees and externals, potential human rights violations may be reported.
Any reports are tracked and investigated by our Compliance Department. Following an
internal investigation procedure as documented in our Investigation Policy for handling
potential violations, employees or business partners receive a warning, are fined, or banned
from doing further business with the Company, should the claim be confirmed. GCP may
also decide to consult with authorities if necessary.
Please also see the section ‘Fair Business and Compliance’ and the subsection ‘Management
of Supplier Relationships’ in the Governance part of this report, which provide further
information on compliance with social minimum safeguards on corruption and fair business.
None of the negative indicators described by the Platform on Sustainable Finance report with
regard to human rights, corruption, fair business and taxation for the second criterion are
applicable to GCP. We therefore assess that this criterion is also met for GCP, and thus that the
required minimum safeguards are implemented as required by Article 18 of the EU Taxonomy.
Calculation of Key Performance Indicators
Based on the determination above of EU Taxonomy-eligible activities, GCP calculated the
proportions of eligible and non-eligible activities, and the proportion of these eligible
activities which is aligned, in accordance with the calculation methodologies defined in
the Commission Delegated Regulation 2021/2178 published on 6 July 2021 and updated by
Commission Delegated Regulation 2023/2486 of 27 June 2023.
In general, all three Key Performance Indicators (KPIs) are calculated in accordance with
IFRS in line with our consolidated annual report.
Double accounting is avoided by direct allocation of eligible and aligned KPIs to a specific
economic activity, as well as a clear separation in our accounting system of CapEx and
OpEx accounts. This division is further aggravated through separate bookkeeping systems
at GCP’s various business entities.
As mentioned earlier in this report, GCP reports KPIs only for Climate Change Mitigation
and not for Climate Change Adaptation. Therefore, no separation of KPIs reporting against
both environmental objectives was necessary.
The Turnover, OpEx and CapEx KPIs for aligned activities are determined according to the
following calculations:
Six-Steps of Human Rights Due Diligence
1.
Adopting and embedding a commitment to Human Rights Due Diligence into
policies and procedures
2.
Identification and assessment of adverse impacts, including through stake-
holder engagement
3.
Taking actions to cease, prevent, mitigate and remediate adverse impacts
4.
Tracking the implementation of these actions and its results
5.
Communicating publicly on the approach of HRDD and actions taken to avoid and
address adverse impacts
6.
Providing or cooperating in remediation, incl. establishing or participating in griev-
ance mechanisms where individuals and groups can raise concerns about adverse
impacts
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Turnover KPI
The definition of the Turnover KPI pursuant to the EU Taxonomy Regulation:
The only activity from which revenue is derived that is deemed to be EU Taxonomy-eligible
is Activity 7.7, Acquisition and Ownership of Buildings. GCP’s turnover consists to a great
degree of revenue generated from rental income and operating income. The Company also
derives a comparatively small amount of other income that is not related to eligible economic
activities, which is not counted to the numerator but is included in the denominator. Other
revenue includes mainly management fee, consulting fees as well as income from loans in
connection with real estate transactions.
GCP's denominator is taken from "revenue" of the Consolidated Statement of Profit or Loss.
Aligned turnover is calculated as the sum of turnover generated firstly, from GCP’s
properties that fall within the 15% top building stock in Germany based on the previously
described method and index and secondly, UK assets that have an EPC label A or higher.
OpEx KPI
The definition of the OpEx KPI pursuant to the EU Taxonomy Regulation:
As such the denominator of the OpEx KPI is defined differently and is comprised of specific
expenses summarised in “property operating expenses” disclosed in the Consolidated
Statement of Profit or Loss of this report. The OpEx denominator amount is therefore not
mentioned as such in the financial statement.
OpEx is considered as overall operating expenses that are linked to the Acquisition and
Ownership of Buildings, 7.7, and therefore to the overall maintenance and day to day servicing
of properties.
Hence, for the calculation of the aligned OpEx it is linked, to the extent possible, to the
properties that fall within the 15% top building stock in Germany or are labelled with an
EPC A or higher in the UK.
OpEx linked to research and development cannot be allocated to individual properties as
would be required for alignment.
Numerator
Share of turnover derived from products and services associated with EU
Taxonomy-aligned activities.
Denominator
Total net turnover, calculated in accordance with “IAS 1.82 a) Revenue”
and consistent with the accounting principles applied to the preparation
of the Company’s financial statement.
Please see the consolidated financial statements starting page 147 of
this report.
Numerator
Share of operating expenditure that is –
1. Related to assets or processes associated with EU Taxonomy-aligned
economic activities, including:
y
training and other human resources adaptation needs
y
direct non-capitalised costs that represent research and development
2. Part of the CapEx plan (expand / upgrade of activities)
3. Related to the purchase of output from EU Taxonomy-aligned economic
activities
4. Related to measures allowing activities to be carried out in a low-carbon
manner or with reduced greenhouse gas emissions and individual building
renovation measures
5. Part of OpEx for the adaptation of economic activities to climate change
Denominator
Total operating expenditure, as the sum of direct non-capitalised costs, including –
1. Research and development
2. Building renovation measures
3. Short-term lease
4. Maintenance and repair
5. Any other direct expenditures relating to the day-to-day servicing of assets of
property, plant and equipment by the undertaking or third party.
Please see the consolidated financial statements starting page 147 of this report.
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(1) https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf
CapEx KPI
The definition of the CapEx KPI pursuant to the EU Taxonomy Regulation:
The CapEx denominator is composed of net additions from Note 14 "Property, Equipment,
Intangible Assets and Goodwill", as well as capital expenditure on investment property and
acquisition of investment property, both from Note 15 "Investment Property".
The EU Taxonomy-aligned CapEx comprises costs incurred from economic activities 7.2; 7.3,
7.5 and 7.6. Where refurbishment, energy efficiency projects or renewable energy projects
last for several years, only those expenses that were capitalised in the relevant reporting
year are calculated as EU Taxonomy-eligible or aligned CapEx. There was no CapEx linked
to acquisitions under activity 7.7 in 2023.
The CapEx numerator did not include CapEx as part of a CapEx plan.
Presentation of the Performance Indicators Relating to EU Taxonomy-
Aligned and EU Taxonomy-Eligible Economic Activities
In line with the regulatory requirements for EU Taxonomy reporting in 2023, GCP is disclosing
the performance indicators in the table template provided by the European Commission.
Please see the KPI calculation tables for Turnover, OpEx and CapEx on the following pages.
Taxonomy-aligned, eligible and non-eligible percentages of GCP‘s KPIs
Numerator
Share of capital expenditure that is –
1. Related to assets or processes that are associated with EU Taxonomy-aligned
economic activities
2. Part of a CapEx plan (expand / upgrade of activities)
3. Related to the purchase of output from EU Taxonomy-aligned economic
activities
4. Related to measures allowing activities to be carried out in a low-carbon
manner or with reduced greenhouse gas emissions
5. Part of the CapEx for adaptation of economic activities to climate change
Denominator
Total capital expenditure, as the sum of –
1. Additions to tangible and intangible assets during the financial year considered
before depreciation, amortisation and any re-measurements, including –
y
IAS 16.73 e) i) and iii) Property, Plant and Equipment
y
IAS 38.118 e) i) Intangible Assets
y
IAS 40.76 a) and b) Investment Property (for the fair value model)
y
IAS 40.79 d) i) and ii) Investment Property (for the cost model)
y
IAS 41.50 b) and e) Agriculture
y
IFRS 16.53 h) Leases (Leases that do not lead to the recognition of a right-
of-use over the asset shall not be counted as CapEx)
2. Revaluations and impairments, additions resulting from business
combinations and excluding fair value change
Please see the consolidated financial statements starting page 147 of this report.
27.3%
100%
2.2%
3.9%
97.8%
30.2%
100%
Reviewed by auditor
Eligible
Aligned
Non-eligible
Turnover
OpEx
CapEx
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Financial year 2023
Year
Substantial contribution criteria
DNSH criteria (“Does Not Significantly Harm”)
Economic activities
Code
(s)
Absolute CapEx
Proportion of CapEx 2023
Climate Change Mitigation
Climate Change Adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Climate change migration
Climate change adaption
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Proportion of
Taxonomy-
aligned (A.1)
or eligible
(A.2) CapEx,
2022
Category
enabling
activity
Category
transitional
activity
EUR
'000
%
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Renovation of existing buildings
CCM 7.2
2,745
2.42%
Y
N
N/EL
N
N/EL
N/EL
N/EL
Y
Y
Y
Y
N/EL
Y
2.94%
T
Installation, maintenance and repair of energy efficiency
equipment
CCM 7.3
1,322
1.16%
Y
N
N/EL
N
N/EL
N/EL
N/EL
Y
N/EL
N/EL
Y
N/EL
Y
0.55%
E
Installation, maintenance and repair of instruments
and devices for measuring, regulation and controlling
energy performance of buildings
CCM 7.5
295
0.26%
Y
N
N/EL
N
N/EL
N/EL
N/EL
Y
N/EL
N/EL
N/EL
N/EL
Y
0.00%
E
Installation, maintenance and repair of renewable
energy technologies
CCM 7.6
25
0.02%
Y
N
N/EL
N
N/EL
N/EL
N/EL
Y
N/EL
N/EL
N/EL
N/EL
Y
0.00%
E
CapEx of environmentally sustainable activities
(Taxonomy-aligned) (A.1)
4,387
3.86%
3.86%
0.0%
0.0%
0.0%
0.0%
0.0%
3.49%
Of which enabling
1,642
1.45%
1.45%
0.0%
0.0%
0.0%
0.0%
0.0%
N/EL
Y
N/EL
N/EL
N/EL
N/EL
Y
0.55%
E
Of which transitional
2,745
2.42%
2.42%
N/EL
Y
Y
Y
Y
N/EL
Y
2.94%
T
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
Construction of new buildings
CCM 7.1
177
0.16%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.51%
Renovation of existing buildings
CCM 7.2
20
0.02%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.00%
Installation, maintenance and repair of energy
efficiency equipment
CCM 7.3
3,738
3.29%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.62%
Installation, maintenance and repair of
instruments and devices for measuring, regulation and
controlling energy performance of buildings
CCM 7.5
15
0.01%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.00%
Acquisition and ownership of buildings
CCM 7.7
102,790
90.48%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
94.31%
CapEx of Taxonomy- eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities) (A.2)
106,741
93.96%
93.96%
0.0%
0.0%
0.0%
0.0%
0.0%
95.44%
A.
CapEx of Taxonomy-eligible activities (A.1+A.2)
111,128
97.82%
97.82%
0.0%
0.0%
0.0%
0.0%
0.0%
98.93%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy- non-eligible activities
2,474
2.18%
Total (A + B)
113,602
100.0%
Proportion of
CapEx
from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023
Metrics: EU Taxonomy
2023 figures reviewed by auditor
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Proportion of
OpEx
from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023
Financial year 2023
Year
Substantial contribution criteria
DNSH criteria (“Does Not Significantly Harm”)
Economic activities
Code
(s)
Absolute OpEx
Proportion of OpEx 2023
Climate Change Mitigation
Climate Change Adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Climate change migration
Climate change adaption
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Proportion of
Taxonomy-
aligned (A.1)
or eligible
(A.2) CapEx,
2022
Category
enabling
activity
Category
transitional
activity
EUR
'000
%
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Acquisition and ownership of buildings
CCM 7.7
74,900
30.7%
Y
N
N/EL
N/EL
N/EL
N/EL
Y
Y
N/EL
N/EL
N/EL
N/EL
Y
26.8%
OpEx of environmentally sustainableactivities
(Taxonomy-aligned) (A.1)
74,900
30.7%
30.7%
0.0%
0.0%
0.0%
0.0%
0.0%
26.8%
Of which enabling
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
N
N
N
N
N
N
N
0.00%
E
Of which transitional
-
0.0%
0.0%
N
N
N
N
N
N
N
0.00%
T
A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
Acquisition and ownership
of buildings
CCM 7.7
169,406
69.3%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
73.2%
OpEx of Taxonomy- eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities (A.2)
169,406
69.3%
67.5%
0.0%
0.0%
0.0%
0.0%
0.0%
73.2%
A.
OpEx of Taxonomy-eligible activities (A.1+A.2)
244,306
100.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100.0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy- non-eligible activities
-
0.0%
Total
244,306
100.0%
2023 figures reviewed by auditor
GRAND CITY PROPERTIES S.A.
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Financial year 2023
Year
Substantial contribution criteria
DNSH criteria (“Does Not Significantly Harm”)
Economic activities
Code
(s)
Absolute turnover
Proportion of
turnover
Climate Change Mitigation
Climate Change Adaptation
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Climate change migration
Climate change adaption
Water and marine resources
Circular economy
Pollution
Biodiversity and ecosystems
Minimum safeguards
Proportion of
Taxonomy-
aligned (A.1) or
-eligible (A.2)
turnover, 2022
Category
enabling
activity
Category
transitional
activity
EUR
'000
%
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y; N; N/
EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Acquisition and ownership of buildings
CCM 7.7
165,960
27.3%
Y
N
N/EL
N/EL
N/EL
N/EL
Y
Y
N/EL
N/EL
N/EL
N/EL
Y
24.4%
Turnover of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
165,960
27.3%
27.3%
0.0%
0.0%
0.0%
0.0%
0.0%
24.4%
Of which enabling
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
N
N
N
N
N
N
N
0.00%
E
Of which transitional
-
0.0%
0.0%
N
N
N
N
N
N
N
0.00%
T
A.2.Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
EL; N/EL
Acquisition and ownership of buildings
CCM 7.7
441,782
72.7%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
72.20%
Turnover of Taxonomy-eligible but not environmentally
sustainable activities
(not Taxonomy-aligned activities (A.2)
441,782
72.7%
72.7%
0.0%
0.0%
0.0%
0.0%
0.0%
72.2%
A.
Turnover of Taxonomy-eligible activities (A.1+A.2)
607,741
100.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
96.6%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy- non-eligible activities
-
0.0%
TOTAL (A + B)
607,741
100%
Proportion of
turnover
from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023
2023 figures reviewed by auditor
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Cologne
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Our Workforce: Labour Standards and Employee Topics
Long-term Targets
•
Be among the top ten most attractive employers in the residential real estate sector by 2030
•
Maintain zero incidents of discrimination
•
Offer a minimum of 12hrs of training and development opportunities per FTE
2024 Goals
•
Continue to offer our volunteering
program organised as a company-wide Social Day for
employees
•
Implement a second round of our ‘Activate the Base’ program, encouraging employees
to implement their own sustainability projects while receiving guidance from an external
coach
•
Introduce and conduct 180-degree surveys to encourage self-development among
employees
•
Implement our newly developed staff career path to create more transparency on
development opportunities
It is fundamental for a responsible business that everyone should feel safe and protected, and
we take significant steps to ensure that our work environment has a positive impact on the
health and wellbeing of our people. Beyond this foundation, we seek to excel in factors such
as career development, education, work-life balance, wellbeing, and diversity and inclusion,
which are required to attract and retain today’s top talent. The interests, views and rights of
our own employees primarily relate to human rights and health and safety. Our approach to
the protection of our workforce is explained in the following section.
Our suite of social policies including our Employee Code of Conduct, Diversity Policy, Anti-
Discrimination Policy, Human Rights Policy, Anti-Corruption Policy and Whistleblowing
Policy –all allow us to manage impacts, risks and opportunities relating to our workforce.
These policies cover all of our own employees and were developed with the interests of
our employees in mind. Our social policies detail our commitments to the protection of
our employees’ human rights, health and safety, and protection against discrimination and
harassment. They also detail how our employees should keep us safe in relation to corruption
and bribery prevention. The centralisation of our HR Department ensures that processes
and policies are standardised across the Company, meaning that knowledge and talents are
effectively used across the board.
Following the request from our employees, in 2023, we developed employee career paths,
including specific KPIs, which intend to create a clear structure and more transparency
regarding career and development opportunities at GCP. These career paths are expected to
be communicated and applied from spring 2024. We also ensure all our employees are paid
adequate wages in line with applicable benchmarks.
Employee Satisfaction
We engage with our employees in a number of ways, primarily through our annual employee
engagement survey which allows us to obtain direct feedback from all employees. We
also conduct regular HR 'roundtables' during which our employees and managers have the
opportunity to ask questions and engage directly with our HR Department. Our Head of HR
is responsible for overseeing our annual employee satisfaction survey, as well as our HR
roundtables and we use the results of both to inform decisions or activities that will help
manage actual and potential impacts.
To ensure straightforward communication with staff across the Company and foster
employee engagement, we use a dedicated HR soſtware. Through the platform, employees
can manage personal data, holiday and home office requests, sick leave, and book training
and participation at other company events. We are continuing to roll out new features to
make the system more user-friendly. Our goal is for this soſtware to serve as a centralised
HR system across all our locations of operation, so that all our employees have easy and
consistent access to the information they need, and to make the employees and the HR
Department more agile.
In 2023, we conducted a survey with our employees, the results of which will guide our
strategy to improve workplace satisfaction. The results were a clear indication of the
SOCIAL INFORMATION
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engagement of our employees, with a 63% response rate across the Company. From this, we
have identified priority areas for improvement in our HR policies, and we formulated an action
plan for 2023 and 2024 to act on this feedback. This included further employee surveys to
provide more opportunities for feedback and communication, furthering information about
career progression, and increased communication about GCP’s overall strategy and vision,
and the promotion path opportunities which employees can pursue within our organisation.
In 2023, our engagement around employee development was recognised. GCP was chosen as
‘Most Wanted Start 2024’ by the German newspaper Die Zeit and Kununu, a leading platform
for employer reviews and feedback on corporate culture, compensation schemes, and overall
employee satisfaction. This accolade demonstrated GCP’s position as a leading apprenticeship
company in Germany and highlighted our commitment to employee development.
As part of our ongoing efforts to enhance workforce satisfaction and wellbeing, our
collaboration with a work-life platform in Germany continued throughout 2023. The platform
extends comprehensive support to our employees, which includes family-oriented services
like childcare for holidays, emergencies, daily needs, and elderly care. The platform further
enriches the employee experience by offering programs for expecting parents, promoting
a healthy work-life balance through virtual sports courses and mental health prevention
programs, and providing access to diverse consultations and talks on leading a healthy life,
diversity and inclusion, and addressing discrimination concerns. These offerings align with
our commitment to fostering a positive and supportive work culture.
Training and Development
We place great importance on delivering a broad learning and development program to our
staff to provide them with the skills required to prosper in today’s business environment
and further their careers. Our training is targeted to individual needs and delivered flexibly
to meet the needs of all our employees. We utilise our in-house expertise, as well as
external specialists, to deliver training ranging from construction and property management
to business skills and leadership training. Training is delivered in person, through online
webinars, or via our self-directed learning portal, the Contemporary Real Estate Academy
(CREA). This platform enables a unified presentation of our mandatory training content and
learning and development material, which is accessible to all staff across our business. In
2023, additional features were added that allow for better communication with employees
on training opportunities and advanced tracking of training data and the creation of reports
for content owners and admin users from our HR department.
We have also continued to implement performance reviews digitally through our HR
soſtware. Managers receive training on using the tool to provide performance feedback and
can then provide ratings and reviews digitally. In 2024, we plan to relaunch the performance
review tool across the GCP departments, with a new career development plan, aiming to
deliver 60% of performance reviews using this method. Streamlining this review process
will allow our employees to receive personal feedback more simply and regularly, helping
them to improve and progress towards their own goals.
In 2023, we also continued to expand our leadership training programme, delivering 875
hours of training for upcoming leaders within our organisation. In addition, we maintained
our mentoring scheme, enabling our employees to receive professional coaching support
from more senior team members. These programmes sought to boost individual employee
performance while securing our long-term viability. The leadership programme is designed to
equip the Company’s current and potential leaders with the fundamental critical thinking and
problem-solving skills essential for making sound decisions. It aims to improve communication
and team management skills, conflict resolution, as well as innovativeness and productivity.
Employees who participate in this programme are provided with the skills necessary to
effectively manage change, ensuring the Company remains resilient and adaptable.
As an international company representing more than 40 nationalities, headquartered in
Germany, we also support our employees with language classes in English and German. In
2023, we continued to pursue our intensive focus on language learning, partnering with a
well-known language school to offer advanced German courses for non-native speakers and
English for German speakers, with 1 547 hours of training provided. The language programme
is targeted at promoting effective communication and collaboration amongst employees and
other stakeholders. It enhances operational efficiency, tears down cultural barriers, reduces
misunderstandings, builds trust, and fosters a more inclusive workplace environment.
Occupational Health and Safety
We take our responsibility to provide a safe work environment seriously and ensure that
tasks do not pose undue health risks. Our Occupational Health and Safety Policy ensures
strict compliance with all workplace health and safety regulations at national and EU level.
We are jointly responsible for occupational health and safety through the avoidance of risks
to ourselves and our employees by identifying and reporting any unsafe working conditions,
violations of safety requirements, and accidents in the workplace. The implementation of
this policy is overseen by our dedicated internal Office Health and Safety Manager and by the
internal inspections of the occupational safety standards in our workplaces. We also undergo
ad hoc external audits by state officers, but none have taken place in 2023.
In order to manage material risks, impacts and opportunities to our workforce, we set targets to
help mitigate these risks and maximise opportunities. In 2023, we increased our internal budget
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for employee training, including for occupational health and safety, with some employees being
identified as knowledge owners who then delivered training sessions themselves. Furthermore,
we are in the process of expanding our mentoring and coaching program in collaboration with an
employee who from 2024 will be our full-time internal Business Coach aſter being trained in the
matter and having already started coaching during the last quarter of 2023.
To contribute further to the wellbeing of our employees, we offer a flexible package of
benefits and working provisions, such as hybrid working arrangements to support working
from home, and flexible working hours. We also support part-time working, granting greater
flexibility for our employees to balance their work around their lives and families. Such part-
time arrangements are specific to the employee’s needs.
The wider health and wellbeing benefits provided include eye examinations and health
checks carried by our Company physician, access to our Company gym for employees at our
Berlin headquarters with courses and personalised training, and mental health appointments
available for all GCP employees with our in-house consultant.
Furthermore, our collaboration with a work-life platform mentioned under Employee
Satisfaction also contributes to fostering a secure and supportive workplace environment.
Offerings underpinning our commitment to occupational health and safety include hundreds
of virtual sports and mental health prevention courses covering topics from mindfulness
to resilience, and numerous talks and consultation offers promoting a healthy lifestyle.
Additionally, the platform provides access to a 24/7 emergency hotline staffed by qualified
psychologists and coaches, ensuring prompt psychological support during critical situations.
Equal Treatment and Opportunities for All
We are committed to promoting equal treatment and opportunities for all within our
workforce. Our Anti-Discrimination Policy specifically addresses the following grounds
for discrimination: race or ethnic origin, gender, religion or ideology, disability, age,
sexual identity. Discrimination on the basis of any of these characteristics constitutes an
infringement of basic human rights and is explicitly prohibited by us. The Anti-discrimination
Policy explains our employees’ obligation and right to lodge a complaint should they believe
they have been subject to any kind of discrimination. These complaints are taken seriously
and are duly investigated. Further, our Diversity Policy details the diversity initiatives that we
implement, including the promotion of talent development, the recognition of life experience,
and the offering of cultural support.
In 2023 as a result of the 'Activate the Base' initiative, a Diversity Committee comprising
employee representatives from different organisational levels was established with the
aim of overseeing our commitments to diversity, inclusion and anti-discrimination. A
dedicated site is now available in our intranet containing up-to-date topics and information,
and comprehensive diversity training is now provided to all employees upon joining the
organisation. To strengthen our commitment, the position of 'Chief Diversity Officer' was
also established during 2023, and is currently held by the Head of HR.
The accessibility of our offices for employees with reduced mobility, and/or visual or auditive
impairments, as well as the general accessibility of our documents and websites, are areas
that will be examined in the future by the Diversity Committee, led by our Chief Diversity
Officer, as part of our commitment to fostering inclusivity within our organization.
Work-Related Rights
We respect and promote human rights throughout our organisation with the help of stringent
policies and procedures. Should we operate in areas at risk of human rights violations,
we have committed to undertake human rights due diligence and risk assessments. We
regard every person as unique, and recognise people's individual differences such as ethnic
origin, gender, religion or belief, experience, physical and mental abilities, age, and sexual
identity. In this way, we ensure our employees, tenants and business partners, including
our suppliers, respect the shared human rights of all people, in line with international
regulations such as the International Labour Organisation's Core Labour Standards, and
the UN Guiding Principles on Business and Human Rights. Our policies concerning our
employee’s work-related rights refer to forced or compulsory labour, and child labour.
However, they currently do not explicitly refer to trafficking in human beings given the
limited relevance of this in the regions in which we operate. We commit to duly consider
this aspect during our policy reviews.
Metrics: Our Workforce
As part of our commitment to improving employee satisfaction, maintaining high standards of
health and safety, and ensuring all employees receive equal treatment and opportunities, we
monitor and measure a series of metrics to help understand our progress in areas relating to
our workforce. Employee data disclosed below is representative of the figures at the end of
the reporting period and are reported in full-time equivalent.
We monitor our employee numbers by both geographical area and contract type as seen in
tables 5 and 6 below which allows us to monitor further information and understand trends
in employee-related data. These figures include employees who are subject to the material
impacts identified during our DMA.
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Employee head count by contract type
EPRA
Code
Units of
Measure
Metric
2023
2022
Number
Percentage
Number
Percentage
N/A
Total
numbers
and
percentages
Permanent emp-
loyees who identify
as female
329
54%
352
56%
Permanent
employees who
identify as male
277
46%
282
44%
Permanent emp-
loyees who identify
as 'other'
0
0%
N/A
N/A
Temporary
employees who
identify as female
99
42%
91
36%
Temporary
employees who
identify as male
138
58%
159
64%
Temporary
employees which
identify as 'other'
0
0%
N/A
N/A
Non-guaranteed
hours employees
who identify as
female
2
50%
N/A
N/A
Non-guaranteed
hours employees
who identify as
male
2
50%
N/A
N/A
Non-guaranteed
hours employees
who identify as
'other'
0
0%
N/A
N/A
Employee headcount by geographical area
EPRA
Code
Units of
Measure
Metric
2023
2022
Number
Percentage
Number
Percentage
N/A
Total
numbers
and
percentages
Total
843
100%
884
100%
Germany
769
91.2%
839
94.9%
United
Kingdom
58
6.9%
27
3.1%
Cyprus
13
1.5%
14
1.6%
Others
3
0.3%
4
0.4%
Employee breakdown by nationality
N/A
Percentages
Share in total
workforce
(as % of total
workforce)
Share in all
managerial
positions
(as % of total
managerial
workforce)
Share in total
workforce
(as % of total
workforce)
Share in all
managerial
positions
(as % of total
managerial
workforce)
Germany
72.0%
65.2%
73.6%
66.4%
Romania
7.2%
0.9%
10.1%
1.8%
United
Kingdom
5.9%
10.7%
1.7%
4.6%
Israel
2.5%
8.9%
1.3%
11.8%
Cyprus
1.5%
5.4%
1.0%
5.5%
Others
10.8%
8.9%
12.3%
9.9%
No. of nationalities
(incl. Germany)
#
48
47
TABLE 5
TABLE 6
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Training metrics are monitored as shown in table 8, including the percentage of our employees
who receive performance and career development reviews.
Due to our efforts to enhance and maintain employee satisfaction, we monitor turnover and
retention rates of our employees as well as track key hiring KPIs as reflected in table 7.
Training and Development
EPRA
Code
Units of
Measure
Metric
2023
2022
Emp-
Dev
% of total
workforce
% of total employees who received regu-
lar performance and career development
reviews during the reporting period
29.6%
26.5%
Emp-
Training
Average
number
of training
hours
All employees
14.2
11.6
Female
16.7
14.7
Male
11.8
8.7
Management
21.3
18.6
Female
26.5
25.8
Male
17.5
13.8
Non-management
17.2
14.0
Female
19.4
17.0
Male
14.8
10.8
Part-time employees
12.0
N/A
FTE employees
18.7
16.0
N/A
Average
amount (€)
Average investment in training per FTE
638.0
506.1
Percentage
(%)
Percentage of FTEs that participated in
leadership development programme
1.4%
N/A
Percentage of FTEs that participated in
language programme
16.8%
N/A
Hiring and Turnover
EPRA
Code
Units of
Measure
Metric
2023
2022
Number
Rate
Number
Rate
Emp-
Turn-
over
Total
number
and rate
of new
employee
hires
New employee hires
186
22.1%
222
25.0%
Female
86
46.2%
92
41.0%
Male
100
53.8%
130
59.0%
Age group <30
71
38.2%
89
40.1%
Age group
≥
30 - <50
88
47.3%
112
50.5%
Age group
≥
50
27
14.5%
21
9.5%
Open positions filled
by internal candidates
(internal hires)
58
23.8%
83
27.2%
Average
amount (€)
Average hiring cost/
FTE
600.8
N/A
675.3
N/A
Total
number
and rate of
employee
turnover
Employee turnover
208
19.8%
214
19.0%
Female
88
42.3%
96
45.0%
Male
120
57.7%
118
55.0%
Age group <30
54
26.0%
64
29.9%
Age group
≥
30 - <50
116
55.8%
112
52.2%
Age group
≥
50
38
18.3%
38
17.8%
Employee initiated
turnover
149
14.2%
144
13.0%
Female
63
42.3%
69
47.9%
Male
86
57.7%
75
52.1%
Age group <30
36
24.2%
42
29.2%
Age group
≥
30 - <50
91
61.1%
84
58.3%
Age group
≥
50
22
14.8%
18
12.5%
TABLE 7
TABLE 8
2023 figures reviewed by auditor
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Our commitment to the health, safety and well-being of our employees is measured using
health and safety metrics, shown in table 9.
We monitor and measure the diversity of our employees in table 10, where we collect data
regarding the representation of male/female/other employees, and employee with disabilities.
Diversity
EPRA
Code
Units of
Measure
Metric
2023
2022
Diversity-
Emp
% of total
employees
who
identify
Female
51%
50%
Male
49%
50%
Other
0%
0%
% of
employees
who
identify
Female (Board of Directors)
33%
33%
Male (Board of Directors)
67%
67%
Female (top management)
30%
18%
Male (top management)
70%
82%
Female (senior management)
37%
33%
Male (senior management)
63%
67%
Female (junior management)
47%
46%
Male (junior management)
53%
54%
N/A
Female (all management)
43%
40%
Male (all management)
57%
60%
Female (revenue generating
management functions)
43%
35%
Male (revenue generating
management functions)
57%
65%
Female (STEM-related positions)
16%
14%
Male (STEM-related positions)
84%
86%
Number
Employees with disabilities
17
15
Employee Health and Safety
EPRA
Code
Units of Measure
Metric
2023
2022
H&S-
Emp
Number of injuries/accidents
per total time worked
Injury / accident rate
7
0.000006
0.000005
8
Number of injuries per mil-
lion hours worked
Lost-Time Injury
Frequency Rate (LTIFR)
5.6
4.8
Number of days lost per
total time worked
Lost day rate
0.0004
0.0004
Number of days lost per
total days scheduled to be
worked by employees
Absentee rate
8.8
9.3
Number of fatalities
Work-related fatalities
0
0
N/A
Number of injuries/accidents
Recordable work-
related injuries/
accidents for own
workforce
8
7
7.
Accidents and injuries are tracked internally as the same metric, therefore accident rate is considered as the same metric as injury rate.
8.
2022 figure for Injury Rate has been restated due to an error in last year’s reporting, where an internal metric using number of Full-Time Employees (FTEs) as the denominator was reported. In 2023, we updated the methodology as prescribed by the EPRA sBPR guidelines, which uses total
number of working hours as the denominator.
TABLE 9
TABLE 10
2023 figures reviewed by auditor
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Table 11 shows the gender pay gap within our employees. This indicator measures the
disparity in earnings between women and men, calculated as the average gross hourly
earnings of female employees divided in the average gross hourly earnings of male
employees. We closely monitor and report this difference based on various levels of
aggregation in an effort to increase transparency and conform to widely accepted standards.
The data is split based on employee remuneration (salary and bonus) and basic salary in
relation to employee level.
The unadjusted gender pay gap for all employees was 0.82:1, aligning with the German
national average published by the Federal Bureau of Statistics
9
. We aim to outperform this
national average by actively engaging in efforts to reduce the gap, ultimately targeting full
pay equality.
The Work-Related Rights section of this report describes our approach to our employees’
human rights. Part of this approach entails the monitoring of issues and incidents relating to
these rights, as shown in table 12.
Gender Pay Gap
EPRA
Code
Units of Measure
Metric
2023
2022
Diversity-
Pay
Executive
Ratio of remuneration
(salary and bonus) of women to men
0.61
0.52
Management
0.86
0.90
10
Non-management
0.90
0.92
All employees
0.82
0.83
Executive
Ratio of salary of women to men
0.58
0.57
Management
0.87
0.89
Non-management
0.90
0.91
All employees
0.83
0.83
N/A
Total
compensation
ratio
Ratio of the highest paid individual to
the median annual total compensation
for all employees (excluding the
highest paid individual)
18.19
N/A
Issues and Incidents
EPRA
Code
Units of Measure
Metric
2023
2022
N/A
Total number
Incidents of discrimination
(including harassment)
0
11
0
Complaints filed through channels
for people in own workforce to raise
concerns
0
12
N/A
Complaints filed to National Contact
Points for OECD Multinational
Enterprises
0
N/A
Severe human rights issues and inci-
dents connected to own workforce
0
0
Severe human rights issues and
incidents connected to own
workforce that are cases of non-
respect of UN Guiding Principles and
OECD Guidelines for Multinational
Enterprises
0
0
Amount (€)
Material fines, penalties, and
compensation for damages as result
of violations regarding social and
human rights factors
0
0
Material fines, penalties, and
compensation for severe human rights
issues and incidents connected to own
workforce
0
0
9.
As to latest published data, for 2022:
https://www.destatis.de/EN/Themes/Labour/Labour-Market/Quality-Employment/Dimension1/1_5_GenderPayGap.html
10.
The Management remuneration ratio for 2022 has been restated, as the ratio disclosed in 2022 was calculated based on employees in Germany only. The updated figure reflects all locations.
11.
Only those discrimination cases that resulted in sanctions or actions towards the accused person are reported.
12.
Only if a complaint led to a confirmed compliance case, it is reported here.
TABLE 11
TABLE 12
2023 figures reviewed by auditor
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Workers in the Value Chain
Long-term Targets
•
Maintain zero human rights violations in the supply chain
•
Maintain our high standard of business partner scrutiny
2024 Goals
•
Continue the distribution of our new Business Partner Questionnaire relating to our
Business Partner Code of Conduct
•
Ensure the voluntary alignment of our Company policies to the new Supply Chain Act in
Germany (LkSG) and initiate possible changes accordingly
While the topic of workers in the value chain was not identified as material during our DMA,
GCP believes that respect for human rights is a non-negotiable foundation for any business.
As such, GCP’s commitment to maintaining stringent standards of ethical behaviour extends
throughout our value chain as well as to our own operations, and we operate in accordance
with the UN Guiding Principles on Business and Human Rights. We do this through the
expectations and requirements outlined in our Business Partners Code of Conduct which
includes expectations and requirements around human rights protection. This document
contains matters such as respecting and recognizing employees’ rights pertaining to freedom
of association and the exercise of collective bargaining, providing fair remuneration, refraining
from child, forced and compulsory labor, respecting minimum age requirements and providing
a workplace free of harassment and discrimination of any kind. We identified the need to
engage with the workers in our value chain and will do so by using the Business Partner
Questionnaire developed in 2023 which assesses compliance with our Code of Conduct.
The principal interests, views and rights of our value chain workers relate to human rights
protection and fair labour standards. We believe respect for, and protection of human rights
is a non-negotiable for any business, so our commitment to maintaining effective, diligent
standards of ethical behaviour extend from not only our own operations, but across our
value chain. We have ensured the interests, views and rights of our value chain workers are
taken into account in our updated Business Partner Code of Conduct which reduces risk to
ourselves as well as our value chain workers. Furthermore, our Human Rights Policy sets out
our commitments to act in accordance with internationally recognised standards of human
rights and includes our expectations of our suppliers to ensure our value chain workers are
protected to the same standards we hold ourselves. Any and all reported violations of human
rights are reported directly to our CEO and a member of the Board of Directors. These are
also recorded by our Compliance department. We are committed to reporting human rights
violations and include this risk within our risk management process.
In our regions of operation, human rights are protected by the strict legal framework of the
European Union and the United Kingdom, meaning that concrete human rights violations are
not a substantial risk. This means that the most material business impact of this topic is as a
compliance issue, so our comprehensive controls on human rights throughout our value chain
are managed through our compliance framework.
Since our business model includes the refurbishment of properties, much of our supply chain
consists of building work carried out by construction companies and their subcontractors.
Since these sub-contractors do not operate under our direct oversight, this introduces a risk
area for human rights violations, for which specific controls are in place. Prior to contracting
our business partners, we conduct checks regarding their reputation, ability to provide the
proposed work and their compliance with the respective local laws. The signing of GCP’s Code
of Conduct for Business Partners is a binding requirement for our business partners with
an annual contractual volume above €5 thousand, with the exception of large corporations
which have their own code of conduct – provided it is in line with our standards – and with
the exception of organisations that operate in heavily-regulated sectors. To ensure that our
requirements are both practical and thorough, we worked closely with leading experts to
develop a robust system for reporting and monitoring, which can also be integrated into their
operations smoothly. The code requires a commitment to the core principles of the agreement
of the governing body of the ILO, the Ten Principles of the UN Global Compact, and the OECD
Guidelines for Multi-national Enterprises on Responsible Business Conduct.
Each construction undertaking is managed by a dedicated GCP project manager, who
engages directly with the onsite contractors and sub-contractors. These project managers
evaluate compliance with the Code of Conduct during their site visits, such as inspections
and acceptance of partial deliveries. We also conduct spot checks of business partners’
compliance through our operational departments. This supplements our standard systems
for auditing the activities of our business partners to control for the different risk potential.
Our property management business also outsources facilities management services. These
companies are required to have their own human rights guidelines in place and are also
subject to the Code of Conduct for Business Partners. Our facilities managers are required
to complete questionnaires regarding their compliance practices, in which they must confirm
that they have conducted their own human rights checks on any sub-contractors and that
they comply with all relevant human rights laws.
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Consumers and End-Users
Long-term Targets
•
Create a high standard of living at our properties through safe, attractive buildings, active
community building and engaged customer service
•
Retain residents by actively fostering tenant loyalty by creating supportive, affordable
communities where people enjoy living and staying
•
Continually enhance tenant satisfaction levels regarding all assessment areas, remaining
above internal minimum targets
2024 Goals
•
Maintain a high level of tenant satisfaction
•
Expansion of service possibilities through the GCP app and our CRM system
•
Continue to further develop the digital solutions and focus on wider offers for self-service
in the GCP tenant app, such as presentation of monthly operational cost calculations and
documents, tenant account statements and other digital tenant notices
•
Renewal of our TÜV certification for Quality Management (ISO 9001:2015) and Service
Quality
•
Continuous development of our quality control processes
Tenant Satisfaction
Our business has been built on the premise of exceptional customer service, driven by our
desire to contribute directly to improving our tenants’ quality of life. We aim to build long-term
tenant relationships by striving for high standards in our properties and their surroundings and
customising our management approach to cater for each tenant’s needs. When considering our
consumers and end-users, we include all tenants who can be materially impacted by our activities.
Long-term tenant relationships are the cornerstone of our business model. In order to deliver
long-term cash flows that are central to our business model, it is crucial that we build positive,
long-term tenant relationships. This drives our objectives for this area: to continually increase
the satisfaction of our tenants with their experience of our properties; and to offer industry-
leading, tenant-oriented customer service.
The GCP Tenant Satisfaction Policy sets out our management approach to this key topic
for each stage of the tenant lifecycle, including pre-contract. The policy outlines how we
monitor satisfaction in order to understand performance, address any issues and ensure the
continuous improvement of our approach.
Our regional directors and property managers work together to enhance the quality
and value of our properties. Through regular site visits, our property managers address
necessary maintenance work, plan technical improvements and ensure that refurbishment
and management activities are aligned to tenants’ needs. Our property managers also take
care of our tenants directly- tenants can reach out to them through our Service Centre, which
will forward tenants’ requests and queries to the relevant property managers.
GCP primarily meets customer service requests in two different ways. Firstly, through the
GCP Service Centre, our customer care agents individualise solutions for each tenant and
provide support in several different languages. Tenants are ensured prompt responses to
queries and can expect to hear back within a maximum timeframe of 24 hours. Furthermore,
urgent requests are addressed in under an hour. As a result of this quick and personalised
customer support system, the Service Centre has been validated independently and well
rated. Focus Money, for example, rated the GCP Service Centre’s customer service as “very
good” in 2023.
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
engagement. Through the GCP App, prospective and existing tenants can access a wide range
of digital services. These include tools for apartment searching and service and maintenance
requests, a loyalty program, access to data on their energy consumption digitally instead of
by post, and engagement activities such as an online advent calendar. The App allows tenants
to view the status of and receive updates on their requests, thus increasing the transparency
of the process. These efforts have been well received by tenants, as evidenced by increased
digital interactions. Compared to 2022, in 2023 there has been a 9% rise in tenants reaching
out through the GCP App, a 7% increase via chat and a 20% increase via email.
High-Quality Tenant Service
Effective communication is central to the service we provide to current and prospective
tenants, who rely on the information and assistance they receive from GCP as their building
operator. In addition to the support provided by our property managers, the GCP Service
Centre offers tenants support for day-to-day concerns including requests for information and
property viewing bookings for prospective tenants. The Service Centre is available 24/7 for
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emergency support, and from 7am – 7pm on working days, in a variety of languages. For
emergency cases occurring outside office hours, the Service Centre engages directly with the
corresponding service providers to address the case immediately and avoid possible delays
related to the working hours of property managers.
Our GCP Service Centre targets minimum wait times, aiming to respond to 95% of calls within
20 seconds. It was recertified by TÜV Nord in March 2023 for Proven Service Quality, and for
Quality Management (DIN EN ISO 9001:2015). These continued certifications demonstrate
the rigorous management of the Service Centre in terms of stakeholder engagement, risk
management and continual improvement.
In 2023, the Service Centre introduced a voice bot aimed at managing peak call times and reducing
waiting periods. Currently, the callers, tenants and prospective tenants can choose this option
through a personalised message. In 2024, our goal is to further enhance automation by integrating
this process directly into our CRM, streamlining and optimising the handling of enquiries.
Following a resolved request/enquiry through the Service Centre, a survey is issued to
the relevant tenant. This survey addresses GCP’s performance in terms of friendliness,
reachability, quality of work conducted and time to resolve. In 2023, GCP was rated 4.75 (out
of 5) for accessibility, 4.83 (out of 5) for the service of the staff, and 4.5 or above in all other
aspects. Our target is to continue to improve our score across all areas aiming to maintain a
minimum score of 4.5 in all aspects, and to answer 95% of calls within 20 seconds.
We also seek to improve our tenants’ experience of our properties through the GCP App
and GCP loyalty programme. We continue to offer our tenants exclusive benefits through
the GCP loyalty programme, which issues shopping discounts for new tenants and loyalty
points for existing tenants who can exchange them for vouchers or settle them against rent
payments. For example, tenants can benefit from special offers with partners like Vodafone,
O2 and MediaMarkt. In keeping with our commitments to reduce our environmental impact
and to encourage sustainable lifestyle choices, we have initiated a scheme by which tenants
can receive points on their loyalty account for switching to a renewable electricity provider.
Tenant Health and Safety
Guaranteeing high standards of health and safety within our buildings is a fundamental
obligation to our tenants, and a prerequisite to ensuring their satisfaction with our service.
Through the dedication of our property management teams, we work continually to instil
a positive health and safety culture across our operations. Our ultimate goal is to protect
tenants and third parties from health and safety risks, and to deliver a living environment
which is healthy, safe and motivating, with which our tenants are satisfied. When
considering our consumers and end-users, we include all tenants who can be materially
impacted by our activities.
To guide the implementation of our sustainability strategy, guarantee the highest health
and safety standards and track our progress, we have set a long-term goal to create a high
standard of living at our properties through safe, attractive buildings, active community
building and engaging customer service.
Health and safety are central to our asset management approach at every stage of a property’s
lifecycle. At acquisition, we conduct a comprehensive due diligence risk assessment which
enables us to identify risks and implement preventative maintenance solutions. We assess
the building’s structural characteristics and establish which refurbishment activities should
be targeted, looking for opportunities to improve the quality and accessibility of the property.
Various measures are then implemented to support tenants’ wellbeing, easier movement
around the building, and additional communal space and services.
During the operational phase, we pursue our aim to continually enhance the quality of our
residential units and their surroundings. Through regular checks and maintenance work
conducted by our property teams, we seek to identify and mitigate potential health and
safety risks before they materialise. Safety is a priority throughout these assessments,
especially fire safety, and we commission expert advice from external fire safety specialists
where necessary. If deficits are identified, these are documented and reported to the
Construction Department who are then responsible for seeing that the required work is
carried out. The proper implementation of these corrections is confirmed by appropriate
follow-up processes, through cooperation between the Construction Department and the
Property Managers.
Our Tenant Health and Safety Policy sets out clear time frames for such defects to be
remedied, and property managers’ bonuses are performance-based and depend on the
efficiency in the delivery of these improvements.
All our properties are subject to continuous safety assessments as part of our operational
monitoring activities. The quarterly site inspections performed according to our internal
protocol are conducted in accordance with national and federal legislation. These comprise
scheduled inspections, covering aspects such as water quality (e.g., legionella), elevator
safety and fire protection systems, as well as inspections of physical and organisational
aspects and fire protection audits. The combination of these regular site visits also helps to
prepare budget decisions for each property.
Besides the Tenant Health and Safety Policy, our Human Rights Policy also details our
commitment to protecting the human rights of our tenants. Although this policy is currently
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confidential, it has been written in accordance with the UN Guiding Principles on Business and
Human Rights and in particular respects the privacy of our tenants through data protection
measures. Any and all reported violations of human rights are recorded by our Compliance
Department and reported directly to our CEO and a member of the board of Directors. We
are committed to reporting human rights violations and include this risk within our risk
management process.
Metrics: Consumers and End-Users
Our diligent approach to maintaining the highest standard of tenant health and safety is
described above, and the metrics we use to monitor the success of our approach are shown
in table 13.
Asset Health and Safety
EPRA Code
Units of Measure
Metric
2023
2022
H&S-Asset
Percentage of assets for which
health and safety impacts are
assessed or reviewed for com-
pliance/improvement
Percentage of assets
92%
100%
H&S-Comp
Number of incidents of
non-compliance with reg-
ulations and/or voluntary
standards
Number of incidents
1
0
Tenant engagement: GCP cinema summer.
TABLE 13
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Affected Communities and Neighbourhood Development
Investors in the built environment are expected to think beyond their commercial interest,
to create long-term socio-economic benefit in the communities they operate in. By building
productive relationships with the local community, we can contribute to the development
of prosperous neighbourhoods, which in turn will benefit our properties and their tenants.
The principal interests, views and rights of our local communities relate to affordability,
engagement and human rights. We actively engage with the wider communities surrounding
and within our properties to promote neighbourliness and connection. Our approach to
meeting the needs of our communities is underpinned by our Community Involvement and
Development Policy.
Long-Term Targets
•
Invest up to €500 thousand p.a. in community building activities until 2030 via the Grand
City Properties Foundation
•
Build supportive and affordable communities where people want to live and stay
•
Target investments toward the creation of high-quality shared spaces for tenants and
support local community-building organisations
2024 Goals
•
Achieve a level of community investment through the GCP Foundation of at least €200
thousand p.a.
•
Continue supporting employee volunteering through ‘Social Days’, including our annual
blood drive day at the Berlin office
•
Host events with social responsibility themes in cooperation with external partners
While affected communities was not identified as a material topic in our DMA, we are aware
of the important role we play in our local communities and take this responsibility very
seriously. Our approach is underpinned by our Community Involvement and Development
Policy which sets out our commitment to make a positive impact in the local communities
where we operate and improve the wellbeing of our tenants and local stakeholders.
In addition to outlining reporting, responsibility, and planning requirements for active
community relationship management, the policy highlights the importance of key activities
for addressing local communities’ needs including the GCP Foundation, and open and
meaningful engagement and consultation with external stakeholders. We take a proactive
approach to social engagement to help build vibrant and friendly communities in and around
our residential assets. There are three main elements to this approach: supporting local
organisations through charitable projects, providing community events in the shared spaces
in and around our assets, and encouraging our employees to get involved in community
development through paid volunteering days. Thus, active community contributions are one
of our key priorities moving into 2024.
We are also proud of our work to make our properties as affordable as possible to the
communities in which they are situated. This includes taking a considered approach to
modernisation rent increases and being responsive to hardship applications where such
increases are implemented.
Neighbourhood Development and Community Engagement
Overseen by our central team, our local property managers run community events in and
around our assets to bring neighbours together, which also enables us to develop relationships
with our tenants. Activities this year have included:
•
Neighbourhood gardening: Kick-off of two urban gardening projects in a high-rise quartier
in Cologne and a property in Braunschweig
•
GCP Easter Week: Digital Easter week campaign with daily interactive activities (1,972
participants)
•
GCP Cinema Summer: Live open-air cinema at 8 locations, plus additional 700 cinema
boxes for a home movie night (2,052 participants)
•
GCP Halloween World: Digital Halloween craſt activity with daily interactive tasks on the
GCP website and GCP App (1,321 participants)
•
GCP Advent Calendar: Interactive calendar from Dec. 1st to 24th with games, quizzes and
surprises (16,583 participants).
Some of these events have been a tradition for many years and always include a call for
participation through multiple channels to foster engagement. The high participation numbers
and the high tenant satisfaction rate on the initiatives of 97% reflect the great reception from
the tenants, and we are proud to continue building up our efforts for community engagement
in 2024.
We also seek to engage with local governments and officials to coordinate our activities
with the needs of our local communities. This can range from government entities to
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tenants’ associations and religious or cultural organisations. In an important example of this
cooperation, GCP apartments across Germany have been rented to local municipalities to
provide accommodation for refugees from Ukraine since the outbreak of the war. Some of
these refugees were able to move out and rent their own apartments aſter some months,
some within the GCP portfolio, while others remain in the original accommodation provided
with ongoing support from the government or from non-profit organisations.
In order to create supportive communities where people enjoy living and staying, we aim
to cultivate a sense of neighbourliness and connection. We offer a range of community
facilities including playgrounds, fitness trails, BBQ areas, tenant libraries, and events based
on seasonal occasions. Alongside the assistance provided by our property managers and
Service Centre, tenants can rely on the support of a Collector and a Social Tenants Manager
who assist in matters such as communication with local authorities or the implementation
of community projects and provides general advice to tenants. In areas where there is no
dedicated Community Relations Officer, property managers serve as a point of contact,
actively engaging with tenants.
Charitable Contributions
Our support for charitable projects is delivered through the Grand City Properties Foundation.
The Foundation is run by a Committee of GCP managers and overseen by an independent
Board of Trustees, and all employees are encouraged to propose projects for consideration.
Typical projects involve investments in infrastructure, such as library rooms, playgrounds and
sports pitches, and the funding of initiatives such as educational support programs, sports
clubs, poverty relief, and social network groups.
In 2023, the Foundation donated €127 thousand to
to charitable causes. For instance, it
supported a women's advice centre in the city of Kiel offering counselling options for women
in vulnerable situations such as in cases of domestic violence or for migrant women. Our
donation funded an artistic redesign of the passageway leading to the counselling centre
with the aim of creating a space that feels safe and friendly for the women visiting the centre,
but that also enhances the neighbourhood aesthetics and helps break spatial barriers. The
foundation also supported lebensnah e.V., an association providing support for people with
disabilities, in developing a new individualised German sign language course and an urban
gardening project by the Caritas Association of Cologne.
We continued in 2023 to provide in-kind support for social and charitable purposes. GCP
currently lets 13 units at reduced rent, equivalent to a donation of €51,8 thousand in unexploited
rental income. One example of this is our cooperation with local non-profits providing childcare
and educational assistance in our properties. We offer rent-free access to housing units or
commercial space, as well as furniture, equipment and living funds to cover operational costs.
We also help the occupants of these spaces to acquire furniture, equipment and funds.
GCP views local sports teams as integral to community development, therefore we sponsor
several local sports clubs such as the football teams FC Azadi-Bochum, VfB Frohnhausen
Essen, ASC Dortmund and the volleyball team TV Hörde Dortmund, to name a few.
Social Day
In 2023, we continued to deliver our Social Days to our employees. We delivered three in
total which involve volunteering for an organisation during a paid working day. These were a
combination of self-organised, and organised through Lebenshilfe e.V., which sees itself as a
self-help and support association for people with intellectual disabilities and their families,
helping people with disabilities to participate in society on an equal footing.
We hope to continue these successful Social Days into 2024 and aim to expand this
engagement opportunity to employees in other regions. In addition to our Social Day, our
annual employee blood drive day took place in October 2023 in Berlin.
Sponsoring of FC Azadi-Bochum
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Affordable Housing
Our tenants represent a wide range of social, economic and cultural backgrounds. To provide
properties which serve these communities, we are committed to providing affordable
housing, so to monitor our performance in this regard, a “rental cost portion” metric has been
developed modelled on Eurostat’s housing cost overburden rate.
This metric compares GCP’s
median rent for residential units against the net minimum wage, reflecting salary aſter taxes
and social security contributions, which we believe is a conservative benchmark focusing on
those most sensitive to rent affordability.
The housing cost portion based on the median warm rent of GCP’s residential properties
in Germany in 2023 was 39% of this benchmark, up from 38% in 2022. The warm rent
incorporates various costs of living including energy costs, and housing services, which
GCP has no control over. The rental cost portion based on median cold rent in 2023 for
our German residential properties, excluding these factors, remained at 24% of the net
minimum wage salary in 2023. These figures show that increased housing costs in 2023
were driven by utility and service cost inflation rather than increasing rental costs, along
with observations that wage growth lagged in the current inflationary environment.
Germany has already acted to increase the minimum wage as of January 1st, 2024, along
with another increase set for 2025, which should improve housing affordability if the trend
of a decreasing rate of inflation continues. These results are a testament to the Company's
commitment to ensuring that our high-quality residential properties are priced affordably
for all our tenants.
Modernisation Rent Increases
GCP launched its modernisation program for its residential properties in 2021 and is carrying
a relatively small program, targeted to where GCP can make a significant impact. As part of
our commitment to providing affordable housing, GCP works to ensure that modernisation
cost allocation to tenants is done in a way that keeps housing affordable. To determine these
cost allocations, the Rent Control and Increase Department analyses the current market
situation and relevant regulations on cost allocations, to decide whether to enact rental
increase waivers on the modernisation costs. The average modernisation cost allocation for
German residential properties in 2023 was €0.53/sqm, which is 16% lower than the legally
possible cost allocation set out in German law.
In cases of significant rent increases, tenants can object to the cost allocation in what is
known as a financial hardship case. These can be resolved through a complete or partial
waiver of the entitled rent increase for a given number of years. In 2023, however, zero
hardship cases were received out of the 1,349 units modernised. We believe this low
number of hardship case applications reflects GCP’s targeted approach to conducting
modernisation projects, and the careful consideration the Company puts into rent increases
which in many cases is partially waived based on the Company’s understanding of the
local market situation. Recognising the importance of not placing pressure on our tenants
in cases of financial hardship, we ensure that any and all changes are discussed with our
tenants beforehand. This transparent and open approach allows security and trusted
relationships with our tenants.
Metrics: Affected Communities
Our dedication to maintaining strong community connections and developing longstanding
relationships is demonstrated by our Community Involvement and Development Policy, which
guides our efforts towards tenant engagement. As mentioned above, GCP organises a range of
community events such as seasonal tenant festivals and campaigns throughout the year, on site
and/or digitally. By organizing various tenant events also digitally, GCP tenants at all locations
have the opportunity to participate. This is enhanced by complementary tenant benefits, such
as an additional incentive for the GCP loyalty programme or embedding the digital campaigns
in the GCP app. These initiatives impact the wider community and are considered stakeholder
engagement programmes.
For 2024, we strive to set up an effective tracking system that allows us to better measure the
reach of the initiatives in terms of actual impact generated in the communities - such as actual
participation rates and satisfaction levels with the various programmes.
Community Engagement
EPRA Code
Units of Measure
Metric
2023
2022
Comty-Eng
% of assets under operational
control that have implemented
local community engagement,
impact assessments,
and/or development programmes
Percentage
of assets
75%
N/A
TABLE 14
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Corporate Governance
GCP places a strong emphasis on corporate governance, executed responsibly by the Board
of Directors and the management teams. GCP is proud of the high confidence of its investors,
which is reflected in the impressive placement of funds by major global investment banks.
Among our shareholders and bondholders are large international leading institutional
investors and major global investment and sovereign funds.
GCP is not subject to any compulsory corporate governance code of conduct or
respective statutory legal provisions. In particular, GCP is not required to adhere to
the ‘Ten Principles of Corporate Governance’ of the Luxembourg Stock Exchange or to
the German Corporate Governance Code, which are only applicable to listed companies
incorporated in Germany, apart for recommendations C.10 (with sole reference to its
applicability to the Chair of the Audit Committee), D.8 and D.9 of the German Corporate
Governance Code (Deutscher Corporate Governance Kodex). GCP has therefore issued
a declaration that it does not deviate from the aforementioned recommendations of the
German Corporate Governance Code. In general, GCP already complies with most of the
principles and continues to take steps to implement ESG best practices throughout its
business. The Company’s efforts support the United Nations Sustainable Development
Goals (UN SDGs), particularly those relating to Peace, Justice and Strong Institutions
(#16) and Partnerships for the Goals (#17).
Board of Directors
The Board of Directors makes decisions solely in the Company’s best interest, independently
of any conflict of interest. The Company is administered by a Board of Directors vested with
the broadest powers to perform and manage in the Company’s interests. All powers not
expressly reserved by the Luxembourg Companies Act or by the articles of association
to the general meeting of the shareholders fall within the competence of the Board of
Directors. On a regular basis, the Board of Directors evaluates the effective fulfilment of
their remit and compliance with corporate governance procedures implemented by the
Company. This evaluation is also performed by the Audit and Risk Committees.
The Board of Directors chooses amongst the directors a chairperson who shall have a
casting vote. The renewal of the mandate of Mr. Christian Windfuhr as executive director
has been approved at the Annual General Meeting (AGM) in 2023 until the AGM in 2025.
The renewal of the mandate of Ms. Simone Runge-Brandner as independent director has
been approved at the AGM in 2023 until the AGM in 2024. The mandate of Mr. Daniel
Malkin as independent director was not up for renewal and therefore ended at the AGM
in 2023. Mr. Markus Leininger has been appointed and confirmed as independent director
at the AGM in 2023 until the AGM in 2025. The Board of Directors is supported by five
committees of the Board, consisting principally of independent directors, these being
the ESG, Audit, Risk, Remuneration and Nomination Committees. Additional support is
provided by the Advisory Board.
Annual General Meeting
The next Annual General Meeting (AGM) of the shareholders of Grand City Properties S.A. for
2024 is intended to take place on June 26th, 2024, in Luxembourg.
Members of the Board of Directors
Name
Position
Mr. Christian Windfuhr
Director, Chairperson
Ms. Simone Runge-Brandner
Independent Director
Mr. Daniel Malkin
Independent Director (until the AGM 2023)
Mr. Markus Leininger
Independent Director (appointed at the AGM 2023)
GOVERNANCE INFORMATION
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In 2023 the Board of Directors conducted 24 meetings. The below table shows the
attendance of the Board members, as well as the attendance average:
The composition of our highest governance body is summarised in table 15.
CEO
The Board of Directors resolved to delegate the daily management of the Company to Mr.
Rafael Zamir, as Daily Manager (administrateur-delegue) 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-delegue) 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 assistance
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.
Audit Committee
The Board of Directors has 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 of at least two members who shall be independent
non-executive directors. The responsibilities of the Audit Committee relate to the integrity of
the 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, including reviewing accounting policies and updating them regularly.
The Audit Committee recommends to the Board of Directors the appointment and replacement
of the approved independent auditor and provides guidance to the Board of Directors on the
auditing of the annual financial statements 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.
Director
Meetings attended
Percentage attended
Christian Windfuhr
24(/24)
100%
Simone Runge-Brandner
21(/24)
88%
Markus Leininger (elected June 28
th
, 2023)
(5)
11(/12)
92%
Daniel Malkin (ending June 28
th
, 2023)
(5)
12(/12)
100%
Board Average
23/24
95%
(5)
Since Mr. Markus Leininger was elected in June 2023, his attendance is assessed solely based on the meetings held after his appointment to the Board by the Annual General Meeting. In calculating averages, his attendance is recorded as 92%, reflecting his participation in the meetings following
his appointment. The same applies for Mr. Daniel Malkin, whose calculations are based solely on the meetings held before the expiration of his mandate in June 2023.
Composition of the Highest Governance Body
EPRA
Code
Units of
Measure
Metric
2023
2022
Number
Percentage
Number
Percentage
Gov-
Board
Total
numbers
and
percentages
Executive board
members
1
33%
1
33%
Independent board
members
2
67%
2
67%
Non-executive
board members
0
0%
0
0%
Independent /
non-executive
board members
with competencies
relating to
environmental and
social topics
2
100%
N/A
N/A
Average tenure
(years) on the Board
of Directors
4.9
N/A
7.8
N/A
TABLE 15
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ESG Committee and ESG Management
The Company’s governance incorporates consideration of sustainability issues at both the Board
of Directors and management levels. The operational ESG strategy has been established and is
managed by the Board of Directors, which has ultimate oversight of the overall ESG performance.
The Board of Directors established an ESG Committee to supervise the Company´s ESG processes
and to review and assess the Company’s contribution to sustainable development. The ESG
Committee shall be composed by at least two members of the Board of Directors.
The ESG Committee is chaired by Mr. Christian Windfuhr, and now includes Markus Leininger
and Simone Runge-Brandner, the independent members of the Board of Directors, as well
as advisory members including the Company’s Head of Sustainability, the Head of Energy,
and Head of Human Resources, as well as the Chief Operating Officer. The ESG Committee
oversees strategic guidance on ESG topics and is responsible for reviewing and assessing
the Company’s responsible business strategy, policies and practices with respect to ESG.
The Committee meets at least twice a year, with additional meetings called as required,
and sets the direction for the work of the Sustainability Department.
The Sustainability Department acts as a cross-departmental interface, working across the
Company to implement and monitor sustainability programmes and initiatives at an operational
level. It is led by the Head of Sustainability and reports directly to the CEO of the Company and
to the Chairperson of the Board of Directors. The Department also prepares the Company’s
materiality analysis and ESG reporting, as well as responds to enquiries by investors and rating
agencies on ESG topics. It collaborates closely with the Energy Department, which applies its
engineering expertise to implement the technical elements of our sustainability strategy. There
are constant exchanges of information between departments around ESG-related aspects.
Risk Committee and Chief Risk Officer
The Board of Directors has established a Risk Committee tasked with assisting and providing
expert advice to the Board of Directors in fulfilling its oversight responsibilities, relating to
the different types of risks the Company is exposed to, recommending on a risk management
structure and its processes, as well as assessing and monitoring the effectiveness of the
risk management system. 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 Chief Risk
Officer (CRO), who brings a systematic and disciplined approach to evaluate and improve the
risk management culture, capabilities and practices integrated within the strategy-setting and
execution. The CRO’s responsibilities are determined and monitored by the Risk Committee,
whose oversight is established pursuant to the Rules of Procedure of the Risk Committee. The
Risk Committee provides advice on actions of risk management, in particular by reviewing the
Company’s risk management procedures established by the management and their effectiveness
for risk detection, assessment, prioritization, mitigation and monitoring, as well as its internal
control system. The Board of Directors decides on the composition, tasks and terms of the Risk
Committee members and the appointment and dismissal of its members, and of the CRO.
Internal Controls and Risk Management Systems
The Company closely monitors and manages any potential risks and sets appropriate
measures to mitigate the occurrence and/or impact of any possible failure to an acceptable
level. The risk management supervision is led by the Risk Committee, which reviews the
risk management structure, organization, processes and coordinates risk-related training.
The Company categorizes the risk management systems into two main categories: internal
risk mitigation and external risk mitigation. The internal controls system and compliance of
the Company is monitored by the Compliance Department.
Internal Risk Mitigation
Internal controls are constructed from five main elements:
•
Risk management – set by the Risk Committee and guided by an ongoing analysis of
the organizational structure and by identifying potential weaknesses. Further, the
committee assesses control deficiencies impacting the risk management framework in
the organization, supported by CCO and CRO.
•
Control discipline – based on the organizational structure and supported by employee and
management commitments. The discipline is erected on the foundations of integrity and
ethical values.
•
Control features – the Company sets physical controls, compliance checks and verifications
such as cross departmental checks. The Company puts strong emphasis on separation of
duties as approval and payment are completed by at least two separate parties. Payment
verification is cross checked and confirmed with budget and contract. A payment exceeding
a certain set threshold amount requires an additional approval as a condition for payment.
•
Monitoring procedures – the Company monitors and tests unusual entries, mainly
through a detailed monthly Actual vs. Budget analysis and additional checks. Strong and
sustainable internal control system significantly reduces the probability and materiality
of errors. The management sees high importance in constantly improving all measures,
adjusting to market changes and organizational dynamics.
•
ESG risk-related expenditures – the Company has included the identification of potential
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financial liabilities and future expenditures linked to ESG risks in the enterprise risk
management. Potential future expenditures on ESG matters and opportunities are
included in the financial budget.
External Risk Mitigation
Through its ordinary course of business, the Company is exposed to various external risks. The
Risk Committee is therefore constantly determining whether the appropriate infrastructure,
resources and systems are in place and are adequate to maintain an acceptable level of
risk. The potential risks and exposure are related, inter alia, to volatility of interest rate
risk, inflation risk, liquidity risk, credit risk, regulatory and legal risk, collection and tenant
deficiencies, the need to unexpected capital investments, property damage risk, physical
climate risks, market downturn risk and geopolitical risk. The Company sets direct, specific
guidelines and boundaries to mitigate and address each risk of failure or potential default, by
hedging and/or reducing it to an acceptable level of impact and/or occurrence.
For information regarding the external risks please see pages 199-205 (Note 25.3 Risk
management objectives and policies).
ESG Risk Management
The assessment of physical and transitional risks linked to climate change are primarily external.
The Risk Committee commissions the CRO and the Sustainability Department to conduct
physical risk assessments of GCP’s portfolio in Germany and the UK. Other departments,
including insurance, energy and technical due diligence provide additional support and expertise
where necessary. Under current procedures, GCP assesses climate-related risk at the portfolio
level; however, it is the Company's long-term ambition to conduct an asset-level analysis. The
Company’s focus is to prioritise information which provides the most accurate image of regional
and local climate risks, as well as opportunities arising from the necessary transition.
Climate-related risks are taken into account throughout the process described above.
A comprehensive risk matrix catalogue for each risk group has been compiled for the
Company, including physical and transitional climate-related risks. Each risk is rated based
on a combination of impact and likelihood resulting in four rating definitions: Inherent Risk,
Target Residual Risk, Target Risk Reduction and Actual Residual Risk.
The ability to quantify climate related risks depends, inter alia, on the availability of data
and methodologies. The Carbon Risk Real Estate Monitor (CRREM) tool is an emerging best
practice for stranding risk assessment in the real estate sector.
While CRREM was found
to be the most advanced tool for assessing alignment with Paris Agreement targets, its
current methodology poses challenges limiting its practical usability for landlords to focus
on renovation planning to address energy and carbon intensity under their own sphere of
influence. The Company has thus prioritized applying stranding definitions based on EPCs
and the EU’s climate commitments embodied in the EPBD recast, which grants a better
understanding of investment actions needed and the expected results of those actions
specific to each asset class, both in terms of their sustainability and financial impacts..
In order to further engage stakeholders, including the value chain and workers in our value
chain, GCP intends to develop a methodology in 2024 which assesses potential risks allowing
GCP to develop even further its mitigation strategy. This process will include department
heads and team leaders. This new approach will promote an enhanced risk management
structure, ensuring amplified understanding and cooperation across our stakeholders.
Nomination Committee
The Board of Directors established a Nomination Committee. The majority of the members
shall be non-executive directors. For every significant position to be filled, the committee will
make an evaluation of the existing and required skills, knowledge 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 proposals from shareholders, the Board
of Directors and executive management, and suggest candidates to the Board of Directors.
Remuneration Committee
The Board of Directors established a Remuneration Committee. The Remuneration Committee
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
adopted 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 Company.
ESG-Linked Remuneration
The Company has a Remuneration Policy which is recommended to the Board by the Remuneration
Committee and governs the remuneration of directors and members of management. The
Remuneration Policy provides for the option to include criteria including project-related targets as
well as diversity and sustainability objectives.
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Sustainability
Department
y
Cross-departmental interface
y
Implements and monitors
sustainability programs
Energy Department
y
Develops energy and
carbon reduction strategy
y
Implements and tracks energy
projects and progress
HR Department
Compliance Department
Operations & Construction Departments
Responsible for defining,
implementing and tracking
departments‘ ESG targets
Christian Windfuhr
Director, Chairperson
Simone Runge-Brandner
Independent Director
Markus Leininger
Independent Director
ESG Sponsors at Board level
BOARD OF DIRECTORS
ESG Committee
Christian Windfuhr, Simone Runge-Brandner,
Markus Leininger
Head of Sustainability, Head of Energy,
Chief Operating Officer, Head of HR
y
Meets at least quarterly
y
Strategic guidance on ESG
y
Responsible for reviewing ESG strategy
ESG
GOVERNANCE STRUCTURE
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
transmitted through general publication channels as well as on a specific section on its
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
previously announced 2021 buy-back programme, are suspended from their voting rights.
The shareholders of GCP exercise their voting rights at each AGM whereby each share is
granted one vote. The AGM takes place within six 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, 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 GCP, the allocation of the statutory financial results, the appointment of the approved
independent auditor, and the discharge to and appointment or 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 electronique des societes et associations
in Luxembourg (RESA), in a Luxembourg newspaper and on the Company’s website at least
30 days before the AGM and in accordance with applicable Luxembourg law.
Compliance with the Transparency Law
The Company is committed to adhere to best practices in terms of corporate governance
by applying, among others, rules arising from the Luxembourg law of 11 January 2008 on
transparency requirements for issuers, as amended (the ‘Transparency Law’).
The quarterly and annual financial reports, investor presentations, press releases and
ad-hoc notifications are available in the English language on our 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 financial 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 31, 93, and note 17 on pages 183, 184 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 pages 31, 93 of this
annual report and on the Company’s website, where the shareholding structure is
updated on a regular basis.
b) With regard to article 11 (1) (b) of the Takeover Law, the ordinary shares issued by
the Company are admitted to trading on the regulated market of the Frankfurt Stock
Exchange (Prime Standard) and are freely transferable according to the Company’s
articles of association (the
“Articles of Association”
).
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
acquired by the Company, either directly or indirectly through subsidiaries, pursuant to
its previously announced 2021 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 page 185, note 18 of
this annual report.
Shareholder name
Amount of Shares
1)
Position
Edolaxia Group Ltd
2)
108,028,094
61%
1)
Total number of Grand City Properties S.A. shares as of 31 December 2022: 176,187,899
2)
Edolaxia Group Ltd is a wholly owned subsidiary of Aroundtown SA
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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 automatically applies, subject to the Luxembourg law of 11 January 2008 on
transparency requirements 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 makes the notification.
g) With regard to article 11 (1) (g) of the Takeover Law, as of December 31, 2023, the
Company was not aware of any agreements between shareholders that would lead to a
restriction 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 88 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 quorum 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 Committee, a Remuneration Committee, Nomination Committee and an ESG
Committee. Further details on the powers of the Board are described on pages 88, 89,
90, 91 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 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.
j)
With regard to article 11 (1) (j) of the Takeover Law, the Company’s (listed on pages 184,
187 to 189 and notes 17.7 and 19.2) bonds, hybrid bonds and security issuances under the
EMTN programme contain change of control provisions that provide noteholders with
the right to require the Company to repurchase their notes upon a change of control
of the issuer. The Company’s ISDA master agreement securing derivate transactions
with regard to its listed debts contains a termination right if the Company is financially
weaker aſter a takeover.
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.
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Fair Business and Compliance
Our business strategy is underpinned by our fundamental commitment to ethical conduct,
robust corporate governance and high levels of transparency. Safeguarding the Company
from any reputational damage due to error or misconduct is essential in maintaining our
strong reputation. Our compliance framework seeks to embed our principles of integrity,
respect, performance, accountability, and sustainability into all of our business activities.
We ensure our Board of Directors and senior executives hold vast experience and skillsets
in relevant business areas in order to help maintain our high governance standards.
Long-term Targets
•
Keep our level of fair business relationships with our customers and suppliers
•
Maintain zero tolerance towards compliance violations
2024 Goals
•
Maintain high-level awareness and engagement with our Company policies
•
Review and implement actions to comply with new European regulations (e.g. CSRD)
during 2024
•
Adherence to the Company risk management strategy by performing compliance risk assessment
•
Ensure the voluntary alignment of our Company policies to the new Supply Chain Act in
Germany (LkSG)
To ensure our high ethical standards are embedded in our business, we have developed a
comprehensive compliance framework. This system is designed to adapt to increasingly complex
legal frameworks, and to protect our business from the risks associated with unethical conduct. The
expectations and requirements of this framework are clearly set out through the Company policies
and standards. Alignment with these standards is monitored by internal control mechanisms, and
in case of deviations we have a clear reporting and response process.
All Company-wide policies
mentioned in this section are aligned with and approved by the Board of Directors. This ensures
and justifies the clear statement of GCP’s top management that these policies are a crucial part of
the Company and binding for each and every one working for and with GCP.
Our compliance and risk management teams are structured accordingly to ensure
responsible behaviour guides us, and they are supplemented by internal monitoring
procedures, covering all steps of real estate investment and management.
Employee Code of Conduct
At the heart of our internal policies for compliance is our Employee Code of Conduct.
This sets out the principles of our commitment to ethical behaviour and is a contractual
requirement for our staff at every level. The Code of Conduct covers our standards on
topics including bribery, corruption, fair competition and anti-trust, conflict of interest
and discrimination. We are not subject to any compulsory corporate governance code of
conduct or respective statutory legal provisions and are not currently required to adhere
to the ‘Ten Principles of Corporate Governance’ of the Luxembourg Stock Exchange or the
German Corporate Governance Code.
The Company, in its employee Code of Conduct, has instruments in place to prevent and
fight violations of law, such as human rights violations, corruption and bribery, and also
includes the prohibition of insider dealing. As the Company is subject to several obligations
under Regulation (EU) No. 596/2014 (Market Abuse Regulation (MAR)), as amended, it has
established 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 (including by way
of training sessions) pursuant to applicable provisions under MAR, all persons discharging
managerial responsibilities of their obligations in the context of managers’ transactions.
Memorandums, notifications, training and information are distributed regularly.
Supporting this code are a number of specific policies, such as our Anti-Corruption, Global
Information Security and Anti-Discrimination Policies. GCP is also a signatory of the Charta
der Vielfalt (German Diversity Charter). For more information on our anti-discrimination
efforts, please refer to the subsection ‘Equal Treatment and Opportunities for all’. Another
crucial subject in our compliance program is the management of ethical standards in our
supply chain as described in the section ‘Workers in the Value Chain’.
Outstanding leadership is crucial in this regard. Our managers are expected to be examples of
our core values of mutual respect and clear communication. This standard of behaviour usually
shows positive effects on our commercial success, as well as on staff performance. We maintain a
horizontal organisational structure, with a widespread culture of transparent and regular feedback
between employees and managers. Furthermore, our Employee Code of Conduct establishes
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expectations for all staff to abide by the values of openness, trust, teamwork, and acceptance
of diversity in all their dealings with one another and with our tenants and other stakeholders.
Adherence to the Code of Conduct is a mandatory requirement of all employee contracts.
Our Intranet Compliance Site
In 2022, we launched the compliance site on our Company intranet, where the above
policies are available to all our employees. This is a major step towards our overarching
goal of unifying our internal policies across all our operating regions. Through the intranet
platform, we can now also ensure that policies are available in a standard form to the
whole organisation, and that updates to these policies are rolled out immediately.
Our intranet page and our publicly available website also support the measures that ensure
ongoing alignment with our compliance standards. Firstly, it contains a dedicated page on our
breach reporting and whistleblowing processes and provides access to our whistleblowing
platform. We are aware that ensuring continued alignment to our high ethical standards requires
a frictionless method for employees’ concerns to be registered, and this is the spirit of our “Speak
Up” approach. Through it, employees and external service providers are encouraged to voice any
concerns they may have about breaches of the law or contradiction of our Code of Conduct
without any fear of repercussions, as dictated by the Whistleblower Protection Act. Issues can
also be reported in person, but to guarantee total anonymity when preferred, we work with
a third-party web application to allow stakeholders to register any suspected misconduct in
good faith to ensure whistleblowing protection in line with our Whistleblowing Policy. Our
intranet page ensures availability and awareness of this platform for our employees and the
whistleblowing system can also be accessed via our website by external stakeholders. This
whistleblowing process is key to the effectiveness of the compliance framework. Should a report
be submitted through our whistleblowing platform, an investigation is launched by a responsible
user of the system, or a member of Compliance to ensure objectivity of the investigation.
Additionally, the intranet platform provides links to our Contemporary Real Estate
Academy (CREA), our e-learning tool providing training on anti-corruption, bribery and data
protection topics. This continual training and communication ensure that understanding of
our standards is always being reinforced. Compliance trainings through CREA are included in
our Welcome Days for new employees, as well as training on the use of our whistleblowing
platform. Furthermore, employees are required to undergo annual refresher training on
these policies, to reaffirm their commitment to these standards.
Compliance Monitoring
In addition to unifying our compliance approach across our operating locations, we want
awareness and consideration of compliance issues to be straightforward and commonplace
for our employees. To this end, in 2022 we introduced compliance ambassadors in our
regional offices, to serve as first contact points for staff on compliance subjects. These have
currently been embedded in our UK and Cyprus offices, as well as some regional offices in
Germany. In order to enable an open culture around compliance, these ambassadors are not
officers of the Compliance department, but are empowered to serve as sources of information
and guidance for staff across the organisation. In 2023, we intensified our collaboration with
our local compliance ambassadors, which we aim to continue also in 2024.
We monitor the effectiveness of our compliance framework by tracking the number of
compliance violations. We continue to carefully analyse the evolving market and regulatory
environment in conjunction with further appropriate development of internal structures.
This process considers a range of compliance issues including but not limited to corruption
or bribery, conflicts of interest, insider trading, and money laundering . In 2023, zero
relevant compliance cases were reported within the Company.
For the purpose of this report, Grand City Properties considers a compliance case to be
relevant either when it has the potential to materially harm the reputation of GCP, will
have a significant impact on an investor’s decision to invest in GCP or if it may lead to a
significant financial damage (of > €500 thousand). Any cases reported to the Compliance
Department in 2023 were treated with the highest attention and considered carefully
based on the provided definition of relevance. It was determined that none of the cases
could be considered relevant.
Transparency and Reporting
We are committed to transparently reporting on our ESG progress, as such this is the 7th
year in a row for which we have been awarded the Gold Award for both EPRA BPR and EPRA
sBPR, showcasing our continual commitment to the highest standards of transparency and
reporting. We also received recognition by Sustainalytics, a sustainability rating agency,
which ranked us as “Low Risk” in its ESG rating and among the 8th percentile of the global
rated universe
(6)
. Our S&P Global Corporate Sustainability Assessment (CSA) was ranked in
the top 6th percentile of real estate companies globally.
(6)
Copyright © 2024 Morningstar Sustainalytics. All rights reserved. This report contains information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational
purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers
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Corporate Culture
In 2023, we asked some of our employees who sit within key ESG-related roles to tell us how
they felt about our corporate culture. We wanted to understand how our employees view the
Company, and if, and how, we need to make improvements. The feedback we received during this
exercise is reflective of our employee engagement programmes and demonstrates the values we
uphold at the Company. In the upcoming year, we aim to maintain this positive corporate culture.
Here’s what they had to say:
Political Engagement and Lobbying
GCP does not engage in direct lobbying activities or make donations to political parties.
However, as a member of bodies such as the German Sustainable Building Council (DGNB),
the German Property Federation (ZIA) and the European Public Real Estate Association
(EPRA), we participate in consultations on public policy. For example, we have been
involved through EPRA in consultation with the EU on the real estate applications of their
Sustainable Finance and Taxonomy Regulations. However, we do not make any political
contributions and have measures in place when working with former politicians to check
that there are no connections remaining with their previous political activities.
Management of Supplier Relationships
Prior to contracting our Business Partners, we conduct checks regarding their reputation,
ability to provide the proposed work and their compliance with the respective local laws. We
recognise the significance of our suppliers and the importance of the type of relationships we
build with them, as well as the influence we can have on them in terms of ESG performance.
We therefore have developed a Business Partner Code of Conduct which details our
expectations and requirements from our suppliers in order to extend our reach of responsible
and sustainable practices. The signing of GCP’s Business Partner Code of Conduct is a binding
requirement for our business partners with an annual contractual volume above €5 thousand
with the exception of large corporations which have their own code of conduct – provided it
is in line with our standards – and with the exception of organisations that operate in heavily-
regulated sectors. With the signing of our Business Partner Code of Conduct, these business
partners demonstrate their commitment to adhering to the Code of Conduct. Furthermore,
in 2023 we enhanced this process by developing a Business Partner Questionnaire which
assesses compliance with our Code of Conduct.
To fulfil our commitment and effectively manage the risks associated with our business
partners, we conduct regular onsite checks, particularly focusing on health and safety.
Regarding payment terms, although we do not have a specific policy in place that addresses
cases of late payments to our suppliers, we do define the payment terms at the beginning
of our contracts to ensure we are on the same page with suppliers, and we do adhere to
this agreement.
Taking into account adverse impacts on human rights identified in the Company’s materiality
assessment and risk management process, which involves consideration of the risks associated
with our suppliers according to their economic sector and countries of operation. GCP has
identified and addressed potential risks in the areas of construction and refurbishment/
maintenance of the business through a number of measures and processes. For instance,
GCP’s critical suppliers (those with a contract volume of >€250 thousand per annum) are
required to sign the Company’s HR questionnaire and during project implementation, site
visits are conducted by Construction or Operation departments on a quarterly basis to ensure
compliance with our ESG Strategy.
Corruption and Bribery
Our Anti-Corruption Policy details the procedures and processes in place to prevent, detect
and address allegations or incidents of corruption or bribery, including varying levels of
contracts for different supplier types involving checks of company structure and finance
supportive
flexible
innovative
fair
everchanging
family-like
creative
empowering
hands-on
communicative
improvement-oriented
helpful
open
adaptive
encouraging
dynamic
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functions. The Policy, alongside our Code of Conduct, is available to all employees to ensure
they understand their responsibilities in preventing and reporting incidents of corruption or
bribery. While the policy is not yet explicitly aligned with the United Nations Convention on
Corruption, we will be updating it in 2024, and will consider this convention.
During 2023, we were not subject to any convictions or fines resulting from the violation of
anti-corruption or anti-bribery laws. We also did not experience any incidents of corruption or
bribery, or any public legal cases in this regard.
Data Protection
We have a deep commitment to protecting the privacy of our stakeholders’ data, which
goes beyond what is required of us by regulation. We believe data protection is a key
aspect sitting within our governance responsibilities, and every organisation should have
strong data protection governance in place. The volume of data handled in our business
relationships increases every year, and we take the trust placed in us to protect the
confidentiality of this data very seriously.
Long-Term Targets
•
Identify risks proactively, to detect and eliminate weaknesses before they can become
threats
•
Embed a culture of awareness and vigilance throughout our staff, through consistent and
regular training
•
Pursue continual improvement of the security of our digital systems
2024 Goals
•
Pass our recertification audits for ISO 27001
•
Introduce a new “on the job” learning format aimed at making information security more
tangible by e.g., rolling out awareness campaigns across our offices
The development of our Information Security and Privacy Strategy is continual, and is
spearheaded by our in-house cybersecurity leads, who sit in on the board’s Risk Committee
meetings to reflect data security considerations in our top-level risk management processes.
Our ISO 27001 certification for our Information Security Management System (ISMS) at our
headquarters in Berlin was maintained for a third consecutive year in 2023. The scope of the
certification applies to our head office, while the scope of the implementation applies to all local
and international offices where all relevant policies and procedures apply in the same way. For
operational reasons, all digital information flows through Berlin, making this the most material
location to focus our certification effects.
The core principles of our Information Security Management System are:
•
Confidentiality: encryption wherever data is stored or accessed
•
Integrity: establishing procedures to prohibit unauthorised personnel to alter information
•
Availability: designing systems to minimise downtime
Bremen
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•
Security: securing business information pertaining to Company operations
•
PII: enforcing the security and confidentiality of processed personal information
•
Regulations: satisfying regulatory (such as GDPR) and other information security
requirements
•
Awareness: training employees on how to identify threats and act according to Company
guidelines
•
Resilience: protecting our systems and networks as well as the data contained therein from
malicious activities
•
Information Assets: ensuring that all networks, systems and applications comply with
confidentiality, integrity and availability
As part of our proactive approach to risk management, we have conducted 28 internal
reviews at our office branches (local and international) over 2022 and 2023, and further
reviews are already planned for 2024. These were designed to compare the effectiveness
of measures at these offices to the implementation at our operational HQ, to ensure that
the application of our procedures is unified across our business locations. The results
demonstrated good levels of compliance across the organisation, and opportunities to
further improve practice at these sites were identified. Our goal is to continue to conduct
more audits, so we can pinpoint potential weaknesses before they become threats.
In 2023, as planned, we restarted our in-person welcome days, including data protection as a
key part of the agenda. We also conducted extensive technical crisis penetration tests alongside
risk assessments. To further strengthen our security posture, an extensive Data Loss Prevention
Strategy was kicked-off in 2023, which will continuously roll out over the course of 2024.
Also, this year, a core member of our data protection team was invited to speak at a Federal
Office for Information Security (BSI) event, explaining our approach to cybersecurity and its
successes. BSI is a German government agency addressing cybersecurity, so this invitation
demonstrated the success and strength of our approach.
One key channel of risk to our systems and networks identified is mobile devices. In light
of the shiſt in recent years to remote working spurred by the COVID-19 pandemic, we have
introduced new controls to ensure that all external connections are secure. Through a
Privileged Access Management (PAM) System, we have added a supplementary security
layer for external IT service providers which enforces MFA (multi-factor-authentication),
session recording, least privileges and requires approval before each session. For our
external business service providers, we have implemented a tool which checks the
compliance of the operating systems that connect to ensure that they are well protected
with a recent operating system, a malware solution and encryption capabilities. External
service providers can only connect if all these standards are fulfilled.
To ensure adequate security in our processes for saving and sharing information, all
documents are labelled with an information security classification, from Public to
Restricted, which requires password protection for the document, where applicable. To
embed our data protection system across the Company, we place great importance on
training and awareness for our staff, with all personnel being required to sign a Company
statement of their commitment to data protection. Furthermore, all our employees are
required to complete video-based training modules on data protection, which are regularly
developed to keep the training provided up to date. In 2022, we developed and filmed
new awareness videos starring our employees to make the training more relatable and
understandable, and we implemented a photo-based project portraying colleagues in fun
poses edited to be used as “landing pages” for phishing campaigns. In 2024, we intend to
continue creating highly personalised awareness campaigns covering further topics.
Beyond initial training on our data protection procedures, we emphasise continued learning
and awareness efforts. Furthermore, GCP’s Standard Operating Procedures (SOPs) set out
expected courses of action for day-to-day activities, such as saving and storing information
or handling requests for data. Permanent employees must complete mandatory refresher
training every 18 months to reinforce their knowledge of these procedures and awareness
of data protection risks.
Furthermore, we monitor potential security incidents and data protection breaches as an
indicator of the effectiveness of our operational procedures. In 2023, no such confirmed
breaches or incidents were reported. In the event of any confirmed incident, a response
team is formed to immediately investigate the matter and recommend remedial actions to
prevent a similar occurrence.
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As members of the European Public Real Estate Association (EPRA), we choose to report on
our ESG impacts in accordance with the 3rd edition (2017) of the EPRA Sustainability Best
Practice Recommendations (sBPR). In 2023, we received the EPRA sBPR Gold award for our
disclosure for the seventh time consecutively. This year, in preparation for the first compliance
window of the CSRD, we have reported where possible in alignment with ESRS disclosure
requirements according to our DMA.
Organisational Boundaries
The information and data in this report covers the operations of Grand City Properties
(GCP) spanning our direct employees and portfolio. As of 31 December 2023, the Company
portfolio held €8.6 billion of investment property.
Landlord and Tenant Boundaries
We have followed the methodology followed in last year’s report for allocating energy
consumption between landlord-controlled areas and tenant-controlled areas. In our 2019
baseline, we use a common area/total area ratio to apportion shared-service heating
consumption between landlord and tenant spaces, based on the floor area distribution found
with the property types classification appendix (3a) of the GRESB Real Estate Assessment
reference guide
(13)
. Thus, the whole building consumption is attributed to landlord or
tenant control in proportion to the ratio of shared spaces to tenant areas expected for the
property. Correspondingly, emissions from this heating are attributed to Scope 1 and 2 or
to Scope 3 in the same proportion. For electricity, the consumption for tenant-controlled
areas is estimated based on industry standard energy benchmarks, namely those of CIBSE.
At present, we collect and/or estimate scope 3 emissions data relating to tenant energy
consumption. We look to expand this emissions data boundary in future years.
Therefore, the energy consumption and the corresponding CO
2
emissions will now represent
the entire building area i.e., of both landlord and tenant-controlled area. We recognise that
under an operational control approach, the allocation of CO
2
emissions between Scope 1
or 2 and Scope 3 is dependent on the metering and sub-metering arrangement in place
between tenants and landlords. However, to create an accurate representation of the entire
building, we have classified indirect emissions by area apportioned between landlord and
tenant spaces, as described in the methods above.
Coverage
Absolute and like-for-like portfolio data relates to the assets outlined in our Organisational
Boundaries. The like-for-like subset contains all the properties which we have operated
continuously for the full two-year period from 1st Jan 2021 to 31st December 2023.
Actual environmental performance data is only reported on assets for which we have
operational control and for which we can collect utilities data. On an absolute basis, this
included a net lettable area of 3,055 thousand m
2
out of a total portfolio covering a net
lettable area of 3,600 thousand m
2
(excluding assets held for sale and properties under
development) at the end of 31 December 2023. During 2023, we continued to increase the
scope and quality of our environmental data collection and are now able to report like-for-
like data from 99.7% of the net lettable area for which data is reported.
Further information relating to maximum coverage on an absolute and like-for-like basis per
utility type is provided within our data tables.
Data relating to our employees covers all direct employees employed by Grand City
Properties, including part-time and temporary workers as well as inactive employees.
Accordingly, it excludes contractors and those not directly employed by us.
Reporting Period
All data relates to our financial year, which coincides with the calendar year, and consequently
runs from January 1 to December 31 of the year under review.
APPENDIX 1: DATA PREPARATION
(aligned with EPRA sBPR)
(13) 2023 Real Estate Standard and Reference Guide, https://documents.gresb.com/generated_files/real_estate/2023/real_estate/reference_guide/complete.html#property_types_classification
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Estimation of Landlord-Obtained Utility Consumption
1) Measured data for the reporting year were not fully available in time for publication.
In instances where the available heating data is not representative, estimations were
calculated based on known consumption from other periods, following the ratio-based
heating-degree-days normalisation method. In the case of electricity, the consumption
was extrapolated based on the weighted arithmetic mean of other known periods. In
some instances, this was not possible for heating. Here we calculated an estimation by
extrapolating expected heating consumption according to the EPC rating of the building
and weather normalisation was not performed.
2) Data is only available for a proportion of units under our management control, for
example regarding recycled waste. In this instance we have extrapolated data for the
units where we are able to collect complete data given the similarities between our
units and those which are tenanted.
We have reported the percentage of estimation that this represents per utility type in our
data tables.
Furthermore, we have disclosed the proportion of overall consumption that our estimation
of tenant consumption represents, according to our methodology described in the section
‘Landlord and Tenant Boundaries’.
Regarding only landlord-obtained utility consumption, as per the EPRA sBPR requirements,
we have detailed the extent of estimations below:
•
Electricity: 63% of landlord-obtained consumption is based on available utility
consumption data, with 37% estimated.
•
Heating: 70% of landlord-obtained consumption is based on available utility consumption
data, with the remaining 30% estimated.
The total volume of waste is based on the contracted waste volumes at properties where
this information was available. No additional estimation occurred. The total proportion of
recycled waste is based on household averages published by the German environmental
protection authority which represents the highest authority in the country.
Our own office utilities consumption is estimated based on the proportion of the total rental
floor area occupied by Grand City Properties as we do not occupy the whole building and no
sub-meters exist.
Units of Measurement and Normalisation
Utilities data are reported based on absolute consumption measured in kWh (energy), t CO
2
e
(GHG emissions), m3 (water) and m3 and tonnes (waste).
GHG emissions are reported using location-based conversion factors published by the
German Environmental Protection Association.
Where consumption is normalised, we calculate intensity indicators using floor area
(m
2
) for whole buildings, including tenant areas. Since we are now estimating the tenant
consumption, we believe that our numerator and denominator provide a representative
intensity figure.
Employee coverage rates are expressed as a percentage of GCP’s total direct employees at
year end.
Health and safety performance measures are calculated using the following formulae:
•
Accident/Injury Rate = Number of reportable injuries / Total hours worked
•
Lost-Time Injury Frequency Rate (LTIFR) = Number of injuries / Million hours worked
•
Lost Day Rate = Number of days lost due to workplace injuries / Number of working
hours
•
Absentee Rate = Number of days absent due to illness / Total number of working days
•
Work-related Fatalities = Total number of work-related fatalities
•
Number of Accidents = Number of Injuries
•
Rate of Accidents = Injury rate
Accidents and injuries are tracked as the same metric, and therefore accident rate is
classified as the same metric as injury rate.
Segmental Analysis (By Property Type, Geography)
Segmental analysis by geography is not relevant for our portfolio. Our assets are located
within Germany and London, and therefore in the same climatic zone. Segmental analysis is
instead provided by asset type and is consistent with our financial reporting.
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Disclosure on Own Offices
Our own occupied office consumption is excluded from our portfolio data as we are a tenant
in the building.
Restatements of Information
•
In 2023 the Company updated its definition of the Operational Control portfolio to
include all assets it directly manages in its German portfolio. This has resulted in a
restatement of the EPC coverage figures with the denominator now being calculated
according to the new operational control portfolio definition.
•
Shares of renewable electricity and fuel from green sources: a technical error was
identified for 2022 figures, where an existing contract for renewable energy for one
energy type was incorrectly applied to all energy contracts for that asset. This has
now been corrected to tagging renewable contracts more granularly to contracts for
each specific energy type.
•
Injury rate: 2022 figures for Injury Rate have been restated due to a technical error in
last year’s reporting, where an internal metric using number of Full-Time Employees
(FTEs) as the denominator was reported. In 2023, we updated the methodology as
prescribed by the EPRA sBPR guidelines, which uses total number of working hours
as the denominator.
•
Gender Pay Gap: The Management remuneration ratio for 2022 has been restated, as
the ratio disclosed in 2022 was calculated based on employees in Germany only. The
updated figure reflects all locations.
Narrative on Performance
Explanation and analysis of our performance in relation to the Performance Measures
reported on are found with the respective data tables throughout this report.
Re-opening event of a tenant library
GRAND CITY PROPERTIES S.A.
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102
Key Factors
EPRA Code
Indicator
Units of Measure
Location in Report
Environmental
Energy
Consumption
Elec-Abs
Total electricity consumption
kWh
Table 1, Page 56
Elec-LfL
Like-for-like total electricity consumption
kWh
Table 1, Page 56
DH&C-Abs
Total district heating and cooling consumption
kWh
Table 1, Page 56
DH&C-LfL
Like-for-like total district heating and cooling consumption
kWh
Table 1, Page 56
Fuels-Abs
Total fuel consumption
kWh
Table 1, Page 56
Fuels-LfL
Like-for-like total fuel consumption
kWh
Table 1, Page 56
Energy-Int
Building energy intensity
kWh/m
2
/year
Table 1, Page 57
Energy Consumption
GHG-Dir-Abs
Total direct greenhouse gas (GHG) emissions
tonnes CO
2
e
Table 2, Page 58
GHG-Indir-Abs
Total indirect greenhouse gas (GHG) emissions
tonnes CO
2
e
Table 2, Page 58
GHG-Int
Greenhouse gas (GHG) emissions intensity from building energy consumption
kgCO2e/m2/year
Table 2, Page 58
Water Consumption
Water-Abs
Total water consumption
m
3
Table 4, Page 61
Water-LfL
Like-for-like total water consumption
m
3
Table 4, Page 61
Water-Int
Building water intensity
m
3
/m
2
/year
Table 4, Page 61
Waste Management
Waste-Abs
Total weight of waste by disposal and diversion routes
tonnes by disposal/diversion route
To be published in April
Waste-LfL
Like-for-like total weight of waste by disposal and diversion routes
tonnes by disposal/diversion route
GBCs
Cert-Tot
Type and number of sustainably certified assets
Total number by certification/rating/labelling scheme
Table 1, Page 57
Social
DE&I
Diversity-Emp
Employee gender diversity
Percentage of male and female employees
Table 10, Page 79
Diversity-Pay
Gender pay ratio
Pay ratio
Table 11, Page 80
Health, Safety and Wellbeing
H&S-Emp
Employee health and safety
Injury rate
Table 9, Page 79
Lost day rate
Table 9, Page 79
Absentee rate
Table 9, Page 79
Work-related fatalities
Table 9, Page 79
H&S-Asset
Asset health and safety assessments
Percentage of assets
Table 13, Page 84
H&S-Comp
Asset health and safety compliance
Number of incidents
Table 13, Page 84
Employee Development
Emp-Training
Training and development
Average number of hours
Table 8, Page 78
Emp-Dev
Employee performance appraisals
Percentage of total workforce
Table 8, Page 78
Emp-Turnover
Employee turnover and retention
Total number and rate of new employee hires and turnover
Table 7, Page 78
Community Engagement
Comty-Eng
Community engagement, impact assessments and development programmes
Percentage of assets
Table 14, Page 87
Governance
Governance Body
Gov-Board
Composition of the highest governance body
Total number of executive board members
Table 15, Page 89
Total number of independent board members
Table 15, Page 89
Total number of non-executive board members
Table 15, Page 89
Average tenure on the governance body
Table 15, Page 89
Number of independent/non-executive board members with competencies
relating to environmental and social topics
Table 15, Page 89
Gov-Select
Nominating and selecting the highest governance body
Narrative description
Page 88
Gov-Col
Process for managing conflicts of interest
Narrative description
Page 88
EPRA SBPR INDEX
GRAND CITY PROPERTIES S.A.
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GRAND CITY PROPERTIES S.A.
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Board of Directors' Report - Business performance & analysis
102
BUSINESS PERFORMANCE & ANALYSIS
Berlin
GRAND CITY PROPERTIES S.A.
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For the year ended 31 December
2023
2022
€’000
Revenue
607,741
582,505
Net rental income
411,313
396,041
Operating and other income
196,428
186,464
Property revaluations and capital gains (loss)
(890,017)
117,761
Property operating expenses
(279,050)
(266,287)
Administrative and other expenses
(10,906)
(10,689)
Depreciation and amortisation
(9,323)
(10,488)
Operating profit
(581,555)
412,802
Adjusted EBITDA
319,647
308,100
Finance expenses
(56,814)
(46,914)
Other financial results
(86,088)
(137,133)
Current tax expenses
(40,865)
(39,120)
Deferred tax income (expenses)
127,254
(10,532)
Profit (loss) for the year
(638,068)
179,103
Profit attributable to the perpetual notes investors
33,700
24,750
FFO I
183,936
192,219
FFO II
255,708
200,822
NOTES ON BUSINESS PERFORMANCE
Consolidated income statement data
GRAND CITY PROPERTIES S.A.
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Revenue
GCP recorded revenues amounting to €608 million for the year 2023, increasing by 4% as
compared to €583 million in 2022. Total revenue consists of net rental income and operating
and other income.
Net rental income amounted to €411 million for the year 2023, an increase of 4% as compared
to the €396 million recorded in 2022. The strong like-for-like rental growth, along with the
completion of pre-let properties, is the main driver of the increase in the rental income, offset
by disposals.
GCP recorded robust like-for-like rental growth of 3.3% as a result of in-place rental growth
of 3.1% and occupancy increases of 0.2%. Vacancy rates reached a new historic low in
2023, standing at 3.8% as of December 2023, as compared to 4.2% as of December 2022,
and decreasing from 5.1% as of December 2021. The increase in the rental growth of the
Company’s portfolio and the continuous decrease in the vacancy rate are a result of GCP’s
strong letting performance, utilizing the significant supply and demand imbalance in major
German metropolitan areas and London. Furthermore, market rents have increased across the
portfolio, enabling higher rent increases. The Company’s portfolio is located in fundamentally
strong metropolitan areas, taking advantage of the favourable trends in rental rates. In-place
rent for the portfolio amounted to €8.6/sqm in December 2023 as compared to €8.2/sqm in
December 2022 and €8.1/sqm in December 2021.
To face the uncertainties in the market and the continuous interest rates increases, the
Company continued its deleveraging strategy, reinforcing its strong liquidity position.
Throughout the year, GCP successfully completed disposals of properties in the amount of
€306 million. The disposed properties had a partially contribution in 2023, while they had a
full contribution to net rental income in 2022. On the other hand, the Company’s acquisitions
amounting to €250 million completed in the second quarter of 2022, mainly in London and
Berlin, had a full impact in 2023, while having only a partial impact in 2022. The impact
of disposals on the net rental income outweighed the impact of the acquisitions, partially
offsetting the internal growth in the year. The Company’s rental growth is also supported by
the completion of properties in the pre-let phase. As of December 2023, the annualized net
rent of the portfolio amounted to €406 million.
The Company‘s operating and other income amounted to €196 million, an increase of 5%
compared to €186 million in the previous year. The operating and other income consists
primarily of income related to recoverable operational expenses from tenants related to
utilities and services, such as heating and water, among others. The main factor contributing
to the increase in this line item is cost inflation of utility costs, mainly heating. The decrease
of portfolio vacancy in recent periods also drives the increase in the operating and other
income. An increased efficient operational platform and implementation of targeted capex
initiatives aim to enhance the asset efficiency and create more lean cost structures, partially
mitigating the impact of cost inflation.
Property Revaluations and Capital Gains (Loss)
In 2023, GCP recorded negative property revaluations and capital loss amounting to €890
million, as compared to positive property revaluations and capital gains in 2022 of €118
million. This line item is primarily composed of property revaluations. Property revaluations
are one off non-cash gains or (losses) related to the changes of the fair value of the investment
portfolio. GCP engages independent and certified valuers to determine the fair value of its
investment properties. As part of the annual report the Company has externally revalued its
full portfolio, bringing the portfolio value to the most up-to-date status.
The property devaluations recorded in 2023 amounted to €881 million, as compared to a
revaluation result of €115 million in 2022. The loss in 2023 is primarily the result of the higher
discount and cap rates as a result of the higher interest rates in the market. The negative
trend of the increasing interest rates was partially offset by a solid like-for-like operational
For the year ended 31 December
2023
2022
€’000
Net rental income
411,313
396,041
Operating and other income
196,428
186,464
Revenue
607,741
582,505
For the year ended 31 December
2023
2022
€’000
Property revaluations
(881,382)
115,039
Capital gains (loss)
(8,635)
2,722
Property revaluations and capital gains (loss)
(890,017)
117,761
GRAND CITY PROPERTIES S.A.
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growth and a reduction in vacancy across the portfolio. GCP’s portfolio is well diversified in
fundamentally strong metropolitan areas with strong economic drivers while the demand for
residential units follows a positive trend due to the significant housing shortage. In 2023,
excluding the offsetting impact of capex, the portfolio value decreased by 9% on a like-for-
like basis compared to December 2022. The rental growth has a substantial part in offsetting
negative headwinds and supports yield expansion. The portfolio had an average value of
€2,109/sqm and a rental yield of 4.8% as of December 2023, as compared to €2,282/sqm
and a rental yield of 4.2% as of December 2022.
Capitals gains and losses are the second component of the property revaluation and capital
gains (loss) line item. Capital gain/loss results capture the premium/discount of disposals
compared to their book values. Throughout the year, the Company disposed €306 million
of assets and recorded a loss of €8.6 million which reflects 3% discount to net book values,
while recording profits over total acquisition costs including capex of €72 million which
reflects a 31% profit margin.
Disposal Analysis
As part of the deleveraging strategy of the Company in response to the challenges of the
market environment, with the aim to maintain a conservative financial profile and strong
liquidity position especially in the uncertain market environment and to mitigate the impact of
the negative revaluations of the investment property portfolio on its leverage, GCP completed
the disposal of €306 million of properties in 2023. Accordingly, GCP’s LTV has remained
stable and stood at year-end 2023 at 37%. Through GCP’s wide deal sourcing network, the
Company succeeded to proceed with the disposal of assets despite the tough environment
in the real estate transaction market. The disposed assets are mainly located in London and
NRW, as well as land in Berlin, and include several condominium sales. The closed disposals
include disposals signed in 2022 in the amount of approx. €180 million. During 2023 the
Company signed disposals in the amount of over €190 million, of which around €120 million
were completed in 2023.
For the year ended 31 December
2023
2022
€’000
Acquisition cost including capex
of disposed properties
234,192
9,881
Total revaluation gains on disposed
properties since acquisition
80,407
5,881
(A) Book value (IFRS)
314,599
15,762
Disposal value net of transaction costs
305,964
18,484
(B) Capital gain (loss)
(8,635)
2,722
(B/A) Premium/discount to net book value
-3%
17%
(C) Disposal value net of transaction costs
305,964
18,484
Acquisition cost including capex of
disposed properties
(234,192)
(9,881)
(D) Realised profit from disposal
71,772
8,603
(C/D) Disposal profit margin on
investment property
31%
87%
Cologne
GRAND CITY PROPERTIES S.A.
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Property Operating Expenses
Property operating expenses amounted €279 million in 2023, higher by 5% as compared
to €266 million recorded in 2022. Property operating expenses mainly include purchased
services, which comprise charges for a variety of utilities and services, including waste
disposal, water and heating, and other costs that are primarily recoverable from tenants. In
addition, personal expenses, maintenance and refurbishment expenses, and other operating
costs are also included in property operating expenses.
Due to cost inflation, purchased services increased materially during 2023, similar to the
income line item, increasing to €200 million in 2023 from €188 million in 2022. The main
driver of the increase during 2023 is the cost inflation in recoverable expenses such us
heating expenses. There has been a notable rise in heating costs in the first half of 2023,
however, a shiſt in the trend occurred during the second half of the year, leading to a relative
decline in expense levels. Considering that most of these costs are borne by the tenants, this
increase aligns with the aforementioned growth in operational income and thus does not
have a substantial impact on the net operating result.
The Company took proactive measures to support its tenants and keep their expense level low
and therefore continued its information campaigns across all channels on how to effectively
save energy and reduce costs, or switch to more renewable sources of energy. In order to
improve the energy efficiency of the portfolio GCP executed targeted modernization projects
such as the replacement of heating systems, insulating facades and roofs and installing energy
efficient windows, while the Company continued switching energy contracts to renewable or
climate-neutral energy sources. The increase in the occupancy rates, also contributed slightly
to the increase of this line item in 2023.
As part of the Company’s strategy of maintaining high levels of tenant satisfaction and
building long term relationships, GCP organized tenant activities such as autumn festivals,
open-air cinema events in GCP’s “Cinema Summer” and many more community events across
multiple locations, as well as tenant benefit programs, such as GCP’s loyalty program as well
as providing a variety of discounts to tenants. Through the GCP service center, 24/7 support
is provided to tenants. GCP’s tenant care agents offer tailored support in several languages
to ensure that tenant needs are being met quickly and effectively. In addition, as part of GCP’s
approach to increase efficiencies through enhanced digitalization and self-service options for
the tenants, the Company added more services to the GCP tenant app and Portal, which
allows existing and prospective tenants to sign leases, upload documentation, and initiate
and track service requests. Digitalisation and automation services are also enhanced by the
implementation of an artificial intelligence voice bot designed to address peak call times
and minimize waiting periods by digitilising recurring requests such as property searching,
signing leases, uploading documentation, and initiating and tracking service requests.
Personnel expenses were also affected by cost inflation, mainly driven by wage growth and
a continued strong labour market. Personnel expenses amounted to €26 million in 2023,
as compared to €24 million in 2022. The last item of property operating expenses, other
operating costs, amounted €30 million in 2023, as compared to €32 million in 2022. Other
operating costs are mainly composed of expenses such as legal fees, marketing activities,
transportation, and communication expenses.
Maintenance and Capex
The Company’s strategy is based on maintaining a high level of tenant satisfaction, providing
tenants with quality housing by sustaining and improving the quality of the portfolio. As such,
GCP continuously evaluates the quality of its assets and undertakes a diverse range of targeted
maintenance and refurbishment projects to uphold the quality and value proposition of its
portfolio. These projects are implemented by the Company to address property-specific needs,
aiming to improve the quality of life for tenants. This approach maximizes tenant satisfaction,
resulting in a decrease in tenant turnover and vacancies while leading to higher rents. As a
results of these actions, the Company succeeded in further increasing tenant satisfaction while
reducing the vacancy rate in 2023 to an all-time low of 3.8%.
Maintenance and refurbishment expenses remained relatively stable, amounting to €22
million or €5.3 per average sqm in 2023, as compared to €22 million or €5.2 per average
sqm in 2022. 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 upkeep, thereby maintaining the tenant’s living conditions. In addition,
For the year ended 31 December
2023
2022
€’000
Purchased services
(200,384)
(187,631)
Maintenance and refurbishment
(22,187)
(21,723)
Personnel expenses
(26,342)
(24,458)
Other operating costs
(30,137)
(32,475)
Property operating expenses
(279,050)
(266,287)
GRAND CITY PROPERTIES S.A.
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to optimise the service requests from tenants, the Company provides digitalised service
requests through the tenant app and portal which allows tenants to place service requests,
monitor the status of their maintenance and service requests, and provide supporting
documentation. Tenants also have the ability to speak to GCP’s tenant care agents about
service requests through the GCP service center.
GCP invested €77 million in repositioning capex or €18.4 per average sqm in 2023, as
compared to €71 million or €17.3 per average sqm in
2022. The increase is mainly driven by cost inflation.
Repositioning capex consist of targeted investments
aimed at enhancing safety, quality and features of
assets within the portfolio. Specific examples of
these
expenditures
include
apartment
renovations
and preparation for letting, upgrades to corridors and
staircases, façade refurbishments and refits, and similar
improvements. Additionally, repositioning capex extends
to enhancements in community areas surrounding the
property, contributing to an increased value proposition
for assets in proximity. This can be achieved through the
addition or renovation of playgrounds, barbeque pits,
common meeting areas, and more. Repositioning capex
supports the value growth of the portfolio as well as the letting progress, reducing vacancy,
while increasing the rent potential.
GCP, additionally invested approximately €10 million in modernisation investments in 2023,
stable as compared to €10 million in 2022. Modernisation projects are carried on a targeted
basis and include measures such as adding balconies and installing elevators as well as
technical installations to ensure optimal power supply, water supply and heat supply. Includes
also energetic modernisation measures such as installing green energy and heating systems
and increasing energy efficiency through better insulation and windows. These modernisation
initiatives, supplementary to repositioning capex, are designed to enhance the overall quality of
the portfolio and drive an increase in rental rates.
Finally, the Company invested approximately €15 million in pre-letting modifications in 2023, as
compared to €59 million in 2022. Pre-letting modifications consist 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. Additionally, they include large refurbishment projects,
and the creation of significant new lettable areas. Since a significant number of projects were
completed in 2022 and GCP became more selective with regard to new projects, this line item
is significantly lower in 2023 as compared to the previous year.
Administrative and Other Expenses
Administrative and other expenses amounted to €10.9 million in 2023, similar to €10.7
million in 2022. Even though the Company faced higher administrative and operational costs
due to cost inflation, the Company’s increased efficiencies partially offset these increases.
Administrative and other expenses are mainly comprised of expenses related to administrative
personnel, legal and professional consultancy fees, audit and accounting costs, marketing
fees, and other expenses.
Finance Expenses
Finance expenses amounted to €57 million in 2023, higher by 21%, as compared to €47
million in 2022. The increase in this line item is mainly driven by new debt raised during
the reporting period, raised at the current interest rate levels, which is higher than the
average cost of debt. Additionally, the increased risk-free interest rate has impacted the
component of the debt exposed to variable rates, while the expiry of certain hedging
instruments resulted in debt becoming variable and resetting at higher rates. The increase
in the financing expense was partially offset by an increase in the interest income on the
Company’s high cash balance.
Repositioning capex / avg sqm
Maintenance / avg sqm
Maintenance &
Capex development (€/sqm)
16.0
2022
5.2
17.3
22.5
2023
For the year ended 31 December
2023
2022
€’000
Personnel expenses
(4,441)
(4,509)
Audit and accounting costs
(2,818)
(2,856)
Legal and professional consultancy fees
(2,666)
(2,437)
Marketing and other expenses
(981)
(887)
Administrative and other expenses
(10,906)
(10,689)
For the year ended 31 December
2023
2022
€’000
Finance expenses
(56,814)
(46,914)
18.4
23.7
5.3
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During 2023, the Company secured new bank financing in the amount of over €550 million
with maturities between 5 to 10 years, while bond buybacks of €90 million in nominal value
have been made. As of December 2023, the Company’s cost of debt is 1.9% with an average
debt maturity of 5.3 years, as compared to 1.3% cost of debt and an average debt maturity of
5.9 years as of December 2022. GCP is hedged against the majority of rising interest rates for
its existing debt, with a hedge ratio of 88%, supporting GCP’s conservative financial profile,
while the strong liquidity position, including signed disposals, is adequate to cover debt
maturities for the next 3 years until the end of 2026.
Other Financial Results
Other financial results amounted to a negative amount of €86 million in 2023, as compared
to a negative amount of €137 million in 2022. Other financial results capture the net
change in the fair value of financial assets and liabilities, traded securities, and derivative
instruments. The fair value of these financial assets and instruments is mainly driven by
the volatility in capital markets and the fluctuations in the interest rates. One-off financial
costs associated with early debt repayment and the gain resulting from the buyback of €90
million in nominal value bonds at a discount of 8% are also included in this line item. Other
costs relating to financial activities such as hedging fees, bank financing and actions for
optimizing the Company’s debt profile are also included.
Taxation
Total tax income amounted to €86 million in 2023, as compared to €50 million tax expense
in 2022. The total tax income/expenses include both current tax expenses and deferred tax
income/expenses.
Current tax expenses amounted to €41 million in 2023, as compared to €39 million in 2022.
This line item mainly consists of corporate and property taxes that trend in-line with GCP’s
underlying business and portfolio size.
Deferred tax amounted to an income of €127 million as of December 2023, as compared an
expense of €11 million in 2022. Deferred tax income/expenses are mainly composed of non-
cash tax income/expenses related to the tax amount due on revaluation gains in the event
of a theoretical disposal with a tax rate applied based on the location of the asset. Deferred
taxes are additionally impacted by the revaluation gains or losses of derivatives and losses
carried forward. GCP recorded a deferred tax income in 2023, primarily due to the positive tax
impact from the negative revaluation of investment properties.
For the year ended 31 December
2023
2022
€’000
Change in fair value of financial
assets and liabilities, net
(67,015)
(115,925)
Finance-related costs
(19,073)
(21,208)
Other financial results
(86,088)
(137,133)
For the year ended 31 December
2023
2022
€’000
Current tax expenses
(40,865)
(39,120)
Deferred tax income (expenses)
127,254
(10,532)
Total tax income (expenses)
86,389
(49,652)
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Profit (Loss) for the Year
GCP recorded a net loss of €638 million in 2023, as compared to a net profit of €179 million
in 2022. The net loss for 2023 is mainly due to the non-recurring and non-cash property
negative revaluation of the investment property portfolio as a result of the higher discount
and cap rates in the market, which were only partially offset by operational growth, as the
adjusted EBITDA and FFO, reflecting the recurring operational profitability, remained robust.
Earnings (Loss) per Share
In 2023, GCP recorded basic loss per share in the amount of €3.18 as well as diluted loss
per share in the amount of €3.17, as compared to a basic earnings per share of €0.77 and a
diluted earnings per share of €0.76 respectively for the year 2022. In addition to the above-
mentioned factors that impacted the profitability of the Company, there was a slight increase
in the average share count, affecting the per share result. This increase was largely due to
the high acceptance rate of the scrip dividend in H2 2022, which enabled the Company to
preserve cash and improve its financial liquidity and had a full year effect in 2023.
The diluted earnings per share reflects the various dilutive effects, which in 2023 primarily
relate to the impact from share-based remunerations. As the Company does not have dilutive
instruments, the basic and diluted earnings per share are not materially different.
Total Comprehensive Income (Loss)
Total comprehensive loss amounted to €642 million in 2023, as compared to a total
comprehensive income of €166 million in 2022. The total comprehensive loss in the current
year is driven by the combination of a net loss of the year and total other comprehensive
loss, net of tax. GCP recorded other comprehensive loss of €3 million in the year 2023, as
compared to a other comprehensive loss of €13 million in the previous year. This line item is
mainly composed of changes in forward and other derivative contracts and foreign currency
impacts related to hedging activities mostly associated with the London portfolio, and
revaluation of owner-occupied property.
For the year ended 31 December
2023
2022
€’000
Profit (loss) for the year
(638,068)
179,103
Profit (loss) attributable to the owners of the Company
(547,507)
129,214
Profit attributable to the perpetual notes investors
33,700
24,750
Profit (loss) attributable to non-controlling interests
(124,261)
25,139
For the year ended 31 December
2023
2022
Basic earnings (loss) per share (in €)
(3.18)
0.77
Diluted earnings (loss) per share (in €)
(3.17)
0.76
Weighted average number of ordinary
shares (basic) in thousands
172,352
168,170
Weighted average number of ordinary
shares (diluted) in thousands
172,633
171,591
For the year ended 31 December
2023
2022
€’000
Profit (loss) for the year
(638,068)
179,103
Total other comprehensive loss
for the year, net of tax
(3,447)
(12,883)
Total comprehensive income (loss) for the year
(641,515)
166,220
GRAND CITY PROPERTIES S.A.
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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, excluding
the effects of property revaluations, capital gains, and other non-operational income
statement items such as equity settled share-based payments and other adjustments.
Adjusted EBITDA amounted to €320 million for the year 2023, increasing by 4% compared
to €308 million generated in 2022. The increase is mainly driven by the increase in the net
rental income generated as a result of the strong operational performance of the Company
reflected in the solid like-for-like rent increase of 3.3%.
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
attributable to the Company’s perpetual notes investors. Funds From Operations I (FFO I)
generated by GCP in the year 2023, amounted to €184 million, lower by 4%, as compared
to €192 million in 2022. The decrease in the FFO I is mainly driven by the higher finance
expenses as a result of the newly drawn secured debt in 2023 and higher expenses on
part of its existing debt that is variable,
as well as from an increase in the perpetual
notes attribution due to the reset of two perpetual notes at the end of January 2023 and
October 2023 where the coupon rates increased from 2.75% to 6.3% and from 2.5% to
5.9% respectively. The strong operational growth of the Company, reflected in a higher
adjusted EBITDA, partially offset the negative effect of the higher finance expenses.
For the year ended 31 December
2023
2022
€’000
Operating profit (loss)
(581,555)
412,802
Depreciation and amortisation
9,323
10,488
EBITDA
(572,232)
423,290
Property revaluations and capital gains (loss)
890,017
(117,761)
Equity settled share-based payments and
other adjustments
1,862
2,571
Adjusted EBITDA
319,647
308,100
Finance expenses
(56,814)
(46,914)
Current tax expenses
(40,865)
(39,120)
Contribution to minorities
(4,332)
(5,097)
Adjustment for perpetual notes attribution
(33,700)
(24,750)
FFO I
183,936
192,219
Weighted average number of ordinary shares
(basic) in thousands, including impact from
share-based payments
172,634
168,396
FFO I per share (in €)
1.07
1.14
Result from disposal of properties
71,772
8,603
FFO II
255,708
200,822
ADJUSTED EBITDA DEVELOPMENT
(in € millions)
2021
299
2023
2022
320
308
GRAND CITY PROPERTIES S.A.
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For the year ended 31 December
2023
2022
€’000
FFO I
183,936
192,219
Repositioning capex
(76,610)
(70,535)
AFFO
107,326
121,684
FFO I per Share
GCP recorded an FFO I per share of €1.07 in the reporting period, lower as compared to €1.14 in
2022. The per share metrics were also impacted by the higher average share count as compared
to the previous period due to the high participation rate in the scrip dividend.
FFO II
GCP recorded FFO II in the amount of €256 million in 2023, higher as compared to €201 million
in 2022. 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 initial acquisition cost plus all the capex invested into disposed properties. The
increase in FFO II is primarily driven by the higher disposal activity in 2023 as compared to
2022. In 2023, GCP disposed investment properties in the amount of €306 million generating
gains of €72 million over total costs, as compared to 2022 during which GCP disposed €18
million of properties generating €9 million of gains over total costs.
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
Company’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, and therefore increasing
the value, which GCP deems as being relevant for its AFFO calculation. GCP recorded AFFO
of €107 million in the reporting year, as compared to €122 million in 2022. The decrease
in this line item is mainly driven by the lower FFO I and the higher repositioning capex
invested in the year.
FFO I DEVELOPMENT
(in € millions)
2021
186
2023
2022
184
192
FFO I PER SHARE
ANNUAL DEVELOPMENT
(in €)
2021
1.11
2023
2022
1.07
1.14
Bremen
GRAND CITY PROPERTIES S.A.
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Cash Flow
Net cash provided by operating activities amounted to €249 million in the reporting period,
higher as compared to €216 million generated in 2022. The increase in the cash provided by
operating activities in 2023, is mainly driven by the strong operational growth, reflected in
the 4% increase in adjusted EBITDA. This line item was negatively impacted by cost inflation
mainly driven by the higher energy prices that increased operational costs. Timing difference
between the actual consumption cost of the heating expenses recovered from tenants and
the settlement of the payments by tenants increased the working capital needs, resulting to
a negative impact on the cash provided by operating activities. In the second half of 2023 the
trend of increasing operating cost receivables reversed as a result of settlement of service
charges with tenants. As a result, the negative impact was lower compared to 2022.
Net cash provided by investing activities amounted to €148 million in 2023, as compared
to net cash used in investing activities of €168 million in 2022. The successful disposals
of properties of €306 million in 2023 net of €85 million vendor loans granted, positively
impacted the cash flow from investment activities. Additionally, GCP received €50 million
for the repayments of loan-to-own assets. Capex investments during the year partially offset
the net cash provided by investing activities. These investments are aimed at enhancing the
rental growth and as a result enhancing the operational cashflow in the next years.
Net cash provided by financing activities amounted to €405 million in 2023, as compared
to net cash used in financing activities of €617 million in 2022. The positive net cash flow
position of the financing activities is mainly the result of the new bank financing raised
in the reporting year. Bond buybacks of €90 million notional amount partially offset the
net cash provided by financing activities. Furthermore, in 2023 GCP entered into a finance
lease agreement on a property in London and received €50 million proceeds. The proactive
measures taken by GCP allowed the Company to maintain a clean maturity profile with cash
and liquid assets covering debt maturities until the end of 2026. GCP, as of December 2023
has a hedging ratio of 88%, while cost of debt remains low at 1.9% with an average debt
maturity of 5.3 years.
As a result, in 2023, GCP recorded a net increase in cash and cash equivalents in the amount
of €803 million as compared to a net decrease of €568 million in 2022, driven by the positive
net cash flow from operating, investing, and financing activities. The large increase in the
cash balance in 2023 followed the Company’s target for the year 2023 to retain high cash
levels and maintain a stable leverage. The Company’s strong liquidity position, along with
the conservative financial profile provide the Company the ability to service its debt and be
secured against the increased market rates.
For the year ended 31 December
2023
2022
€’000
Net cash provided by operating activities
249,407
216,115
Net cash provided (used) by (in)
by investing activities
147,796
(167,689)
Net cash provided (used) by (in)
financing activities
405,304
(616,755)
Net increase (decrease) in cash and cash
equivalents
802,507
(568,329)
Changes in cash and cash equivalents held-
for-sale and effects of foreign exchange rate
1,734
(2,222)
Cash and cash equivalents as on 1 January
324,935
895,486
Cash and cash equivalents as on
31 December
1,129,176
324,935
GRAND CITY PROPERTIES S.A.
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Assets
As of December 2023, GCP’s total assets amounted to €10.9 billion, 2% lower as compared
to €11.1 billion as of December 2022.
Non-current assets amounted to €9.1 billion as of December 2023, a decrease of 9% as
compared to the non-current balance of €10 billion as of December 2022. The main component
of this line item is investment property. Investment property amounted to €8.6 billion as of
December 2023, lower by 9% as compared to €9.5 billion as of December 2022. The decrease
in the investment property is mostly a result of the negative revaluation recorded in the
Company’s portfolio as well as disposals. The negative revaluations were recorded in 2023
driven by the higher discount and cap rates as a result of higher interest rates. Additionally,
disposals of investment properties and reclassification of properties as assets held-for-
sale also impacted the decrease in the balance of investment property. During 2023, GCP
completed the disposal of €306 million of properties, at a discount of 3% to book value.
Non-current assets also include tenant deposits, which are used as a security for rent
payments, and which had a balance of €47 million as of December 2023. Long-term financial
investments are also part of the non-current assets and include co-investments in attractive
deals and are held with the expectation for long term yield and had a balance of around €50
million. Investments where the Company holds a minority position in real estate portfolios
and had a balance of €30 million are also included.
As of December 2023, vendor loans amounted to approx. €85 million. Vendor loans are
loans given to buyers of properties that were sold during 2023, with the primary purpose of
facilitating these transactions. These loans are backed by the sold properties themselves and
typically have an average LTV ratio of approximately 60% at the disposal date. In the event
of a borrower‘s default, the Company could repossess the assets at a discount (a process
involving a receiver) and impose penalties on the defaulted buyer. The expected cash flows
from these vendor loans will contribute to reducing the Company‘s overall leverage, although
conservatively they are not factored into the LTV calculation until payment is received.
As of December 2023, the balance of loans-to-own assets amounted to approximately
€40 million (including short term), as compared to €90 million to year-end 2022 due to
repayments. These loans-to-own assets represent interest-bearing loans, backed by assets
in case of default and include an embedded option to purchase the underlying asset at a
discounted price under specific conditions (process involve a receiver).
Current assets, as of December 2023, amounted to €1.8 billion, an increase of 62% as compared
to €1.1 billion as of December 2022. Cash and cash equivalents comprise the main component of
this line item. The increase in the current assets is mainly driven by a significant increase in the
cash and cash equivalents following GCP’s aim to increase its liquidity position and retain cash
in order to navigate the current market uncertainty. The increase in cash is mainly from new
bank financing, cash generated from operating activities, proceeds obtained from disposals,
and repayments received from loans associated with the loans-to-own. GCP maintains a strong
liquidity position with cash and liquid assets of €1.2 billion, representing 28% of total debt, and
including signed but net yet closed disposals, covering debt maturities until the end of 2026.
Trade and other receivables and assets held for sale are also included in the current assets.
As of December 2023, trade and other receivables amounted to €391 million, with approx.
€216 million in this line item comprised of operating cost receivables. In the second half of
2023 the trend of increasing operating cost receivables reversed as a result of settlement of
service charges with tenants. These operating costs receivables are settled once per year
against the advances received from tenants.
As of the end of December 2023, assets held for sale amounted to €196 million, as compared
to €344 million as of the end of December 2022. This line item represents properties intended
for disposal within the next 12 months. The decrease in this line item, is mainly driven by the
disposals during the reporting year, while the reclassification of investment property assets
as held-for-sale offset partially the decrease. Approx. €70 million of assets held for sale have
been signed for disposal and are expected to close in the coming periods.
Dec 2023
Dec 2022
€’000
Non-current assets
9,077,640
9,997,258
Investment property
8,629,083
9,529,608
Current assets
1,840,507
1,134,070
Cash and liquid assets (including those
recorded under held for sale)
1,230,483
429,127
Total Assets
10,918,147
11,131,328
GRAND CITY PROPERTIES S.A.
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Main Valuation Parameters
Liabilities
Total liabilities, as of the end of December 2023, amounted to €5.7 billion, higher as compared
to €5.2 billion as of the end of December 2022. Total liabilities mainly consist of straight bonds
and loans and borrowings, deferred tax liabilities, other long-term liabilities and derivatives
financial instruments, and current liabilities. The increase in this line item is mainly driven by
the new secured debt in 2023. However, bond buybacks at a discount and the decrease in the
deferred tax liabilities balance due to the revaluation losses partially offset the increase in the
total liabilities.
As part of GCP’s deleveraging and debt optimization strategy, the Company has continued
to take proactive measures to maintain the Company’s conservative debt profile and
enhance its liquidity position. GCP increased its strong liquidity position to €1.2 billion
as of the end of December 2023, up from €429 million in December 2022, and combined
with €70 million signed but not yet closed disposals, the cash and liquid assets covers
the Company’s debt maturities until the end of 2026, up from mid-2025 by the end of
December 2022. During 2023, the Company raised new secured bank debt of €550 million
with weighted average maturity of over 7.5 years. The Company also repurchased €90
million nominal value of straight bonds at discount, partially offsetting the increase in new
debt. The Company also has the flexibility to secure further bank financing in the future
due to the high ratio of unencumbered assets of 75% with a total value of €6.6 billion.
As of the end of December 2023, GCP’s cost of debt remains low at 1.9%, mostly hedged
against interest rate changes as a result of GCP’s 88% hedging ratio, and with an average
Main Average Valuation Parameters
2023
2022
Value per sqm
€2,109
€2,282
Market rental growth p.a.
1.9%
1.8%
Management cost per unit p.a.
€303
€291
Ongoing maintenance cost per sqm
€11.1
€10.2
Average discount rate
5.4%
4.8%
Average cap rate
4.1%
3.8%
(1)
including short-term derivative financial instruments
(2)
excluding current liabilities included in the items above
(1)
excluding properties classified as development rights & invest
Dec 2023
Dec 2022
€’000
Short and long term loans and borrowings
872,427
323,280
Straight bonds and bond redemption
3,559,897
3,612,105
Deferred tax liabilities (including those under
held for sale)
671,896
795,905
Other long-term liabilities and derivative financial
instruments
(1)
268,940
201,905
Current liabilities
(2)
314,878
283,978
Total Liabilities
5,688,038
5,217,173
Dec 2023
Dec 2022
€’000
(A) End of period annualised net rental income
(1)
405,529
392,810
(B) Investment property
(1)
8,478,502
9,285,162
(A/B) rental yield
4.8%
4.2%
(B/A) rent multiple
20.9x
23.6x
GRAND CITY PROPERTIES S.A.
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debt maturity of 5.3 years. GCP reserved additional financial flexibility through its €300
million in undrawn credit facilities.
Deferred tax liabilities, as of the end of December 2023, amounted to €672 million, a decrease
of 18%, as compared to the deferred tax liabilities balance of €796 million as of the end of
December 2022. Deferred tax liabilities take into account a hypothetical scenario where
investment properties are sold through asset transactions, applying a tax rate determined
by the specific location of the property. The decrease in this line item is the result of the
revaluation losses recorded in the year.
Other long-term liabilities and derivative financial instruments as of the end of December
2023, amounted to €269 million, an increase of approx. €70 million compared to the previous
year. The increase was partly due to the increase in financial lease liabilities in the amount of
€50 million, due to a commencement of a finance lease agreement on a property in London.
This transaction enhanced the liquidity position of the Company and provides financial
flexibility to the Company, as in return GCP is committed to a low lease payment of 3.5% into
perpetuity.
As of December 2023, current liabilities amounted to €315 million, higher as compared
to €284 million as of the end of December 2022. Prepayments received from tenants are
the main driver of the increase in this line item. Current liabilities include trade and other
payables, deferred tax liabilities, liabilities held for sale, and other current liabilities.
Equity
Total equity amounted to €5.2 billion as of the end of December 2023, lower as compared
to €5.9 billion as of the end of December 2022. The decrease is driven by the net loss
recorded in the year, mainly as a result of the negative revaluation of the investment
property portfolio. The decrease was partially offset by the Company’s strong operational
result. GCP maintains a strong capital structure, with an equity ratio of 48% as of the end
of December 2023.
Equity attributable to perpetual notes investors amounted to €1.2 billion as of the end of
December 2023, stable as compared to €1.2 billion as of the end of December 2022. GCP, as
part of its measures to maintain a conservative financial profile, announced its decision not to
call the €200 million perpetual notes series in January 2023 and the €350 million perpetual
notes series in October 2023. The Company decided not to call the perpetual notes due to the
considerably higher cost of issuing new notes for replacement compared to the coupon reset
price of the notes. The reset coupon rates amounted to 6.3% and 5.9%, respectively, resulting
in annualised €19 million higher coupon 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, which supports the classification of the perpetual
notes as equity according to IFRS. Going forward, the Company will continue to assess all its
options regarding its perpetual notes.
Non-controlling interests amounted to €516 million as of the end of December 2023, lower as
compared to €666 million as of the end of December 2022. The decrease is mainly driven by
the loss recorded in the period attributed to non-controlling interests and due to distribution of
profits to minorities.
Dec 2023
Dec 2022
€’000
Total Equity
5,230,109
5,914,155
of which equity attributable to the owners of the Company
3,477,627
4,020,773
of which equity attributable to perpetual notes investors
1,236,693
1,227,743
of which non-controlling interests
515,789
665,639
GRAND CITY PROPERTIES S.A.
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Debt Financing KPIs
GCP maintains a conservative financial approach as a key element of its business strategy,
as evidenced by strong debt financing KPIs such as a low LTV ratio, a significant pool of
unencumbered assets, and robust coverage ratios.
As of the end of December 2023, GCP had an LTV ratio of 37%, broadly stable as compared
to 36% as of the end of December 2022 and well below the internal board-mandated limit of
45% and the limits imposed by the Company’s bond covenants. GCP also maintained strong
coverage ratios driven by the solid operational performance. GCP had a solid ICR of 5.6x
and a DSCR of 5.2x in 2023, as compared to 6.6x and 6.1x respectively in 2022, impacted
by the precautionary measures taken by the Company to strengthen the liquidity position.
These metrics illustrate the Company’s capacity to meet its debt obligations. The large pool of
unencumbered assets of €6.6 billion, representing 75% of total investment property portfolio
value, provides also significant financial flexibility which provides the option of raising secured
financing debt at relatively favorable interest rates.
The Company’s conservative financial profile with a low
LTV and high coverage ratios provides broad access to both
public and private capital markets, further supported by its
investment grade credit ratings from S&P (BBB+/Negative)
as of December 2023, and unsolicited rating by Moody’s
(Baa1/Negative).
The EPRA LTV is addressed in the EPRA Performance
Measures section of the report.
UNENCUMBERED ASSETS
Dec 2023
Dec 2022
€’000
(A) Unencumbered Assets
6,606,947
8,664,533
(B) Total Investment Property (including
those under held for sale)
8,824,724
9,860,461
(A/B) Unencumbered Assets Ratio
75%
88%
For the year ended 31 December
INTEREST COVERAGE RATIO (ICR)
2023
2022
€’000
(A) Adjusted EBITDA
319,647
308,100
(B) Finance Expenses
56,814
46,914
(A/B) Interest Coverage Ratio
5.6x
6.6x
For the year ended 31 December
DEBT SERVICE COVERAGE
RATIO (DSCR)
2023
2022
€’000
(A) Adjusted EBITDA
319,647
308,100
(B) Finance Expenses
56,814
46,914
(C) Amortisation of loans from
financial institutions
4,417
3,766
[A/(B+C)] Debt Service Coverage Ratio
5.2x
6.1x
(1)
including advanced payments and deposits and excluding right-of-use assets
LOAN-TO-VALUE
Dec 2023
Dec 2022
€’000
Investment property
(1)
8,544,738
9,492,946
Investment properties of assets held-for-sale
(1)
191,773
327,586
(A) Total value
8,736,511
9,820,532
Total debt
4,432,324
3,935,385
Cash and liquid assets (including those under held for sale)
1,230,483
429,127
(B) Net debt
3,201,841
3,506,258
(B/A) LTV
37%
36%
Dec 2023
Dec 2022
36%
37%
LTV
BoD Limit
Low leverage
45% Board of Directors’ limit
GRAND CITY PROPERTIES S.A.
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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 performance
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 different
companies.
2023
2022
In €‘000 unless otherwise indicated
EPRA NRV
4,606,481
5,322,769
EPRA NRV per share (in €)
26.7
30.8
EPRA NTA
*
4,013,761
4,655,551
EPRA NTA per share
*
(in €)
23.2
27.0
EPRA NDV
3,745,313
4,642,313
EPRA NDV per share (in €)
21.7
26.9
EPRA Earnings
187,378
182,702
EPRA Earnings per share (in €)
1.09
1.09
EPRA LTV
48%
46%
EPRA Net initial yield (NIY)
3.6%
3.2%
EPRA "topped-up" NIY
3.6%
3.2%
EPRA Vacancy
3.8%
4.2%
EPRA Cost Ratio (incl. direct vacancy costs)
22.7%
22.9%
EPRA Cost Ratio (excl. direct vacancy costs)
20.8%
20.9%
EPRA PERFORMANCE MEASURES
Bonn
(*) updated methodology to exclude RETT
GRAND CITY PROPERTIES S.A.
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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
stakeholders 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 Company 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
crystallising 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. Prior to 2023 GCP reported EPRA NTA including RETT. The Company decided to
update the methodology and no longer adds back RETT to its standard EPRA NTA. Starting
H1 2023 GCP no longer reports the reconciliation to EPRA NTA including RETT and therefore
2022 numbers have been reclassified.
EPRA Net Disposal Value (NDV)
represents the shareholders’ value under a disposal
scenario, 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 2023
Dec 2022
Equity attributable to the owners of the Company
3,477,627
3,477,627
3,477,627
4,020,773
4,020,773
4,020,773
Deferred tax liabilities on investment property
(1)
665,331
(2)
559,911
(3)
-
778,490
(2)
664,886
(3)
-
Fair value measurements of derivative financial instruments
(4)
(17,987)
(17,987)
-
(19,106)
(19,106)
-
Intangible assets and goodwill
-
(5,790)
-
-
(11,002)
-
Real estate transfer tax
481,510
-
-
542,612
-
-
Net fair value of debt
-
-
267,686
-
-
621,540
NAV
4,606,481
4,013,761
3,745,313
5,322,769
4,655,551
4,642,313
Basic number of shares including in-the-money
dilution effects (in thousands)
172,640
172,607
NAV per share (in €)
26.7
23.2
21.7
30.8
27.0
26.9
(1)
including deferred tax liabilities on derivative financial instruments
(2)
including balances held-for-sale
(3)
excluding deferred tax liabilities on assets held for sale, non-core assets and development rights in Germany
(4)
not including net change in fair value of derivative financial instruments related to currency effects
* EPRA NTA was reclassified in 2023 to exclude RETT
GRAND CITY PROPERTIES S.A.
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EPRA NRV
As of the end of December 2023, the Company recorded an EPRA NRV in the amount of
€4.6 billion or €26.7 per share, both decreasing by 13% as compared to €5.3 billion and
€30.8 as of year-end 2022. The NRV metric adds back the full amount of deferred tax as
well as the real estate transfer tax as it assumes that entities never sell assets and aims to
represent the value required to rebuild the Company. The decrease on both metrics is driven
primarily by the negative revaluation of the investment property portfolio, partially offset by
the operational profit of the Company.
EPRA NTA
As of the end of December 2023, the Company recorded an EPRA NTA in the amount of €4
billion or €23.2 per share, both decreasing by 14%, as compared to €4.7 billion and €27.0 per
share as of the end of December 2022. The decrease, as in the EPRA NRV, is primarily the
result of the negative revaluation, partially offset by the operational profits.
The EPRA NTA portrays the normal business environment where company’s buy and sell
assets thereby incurring a certain amount of unavoidable deferred tax of the properties sold.
Prior to 2023 GCP reported EPRA NTA including RETT. The Company decided to update the
methodology and no longer adds back RETT to its standard EPRA NTA. Starting H1 2023 GCP
no longer reports the reconciliation to EPRA NTA including RETT. 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.
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.
•
Development rights in Germany:
As part of GCP’s value creation process, the company
identifies development potential and works to obtain the relevant development rights.
Once the development rights are granted, GCP decides whether to dispose the rights or
to develop the projects. As GCP is expected to dispose a portion of the building rights on
an opportunistic basis, the deferred tax regarding the building rights is not added back
in the NTA calculation.
*
all investment properties, excluding investment properties held-for-sale, investment properties in cities
classified as „Others“ and development rights in Germany
Particulars
Fair Value
as %
of portfolio
% of deferred
tax added
back
€’000
Portfolio to be held long term*
7,621,271
87%
100%
Investment properties held-for-sale
195,641
2%
0%
Portfolio cities classified as "Others"
880,732
10%
0%
Development rights in Germany
127,080
1%
0%
Total (including assets classified
as held-for-sale)
8,824,724
100%
GRAND CITY PROPERTIES S.A.
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EPRA NDV
As of the end of December 2023, the Company recorded an EPRA NDV
amounted to €3.7 billion or €21.7 per share, both lower by 19%, as compared
to €4.6 billion or €26.9 per share at the end of December 2022. The EPRA
NDV represents 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. Apart from
lower equity, the decrease is also driven by higher market values of the
Company’s debt as a result of a decrease in market rates as of December
2023 compared to December 2022.
EPRA NAV METRICS DEVELOPMENT
(in €)
EPRA NAV METRICS DEVELOPMENT
(in € millions)
EPRA NDV P.S
EPRA NDV
EPRA NTA P.S
EPRA NTA
EPRA NRV P.S
EPRA NRV
Dec 2022
Dec 2022
Dec 2022
Dec 2022
Dec 2022
Dec 2022
Dec 2023
Dec 2023
Dec 2023
Dec 2023
Dec 2023
Dec 2023
21.7
26.9
23.2
27.0
26.7
30.8
3,745
4,642
4,606
5,323
4,014
4,656
-13%
-19%
-14%
-19%
-14%
-13%
Berlin
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The EPRA Earnings is intended to serve as a key
indicator of the fundamental operational profits for the
year within the context of a real estate company and is
intended to measure the extent to which the Company’s
dividend distribution 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 believes FFO I to be a
better measure of recurring operational profits which is
further supported by the fact that its dividend payout
policy is based on the FFO I metric.
GCP recorded EPRA Earnings in the amount of €187 million
in 2023, higher by 3% as compared to €183 million in 2023.
EPRA Earnings per share amounted to €1.09 in 2023,
stable as compared to €1.09 for the year 2022.
The bridge to FFO I adjusts for one-off expenses as well
as non-cash charges while including the perpetual notes
attribution, which has increased by €9 million in 2023
compared to 2022.
For the year ended 31 December
2023
2022
€’000
Earnings (loss) per IFRS income statement
(638,068)
179,103
Property revaluations and capital gains (loss)
890,017
(117,761)
Change in fair value of financial assets and liabilities, net
67,015
115,925
Deferred tax (income) expenses
(127,254)
10,532
Contribution to minorities
(4,332)
(5,097)
EPRA Earnings
187,378
182,702
Weighted average number of ordinary shares (basic) in thousands
172,352
168,170
EPRA Earnings per share (in €)
1.09
1.09
Bridge to FFO I
Add back: Depreciation
9,323
10,488
Add back:
Finance-related costs
19,073
21,208
Add back:
Equity settled share-based payments and other adjustments
1,862
2,571
Less: Adjustment for perpetual notes attribution
(33,700)
(24,750)
FFO I
183,936
192,219
Weighted average number of ordinary shares (basic) in thousands,
including impact from share-based payments
172,634
168,396
FFO I per share (in €)
1.07
1.14
EPRA Earnings
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Dec 2023
Consolidated
(as reported)
Share of
Joint
Ventures
Share of
material
associates
Material
non-
controlling
interests
Proportionate
consolidation
€’000
Total debt
4,432,324
-
-
-
4,432,324
Equity attributable to
perpetual notes investors
1,236,693
-
-
-
1,236,693
Net foreign currency
derivatives on debt
(50,124)
-
-
-
(50,124)
EPRA Gross Debt
5,618,893
-
-
-
5,618,893
Less:
-
Cash and liquid assets
(including those under
held for sale)
(1,230,483)
-
-
-
(1,230,483)
(A) EPRA Net Debt
4,388,410
-
-
-
4,388,410
Owner occupied
property
47,577
-
-
-
47,577
Investment property
(1)
8,544,738
-
-
-
8,544,738
Investment properties
of assets held-for-sale
(1)
191,773
-
-
-
191,773
Intangible assets
5,790
-
-
-
5,790
Financial assets
129,079
-
-
-
129,079
Net receivables
152,896
-
-
-
152,896
(B) EPRA Net Assets
9,071,853
-
-
-
9,071,853
(A/B) EPRA LTV
48%
48%
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
perpetual notes investors
1,227,743
-
-
-
1,227,743
Net foreign currency
derivatives on debt
(44,276)
-
-
-
(44,276)
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%
(1) including advanced payments and deposits and excluding right-of-use assets
EPRA Loan to Value (EPRA LTV)
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EPRA Loan to Value (EPRA LTV)
The EPRA Loan-To-Value (LTV) is a metric which aims to assess the leverage of the
shareholder 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 considered 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
and protective to all debt types, and not carrying any covenants and is considered as 100%
equity also for the bond covenant calculations. 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. GCP views its LTV calculation as a better measure of leverage and the debt
position which is closer aligned with the bond covenant calculations. However, for enhanced
transparency the Company presents both LTV metrics.
EPRA LTV amounted to 48% as of December 2023, as compared to 46% as of December
2022. The increase in the EPRA LTV is mainly driven by the relatively stronger decrease in the
EPRA Net Assets as a result of the negative revaluation in 2023. EPRA Net Debt decreased
as well, primarily as a result of operational profits and disposals strengthening the liquidity
position.
London
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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
properties, excluding the value of properties classified as development rights & invest, 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.
The Company’s portfolio had an EPRA NIY of 3.6% as of the end of December 2023, higher
as compared to December 2022. The NIY increased as a combined result of higher annualised
net rent as a result of solid net operational growth as well as the lower portfolio value, which
was impacted by negative revaluations. The NIY increase between the periods was offset by
disposals which were carried at a higher-than-average yield.
Dec 2023
Dec 2022
€’000
Investment property
8,629,083
9,529,608
Investment properties of assets held-for-sale
195,641
330,853
Less: Classified as development rights & invest
(182,199)
(309,763)
Complete property portfolio
8,642,525
9,550,698
Allowance for estimated purchaser‘s costs
634,036
705,145
(A) Gross up complete property portfolio valuation
9,276,561
10,255,843
End of period annualised net rental income
(including impact from assets held for sale)
412,452
404,720
Operating costs
(1)
(82,851)
(81,572)
(B) Annualised net rent, aſter non-recoverable costs
329,601
323,148
(C) Topped-up net annualised rent
329,601
323,148
(B/A) EPRA NIY
3.6%
3.2%
(C/A) EPRA “topped-up” NIY
3.6%
3.2%
(1) to reach annualised operating costs, cost margins were used for each respective period
Mannheim
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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.
GCP’s portfolio had an EPRA Vacancy of 3.8%, as of the end of December 2023, lower as
compared to 4.2% as of December 2022. The historic low vacancy rate recorded in 2023 is
mainly the result of the strong letting performance of the Company, reflecting the strong
demand in GCP’s portfolio locations.
Dec 2023
Dec 2022
€’000
(A) Estimated rental value (ERV) of vacant space
16,179
17,147
(B) December annualised net rent including
vacancy rented at ERV
421,708
409,957
(A/B) EPRA Vacancy Rate
3.8%
4.2%
Hannover
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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
Company’s direct administrative expenses and property operating expenses (including non-recoverable service charges as well as share-based payments) by the rental income for the year,
excluding ground rents. The ratio is calculated both including and excluding the direct vacancy costs.
GCP’s EPRA Cost Ratios, both including and excluding direct vacancy costs, stood at 22.7% and 20.8%, as of 2023, respectively, as compared to 22.9% and 20.9% as of 2022. The decrease in the
EPRA Cost Ratios is mainly the result of solid operational growth, which outpaced cost inflation.
For the year ended 31 December
2023
2022
€’000
Property operating expenses, net
60,435
58,100
Maintenance and refurbishment
22,187
21,723
Administrative and other expenses
10,906
10,689
(A) EPRA Costs (including direct vacancy costs)
93,528
90,512
Direct vacancy costs
(8,072)
(7,644)
(B) EPRA Costs (excluding direct vacancy costs)
85,456
82,868
Revenue
607,741
582,505
Less: operating and other income
(196,428)
(186,464)
(C) Rental income, net
411,313
396,041
(A/C) EPRA Cost Ratio (including direct vacancy costs)
22.7%
22.9%
(B/C) EPRA Cost Ratio (excluding direct vacancy costs)
20.8%
20.9%
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EPRA Capital Expenditure
GCP recorded EPRA property-related capex in the amount of €111 million in 2023, as
compared to €417 million in 2022. EPRA property-related capex is comprised of expenditures
on acquisitions, pre-letting modifications and others, repositioning capex, as well as
modernisation. The decrease in EPRA property-related capex was primarily a result of the
Company not executing material acquisitions in 2023. Acquisition costs represent the gross
expenditure related to the acquisition of investment properties, including transaction costs.
Pre-letting modifications and others amounted to €15 million in 2023. These investments
relate to completing the newly constructed buildings, along with reopening converted or
renovated properties in the pre-leasing phase, as they undergo preparations for lease. The
investments in 2023 was significantly lower than in 2022 as many projects were finished in
2022 and the Company has been more selective in starting new projects.
GCP also invested €77 million in repositioning capex in 2023, which is comprised of
investments that focus on increasing the quality and offerings of assets in the portfolio
and their surrounding areas. Examples of these investments include apartment renovations
and preparation for reletting, improvements to corridors and staircases, façade refits and
the additions or renovation of playgrounds, barbeque pits, study rooms and other common
meeting areas.
Additionally, GCP invested €10 million in modernisation projects in 2023, relatively stable as
compared to €10 million in 2022. These projects include measures such as installing green
energy and heating systems and adding better insulation and windows, among others.
For the year ended 31 December
2023
2022
€’000
Acquisitions
10,079
277,668
Pre-letting modifications and others
14,792
58,928
Repositioning capex
76,610
70,535
Modernisation
9,647
10,184
EPRA property-related capex
111,128
417,315
Essen
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Reconciliation of Adjusted EBITDA
The adjusted EBITDA is an industry standard figure indicative
of the Company’s recurring operational profits before interest
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
profit from investment in equity-accounted investees and
other adjustments. GCP starts from its
Operating profit
and
adds back the item
Depreciation
and
amortisation
to arrive at
the
EBITDA
value. Non-recurring and non-operational items
are deducted such as the
Property revaluations and capital
gains, Result on the disposal of buildings and Share of profit
from investment in equity-accounted investees
. Further
adjustments are labelled as
Equity settled share-based
payment and other adjustments,
which are subtracted since
these are non-cash expenses.
Adjusted EBITDA reconciliation
Operating Profit
(+)
Depreciation and amortisation
(=)
EBITDA
(+/-)
Property revaluations and capital gains
(+/-) Result on the disposal of buildings
(+/-) Share of profit from investment in equity-accounted investees
(+/-) Equity settled share-based payments and other adjustments
(=) Adjusted EBITDA
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
estate company, oſten utilised as a key industry performance
indicator. It is calculated by deducting the
Finance expenses
,
Current tax expenses, Contribution to minorities, Adjustment
for perpetual notes attribution and adding the Contribution
from joint ventures,
to the
Adjusted EBITDA.
To arrive at the
FFO I per share
the
FFO I
is divided by the
Weighted average
number of ordinary shares (basic) in thousands, including
impact from share-based payments,
which reflects the impact
of the
Equity settled share-based payments
adjustment in the
Adjusted EBITDA.
FFO I reconciliation
Adjusted EBITDA
(-) Finance expenses
(-) Current tax expenses
(-) Contribution from/(to) joint ventures and minorities, Net
(-) Adjustment for perpetual notes attribution
(=) (A) FFO I
(B) Weighted average number of ordinary shares (basic) in
thousands, including impact from share-based payments
(=) (A/B) FFO I per share
Reconciliation of Funds From Operations II (FFO II)
FFO II additionally incorporates on top of the
FFO I
the r
esults
from asset disposals
, 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.
FFO II Reconciliation
FFO II
FFO I
(+/-) Result from disposal of properties
(=) FFO II
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.
GRAND CITY PROPERTIES S.A.
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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
Repositioning capex
from the
FFO I
to arrive at the
AFFO
.
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 Assets,
each as indicated in the consolidated financial statements.
GCP believes that the Equity Ratio is useful for investors
primarily to indicate the long-term solvency position of the
Company. The Equity Ratio is calculated by dividing the
Total
Equity
by the
Total Assets
, both as per the consolidated
financial statements of the Company.
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 specifications,
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
Investment property
which includes
the
Advanced payments and deposits, inventories - trading
properties, Investment properties of assets held for sale and
the investment in equity-accounted investees and excludes
right-of-use assets
. For the calculation of net debt, total
Cash and liquid assets
are deducted from the
Straight bonds,
Convertible Bonds and Total loan and borrowings.
Total loan
and borrowings include the
Short-term loans and borrowings,
debt redemption,
and
Financial debt held for sale
while Straight
bonds and Convertible bonds include
Bond redemption.
Cash
and liquid assets is the sum of
Cash and cash equivalents,
Financial assets at fair value through profit and loss,
and
Cash
and cash equivalents held for sale.
(1)
including advanced payments and deposits, inventories - trading properties and ex-
cluding right-of-use assets
(2)
excluding right-of-use assets
(3)
including loans and borrowings held for sale
(4)
including cash and cash equivalents held for sale
Reconciliation of Rental Yield and Rent Multiple
The rental yield and rent multiple are industry standard
measures that indicate the rent generation potential of a
property portfolio relative to the value of that property
portfolio and are generally used as
key valuation indicators
by market participants.
The
rental yield
is derived by dividing the
end of period
annualised net rental income
, by the
Investment
property
.
The
end of period annualised net rental income
represents the
annualised monthly in-place rent of the related
investment
property
as at the end of the period. The rent multiple reflects
the inverse of the rental yield and is derived by dividing the
Investment property
by the
end of period annualised net rental
income
. As the Company’s assets classified as
development
rights & invest
do not generate material rental income, these
are excluded from the calculation for enhanced comparability.
GCP additionally reports rental yield and/or rent multiple
on a more granular basis, such as in its portfolio breakdown
or in relation to specific transactions, to provide enhanced
transparency and comparability on its property portfolio in
specific locations and/or in relation to transaction activity.
(1)
excluding properties classified as development rights & invest
AFFO reconciliation
FFO I
(-) Repositioning capex
(=) AFFO
Rental yield and rent multiple reconciliation
(A) end of period annualised net rental income
(1)
(B) Investment property
(1)
= (A/B) rental yield
= (B/A) rent multiple
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
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Reconciliation of Net Debt-to-EBITDA and Net
Debt-to-EBITDA including perpetual notes
The
Net
debt-to-EBITDA
is
another
acknowledged
measurement 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 calculates the
Net debt-to-EBITDA
ratio by dividing the
total
Net debt
as at the balance sheet date by the
adjusted
EBITDA
(annualised)
for the period. The
adjusted EBITDA
(annualised)
is computed by adjusting the
adjusted EBITDA
(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 adjustment is made.
GCP additionally provides the
Net debt-to-EBITDA
ratio by
adding
its Equity attributable to perpetual notes investors
as at the balance sheet date to the
Net Debt
. While GCP’s
perpetual 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 therefore additionally provides this metric including the
full balance sheet amount of Equity attributable to perpetual
notes investors.
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
flexibility 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
Unencumbered investment
property
of the portfolio by the
Total investment properties
which is the sum of
Investment property, Inventories - trading
property
and
Investment properties of assets held for sale.
* including investment properties, investment properties of assets held for sale and
inventories - trading property
Net Debt-to-EBITDA Reconciliation
(A) Net debt
(B) Adjusted EBITDA (annualised)
(=) (A/B) Net debt-to-EBITDA
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
Unencumbered Assets Ratio reconciliation
(A) Unencumbered assets
(B) Total investment properties*
(=) (A/B) Unencumbered Assets Ratio
GRAND CITY PROPERTIES S.A.
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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
metrics 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 available
aſter debt obligations. Therefore, ICR is calculated by dividing
the
Adjusted EBITDA
by the
Finance expenses
and DSCR is
calculated by dividing the
Adjusted EBITDA
by the
Finance
expenses
plus the
Amortisation of loans from financial
institutions.
With this ratio, GCP is able to show that with its
high profitability and long-term oriented conservative financial
structure, GCP consistently exhibits high debt cover ratios.
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 excludes
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 required 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
Equity
attributable to the owners of the Company
and adds
back
Deferred tax liabilities on investment property fair
value measurements of derivative financial instruments.
Further, the EPRA NRV includes
real estate transfer tax
in
order to derive the
EPRA NRV
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
EPRA NDV
per share
the
EPRA NDV
is divided by the
Basic number of
shares including in-the-money dilution effects (in thousands).
(1)
including balances held-for-sale, and including deferred tax liabilities on derivatives
(2)
not including net change in fair value of derivative financial instruments related to
currency effect
Reconciliation of the Net Tangible Assets
according to EPRA (EPRA NTA)
The Net Tangible Assets 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.
Prior to the 2023 Consolidated Annual Report, GCP reported
EPRA NTA including RETT. Due to market conditions the
Company decided to update the methodology and no longer
adds back RETT to its standard EPRA NTA.
The reconciliation of the EPRA NTA begins at the
Equity
attributable to the owners of the Company
and adds back
Deferred tax liabilities on investment property
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,
intangible assets as per the IFRS Balance sheet
is
subtracted and
fair value measurements of derivative financial
instruments
are considered for this measure of valuation by
EPRA. To arrive at the
EPRA NTA
per share
the
EPRA NTA
is
divided by the Basic
number of shares including in-the-money
dilution effects (in thousands).
(1)
excluding deferred tax liabilities
on non-core assets, assets held for sale and de-
velopment rights in Germany, including deferred tax liabilities on derivatives
(2)
not including net change in fair value of derivative financial instruments related to
currency effect
EPRA NTA Reconciliation
Equity attributable to the owners of the Company
(+) Deferred tax liabilities
(1)
(+/-) Fair value measurements of derivative financial instruments, net
(2)
(-) Intangible assets and goodwill
(+) Real Estate Transfer Tax
(1)
(=) (A) EPRA NTA
(B) Basic number of shares including in-the-money dilution
effects (in thousands)
(=) (A/B) EPRA NTA per share
EPRA NRV Reconciliation
Equity attributable to the owners of the Company
(+) Deferred tax liabilities
(1)
(+/-) Fair value measurements of derivative financial
instruments, net
(2)
(+) Real Estate Transfer Tax
(1)
(=) (A) EPRA NRV
(B) Basic number of shares including in-the-money
dilution effects (in thousands)
(=) (A/B) EPRA NRV per share
DSCR Reconciliation
(A) Adjusted EBITDA
(B) Finance expenses
(C) Amortisation of loans from financial institutions
(=) [A/(B+C)] DSCR
ICR Reconciliation
(A) Adjusted EBITDA
(B) Finance expenses
(=) (A/B) ICR
GRAND CITY PROPERTIES S.A.
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132
Reconciliation of the Net Disposal Value
according to EPRA (EPRA NDV)
The Net Disposal Value 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. 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
Equity attributable to the owners of the Company
and
includes the
Net fair value of debt.
The adjustment is the
difference between the market value of debt and book value
of debt. To arrive at the
EPRA NDV
per share the
EPRA NDV
is
divided by the
Basic number of shares including in-the-money
dilution effects (in thousands).
EPRA Earnings
The EPRA Earnings indicator is intended to serve as a key
indicator of the underlying operational profits for the year in
the context of a real estate company, intended to measure the
extent to which the Company’s dividend distribution is covered
by its operational income. GCP computes EPRA Earnings by
excluding from its IFRS Earnings,
Property revaluations and
capital gains, Result on the disposal of buildings, Changes in
the fair value of financial assets and liabilities (net), Deferred
tax expenses, its Share of profit from investment in equity-
accounted investees, Contribution to minorities and adding the
Contribution from joint ventures.
To arrive at the
EPRA Earnings
per share
the
EPRA Earnings
is divided by the
Weighted
average number
of ordinary shares (basic) in thousands.
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
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
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
GRAND CITY PROPERTIES S.A.
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Board of Directors' Report - Business performance & analysis
133
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 within
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
EPRA
LTV
is calculated by dividing the
EPRA Net debt
by
EPRA
Net Assets. EPRA Net debt
is composed of
EPRA Gross
Debt
subtracted by
Cash and liquid assets
.
EPRA Gross
Debt
is calculated from
Total financial debt
which is the
sum of the current and non-current portions of
Loans and
borrowings
,
Convertible Bonds, Straight Bonds
and adds
to this
Foreign currency derivatives, Equity attributable to
perpetual notes investors,
and
Net Payables
(if applicable).
EPRA Net Assets
is calculated by adding together
Owner-
occupied property, Investment property
and
Investment
properties of assets held-for-sale
(each excluding right-
of-use assets),
Intangible assets, Financial Assets
and
Net
receivables
(if applicable).
Net receivables
or
Net payables
are
Payables
net of
Receivables
, 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
Share of net debt
of joint ventures
(in EPRA Gross Debt),
Share of Investment
properties of joint ventures
(in EPRA Gross Assets), and
the
Net minority impact of material minorities
(applicable
to both assets and liabilities) which would be added to the
EPRA LTV calculation if applicable.
(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.
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
GRAND CITY PROPERTIES S.A.
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134
EPRA Cost Ratios
EPRA Cost Ratio is a key measure to enable meaningful
measurement of the changes in a company’s operating costs
as well as comparability between companies. EPRA Costs
(including direct vacancy costs) is the sum of non-recoverable
operational expenses, maintenance and refurbishment,
administrative expenses
and the
share of expenses from
investments in equity accounted investees
related to the
above. EPRA Costs (excluding direct vacancy costs) eliminate
direct vacancy costs from the EPRA Costs (including direct
vacancy costs).
* including share of operating expenses recovered from tenants
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
Estimated Rental Value (ERV) of vacant space
divi-
ded by the
annualised rental value of the portfolio, including
vacancy rented at ERV
,
for a given month.
(1)
including net rental income from assets held for sale and GCP’s share in equity-ac-
counted investees
(2)
to reach annualised operating costs, cost margins were used for each respective period
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 properties) 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.
The fair value of the full property portfolio is the sum of
investment property, share of investment properties in equity
accounted investees, investment properties from assets
held for sale as well as the inventories - trading properties.
Properties classified as development rights & invest 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
allowance
for estimated
purchaser’s cost.
The
annualised net rental income
is arrived
by subtracting
non-recoverable property operating costs
based on cost margins for comparability.
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 & invest
(=) 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 Cost Ratios reconciliation
EPRA Cost Ratios
(+) Property operating expenses, net
(+) 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)
Revenue
(-) Operating and other 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)
EPRA Vacancy rate reconciliation
(A) ERV of vacant space, for a given month
(B) annualised rental value of the portfolio, including vacancy
rented at ERV, for a given month
(=) (A/B) EPRA Vacancy rate
GRAND CITY PROPERTIES S.A.
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Board of Directors' Report - Business performance & analysis
135
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.
Acquisitions
represent the amount spent for the purchase of
investment properties including capitalized transaction costs.
Pre-letting modifications and others
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.
Repositioning
Capex
comprise of costs involved in improving
the long-term asset quality.
Modernisation
refers to capex carried on a targeted basis
aimed at further improving the quality of the portfolio and
increasing rents.
Berlin
EPRA capital expenditure
(+) Acquisitions
(+) Pre-letting modifications and others
(+) Repositioning Capex
(+) Modernisation
(=) EPRA capital expenditure
GRAND CITY PROPERTIES S.A.
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Board of Directors' Report - Business performance & analysis
136
Dresden
Frankfurt
GRAND CITY PROPERTIES S.A.
I
Board of Directors' Report - Business performance & analysis
137
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 informa-
tion presented in this report is examined from the perspective of the
Company including its portfolio. In several cases, additional infor-
mation 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, 13 March 2024
Christian Windfuhr
Chairman and member
of the Board of Directors
Simone Runge-Brandner
Member of the
Board of Directors
Markus Leininger
Member of the
Board of Directors
138
To the Board of Directors of
Grand City Properties S.A.
37, Boulevard Joseph II,
L-1840 Luxembourg
Grand Duchy of Luxembourg
INDEPENDENT LIMITED
ASSURANCE REPORT
We were engaged by the Board of Directors (the “Management”) of Grand City Properties S.A. (“the
Company”) to report on the Company’s statements and indicators (the “sustainability disclosures
information”) that are disclosed in the Company’s Non-Financial Report 2023 (the “Report”), for the
selected ESG topics and KPIs related to the year 2023, as listed in Appendix I:
y
Energy and Carbon Emissions
y
Environmental Compliance
y
Diversity and Equality
y
Employment and Skills
in the form of an independent limited assurance conclusion as to whether the sustainability disclosures
information is prepared and presented in all material respects in accordance with EPRA Sustainability
Best Practices Recommendations (“EPRA SBPR”) Guidelines dated September 2017, and the EU
Regulation 2020/852 on EU Taxonomy for Sustainable activities (Article 8) (the “Criteria”).
Responsibilities of the Management of the Company
Management of the Company is responsible for the preparation and presentation of the sustainability
disclosures information as reported in the Report in accordance with the Criteria. This responsibility
includes designing, implementing and maintaining internal control relevant to the preparation of the
sustainability disclosures information.
Management is responsible for preventing and detecting fraud and for identifying and ensuring that the
Company complies with laws and regulations applicable to its activities.
Management is also responsible for ensuring that staff involved with the preparation and presentation
of the sustainability disclosures information as reported in the Report are properly trained, information
systems are properly updated and that any changes in reporting encompass all significant business units.
Our Responsibilities
Our responsibility is to examine the sustainability disclosures information as described in the Report
and to report thereon in the form of an independent limited assurance conclusion based on the evidence
obtained. We conducted our engagement in accordance with International Standard on Assurance
Engagements (ISAE) 3000, Assurance Engagements other than Audits or Reviews of Historical Financial
Information, issued by the International Auditing and Assurance Standards Boards as adopted for
Luxembourg by the Institut des Réviseurs d’Entreprises (hereaſter “IRE”).
That Standard requires that we plan and perform the engagement to obtain limited assurance about
whether the sustainability disclosures information as reported in the Report is properly prepared and
presented in all material respects in accordance with the Criteria and is free from material misstatement.
Our firm applies International Standard on Quality Management 1, “Quality Management for Firms
that Perform Audits or Reviews of Financial Statements, or Other Assurance and Related Services
Engagements” (“ISQM 1”), as adopted for Luxembourg by the Commission de Surveillance du Secteur
Financier (CSSF) and accordingly, maintains a comprehensive system of quality control including the
design, implementation and operation of a system of quality management of audits or reviews of
financial statements, or other assurance and related services engagements.
We have complied with the independence and other ethical requirements of the International Ethics
Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code) as adopted for Luxembourg by the CSSF, which
is founded on fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality, and professional behaviour.
139
Summary of work performed
A limited assurance engagement on the sustainability disclosures information as described
in the Report consists of making inquiries, primarily of persons responsible for the preparation
of information presented in the Report, and applying analytical and other evidence gathering
procedures, as appropriate, with relation to the sustainability disclosures information as described
in the Report.
y
Co
nducting media search for references to the Company during the reporting period;
y
Obtaining and reading the Company's policies and processes to address sustainability
matters and reporting;
y
Inquiries and inspection of the processes for determining the Report content and related
controls implemented;
y
Interviews with relevant staff responsible for providing and preparing the information in the
Report, inquiries and inspection of the related controls implemented and methodologies used;
y
Confirmation of alignment of the content and structure of the sustainability statement
with the Criteria
.
The assurance procedures performed in a limited assurance engagement vary in nature and timing
from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level
of assurance obtained in a limited assurance engagement is substantially lower than the assurance
that would have been obtained had a reasonable assurance engagement been performed. A limited
assurance engagement involves performing procedures to obtain sufficient appropriate evidence to
give assurance over the matters identified for our report. The assurance procedures selected depend
on our judgment, the suitable criteria including our assessment of the risk of material misstatement
in the sustainability disclosures information as reported in the Report, whether due to fraud or error.
As part of this engagement, we have not performed any procedures by way of audit, review or verification
of the sustainability disclosures information nor of the underlying records or other sources from which
the information was extracted.
The limited assurance opinion expressed in this report has been formed on the above basis.
Inherent limitations
Our assurance work was limited to examining the relevant documents that were made available by
Management. Other than as described in the assurance procedures above, we were not required to, nor
have we, verified the accuracy or completeness of the underlying data from which the Report, provided
by the client, has been prepared.
Due to the inherent limitations of any internal control structure, it is possible that errors or irregularities
in the information presented in the Report may occur and not be detected. Our engagement is not
designed to detect all weaknesses in the internal controls over the preparation and presentation of
the Report, as the engagement has not been performed continuously throughout the period and the
procedures performed were undertaken on a sample basis.
Our assurance work did not include:
−
Procedures to verify the sustainability disclosures information related to another period than
for the year ended 31 December 2023.
Conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
140
The ESG Topics and KPIs considered for the assurance conclusion are listed below
“(Environmental impacts (EPRA code))”:
y
Energy and Carbon Emissions
−
Electricity (Elec-Abs, Elec-LfL)
−
Fuel (Fuel-Abs, Fuel-LfL)
−
District Heating & Cooling (DH&C-Abs, DH&C LfL)
−
Energy Intensities (Energy-Int)
−
Greenhouse Gas Emission Scope 1 (GHG-Dir-Abs, GHG-Dir-LfL)
−
Greenhouse Gas Emissions Scope 2 and Scope 3 (GHG-Ind-Abs, GHG-Ind-Lfl)
−
Greenhouse Gas Emissions Total
−
Greenhouse Gas Emissions Intensity (GHG-Int)
y
Environmental Compliance
−
Buildings with Mandatory Certificates / EPCs (Cert-Tot)
y
Diversity & Equality
−
Gender Diversity of Board, Management, Employees (Diversity-Emp)
−
Gender Pay Ratios for the Board, Management, Employees (Diversity-Pay)
y
Employment & Sk
ills
−
Training Hours Per Employee (Emp-Training)
−
Employees receiving performance appraisals (Emp-Dev)
−
% New Hires and % Leavers (Emp-Turnover)
These ESG Topics and KPIs are highlighted in the Report with a tick mark.
APPENDIX I: ESG TOPICS AND KPIS
Based on the assurance procedures performed and evidence obtained, as described above, nothing has
come to our attention that causes us to believe that the sustainability disclosures information as reported
in the Report are not prepared and presented in all material respects, in accordance with the Criteria.
Restriction of Use of Our Report
Our report is solely for the purpose set forth in the above objective and is not to be used for any other
purpose. Our report is solely for the use of the Management and, through the Company’s website, the
investors of the Company (“the Investors”). The Investors can rely upon the Report at their own risks.
We do not owe any duty to the Investors, whether in contract or in tort or under statute or otherwise
(including in negligence) with respect to or in relation to the Report. Investors will not bring any actions,
proceedings or claims against KPMG Audit S.à r.l. where the action, proceeding or claim in any way
relates to or concerns the use of or reliance on the Report. We cannot be held liable to Investors for any
direct nor indirect loss or damage suffered or costs incurred by them, arising out of or in connection with
the use or the Report, however such loss or damage is caused.
It might not be translated, summarised, disclosed, published or transmitted electronically for any other
purposes, without our prior consent.
We will agree with you the basis and timing of communications in order to communicate any matters
raised during our assignment that we believe to be both important and relevant.
KPMG Audit S.à r.l.
Cabinet de révision agréé
Alessandro Raone
Réviseur d’entreprises agréé
Luxembourg, 13 March 2024
141
Leipzig
142
Berlin
143
02
Consolidated financial statements
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
144
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 31 December
2023
2022
Note
€’000
Revenue
6
Property revaluations and capital gains (loss)
7
(890,017 )
Property operating expenses
8
(279,050 )
(266,287 )
Administrative and other expenses
9
(10,906 )
(10,689 )
Depreciation and amortisation
14
(9,323 )
(10,488 )
Operating profit (loss)
(581,555 )
Finance expenses
10.1
(56,814 )
(46,914 )
Other financial results
10.2
(86,088 )
(137,133 )
Profit (loss) before tax
(724,457 )
Current tax expenses
11.2
(40,865 )
(39,120 )
Deferred tax (expenses) income
11.3
(10,532 )
Profit (loss) for the year
(638,068 )
Profit (loss) attributable to:
Owners of the Company
(547,507 )
Perpetual notes investors
Non-controlling interests
(124,261 )
(638,068 )
Net earnings (loss) per share attributable to the owners of the Company (in euro):
Basic earnings (loss) per share
12.1
(3.18 )
Diluted earnings (loss) per share
12.2
(3.17 )
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
145
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December
2023
2022
€’000
Profit (loss) for the year
(638,068 )
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss in subsequent periods, net of tax:
Gains (loss) on owner-occupied property revaluation
(5,087 )
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 )
Cash flow hedges and cost of hedging
(14,604 )
Total other comprehensive loss for the year, net of tax
(3,447 )
(12,883 )
Total comprehensive income (loss) for the year
(641,515 )
Total comprehensive income (loss) attributable to:
Owners of the Company
(550,529 )
Perpetual notes investors
Non-controlling interests
(124,686 )
(641,515 )
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
146
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December
2023
2022
Note
€’000
ASSETS
Investment property
15
(*)
Owner-occupied property
14
Equipment
14
(*)
Intangible assets and goodwill
14
Advance payments and deposits
Derivative financial assets
26
Other non-current assets
13
Deferred tax assets
11.3
Non-current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Trade and other receivables
16
Derivative financial assets
26
Assets held-for-sale
24.2
Current assets
Total assets
EQUITY
Share capital
17.1
Treasury shares
17.3
(83,226 )
(83,872 )
Share premium and other reserves
17.4/17.5
Retained earnings
Total equity attributable to the owners of the Company
Equity attributable to perpetual notes investors
17.7
Total equity attributable to the owners of the Company and perpetual notes investors
Non-controlling interests
17.8
Total equity
(*) reclassified
GRAND CITY PROPERTIES S.A.
I
The notes on pages 152 to 206 form an integral part of these consolidated financial statements
147
As at 31 December
2023
2022
Note
€’000
LIABILITIES
Loans and borrowings
19.1
Straight bonds
19.2
Derivative financial liabilities
26
Other non-current liabilities
21
Deferred tax liabilities
11.3
Non-current liabilities
Current portion of long-term loans
19.1
Bond redemption
19.2
Trade and other payables
20
Derivative financial liabilities
26
Tax payable
Provisions for other liabilities and charges
22
Liabilities held-for-sale
24.2
Current liabilities
Total liabilities
Total equity and liabilities
The Board of Directors of Grand City Properties S.A. authorised these consolidated financial statements to be issued on 13 March 2024.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Christian Windfuhr
Chairman and member of the Board of Directors
Simone Runge-Brandner
Member of the Board of Directors
Markus Leininiger
Member of the Board of Directors
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
148
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners of the Company
Equity
attributable
to owners of
Equity
the Company
Cash flow
Foreign
Total equity
attributable
and
hedge and
exchange
Revaluation
attributable to
to perpetual
perpetual
Non-
Treasury
Share
cost of hedge
translation
surplus
Other
Retained
the owners of
notes
notes
controlling
€’000
Share capital
shares
premium
reserves
reserves, net
reserve, net
reserves
Earnings
the Company
investors
investors
interests
Total Equity
Balance as at 31
December 2022 (audited)
(83,872 )
(67,561 )
(20,654 )
Profit (loss) for the year
(547,507 )
(547,507 )
(513,807 )
(124,261 )
(638,068 )
Other comprehensive
income (loss) for the year
(14,604 )
(2,025 )
(3,022 )
(3,022 )
(425 )
(3,447 )
Total comprehensive
income (loss) for the
(14,604 )
(2,025 )
(547,507 )
(550,529 )
(516,829 )
(124,686 )
(641,515 )
year
Share-based payment
(592 )
Initial consolidation,
deconsolidation,
transactions with non-
controlling interests and
(25,164 )
(23,138 )
dividend distributions to
non-controlling interests
Disposal of foreign
operation
Payments to perpetual
notes investors
(24,750 )
(24,750 )
(24,750 )
Balance as at 31
December 2023 (audited)
(83,226 )
(49,155 )
(21,246 )
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
149
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the owners of the Company
Equity
attributable
Total equity
to owners
Cash flow
attributable
Equity
of the
Equity
hedge
Foreign
to the
attributable
Company and
component of
and cost
exchange
Revaluation
owners
to perpetual
perpetual
Non-
Treasury
Share
convertible
of hedge
translation
surplus
Other
Retained
of the
notes
notes
controlling
€’000
Share capital
shares
premium
bond
reserves
reserves, net
reserve, net
reserves
Earnings
Company
investors
investors
interests
Total Equity
Balance as at 31
December 2021
(audited)
(248,009 )
(39,658 )
(23,010 )
Profit for the year
Other comprehensive
income (loss) for
the year
(27,903 )
(14,538 )
(14,538 )
(12,883 )
Total comprehensive
income (loss) for
the year
(27,903 )
Share-based payment
(27 )
Dividend distribution
to the shareholders
of the Company
(137,580 )
(137,580 )
(137,580 )
(137,580 )
Scrip dividend
(82,823 )
Initial consolidation,
deconsolidation,
transactions with
non-controlling
interests and
dividend distributions
to non-controlling
interests
Payments to
perpetual notes
investors
(24,750 )
(24,750 )
(24,750 )
Repayment of
convertible bond
(16,157 )
Balance as at 31
December 2022
(audited)
(83,872 )
(67,561 )
(20,654 )
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
150
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
2023
2022
Note
€’000
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit (loss) for the year
(638,068 )
Adjustments for the profit (loss):
Depreciation and amortisation
14
Property revaluations and capital gains (loss)
7
(117,761 )
Net finance expenses
10
Tax and deferred tax (income) expenses
11.4
(86,389 )
Equity settled share-based payment
18.2
Change in working capital
(38,014 )
(61,132 )
Tax paid
(32,226 )
(30,853 )
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment and intangible assets, net
14
(2,547 )
(4,533 )
Acquisition of investment property, capex and advance payments, net
(114,887 )
(260,263 )
Disposal of investment property, net
Acquisition of investees and loans, net of cash acquired
(3,667 )
Disposal of investees, net of cash disposed
Disposal of financial and other assets, net
Net cash provided (used) by (in) investing activities
(167,689 )
GRAND CITY PROPERTIES S.A.
I
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
151
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December
2023
2022
Note
€’000
CASH FLOWS FROM FINANCING ACTIVITIES:
Amortisation of loans from financial institutions
19.3
(4,417 )
(3,766 )
Proceeds (repayments) of loans from financial institutions and others, net
19.3
(32,560 )
Payment to perpetual notes investors, net
17.7
(24,750 )
(24,750 )
Redemption and buy-back of straight bond
and convertible bond
19.3
(83,334 )
(450,000 )
Transactions with non-controlling interests and dividends paid to non-
controlling interests
(17,021 )
(1,998 )
Dividend distributed to the shareholders of the Company
17.6
(56,340 )
Interest and other financial expenses, net
19.3
(49,035 )
(47,341 )
Net cash provided (used) by (in) financing activities
(616,755 )
Net increase (decrease) in cash and cash equivalents
(568,329 )
Change in cash and cash equivalents held-for-sale
24.2
(1,158 )
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes
(29 )
(1,064 )
Cash and cash equivalents at the end of the year
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
152
1.1. INCORPORATION AND PRINCIPAL ACTIVITIES
Its registered office is at 37, Boulevard Joseph II, L-1840 Luxembourg.
in densely populated areas, predominantly in Germany and is complemented by a
portfolio in London. The Company’s strategy is to improve its properties through targeted
modernization and intensive tenant management, and create value by subsequently raising
These consolidated financial statements for the year ended 31 December 2023 comprise
the Company and its investees (“the Group” or “GCP”).
1.2. LISTING ON THE FRANKFURT STOCK EXCHANGE
Since 2012, the Company’s shares are listed on the Frankfurt Stock Exchange. On 9 May 2017
the Company’s shares were uplisted to the Prime Standard of the Frankfurt Stock Exchange.
The Company’s shares are included in the SDAX index of the Deutsche Börse.
As at 31 December 2023 the issued share capital consists of 176,187,899 shares with a par
value of euro 0.10 per share, of which 3,831,666 shares with suspended voting rights are held
in treasury. For additional information see note 17.3.
1.3. CAPITAL INCREASE, PERPETUAL NOTES AND BOND ISSUANCES
Since 2012, the Company undertook several capital market transactions which included the
issuance of straight bonds, convertible bonds, perpetual notes and equity.
In addition, the Company established Euro Medium Term Notes Programme (“the EMTN
programme”). For more information see notes notes 17 and 19.2.
1.4. GROUP RATING
As at 31 December 2023, the Group has the following credit ratings from credit rating
agencies:
Moody’s | ||
S&P | ||
(unsolicited) | ||
BBB+ | Baa1 | |
Long-term corporate credit rating of the Company | ||
(negative outlook) | (negative outlook) | |
BBB+ | Baa1 | |
Senior unsecured debt of the Company | ||
(negative outlook) | (negative outlook) | |
BBB- | Baa3 | |
Subordinated perpetual notes | ||
(negative outlook) | (negative outlook) |
Since
2021 Moody’s maintains its public rating the Company on an unsolicited basis.
1.5. DEFINITIONS
In these consolidated financial statements:
The Company
Grand City Properties S.A.
The Group | The Company and its investees |
Ultimate controlling party | |
The parent company | |
Companies that are controlled by the Company (as | |
Subsidiaries | defined in IFRS 10) and whose financial statements |
are consolidated with those of the Company | |
Companies over which the Company has significant | |
influence (as defined in IAS 28) and that are not | |
Associates | subsidiaries. The Company’s investment therein is |
included in the consolidated financial statements of | |
the Company using equity method of accounting | |
Investees | Subsidiaries, jointly controlled entities and associates |
Related parties | As defined in IAS 24 |
These consolidated financial statements have been prepared in accordance with the
International Financial Reporting Standards (IFRS) as adopted by the European Union.
Certain consolidated statement of profit or loss, consolidated statement of financial
position and consolidated statement of cash flows’ items related to the year ended
31 December 2022 have been reclassified to enhance comparability with 2023 figures and
are marked as “reclassified”.
The consolidated financial statements were authorised for issue by the Company’s Board
2.2. BASIS OF MEASUREMENT
The consolidated financial statements have been prepared on a going concern basis,
applying the historical cost convention, except for the measurement of the following:
y
Financial assets at fair value through profit or loss;
y
Investment properties are measured at fair value;
y
Owner-occupied properties are measured at fair value;
y
Derivative financial assets and liabilities;
y
Assets and liabilities classified as held for sale;
y
Deferred tax liability on fair value gain on investment property, owner-occupied property
and derivative financial instruments.
The preparation of consolidated financial statements in accordance with IFRS requires from
management the exercise of judgment, to make estimates and assumptions that influence
the application of accounting principles and the related amounts of assets and liabilities,
income and expenses. The estimates and underlying assumptions are based on historical
experience and various other factors that are deemed to be reasonable based on current
knowledge available at that time. Actual results may differ from such estimates.
The estimates and underlying assumptions are revised on a regular basis. Revisions in
accounting estimates are recognised in the period during which the estimate is revised, if
the estimate affects only that period, or in the period of the revision and future periods, if
the revision affects the present as well as future periods.
Judgements
In the process of applying the Group’s accounting policies, management has made the
following judgements, which have the most significant effect on the amounts recognised in
the consolidated financial statements:
h
Leases
−
Property lease classification (the Group as lessor)
- The Group has entered into
property leases on its investment property portfolio. The Group has determined, based
on an evaluation of the terms and conditions of the arrangements, such as the lease
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
153
terms not constituting a major part of the economic life of the properties and the present
value of the minimum lease payments not amounting to substantially all of the fair value
of the properties, that it retains substantially all the risks and rewards incidental to
ownership of these properties and accounts for the contracts as operating leases.
h
Revenue from contracts with customers
−
Determination of performance obligations
- In relation to the services provided to
tenants of investment property as part of the lease agreements into which the Group
enters as a lessor, the Group has determined that the performance obligation is the
overall property management service and that the service performed each day is
distinct and substantially the same. Although the individual activities that comprise the
performance obligation vary significantly throughout the day and from day to day, the
nature of the overall promise to provide management service is the same from day to
day. Therefore, the Group has concluded that the services to tenants represent a series
of daily services that are individually satisfied over time, using a time-elapsed measure
of progress, because tenants simultaneously receive and consume the benefits provided
by the Group. With respect to the sale of property, the Group concluded that the goods
and services transferred in each contract constitute a single performance obligation.
−
Principal versus agent considerations (services to tenants)
- The Group arranges for
certain services provided to tenants of investment property included in the contract the
Group enters into as a lessor, to be provided by third parties. The Group has determined
that it controls the services before they are transferred to tenants, because it has the
ability to direct the use of these services and obtain the benefits from them. In making
this determination, the Group has considered that it is primarily responsible for fulfilling
the promise to provide these specified services because it directly deals with tenants’
complaints and it is primarily responsible for the quality or suitability of the services.
Therefore, the Group has concluded that it is the principal in these contracts. In addition,
the Group has concluded that it transfers control of these services over time, as services
are rendered by the third-party service providers, because this is when tenants receive
and, at the same time, consume the benefits from these services.
−
Determining the timing of revenue recognition on the sale of property
- The Group has
evaluated the timing of revenue recognition on the sale of property based on a careful
analysis of the rights and obligations under the terms of the contract and legal advice
from the Group’s external counsels in various jurisdictions. The Group has generally
concluded that contracts relating to the sale of completed property are recognised at a
point in time when control transfers. For unconditional exchanges of contracts, control is
generally expected to transfer to the customer together with the legal title. For conditional
exchanges, this is expected to take place when all the significant conditions are satisfied.
h
Business combinations
- The Group acquires subsidiaries that own real estate. At
the time of acquisition, the Group considers whether each acquisition represents the
acquisition of a business or the acquisition of an asset. The Group accounts for an
acquisition as a business combination where an integrated set of activities and assets,
including property, is acquired. More specifically, consideration is given to the extent
to which significant processes are acquired and, in particular, the extent of services
provided by the subsidiary. When the acquisition of subsidiaries does not represent a
business combination, it is accounted for as an acquisition of a group of assets and
liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired
based upon their relative fair values, and no goodwill or deferred tax is recognised.
Estimates and assumptions
The key assumptions concerning future and other key sources of estimation uncertainty
at the reporting date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are described
below. The Group based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. Existing circumstances and assumptions
about future developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
h
Valuation of investment property
- The Group uses external valuation reports issued
by independent professionally qualified valuers to determine the fair value of its
investment properties. The fair value measurement of investment property requires
valuation experts and the Company’s management to use certain assumptions
regarding rates of return on the Group’s assets, future rent, occupancy rates, contract
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 affect its fair value.
h
Valuation of financial assets and liabilities
- Some of the Group’s assets and liabilities
are measured at fair value for financial reporting purposes. In estimating the fair value
of an asset or a liability, the Group uses market-observable data to the extent it is
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
154
available. The fair value of financial instruments that are not traded in an active market
is determined using valuation techniques. The Group uses its judgement to select a
variety of methods and make assumptions that are mainly based on market conditions
existing at the end of each reporting period.
h
Taxes
- Significant judgment is required in determining the provision for income taxes.
There are transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax audit issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the income tax and deferred tax provisions
in the period in which such determination is made. Deferred tax assets are recognised
for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgement is required
to determine the amount of deferred tax assets that can be recognised, based upon the
likely timing and the level of future taxable profits, together with future tax planning
strategies. Significant judgement is also applied for deferred tax liabilities related to
the investment property. Deferred tax liabilities consider the theoretical disposal of
investment properties in the form of asset deals with a tax rate applied based on the
nominal rate in the jurisdiction of the property.
h
Impairment of financial assets measured at amortised cost
- When measuring
expected credit loss (ECL) the Group uses reasonable and supportable forward-looking
information, which is based on assumptions for the future movement of different
economic drivers and how these drivers will affect each other. Loss given default is
an estimate of the loss arising on default. It is based on the difference between the
contractual cash flows due and those that the lender would expect to receive, taking
into account cash flows from collateral and integral credit enhancements.
h
Property leases
- estimating the incremental borrowing rate
- The Group cannot
readily determine the interest rate implicit in leases where it is the lessee, therefore,
it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the
rate of interest that the Group would have to pay to borrow over a similar term, and
with a similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. The IBR therefore reflects what
the Group ‘would have to pay’, which requires estimation when no observable rates
The Group’s consolidated financial statements are presented in euro, which is also the
Company’s functional currency, and rounded to the nearest thousand (€’000) unless
stated otherwise.
For each entity, the Group determines the functional currency and items included in the
financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their
respective functional currency spot rates at the date the transaction first qualifies for
recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or
loss, with the exception of monetary items that are designated as part of the hedge of the
Group’s net investment of a foreign operation. These are recognised in other comprehensive
income until the net investment is disposed of, at which time, the cumulative amount is
reclassified to profit or loss. Tax charges and credits attributable to exchange differences on
those monetary items are also recognised in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value is determined.
The gain or loss arising on translation of non-monetary items measured at fair value is treated
in line with the recognition of gain or loss on change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in other comprehensive
income or profit or loss are also recognised in other comprehensive income or profit or loss,
respectively).
In determining the spot exchange rate to use on initial recognition of the related asset,
liability, expense or income (or part of it) on the derecognition of a non-monetary asset
or non-monetary liability relating to advance consideration, the date of the transaction is
the date on which the Group initially recognises the non-monetary asset or non-monetary
liability arising from the advance consideration. If there are multiple payments or receipts in
advance, the Group determines the transaction date for each payment or receipt of advance
consideration.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
155
Group Companies
On consolidation, the assets and liabilities of foreign operations are translated into euros
at the rate of exchange prevailing at the reporting date and their statements of profit or
loss are translated at the average exchange rates for the period, unless exchange rates
fluctuated significantly during the period, in which case the exchange rates prevailing at
the dates of the transactions are used. The exchange differences arising on translation for
consolidation are recognised in other comprehensive income and accumulated in a separate
component of equity under the header of foreign currency translation reserve. On disposal
of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is reclassified to profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments
to the carrying amounts of assets and liabilities arising on the acquisition are treated as
assets and liabilities of the foreign operation and translated at the spot rate of exchange at
the reporting date.
The Group’s main foreign exchange rates versus the euro were as follows:
EUR/GBP | EUR/HKD | EUR/CHF | EUR/JPY | |
As of 31 December 2023 | 0.869 | 8.631 | 0.926 | 156.330 |
As of 31 December 2022 | 0.887 | 8.316 | 0.985 | 140.660 |
Change (%) | (2.0)% | 3.8% | (6.0)% | 11.1% |
Average exchange rate during the year | 0.870 | 8.465 | 0.972 | 151.990 |
The accounting policies adopted and methods of computation followed are consistent with
those of the previous financial year, except for items disclosed below.
There were several new and amendments to standards and interpretations which are
applicable for the first time in 2023, but either not relevant or do not have a material impact
on the consolidated financial statements of the Group.
The following amendments were adopted for the first time in these consolidated financial
statements, with effective date of 1 January 2023:
h
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities
arising from a Single Transaction
The amendments introduce a further exception from the initial recognition exemption.
Under the amendments, an entity does not apply the initial recognition exemption for
transactions that give rise to equal taxable and deductible temporary differences.
Depending on the applicable tax law, equal taxable and deductible temporary differences
may arise on initial recognition of an asset and liability in a transaction that is not a business
combination and affects neither accounting profit nor taxable profit.
Following the amendments to IAS 12, an entity is required to recognise the related deferred
tax asset and liability, with the recognition of any deferred tax asset being subject to the
recoverability criteria in IAS 12.
h
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates
The amendments replace the definition of a change in accounting estimates with a
definition of accounting estimates. Under the new definition, accounting estimates are
“monetary amounts in financial statements that are subject to measurement uncertainty”.
The definition of a change in accounting estimates was deleted.
h
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies
The amendments change the requirements in IAS 1 with regard to disclosure of accounting
policies. The amendments replace all instances of the term ‘significant accounting policies’
with ‘material accounting policy information’. Accounting policy information is material
if, when considered together with other information included in an entity’s financial
statements, it can reasonably be expected to influence decisions that the primary users
of general purpose financial statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy
information that relates to immaterial transactions, other events or conditions is
immaterial and need not be disclosed. Accounting policy information may be material
because of the nature of the related transactions, other events or conditions, even if
the amounts are immaterial. However, not all accounting policy information relating to
material transactions, other events or conditions is itself material.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
156
The IASB has also developed guidance and examples to explain and demonstrate the
application of the ‘four-step materiality process’ described in IFRS Practice Statement 2.
h
Amendments to IAS 12: International Tax Reform—Pillar Two Model Rules
The IASB amends the scope of IAS 12 to clarify that the Standard applies to income taxes
arising from tax law enacted or substantively enacted to implement the Pillar Two model
rules published by the OECD, including tax law that implements qualified domestic
minimum topup taxes described in those rules.
The amendments introduce a temporary exception to the accounting requirements for
deferred taxes in IAS 12, so that an entity would neither recognise nor disclose information
about deferred tax assets and liabilities related to Pillar Two income taxes.
Following the amendments, the Group is required to disclose that it has applied the
exception and to disclose separately its current tax expense related to Pillar Two income
taxes.
The Group has not early adopted any standard, interpretation or amendment that has been
The consolidated financial statements comprise the financial statements of the Company
and its subsidiaries as at 31 December 2023. Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. Specifically, the Group controls
an investee if, and only if, the Group has:
y
Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee)
y
Exposure, or rights, to variable returns from its involvement with the investee
y
The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights results in control. To
support this presumption and when the Group has less than a majority of the voting or
similar rights of an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
y
The contractual arrangement(s) with the other vote holders of the investee
y
Rights arising from other contractual arrangements
y
The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation
of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements
from the date the Group gains control until the date it ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to
the equity holders of the parent of the Group and to the non-controlling interests, even
if this results in the non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group’s accounting policies. All intra-Group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
Unrealised gains arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there
is no evidence of impairment.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted
for as an equity transaction. The carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or received is recognised directly in
equity attributed to owners of the Company.
When the Group loses control over a subsidiary, profit or loss on disposal is calculated as
the difference between (i) the aggregate of the fair value of the consideration received and
the fair value of any retained interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any non-controlling interests and
other components of equity, and is recognised in the consolidated statement of profit or
loss under ‘Property revaluation and capital gains’.
When assets of the subsidiary are carried at revalued amounts or fair values and the
related cumulative gain or loss has been recognised in other comprehensive income and
accumulated in equity, the amounts previously recognised in other comprehensive income
and accumulated in equity are accounted for as if the Company had directly disposed of the
relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings
as specified by applicable IFRS). The fair value of any investment retained in the former
subsidiary at the date when control is lost is regarded as the fair value on initial recognition
Notes to the consolidated financial statements
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GRAND CITY PROPERTIES S.A.
157
for subsequent accounting under IFRS 9 Financial Instruments or IAS 28 Investments in
Associates and Joint Ventures.
The accounting policies set out below have been applied consistently to all periods
presented in these consolidated financial statements and have been applied by all entities
in the Group. Where necessary, adjustments are made to the financial statements of
Where property is acquired, via corporate acquisitions or otherwise, management
considers the substance of the assets and activities of the acquired entity in determining
whether the acquisition represents the acquisition of a business. Where such acquisitions
are not determined to be an acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity or assets and liabilities is
allocated between the identifiable assets and liabilities of the entity based on their relative
The Group determines that it has acquired a business when the acquired set of activities
and assets include an input and a substantive process that, together, significantly
contribute to the ability to create outputs. The acquired process is considered substantive
if it is critical to the ability to continue producing outputs, and the inputs acquired include
an organised workforce with the necessary skills, knowledge, or experience to perform
that process or it significantly contributes to the ability to continue producing outputs
and is considered unique or scarce or cannot be replaced without significant cost, effort,
or delay in the ability to continue producing outputs.
Business combinations are accounted for using the acquisition method. The cost of
an acquisition is measured as the aggregate of the consideration transferred, which is
measured at acquisition date fair value, and the amount of any non-controlling interests
in the acquiree. For each business combination, the Group elects whether to measure
non-controlling interests in the acquiree that are present ownership interests and entitle
their holders to a proportionate share of the entity’s net assets in the event of liquidation,
at fair value or at the proportionate share of the acquiree’s identifiable net assets. Other
types of non-controlling interests are measured at fair value or, when applicable, on the
basis specified in another IFRS.
Any contingent consideration to be transferred by the acquirer will be recognised at fair
value at the acquisition date and included as part of the consideration transferred in a
business combination. Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity. Contingent consideration
classified as an asset or liability that is a financial instrument and within the scope of IFRS
9 Financial Instruments, is measured at fair value with the changes in fair value recognised
in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration
that is not within the scope of IFRS 9 is measured at fair value at each reporting date with
changes in fair value recognised in profit or loss.
Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments that arise from additional
information obtained during the ‘measurement period’ (which cannot exceed one year from
the acquisition date) about facts and circumstances that existed at the acquisition date.
When the Group acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the acquisition date. This includes
the separation of embedded derivatives in host contracts by the acquiree.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are
recognised at their fair value at the acquisition date, except that:
y
deferred tax assets or liabilities and liabilities or assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 12 Income Taxes and
IAS 19 Employee Benefits respectively;
y
liabilities or equity instruments related to share based payment arrangements of the
acquiree or share based payment arrangements of the Group entered into to replace
share based payment arrangements of the acquiree are measured in accordance with
IFRS 2 Share based Payment at the acquisition date; and
y
Assets (or disposal groups) that are classified as held for sale in accordance with IFRS
5 Non-current Assets Held for Sale and Discontinued Operations are measured in
accordance with that standard.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests and any previous
interest held over the net identifiable assets acquired and liabilities assumed). If the fair
value of the net assets acquired is in excess of the aggregate consideration transferred,
the Group re-assesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the amounts to
Notes to the consolidated financial statements
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be recognised at the acquisition date. If the reassessment still results in an excess of the
fair value of net assets acquired over the aggregate consideration transferred, the gain is
recognised in profit or loss.
Aſter initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs)
that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a CGU and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying
amount of the operation when determining the gain or loss on disposal. Goodwill disposed
in these circumstances is measured based on the relative values of the disposed operation
and the portion of the CGU.
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the Group reports provisional amounts for the items
for which the accounting is incomplete. Those provisional amounts are adjusted during the
measurement period (see above), or additional assets or liabilities are recognised, to reflect
new information obtained about facts and circumstances that existed at the acquisition
date that, if known, would have affected the amounts recognised at that date.
The Group’s key sources of income include:
y
Rental income
y
Revenue from contracts with customers:
−
Services to tenants including management charges and other expenses recoverable
from tenants
−
Sale of properties
The accounting for each of these elements is discussed below:
Rental income
The Group earns revenue from acting as a lessor in operating leases which do not transfer
substantially all of the risks and rewards incidental to ownership of an investment property.
Rental income arising from operating leases on investment property is accounted for on
a straight-line basis over the lease term and is included in revenue in the consolidated
statement of profit or loss due to its operating nature, except for contingent rental income
which is recognised when it arises. Initial direct costs incurred in negotiating and arranging
an operating lease are capitalised to the investment property and recognised as an expense
over the lease term on the same basis as the lease income.
Lease incentives that are paid or payable to the lessee are deducted from lease payments.
Accordingly, tenant lease incentives are recognised as a reduction of rental revenue on a
straight-line basis over the term of the lease. The lease term is the non-cancellable period
of the lease together with any further term for which the tenant has the option to continue
the lease, where, at the inception of the lease, the Group is reasonably certain that the
tenant will exercise that option.
Revenue from services to tenants
For investment property held primarily to earn rental income, the Group enters as a lessor
into lease agreements that fall within the scope of IFRS 16. These agreements include
certain ancillary services offered to tenants (i.e., customers). The consideration charged
to tenants for these services includes fees and reimbursement of certain expenses
incurred. These services are specified in the lease agreements and separately invoiced.
The Group has determined that these services constitute distinct non-lease components
(transferred separately from the right to use the underlying asset) and are within the
scope of IFRS 15. The Group allocates the consideration in the contract to the separate
lease and revenue (non-lease) components on a relative stand-alone selling price basis.
In respect of the revenue component, these services represent a series of daily services
that are individually satisfied over time because the tenants simultaneously receive and
consume the benefits provided by the Group. The Group applies the time elapsed method
to measure progress.
The Group arranges for third parties to provide certain of these services to its tenants. The
Group concluded that it acts as a principal in relation to these services as it controls the
specified services before transferring them to the customer. Therefore, the Group records
revenue on a gross basis.
Notes to the consolidated financial statements
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Sale of property
The Group enters into contracts with customers to sell properties that are either complete
or under development.
The sale of completed property constitutes a single performance obligation and the
Group has determined that this is satisfied at the point in time when control transfers. For
unconditional exchange of contracts, this generally occurs when legal title transfers to the
customer. For conditional exchanges, this generally occurs when all significant conditions
are satisfied.
For contracts relating to the sale of properties under development, the Group is responsible
for the overall management of the project and identifies various goods and services to
be provided. In such contracts, the goods and services are not distinct and are generally
accounted for as a single performance obligation. Depending on the terms of each contract,
the Group determines whether control is transferred at a point in time or over time.
The Group has elected to make use of the following practical expedients:
y
Contract costs incurred related to contracts with an amortization period of less than one
year have been expensed as incurred.
y
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not
disclose information about remaining performance obligations for contracts in which
the Group has a right to consideration from tenants in an amount that corresponds
directly with the value to the tenant of the Group’s performance completed to date.
y
The Group does not adjust the transaction price for the effects of significant financing
component since at contract inception it is expected that the period between when the
entity transfers the services to tenants and when the tenants pay for these services will
Finance income comprises interest income on funds invested.
Finance expenses comprise interest expense on bank loans, third party borrowings and bonds.
Other financial results represent changes in the time value of provisions, changes in the fair
value of traded securities, gains or losses on derivative financial instruments, borrowing and
redemption costs, loan arrangement fees, dividend income and other one-off payments.
Financial expenses are recognised as they are incurred in the consolidated statement of
Current tax
Current income tax assets and liabilities are measured at the amount expected to be
recovered from or paid to taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted, or substantively enacted, at the reporting date in
the countries where the Group operates and generates taxable income.
Current income tax relating to items recognised directly in other comprehensive income
or equity is recognised in other comprehensive income (OCI) or in equity and not in the
statement of profit or loss. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
Current tax also includes taxes on the holding of real estate property and construction.
Deferred tax is provided using the liability method on temporary differences between
the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
y
When the deferred tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither accounting profit nor taxable profit or loss
y
In respect of taxable temporary differences associated with investments in subsidiaries,
branches and associates and interests in joint arrangements, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, the
carryforward of unused tax credits and any unused tax losses. Deferred tax assets are
recognised to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carryforward of unused tax credits
and unused tax losses can be utilised, except:
y
When the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
Notes to the consolidated financial statements
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y
In respect of deductible temporary differences associated with investments in
subsidiaries, branches and associates and interests in joint arrangements, deferred
tax assets are recognised only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets
are re-assessed at each reporting date and are recognised to the extent that it has become
probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the reporting date.
In accounting for the deferred tax relating to the lease, the Group considers both the lease
asset and liability separately. The Group separately accounts for the deferred taxation on
the taxable temporary difference and the deductible temporary difference, which upon
initial recognition, are equal and offset to zero. Deferred tax is recognised on subsequent
changes to the taxable and temporary differences.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit
or loss. Deferred tax items are recognised in correlation to the underlying transaction either
in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for
separate recognition at that date, are recognised subsequently if there is new information
about changes in facts and circumstances. The adjustment is either treated as a reduction in
goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement
period or recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if, and only if, it has a legally
enforceable right to set off current tax assets and current tax liabilities and the deferred
tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities which intend either
to settle current tax liabilities and assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered.
The Group has applied a temporary mandatory relief from deferred tax accounting for the
Owner-occupied properties are measured at fair value less accumulated depreciation and
impairment losses recognised aſter the date of revaluation. Valuations are performed with
sufficient frequency to ensure that the carrying amount of a revalued asset does not differ
materially from its fair value.
A revaluation surplus is recorded in other comprehensive income and credited to the
asset revaluation surplus in equity. However, to the extent that it reverses a revaluation
deficit of the same asset previously recognised in profit or loss, the increase is recognised
in profit and loss. A revaluation deficit is recognised in the statement of profit or loss,
except to the extent that it offsets an existing surplus on the same asset recognised in
the asset revaluation surplus.
Equipment includes furniture, fixtures and office equipment and is measured at cost less
accumulated depreciation and impairment losses.
Depreciation is recognised in profit or loss using the straight line method over the useful
lives of each part of an item of equipment.
The annual depreciation rates used for the current and comparative periods are as follows:
% | |
Furniture, fixtures and office equipment | 7.33 |
Property | 3 |
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, the
asset is written down immediately to its recoverable amount.
Expenditure for repairs and maintenance is charged to profit or loss of the year in which it is
incurred. The cost of major renovations and other subsequent expenditure are included in
the carrying amount of the asset when it is probable that future economic benefits in excess
of the originally assessed standard of performance of the existing asset will flow to the
Group. Major renovations are depreciated over the remaining useful life of the related asset.
An item of equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in the
Notes to the consolidated financial statements
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Expenditure on research activities is recognised in profit or loss as incurred.
Development expenditure is capitalised only if the expenditure can be measured
reliably, the product or process is technically and commercially feasible, future economic
benefits are probable and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is recognised in profit or loss as
incurred. Subsequent to initial recognition, development expenditure is measured at cost
less accumulated amortisation and any accumulated impairment losses.
Other intangible assets that are acquired by the Group and have finite useful lives are
measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure, including
expenditure on internally generated goodwill and brands, is recognised in profit or loss as
incurred.
Amortisation is calculated to write off the cost of intangible assets less their estimated
residual values using the straight-line method over their estimated useful lives and is
generally recognised in profit or loss.
The estimated useful lives for current and comparative periods are as follows:
% | |
Soſtware | 20-33 |
Amortisation methods, useful lives and residual values are reviewed at each reporting date
and adjusted if appropriate.
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
Deferred income represents income which relates to future periods.
»
Prepayments
The Group receives prepayments from tenants for ancillary services and other charges
on a monthly basis. Once a year, the prepayments received from tenants are settled
against the operating cost receivables.
»
Tenancy deposits
Tenancy deposits are paid to ensure the tenant occupied real estate is returned in good
Investment property comprises property that is held, to earn rentals or for capital
appreciation or both. Property held under a lease is classified as investment property when
it is held to earn rentals or for capital appreciation or both, rather than for sale in the
ordinary course of business or for use in production or administrative functions.
Investment property comprises principally properties that are not occupied substantially for
use by, or in the operations of, the Group, nor for sale in the ordinary course of business,
but are held primarily to earn rental income and capital appreciation. These buildings are
substantially rented to tenants and not intended to be sold in the ordinary course of business.
Investment property is measured initially at cost, including directly attributable expenditure
such as transfer taxes, professional fees for legal services and other transaction costs.
Subsequent to initial recognition, investment property is stated at fair value, which reflects
market conditions at the reporting date. Gains or losses arising from changes in the fair
values of investment property are included in profit or loss in the period in which they arise,
including the corresponding tax effect.
Transfers are made to (or from) investment property only when there is evidence of a
change in use (such as commencement of development or inception of an operating lease
to another party). For a transfer from investment property to inventories, the deemed cost
for subsequent accounting is the fair value at the date of change in use. If an inventory
property becomes an investment property, the difference between the fair value of the
property at the date of transfer and its previous carrying amount is recognised in profit or
loss. The Group considers as evidence the commencement of development with a view to
sale (for a transfer from investment property to inventories) or inception of an operating
lease to another party (for a transfer from inventories to investment property).
Investment property is derecognised either when it has been disposed of (i.e., at
the date the recipient obtains control of the investment property in accordance with
the requirements for determining when a performance obligation is satisfied in IFRS
15) or when it is permanently withdrawn from use and no future economic benefit
is expected from its disposal. The difference between the net disposal proceeds and
the carrying amount of the asset is recognised in “Property revaluations and capital
gains” in the consolidated statement of profit or loss in the period of derecognition.
In determining the amount of consideration to be included in the gain or loss arising
from the derecognition of investment property, the Group considers the effects of
variable consideration, the existence of a significant financing component, noncash
consideration, and consideration payable to the buyer (if any) in accordance with the
Notes to the consolidated financial statements
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The Group classifies non-current assets (principally investment property) and disposal
groups as held for sale if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. Non-current assets and disposal
groups classified as held for sale (except for investment property measured at fair value)
are measured at the lower of their carrying amount and fair value less costs to sell. Costs
to sell are the incremental costs directly attributable to the disposal of an asset (disposal
group), excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly
probable and the asset or disposal group is available for immediate sale in its present
condition. Actions required to complete the sale should indicate that it is unlikely that
significant changes to the sale will be made or that the decision to sell will be withdrawn.
Management must be committed to the plan to sell the asset and the sale is expected to be
completed within one year from the date of the classification.
Investment property held for sale continues to be measured at fair value. Assets and liabilities
classified as held for sale are presented separately in the statement of financial position.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of
the assets and liabilities of that subsidiary are classified as held for sale when the criteria
described above are met, regardless of whether the Group will retain a non-controlling
A financial instrument is any contract that gives right to a financial asset of one entity and
a financial liability or equity instrument of another entity.
i.
Initial recognition and measurement
Financial assets are classified at initial recognition as subsequently measured at amortised
cost, fair value through other comprehensive income (OCI), or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial assets’
contractual cash flow characteristics and the Group’s business model for managing them.
With the exception of trade receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient, the Group initially measures a
financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs. Trade receivables that do not contain a significant financing
component or for which the Group has applied the practical expedient are measured at the
transaction price determined under IFRS 15. See note 3.5.
In order for a financial asset to be classified and measured at amortised cost or fair value
through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and
interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the
SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial
assets in order to generate cash flows. The business model determines whether cash flows will
result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace (regular way trades) are recognised
on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
ii. Subsequent measurement
For the purposes of subsequent measurement, financial assets are classified in four categories:
1.
Financial assets at amortised cost (debt instruments)
2.
Financial assets at fair value through OCI with recycling of cumulative gains and losses
(debt instruments)
3.
Financial assets designated at fair value through OCI with no recycling of cumulative
gains and losses upon de-recognition (equity instruments)
4.
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both of the following conditions
are met:
y
The financial asset is held within a business model with the objective to hold financial
assets in order to collect contractual cash flows, and
y
The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest
rate (EIR) method and are subject to impairment. Gains or losses are recognised in profit
or loss when the asset is derecognised, modified or impaired refer to expected credit loss
model in determined impairment.
Notes to the consolidated financial statements
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Financial assets at fair value through OCI (debt instruments)
The Group measures debt instruments at fair value through OCI if both of the following
conditions are met:
y
The financial asset is held within a business model with the objective of both holding to
collect contractual cash flows and selling, and
y
The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation
and impairment losses or reversals are recognised in consolidated statement of profit or
loss and computed in the same manner as for financial assets measured at amortised
cost. The remaining fair value changes are recognised in OCI. Upon de-recognition, the
cumulative fair value change recognised in OCI is recycled to profit or loss.
Financial assets at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments
as equity instruments designated at fair value through OCI when they meet the definition
of equity under IAS 32 and are not held for trading. The classification is determined on an
instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are
recognised as other financial results in the consolidated statement of profit or loss when
the right of payment has been established, except when the Group benefits from such
proceeds as a recovery of part of the cost of the financial asset, in which case, such gains
are recorded in OCI. Equity instruments designated at fair value through OCI are not subject
to impairment assessment.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading,
financial assets designated upon initial recognition at fair value through profit or loss, or financial
assets mandatorily required to be measured at fair value. Financial assets are classified as held
for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also classified as held for trading
unless they are designated as effective hedging instruments. Financial assets with cash flows
that are not solely payments of principal and interest are classified and measured at fair value
through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt
instruments to be classified at amortised cost or at fair value through OCI, as described above,
debt instruments may be designated at fair value through profit or loss on initial recognition if
doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the consolidated statement
of financial position at fair value with net changes in fair value recognised in the consolidated
statement of profit or loss.
Dividends on listed equity instruments are also recognised as other financial results in the
consolidated statement of profit or loss when the right of payment has established.
A derivative embedded in a hybrid contract, with a financial liability or non-financial host,
is separated from the host and accounted for as a separate derivative if: the economic
characteristics and risks are not closely related to the host; a separate instrument with the
same terms as the embedded derivative would meet the definition of a derivative; and the
hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are
measured at fair value with changes in fair value recognised in profit or loss. Reassessment
only occurs if there is either a change in the term of the contract that significantly modifies the
cash flows that would otherwise be required or a reclassification of a financial asset out of the
fair value through profit or loss category.
A derivative embedded within a hybrid contract containing a financial asset host is not
accounted for separately. The financial asset host together with the embedded derivative is
required to be classified entirely as a financial asset at fair value through profit or loss.
Financial asset (or, where applicable, part of a financial asset or part of a group of similar
financial assets) is primarily de-recognised (i.e., removed from the Group’s consolidated
statement of financial position) when:
y
The rights to receive cash flows from the asset have expired, or
y
The Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially
all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks
and rewards of ownership. When it has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing involvement. In that case, the
Group also recognises an associated liability. The transferred asset and the associated liability
are measured on the basis that reflects the rights and obligations that the Group has retained.
Notes to the consolidated financial statements
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Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the maximum
The Group recognises an allowance for expected credit losses (ECLs) for all debt
instruments not held at fair value through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash
flows that the Group expects to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are provided for credit losses
that result from defaults events that are possible within the next 12 months (a 12 month
ECL). For those credit exposures for which there has been a significant increase in credit
risk since initial recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). The
Group presumes that the credit risk on a financial asset has increased significantly since
initial recognition when contractual payments are more than 30 days past due, unless the
Group has reasonable and supportable information that demonstrates otherwise.
Lifetime ECL represents the expected credit losses that will result from all possible
default events over the expected life of a financial instrument. In contrast, 12-month ECL
represents the portion of lifetime ECL that is expected to result from default events on a
financial instrument that are possible within 12 months aſter the reporting date.
For trade receivables, the Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date. The Group has established
a provision that is based on its historical credit loss experience, adjusted for forward-
looking factors specific to the debtors and the economic environment.
The Group considers a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full
before taking into account any credit enhancements held by the Group or when there is a
breach of financial covenants by the debtor. Irrespective of the above analysis, the Group
considers that default has occurred when a financial asset is more than 90 days past
due unless the Group has reasonable and supportable information to demonstrate that
a more lagging default criterion is more appropriate. A financial asset is written off when
i.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
ii. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative financial instruments
entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by IFRS 9. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the consolidated statement
of profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are
designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied.
The Group has not designated any financial liability as at fair value through profit or loss.
Financial liabilities at amortised cost
This is the category most relevant to the Group. Aſter initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the liabilities are de-recognised as
well as through the EIR amortization process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR.
Notes to the consolidated financial statements
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iii. De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the de-recognition of
the original liability and the recognition of a new liability. The difference in the respective
III. INTERBANK OFFERED RATES (IBOR) REFORM
IBOR reform Phase 2 requires, as a practical expedient, for changes to the basis for
determining contractual cash flows that are necessary as a direct consequence of IBOR
reform to be treated as a change to a floating rate of interest, provided the transition from
IBOR to a risk-free rate (RFR) takes place on a basis that is ‘economically equivalent’. To
qualify as ‘economically equivalent’, the terms of the financial instrument must be the same
before and aſter transition except for the changes required by IBOR reform. For changes that
are not required by IBOR reform, the Group applies judgement to determine whether they
result in the financial instrument being derecognised. Therefore, as financial instruments
transition from IBOR to RFRs, the Group applies judgement to assess whether the
transition has taken place on an economically equivalent basis. In making this assessment,
the Group considers the extent of any changes to the contractual cash flows as a result
of the transition and the factors that have given rise to the changes, with consideration
of both quantitative and qualitative factors. Factors of changes that are economically
equivalent include: changing the reference rate from an IBOR to a RFR; changing the reset
days between coupons to align with the RFR; adding a fallback to automatically transition
to an RFR when the IBOR ceases; and adding a fixed credit spread adjustment based on
that calculated by the International Swaps and Derivatives Association (ISDA) or which is
implicit in the market forward rates for the RFR.
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated statement of financial position if there is a currently enforceable legal right to
offset the recognised amounts and there is an intention to settle on a net basis, or to realise
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
TREASURY SHARES
When shares recognised as equity are repurchased, the amount of the consideration paid
including acquisition direct costs is recognized as a deduction from equity. Repurchased
shares are classified as treasury shares, presented in the treasury share reserve and are not
revalued
aſter the acquisition. When treasury shares are subsequently sold or reissued, the
amount received is recognized as an increase in equity and the resulting surplus or deficit
VII. CONVERTIBLE BONDS
Convertible bonds, that can be converted to share capital at the option of the holder and
the number of shares to be issued is fixed are separated into liability and equity component
based on the terms of the contract.
On issuance of the convertible bonds, the fair value of the liability component is determined
using a market rate for an equivalent non-convertible instrument. This amount is classified
as a financial liability measured at amortised cost (net of transaction costs) until it is
extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognised and
included in equity. Transaction costs are deducted from equity, net of associated income
tax. The carrying amount of the conversion option is not re-measured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the
convertible bonds, based on the allocation of the proceeds to the liability and equity
components when the instruments are initially recognised.
On conversion, the financial liability is reclassified to equity and no gain or loss is recognised
in the consolidated statement of profit or loss.
VIII. PERPETUAL NOTES
Perpetual notes have no maturity date and may be redeemed by the Company, at its sole
discretion, on certain dates. The Perpetual notes are recognised as equity attributable to
its holders, which forms part of the total equity of the Group. The Company may, at its sole
discretion, elect to defer the payment of interest on the notes (referred to as Arrears of
Interest). Arrears of Interest must be paid by the Company upon the occurrence of certain
events, including but not limited to, dividends, distributions or other payments made to
instruments such as the Company’s ordinary shares, which rank junior to the Perpetual
notes. Upon occurrence of such an event, any Arrears of Interest would be re-classified as
a liability in the Group’s consolidated financial statements. The deferred amounts shall not
Notes to the consolidated financial statements
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Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as forward currency contracts, interest
rate swap and cross-currency swap contracts, to hedge its foreign currency risks, interest
rate risks and fair value risks. Such derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
y
Fair value hedges when hedging the exposure to changes in the fair value of a recognised
asset or liability or an unrecognised commitment.
y
Cash flow hedges when hedging the exposures to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
y
Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Group formally designates and documents the
hedge relationship to which it wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item,
the nature of the risk being hedged and how the Group will assess whether the hedging
relationship meets the hedge effectiveness requirements (including the analysis of
sources of hedge ineffectiveness and how the hedge ration is determined). A hedging
relationship qualifies for hedge accounting if it meets all of the following effectiveness
requirements:
y
There is ‘an economic relationship’ between the hedged item and the hedging instrument.
y
The effect of credit risk does not ‘dominate the value changes’ that result from that
economic relationship.
y
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of
the hedged item that the Group actually hedges and the quantity of the hedging instrument
that the Group actually uses to hedge that quantity of hedge item. Hedges that meet all the
qualifying criteria for hedge accounting are accounted for and further described below:
h
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the consolidated
statement of profit or loss. The change in the fair value of the hedged item attributable
to the risk hedged is recorded as part of the carrying value of the hedged item and is also
recognised in the consolidated statement of profit or loss.
Where the Group designates only the spot element as a hedging instrument, the
forward element is recognised in OCI and accumulated in a separate component of
equity under cost of hedging reserve as time period related element and amortised to
the consolidated statement of profit or loss over the hedged period.
If the hedged item is derecognised, the unamortised fair value is recognised immediately
in profit or loss.
h
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized
in OCI and accumulated in the hedge reserves, while any ineffective portion is
recognized immediately in the consolidated statement of profit or loss. The cash flow
hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging
instrument and the cumulative change in fair value of the hedged item.
The forward element is recognized in OCI and accumulated in a separate component of
equity under other reserve.
The amounts accumulated in OCI are accounted for, depending on the nature of the
underlying hedged transaction. If the hedged transaction subsequently results in the
recognition of a non-financial item, the amount accumulated in equity is removed from
the separate component of equity and included in the initial cost or other carrying
amount of the hedged asset or liability. This is not a reclassification adjustment and
will not be recognized in OCI for the period. This also applies where the hedged
forecast transaction of a non-financial asset or non-financial liability subsequently
become a firm commitment for which fair value hedge accounting is applied.
For any other cash flow hedges, the amount accumulated in OCI is reclassified to
profit or loss as a reclassification adjustment in the same period or periods during
which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated
in OCI must remain in accumulated OCI if the hedged future cash flows are still
expected to occur. Otherwise, the amount will be immediately reclassified to profit or
loss as a reclassification adjustment. Aſter discontinuation, once the cash flows hedge
occurs, any amount remaining in accumulated OCI must be accounted for depending
on the nature of the underlying transaction as described above.
Notes to the consolidated financial statements
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h
Hedge of net investments in foreign operations
−
The Group designates only the spot element as a hedging instrument. The forward
element is recognised in OCI and accumulated in a separate component of equity
under cost of hedging reserve as time period related element and amortised to the
consolidated statement of profit or loss over the hedged period.
−
Gains or losses on the hedging instrument relating to the effective portion of the
hedge are recognised as OCI while any gains or losses relating to the ineffective
portion are recognised in the consolidated statement of profit or loss.
−
On disposal of the foreign operation, the cumulative value of any such gains or losses
recorded in equity is transferred to the consolidated statement of profit or loss.
h
Interbank offered rates (IBOR) reform
The Group applies the temporary reliefs provided by the IBOR reform Phase 1
amendments, which enable its hedge accounting to continue during the period of
uncertainty, before the replacement of an existing interest rate benchmark with an
risk-free rate (RFR). For the purpose of determining whether a forecast transaction
is highly probable, the reliefs require it to be assumed that the IBOR on which the
hedged cash flows are based is not altered as a result of IBOR reform. The reliefs end
when the Group judges that the uncertainty arising from IBOR reform is no longer
present for the hedging relationships that are referenced to IBORs. This applies when
Cash and cash equivalents in the consolidated statement of financial position and in the
consolidated statement of cash flow comprise cash at banks and on hand and short-term
highly liquid deposits with an original maturity up to three months, that are readily convertible
This item includes operating costs that can be recharged to the tenants and direct
management costs of the properties. Maintenance expenses for the upkeep of the property
in its current condition, as well as expenditure for repairs are charged to the consolidated
income statement. Refurbishment that takes place subsequent to the property valuation,
thus excluded in its additional value, will also be stated in this account, until the next
An operating segment is a component of the Group that meets the following three criteria:
y
Is engaged in business activities from which it may earn revenues and incur expenses,
including revenues and expenses relating to intragroup transactions;
y
whose operating results are regularly reviewed by the Group’s chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its
performance; and
y
For which separate financial information is available.
The Group has one reportable operating segment which refers to rental income from
3.18. COMPARATIVES
Where necessary, comparative figures have been adjusted to conform to changes in
presentation in the current period.
Earnings per share are calculated by dividing the net profit attributable to owners of the
Company by the weighted number of Ordinary shares outstanding during the period.
Basic earnings per share only include shares that were actually outstanding during the
period. Potential Ordinary shares (convertible securities such as convertible debentures,
warrants and employee options) are only included in the computation of diluted earnings
per share when their conversion decreases earnings per share or increases loss per share
from continuing operations. Further, potential Ordinary shares that are converted during
the period are included in diluted earnings per share only until the conversion date and
from that date in basic earnings per share. The Company’s share of earnings of investees
is included based on the earnings per share of the investees multiplied by the number of
The grant-date fair value of equity-settled share-based payment awards granted to
employees is generally recognised as an expense, with a corresponding increase in equity,
over the vesting period of the awards. The amount recognised as an expense is adjusted to
reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised is based
on the number of awards that meet the related service and non-market performance
Notes to the consolidated financial statements
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Provisions are recognised when there is a present obligation, either legal or constructive,
vis-à-vis third parties as a result of a past event, if it is probable that a claim will be asserted,
and the probable amount of the required provision can be reliably estimated. Provisions are
reviewed regularly and adjusted to reflect new information or changed circumstances.
Provisions include provisions for operating and administrative liabilities, as well as accruals
of interest on straight and convertible bonds which have not become payable as at the
The Group assesses at contract inception whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Group recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying
assets.
The Group recognises right-of-use assets at the commencement date of the lease (i.e.,
the date the underlying asset is available for use). Initially, the right-of-use assets are
measured at cost and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement date less any lease
incentives received.
In addition, the Group leases properties that meet the definition of investment property.
The right-of-use assets are classified and presented as part of the line item ‘Investment
II) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at
the present value of lease payments to be made over the lease term. The lease payments
include fixed payments (including in-substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include
the exercise price of a purchase option reasonably certain to be exercised by the Group
and payments of penalties for terminating the lease, if the lease term reflects the Group
exercising the option to terminate. Variable lease payments that do not depend on an index
or a rate are recognised as expenses (unless they are incurred to produce inventories) in the
period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing
rate at the lease commencement date because the interest rate implicit in the lease is
not readily determinable. Aſter the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying asset. IFRS 16 requires
certain adjustments to be expensed, while others are added to the cost of the related right-
of-use asset.
The Group presents cash payments for interest portion of lease liabilities under “interest
and other financial expenses, net” in the consolidated statement of cash flows.
III) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to short-term leases
of equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases of office equipment that are considered
to be low value. Lease payments on short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over the lease term.
Group as a lessor
The new and amended standards and interpretations that are issued, but not yet effective,
up to the date of issuance of the Group’s financial statements are disclosed below, if they
are expected to have an impact on the Group’s financial statements. The Group intends
to adopt these new and amended standards and interpretations, if applicable, when they
become effective.
Notes to the consolidated financial statements
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169
The following amendments were adopted by the EU, but not yet effective in 2023:
h
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
In September 2022, the IASB issued amendments to IFRS 16 to specify the requirements
that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback
transaction, to ensure the seller-lessee does not recognise any amount of the gain or
loss that relates to the right of use it retains.
The amendments are effective for annual reporting periods beginning on or aſter 1
January 2024 and must applied retrospectively to sale and leaseback transactions
entered into aſter the date of initial application of IFRS 16. Earlier application is permitted
and that fact must be disclosed.
The amendments are not expected to have a material impact on the Group’s consolidated
financial statements.
h
Amendments to IAS 1 Presentation of Financial Statements:
−
Classification of Liabilities as Current or Non-current (issued on 23 January 2020);
−
Classification of Liabilities as Current or Non-current - Deferral of Effective Date
(issued on 15 July 2020); and
−
Non-current Liabilities with Covenants (issued on 31 October 2022)
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76
of IAS 1 to specify the requirements for classifying liabilities as current or non-current.
The amendments clarify:
y
What is meant by a right to defer settlement
y
That a right to defer must exist at the end of the reporting period
y
That classification is unaffected by the likelihood that an entity will exercise its
deferral right
y
That only if an embedded derivative in a convertible liability is itself an equity
instrument would the terms of a liability not impact its classification
In addition, a requirement has been introduced to require disclosure when a liability
arising from a loan agreement is classified as non-current and the entity’s right to defer
settlement is contingent on compliance with future covenants within twelve months.
The amendments are effective for annual reporting periods beginning on or aſter 1
January 2024 and must be applied retrospectively. The amendments are not expected
to have a material impact on the Group’s consolidated financial statements.
The Group has not early adopted any standard, interpretation or amendment that has been
Halle
Notes to the consolidated financial statements
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170
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at 31 December 2023 and 31 December 2022 on a recurring basis:
As at 31 December 2023 | As at 31 December 2022 | |||||||||
Fair value measurement using | Fair value measurement using | |||||||||
Quoted prices | Significant | Significant | Quoted prices | Significant | Significant | |||||
in active | observable | unobservable | in active | observable | unobservable | |||||
Carrying | Total | market | inputs | inputs | Carrying | Total | market | inputs | inputs | |
amount | fair value | (Level 1) | (Level 2) | (Level 3) | amount | fair value | (Level 1) | (Level 2) | (Level 3) | |
€’000 | ||||||||||
FINANCIAL ASSETS | ||||||||||
Financial assets at fair value | ||||||||||
through profit or loss (*) | 185,408 | 185,408 | 89,451 | 61,804 | 34,153 | 184,463 | 184,463 | 76,199 | 70,288 | 37,976 |
Derivative financial assets | 71,383 | 71,383 | - | 71,383 | - | 63,204 | 63,204 | - | 63,204 | - |
Total financial assets | 256,791 | 256,791 | 89,451 | 133,187 | 34,153 | 247,667 | 247,667 | 76,199 | 133,492 | 37,976 |
FINANCIAL LIABILITIES | ||||||||||
Derivative financial liabilities | 69,193 | 69,193 | - | 69,193 | - | 50,037 | 50,037 | - | 50,037 | - |
Total financial liabilities | 69,193 | 69,193 | - | 69,193 | - | 50,037 | 50,037 | - | 50,037 | - |
(*) including non-current financial assets at fair value through profit or loss, see note 13
Notes to the consolidated financial statements
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171
The Group also has a number of financial instruments which are not measured at fair value in the consolidated statement of financial position. For the majority of these instruments, the
fair values are not materially different to their carrying amounts, since interest receivable/payable is either close to current market rates or the instruments are short-term in nature.
Significant differences were identified for the following instruments as at 31 December 2023 and 31 December 2022:
As at 31 December 2023
As at 31 December 2022
Fair value measurement using | Fair value measurement using | |||||||||
Significant | Significant | Significant | Significant | |||||||
Quoted prices | observable | unobservable | Quoted prices | observable | unobservable | |||||
Carrying | Total | in active market | inputs | inputs | Carrying | Total | in active market | inputs | inputs | |
amount | fair value | (Level 1) | (Level 2) | (Level 3) | amount | fair value | (Level 1) | (Level 2) | (Level 3) | |
€’000 | ||||||||||
FINANCIAL LIABILITIES | ||||||||||
Loans and borrowings (1) | 872,427 | 878,281 | - | 878,281 | - | 323,280 | 289,816 | - | 289,816 | - |
Straight bonds (2) | 3,559,897 | 3,197,414 | 3,030,389 | 167,025 | - | 3,612,105 | 2,813,003 | 2,676,781 | 136,222 | - |
Total financial liabilities | 4,432,324 | 4,075,695 | 3,030,389 | 1,045,306 | - | 3,935,385 | 3,102,819 | 2,676,781 | 426,038 | - |
(1) including current portion of long-term loans
(2) including bond redemption
Fair value hierarchy
Level 1:
the fair value of financial instruments traded in active markets (such as debt and
equity securities) is based on quoted market prices at the end of the reporting period.
Level 2:
the fair value of financial instruments that are not traded in an active market
(for example, over-the-counter derivatives) is determined using valuation techniques
which maximise the use of observable market data and rely as little as possible on entity-
specific estimates. If all significant input required to fair value of financial instrument are
observable, the instrument is included in level 2.
Level 3:
if one or more of the significant inputs is not based on observable market data, the
instrument is included in level 3.
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy
levels as at the end of the reporting period.
When the fair value of financial assets and financial liabilities recorded in the consolidated
statement of financial position cannot be measured based on quoted prices in active
markets, their fair value is measured using valuation techniques including the discounted
cash flows (DCF) model. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgement is required in
establishing fair values. Judgements include considerations of input such as liquidity risk,
credit risk and volatility. Changes in assumptions relating to these factors could affect the
reported fair value of financial instruments and is discussed further below.
Notes to the consolidated financial statements
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172
Valuation techniques used to determine fair values:
The following methods and assumptions were used to estimate the fair values:
y
The fair values of the quoted bonds are based on price quotations at the reporting
date. The fair value of unquoted bonds is measured using the discounted cash flows
method with observable inputs.
y
There’s an active market for the Group’s listed equity investments and quoted debt
instruments.
y
For the fair value measurement of investments in unlisted funds, the net asset value
is used as a valuation input and an adjustment is applied for lack of marketability and
restrictions on redemptions as necessary. This adjustment is based on management
judgment aſter considering the period of restrictions and the nature of the underlying
investments.
y
The Group enters into derivative financial instruments with various counterparties,
principally financial institutions with investment grade credit ratings. Interest rate
and foreign exchange swap and forward, collar and cap contracts are valued using
valuation techniques, which employ the use of market observable inputs. The most
frequently applied valuation technique includes forward pricing and swap models
using present value calculations. The models incorporate various inputs including
the credit quality of counterparties, foreign exchange spot and forward rates, yield
curves of the respective currencies, currency basis spreads between the respective
Notes to the consolidated financial statements
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173
Berlin
During the year, the Group changed its holdings rates in subsidiaries without losing
control. The carrying amount of the Group’s interest and non-controlling interests
was adjusted to reflect the changes in their relative interest in the subsidiaries, in the
amount of euro 6 million and is presented in the consolidated statement of changes in
equity. The results of the transactions are recognised directly in equity attributed to the
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Net rental income | 411,313 | 396,041 |
Operating and other income | 196,428 | 186,464 |
607,741 | 582,505 |
The Group is not exposed to significant revenue derived from an individual customer.
During the year, approximately 77% (2022: 77%) of the Group’s net rental income derive
from Germany, 22% (2022: 22%) derive from the United Kingdom and 1% (2022: 1%) from
7. PROPERTY REVALUATIONS AND CAPITAL GAINS (LOSS) |
Year ended 31 December |
2023
2022
€’000 | |||
Property revaluations (see note 15.1) | (881,382) | 115,039 | |
Capital gains (loss) (see note 24.1) | (8,635) | 2,722 | |
(890,017) | 117,761 |
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Purchased services | (200,384) | (187,631) |
Maintenance and refurbishment | (22,187) | (21,723) |
Personnel expenses | (26,342) | (24,458) |
Other operating costs | (30,137) | (32,475) |
(279,050) | (266,287) |
Notes to the consolidated financial statements
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174
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Personnel expenses | (4,441) | (4,509) |
Audit and accounting costs | (2,818) | (2,856) |
Legal and professional consultancy fees | (2,666) | (2,437) |
Marketing and other expenses | (981) | (887) |
(10,906) | (10,689) |
During the year, the Group recorded euro 1.7 million (2022: euro 1.9 million) and euro 1.2
million (2022: euro 1.0 million) related to audit and audit-related fees provided by KPMG
audit firms and other audit firms, respectively, and less than euro 0.1 million (2022: less
than euro 0.1 million) and euro 0.3 million (2022: euro 0.2 million) related to tax and
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
10.1. FINANCE EXPENSES | ||
Finance expenses from financial institutions and | ||
| third parties, net | (8,755) | (5,944) |
| Finance expenses from straight and convertible | (48,059) | (40,970) |
bonds, net | ||
(56,814) | (46,914) | |
10.2. OTHER FINANCIAL RESULTS | ||
Changes in fair value of financial assets and | ||
| liabilities, net | (67,015) | (115,925) |
Finance-related costs | (19,073) | (21,208) |
(86,088) | (137,133) |
11.1.
TAX RATES APPLICABLE TO THE GROUP
The Company is subject to taxation under the laws of Luxembourg. The corporation tax rate
for Luxembourg companies is 24.94% (2022: 24.94%).
The German subsidiaries with property are subject to taxation under the laws of Germany.
Income taxes are calculated using a federal corporate tax of 15% as of 31 December 2023
(2022: 15%), plus an annual solidarity surcharge of 5.5% (2022: 5.5%) on the amount of
federal corporate taxes payable (aggregated tax rate: 15.825%). German property taxation
includes taxes on the holding of real estate property.
The Cypriot subsidiaries are subject to taxation under the laws of Cyprus. The corporation tax
rate for Cypriot companies is 12.5% (2022: 12.5%). Under certain conditions interest income of
the Cypriot companies may be subject to defense contribution at the rate of 30% (2022: 30%). In
such cases this interest will be exempt from corporation tax. In certain cases, overseas dividend
income of Cyprus tax resident companies may be subject to special defense contribution at a flat
rate of 17%. In such case, this dividend income will be exempt from Cyprus income (corporation)
tax. Under certain conditions, dividend income earned from Cyprus tax resident companies is
exempt from special defense contribution and Cyprus income (corporation) tax.
The United Kingdom subsidiaries with property are subject to taxation under the laws
of the United Kingdom. Income taxes are calculated using a federal corporate tax (that
includes capital gains) of 25% for 31 December 2023 (2022: 19%).
Subsidiaries in other jurisdictions are subject to corporate tax rate of up to 27.9%
.
Pillar Two legislation was enacted in several jurisdictions in which the Group operates.
Since the Pillar Two legislation was not effective at the reporting date, the Group has no
related current tax exposure. The Group applies the exception to recognising and disclosing
information about deferred tax assets and liabilities related to Pillar Two income taxes, as
provided in the amendments to IAS 12 issued in May 2023.
Under the legislation, the Group is liable to pay a top-up tax for the difference between
their GloBE effective tax rate per jurisdiction and a 15% minimum rate.
The Group is in the process of assessing its exposure to the Pillar Two legislation. Due to the
complexities in applying the legislation and calculating GloBE income, the quantitative impact
of the enacted or substantively enacted legislation is not yet reasonably estimable. The Group
is currently engaged with tax specialists to assist them with applying the legislation.
Notes to the consolidated financial statements
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11.2. CURRENT TAX IN CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Corporate income tax | (26,112) | (24,378) |
Property tax | (14,753) | (14,742) |
Charge for the year | (40,865) | (39,120) |
| Investment | Owner-occupied | Derivative financial | Losses | |||
property | property | instruments, net | carried forward | Others | Total | |
€’000 | ||||||
BALANCE AS AT 1 JANUARY 2022 | (738,274) | (5,837) | (4,288) | 51,412 | (12,073) | (709,060) |
Credit (charge) to profit or loss for the year | (43,761) | 204 | 29,157 | 1,515 | 2,353 | (10,532) |
Credit (charge) to other comprehensive income for the year | 1,714 | (2,063) | (27,348) | (166) | - | (27,863) |
Transfers | 11,611 | - | - | 1,013 | - | 12,624 |
BALANCE AS AT 31 DECEMBER 2022 | (768,710) | (7,696) | (2,479) | 53,774 | (9,720) | (734,831) |
Credit (charge) to profit or loss for the year | 96,114 | 174 | (7,100) | 15,802 | 22,264 | 127,254 |
Credit (charge) to other comprehensive income for the year | (1,083) | 956 | 6,762 | 139 | - | 6,774 |
Deconsolidation | 1,158 | - | - | (144) | - | 1,014 |
Transfers | 19,870 | - | - | (3,582) | (12,544) | 3,744 |
BALANCE AS AT 31 DECEMBER 2023 | (652,651) | (6,566) | (2,817) | 65,989 | - | (596,045) |
Notes to the consolidated financial statements
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As at 31 December 2023 the Group has unused tax losses for which no deferred tax assets
have been recognised as it is not considered probable that there will be future taxable
profits available. These deferred tax assets which have not been recognised amounted
to approximate euro 79 million (2022: 54 million) of which euro 10 million (2022: euro 10
million) and euro 69 million (2022: euro 44 million) are related unused tax losses that can
be carried forward indefinitely and for a maximum period of 17 years, respectively.
The Group has applied the initial recognition exception on acquisitions of investment
property which did not meet the definition of business combination. As at 31 December
2023, the deferred tax liabilities which have not been recognised in the consolidated
11.4. RECONCILIATION OF EFFECTIVE TAX RATE
Year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Profit (loss) before tax | (724,457) | 228,755 |
Statutory tax rate | 24.94% | 24.94% |
Tax computed at the statutory tax rate | (180,680) | 57,051 |
Decrease in taxes on income resulting from the | ||
following factors: | ||
Effect of different tax rates of subsidiaries | ||
| operating in other jurisdictions | 56,861 | (27,745) |
Effect of permanent differences | 40,663 | 16,596 |
Others | (3,233) | 3,750 |
Tax and deferred tax (expenses) income | (86,389) | 49,652 |
Notes to the consolidated financial statements
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177
Cologne
12.1. BASIC EARNINGS PER SHARE
The calculation of basic earnings per share as of 31 December 2023 is based on the loss attributable
to ordinary shareholders of euro 547,507 thousand (2022: profit euro 129,214 thousand), and
a weighted average number of ordinary shares outstanding of 172,352 thousand (2022: 168,170
thousand), calculated as follows:
Year ended 31 December | ||
| PROFIT (LOSS) ATTRIBUTED TO ORDINARY | 2023 | 2022 |
SHAREHOLDERS (BASIC) | ||
€’000 | ||
Profit (loss) for the year, attributable to the | ||
| owners of the Company | (547,507) | 129,214 |
Year ended 31 December | ||
WEIGHTED AVERAGE NUMBER OF | ||
ORDINARY SHARES (BASIC) | 2023 | 2022 |
’000 | ||
Issued ordinary shares, net of treasury shares | ||
on January 1 | 172,326 | 164,962 |
Share based payment | 26 | (*) 2 |
Scrip dividend | - | (*) 3,206 |
Weighted average number of ordinary | ||
shares as at 31 December | 172,352 | 168,170 |
Basic earnings (loss) per share (euro) | (3.18) | 0.77 |
(*) reclassified
12.2. DILUTED EARNINGS PER SHARE
The calculation of diluted earnings per share at 31 December 2023 is based on loss attributable
to ordinary shareholders of euro 547,507 thousand (2022: profit euro 129,812 thousand), and a
weighted average number of ordinary shares outstanding aſter adjustment for the effects of all dilutive
potential ordinary shares of 172,633 thousand (2022: 171,591 thousand), calculated as follows:
Year ended 31 December | ||
PROFIT (LOSS) ATTRIBUTED TO ORDINARY | ||
| SHAREHOLDERS (DILUTED) | 2023 | 2022 |
€’000 | ||
Profit (loss) for the year, attributable to the | ||
| owners of the Company (basic) | (547,507) | 129,214 |
Expense on convertible bond series F | - | 598 |
Profit (loss) for the year, attributable to the | ||
| owners of the Company (diluted) | (547,507) | 129,812 |
Year ended 31 December | ||
WEIGHTED AVERAGE NUMBER OF | ||
ORDINARY SHARES (DILUTED) | 2023 | 2022 |
’000 | ||
Issued ordinary shares, net of treassury shares | ||
on January 1 | 172,326 | 164,962 |
Share based payment | 26 | (*) 2 |
Scrip dividend | - | (*) 3,206 |
Effect of exercise of convertible bond series F | - | 3,250 |
Effect of equity settle share-based payment | 281 | 171 |
Weighted average number of ordinary shares | ||
as at 31 December | 172,633 | 171,591 |
Diluted earnings (loss) per share (euro) | (3.17) | 0.76 |
Notes to the consolidated financial statements
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As at 31 December | ||
2023 | 2022 | |
€’000 | ||
Tenancy deposit (1) | 46,523 | 43,599 |
Investment in other long-term | ||
assets (2) | 106,075 | 130,429 |
Financial assets at fair value through | ||
profit and loss (3) | 84,101 | 82,034 |
Others | 13,095 | 6,032 |
249,794 | 262,094 | |
(1)
Tenancy deposits mainly include 1-3 months net rent from the tenants which are paid at the
beginning of the lease. The deposits are considered as a security payment by the tenant and
the Group can use those funds mainly if the tenant has unpaid debts or causes damages
to the property. Past experience shows that the majority of the leases are long-term and
therefore the deposits are presented as long-term assets.
(2)
Include non-current investments, long-term deposit and Group loans to minority and as a seller.
(3) investment in various equity and debt instrumnts as well as investment as minority stakes
Goodwill, | ||||
Owner-occupied | Furniture, | soſtwares and | ||
property (*) | fixtures and | other intangible | Total | |
office equipment | assets | |||
€’000 | ||||
COST | ||||
Balance as at 1 January 2022 | 42,973 | 29,269 | 24,525 | 96,767 |
Additions, net | - | 3,326 | 1,207 | 4,533 |
Revaluation adjustment | 13,037 | - | - | 13,037 |
Transfer to held-for-sale | - | (215) | (2) | (217) |
Balance as at 31 December 2022 | 56,010 | 32,380 | 25,730 | 114,120 |
Additions, net | - | 2,474 | 73 | 2,547 |
Revaluation adjustment | (6,043) | - | - | (6,043) |
Transfer from held-for-sale | - | (284) | - | (284) |
Deconsolidation | - | (177) | - | (177) |
Balance as at 31 December 2023 | 49,968 | 34,392 | 25,803 | 110,163 |
DEPRECIATION/AMORTISATION | ||||
Balance as at 1 January 2022 | - | 16,616 | 9,808 | 26,424 |
Depreciation/Amortisation for the year | 1,290 | 4,278 | 4,920 | 10,488 |
Balance as at 31 December 2022 | 1,290 | 20,894 | 14,728 | 36,912 |
Depreciation/Amortisation for the year | 1,101 | 2,937 | 5,285 | 9,323 |
Balance as at 31 December 2023 | 2,391 | 23,831 | 20,013 | 46,235 |
CARRYING AMOUNTS | ||||
Balance as at 31 December 2023 | 47,577 | 10,561 | 5,790 | 63,928 |
Balance as at 31 December 2022 | 54,720 | 11,486 | 11,002 | 77,208 |
(*) Owner-occupied property measured at fair value less accumulated depreciation and impairment losses
and classified in accordance
with the fair value hierarchy (see note 4). Since one or more of the significant inputs is not based on observable market data, the fair
Notes to the consolidated financial statements
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179
15.1. RECONCILIATION OF INVESTMENT PROPERTY
2023 | 2022 | |
Level 3 (*) | Level 3 (*) | |
€’000 | ||
As at 1 January | 9,529,608 | 9,339,489 |
Plus: investment property classified as held-for-sale | 330,853 | 102,537 |
Total investment property | 9,860,461 | 9,442,026 |
Acquisitions of investment property | 10,079 | 277,668 |
Capital expenditure on investment property | 101,049 | 139,647 |
Disposals of investment property | (314,599) | (15,762) |
Fair value adjustment | (881,382) | 115,039 |
Effect of foreign currency exchange differences | 49,116 | (98,157) |
Total investment property | 8,824,724 | 9,860,461 |
Less: investment property classified as held-for-sale | (195,641) | (330,853) |
As at 31 December | 8,629,083 | 9,529,608 |
(*) classified in accordance with the fair value hierarchy (see note 4). Since one or more of the significant inputs is
not based on observable market data, the fair value measurement is included in level 3.
As at 31 December 2023 and 2022, the fair values of the properties are based on valuations
performed by accredited independent valuers.
15.2. GEOGRAPHICAL INFORMATION
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
Investment property (*) | ||
Germany | 6,935,405 | 7,845,740 |
United Kingdom | 1,738,452 | 1,874,428 |
Others | 150,867 | 140,293 |
8,824,724 | 9,860,461 | |
(*) including assets held-for-sale
The fair value of the properties of the Group is determined at least once a year by external,
independent and certified valuators, who are specialist in valuing real estate properties. As
at 31 December 2023, the full portfolio of the Group has been revalued. The prime valuator,
responsible for the major part of the portfolio is Jones Lang LaSalle GmbH (JLL) and is considered
as one of the market leading valuators in the European real estate market. The fair value of
the properties was prepared in accordance with the RICS Valuation- Professional Standards
(current edition) published by the Royal Institution of Chartered Surveyors (RICS) as well as
the standards contained within the TEGoVA European Valuations Standards, and in accordance
with IVSC International Valuation Standard (IVS), the International Accounting Standard (IAS),
International Financial Reporting Standards (IFRS) as well as the current guidelines of the
European Securities and Market Authority (ESMA) based on the Market Value. This is included
in the General Principles and is adopted in the preparation of the valuations reports of the
valuators. Therefore, the valuation is based on internationally recognized standards.
As part of the engagement, the Company and the valuators confirm that there is no actual
or potential conflict of interest that may have influenced the valuators status as external and
independent. The valuation fee is determined on the scope and complexity of the valuation.
As of 31 December 2023, 97% (2022: 96%) of investment property have been valued using the discounted
cash flows method, 2% (2022:1%) comparable approach and 1% (2022:3%) residual value approach
.
»
Discounted cash flow (DCF) method
Under the DCF method, fair value is estimated using assumptions regarding the benefits and
liabilities of ownership over the asset’s life including an exit or terminal value. This method
involves the projection of a series of cash flows on a real property interest. To this projected
cash flow series, an appropriate, market derived discount rate is applied to establish the
present value of the income stream associated with the asset. The exit yield is normally
separately determined and differs from the discount rate.
The duration of the cash flows and the specific timing of inflows and outflows are determined
by events such as rent reviews, lease renewal and related re-letting, redevelopment, and
refurbishment. The appropriate durations are typically driven by market behaviour that is a
characteristic of the class of real property.
Periodic cash flows are typically estimated as gross income less vacancy, non-recoverable
expenses, collection losses on future rents, lease incentives, maintenance cost, agent and
commission costs and other operating and management expenses. The series of periodic net
operating income, along with an estimate of the terminal value anticipated at the end of the
projection period, is then discounted.
Notes to the consolidated financial statements
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180
The key assumptions used to determine the fair value of the investment properties under
the DCF method, which account for 97% (2022: 96%) of the investment property, are further
discussed below:
Long-term vacancy | Capitalization rate | |||||||
Rent growth p.a. (%) | rate (%) | Discount rate (%) | (%) | |||||
As of 31 December | As of 31 December | As of 31 December | As of 31 December | |||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
REGIONS | ||||||||
Range (weighted average) | ||||||||
1.2 - 2.4 | 1.1 - 3.0 | 0.6 - 3.0 | 0.5 - 3.0 | 3.4 - 9.0 | 3.3 - 8.3 | 2.1 - 7.5 | 2.0 - 7.2 | |
NRW | (1.9) | (1.7) | (2.3) | (2.7) | (5.3) | (4.8) | (4.0) | (3.6) |
1.3 - 2.6 | 1.2 - 3.0 | 0.6 - 7.0 | 0.7 - 4.1 | 3.3 - 7.7 | 2.5 - 7.0 | 2.1 - 7.0 | 1.7 - 6.2 | |
Berlin | (2.0) | (2.0) | (3.4) | (2.3) | (5.0) | (4.4) | (3.9) | (3.4) |
Dresden/ | 1.2 - 2.4 | 1.0 - 3.0 | 1.0 - 6.0 | 1.5 - 4.1 | 4.5 - 8.3 | 4.0 - 8.0 | 3.0 - 6.5 | 2.6 - 5.8 |
Leipzig/ | ||||||||
Halle | (1.8) | (1.6) | (2.4) | (2.6) | (5.1) | (4.5) | (3.8) | (3.5) |
Mannheim/ | ||||||||
KL/ | 1.2 - 2.4 | 1.4 - 3.0 | 2.0 - 5.1 | 2.0 - 3.4 | 4.5 - 7.4 | 3.9 - 6.6 | 3.0 - 6.4 | 2.7 - 5.8 |
Frankfurt/ | (1.7) | (1.7) | (3.4) | (2.9) | (5.3) | (4.6) | (4.1) | (3.6) |
Mainz | ||||||||
Nuremberg/ | 1.5 - 2.4 | 1.3 - 3.0 | 1.0 - 5.8 | 1.0 - 4.0 | 4.4 - 5.5 | 3.8 - 8.6 | 2.9 - 3.7 | 2.5 - 6.2 |
Furth/ | ||||||||
Munich | (1.8) | (1.6) | (4.2) | (2.7) | (5.0) | (4.5) | (3.4) | (3.1) |
Hamburg/ | 1.2 - 2.4 | 1.2 - 2.6 | 1.0 - 4.0 | 0.5 - 3.8 | 4.3 - 8.5 | 3.8 - 7.6 | 2.6 - 7.0 | 2.2 - 7.1 |
Bremen | (1.8) | (1.7) | (3.1) | (2.7) | (5.4) | (4.8) | (4.4) | (4.1) |
1.3 - 3.0 | 1.0 - 3.0 | 2.7 - 2.7 | 2.7 - 2.9 | 6.2 - 8.5 | 5.0 - 9.1 | 4.2 - 6.8 | 3.5 - 7.4 | |
London | (2.2) | (2.3) | (2.7) | (2.7) | (6.7) | (6.2) | (4.9) | (4.4) |
0.6 - 3.0 | 0.3 - 3.0 | 0.2 - 7.8 | 0.0 - 4.0 | 4.6 - 12.0 | 4.0 - 9.3 | 3.1 - 8.3 | 2.7 - 8.3 | |
Others | (1.8) | (1.6) | (3.2) | (2.8) | (6.2) | (5.6) | (5.1) | (4.6) |
0.6 - 3.0 | 0.3 - 3.0 | 0.2 - 4.6 | 0.0 - 4.1 | 3.3 - 12.0 | 2.5 - 9.3 | 2.1 - 8.3 | 1.7 - 8.3 | |
Total | (1.9) | (1.8) | (2.8) | (3.4) | (5.4) | (4.8) | (4.1) | (3.8) |
Significant increases (decreases) in estimated rental value and rent growth per annum in
isolation would result in a significantly higher (lower) fair value of the properties. Significant
increases (decreases) in the long-term vacancy rate and discount rate (and exit yield) in
isolation would result in a significantly lower (higher) fair value.
Generally, a change in the assumption made for the estimated rental value is accompanied
by a directionally similar change in the rent growth per annum and discount rate (and exit
yield), and an opposite change in the long-term vacancy rate.
h
Comparable approach
Under the market comparable approach, a property’s fair value is estimated based on
comparable transactions. The market comparable approach is based upon the principle of
substitution under which a potential buyer will not pay more for the property than it will
cost to buy a comparable substitute property. The unit of comparison applied by the Group
is the price per square meter (sqm).
In general, enquiries have been made of the valuers and public databases, local sales offices
and recent transactions. The main components of the valuation are the location of the
property, the condition of the property with its units; provision of concierge and residents
facilities, provision and layout of accommodation, as well as market sentiment and how the
individual units would be received by the market. The most recent sales data for individual
units within the subject property and comparable evidence within the immediate area will
be taken into account and adjusted by premium according to the specifics of the property
and its units. The achieved market sales price per sqm will be multiplied by the area of the
property to achieve the property specific market value.
The key assumptions used to determine the fair value of the investment properties under
the comparable approach, which account for 2% (2022: 1%) of the investment property, are
further discussed below:
Valuation | Significant | ||
| Technique | unobservable inputs | As of 31 December | |
2023 | 2022 | ||
Range (weighted average) | |||
Market | |||
comparable | Price per sqm (in euro) | 6,800 - 12,800 (10,800) | 6,400 - 16,800 (11,900) |
approach | |||
Notes to the consolidated financial statements
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181
h
Residual value approach
The residual value assesses the various factors associated with a conversion or a new
development of a property. The goal of this method is to calculate an objective value for the
site, which is either undeveloped or suboptimally utilised. The residual value is determined
by first calculating the net capital value of the property aſter completion of the planned
development project. This figure is derived by subtracting the non-recoverable operating
costs (e.g. maintenance and management costs) from the potential gross sale value. In
order to determine the net capital value, the purchaser’s costs have to be deducted. The
costs for the assumed development are subtracted from the net capital value, resulting in
the remainder (residuum). These costs include building fees as well as other required fees,
which are necessary for the construction of a building, depending on its type of use.
The additional construction costs are also part of the total development costs. The
following additional costs are common for constructions: planning, construction, official
review and approval costs as well as financing required immediately for construction. The
amount of additional construction costs depends on the type of building, its finishes and
the location. All of the construction and additional building costs as well as other project
costs including financing costs and developer’s profit are subtracted from the calculated
gross sale value of the completed development. The difference of the gross sale value and
the development costs results in the remainder (residuum). In order to acquire the residual
value, financing and additional purchasing costs for the property are deducted from this
remainder. The residual value represents the amount, which an investor would spend for
the development of the property under specific economic conditions.
The key assumptions used to determine the fair value of the investment properties under
the residual value approach, which account for 1% (2022: 3%) of the investment property,
are further discussed below:
Valuation | Significant | ||
| Technique | unobservable inputs | As of 31 December | |
2023 | 2022 | ||
Range (weighted average) | |||
Sale price per sqm (in euro) | 3,400 – 7,500 (4,600) | 3,000 - 6,200 (3,700) | |
Residual | Rent price per sqm (in euro) | 16.6 – 28.0 (22.3) | 10.0 - 24.0 (19.8) |
value | Development cost per sqm (in euro) | 1,300 - 3,500 (2,800) | 1,000 - 4,600 (3,000) |
approach | Developer margin (%) | 7.5 – 10.0 (9.7) | 9.0 - 15.0 (13.0) |
Highest and best use
As at 31 December 2023, the current use of all investment property is considered the highest
and best use, except for 1% (2022: 2%) of the investment properties, for which the Group
determined that fair value based on the development and the sale of such properties is the
highest and best use. These properties are currently being used to earn rental income, in
line with the Group’s business model of buying and holding investment property to earn
rental income. By increasing the rental income and improving these properties, the value of
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
Operating cost receivables (1) | 215,594 | 188,346 |
Rent and other receivables | 91,685 | 67,492 |
Prepaid expenses | 8,631 | 7,390 |
Other short-term assets (2) | 75,166 | 89,897 |
391,076 | 353,125 | |
(1)
Operating costs receivables represent a right to consideration in exchange for ancillary services that the Group
has transferred to tenants and other charges billed to tenants. Once a year, the operating cost receivables are
settled against advances received from tenants (see note 20).
(2) Include prepayments, Group’s loans as seller, as well as loans connected with future real estate transactions,
short-term investment and deposits.
During the year, the Group recognised a loss allowance for expected credit losses on trade and
Notes to the consolidated financial statements
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182
As at 31 December | ||||
2023 | 2022 | |||
Number of | Number of | |||
| shares | €’000 | shares | €’000 | |
Authorised | ||||
Ordinary shares of euro | ||||
| 0.10 each | 400,000,000 | 40,000 | 400,000,000 | 40,000 |
Issued and fully paid | ||||
Balance as at 1 January | 176,187,899 | 17,619 | 176,187,899 | 17,619 |
Balance as at 31 December | 176,187,899 | 17,619 | 176,187,899 | 17,619 |
17.2.
AUTHORISED CAPITAL
The Company’s authorised share capital as of 31 December 2023 amounts to euro
As at 31 December 2023, the Group holds 3,831,666 (2022: 3,862,089) shares in treasury
which represent 2.2% (2022: 2.2%) out of the total ordinary shares. These shares do not
have voting rights.
As at 31 December | ||
2023 | 2022 | |
In thousands of shares | ||
As at 1 January | 3,862 | 11,226 |
Scrip dividend | - | (7,360) |
Share based payment | (30) | (3) |
As at 31 December | 3,832 | 3,862 |
17.4. SHARE PREMIUM
The share premium derives directly from the capital increases which were affected since
the date of incorporation and from conversions of bonds into shares.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
183
The other reserves include shareholder loans that have been converted to equity and
therefore can be distributed at any time, and proceeds from financial instruments and
share-based payments reserves which temporarily cannot be distributed.
In addition, the other reserves include results on buy-back and redemption of perpetual
17.6. RESOLUTION OF DIVIDEND DISTRIBUTION
As part of the shareholders’ annual meetings it was resolved upon the distribution of cash
dividend for the following years:
Amount | Gross | |||
For | per share | amount | Ex-date | Payment date |
| the year | (in cents) | (€’000) | ||
2014 | 20.00 | 24,344 | 25 June 2015 | 3 July 2015 |
2015 | 25.00 | 38,447 | 30 June 2016 | 1 July 2016 |
2016 | 68.25 | 112,468 | 29 June 2017 | 1 July 2017 |
2017 | 73.00 | 120,296 | 30 June 2018 | 17 July 2018 |
2018 | 77.35 | 129,002 | 27 June 2019 | 22 July 2019 |
2019 | 82.38 | 138,407 | 25 June 2020 | 14 July 2020 |
2020 | 82.32 | 136,433 | 1 July 2021 | 20 July 2021 |
2021 | 83.40 | 137,580 | 30 June 2022 | 19 July 2022 |
The Company has decided not to distribute a dividend for 2022, following the increase in
macro-economic uncertainty and volatility and preserve further liquidity. See note 32.
17.7. PERPETUAL NOTES
Nominal | Placement | Next call | |||
Composition | amount | date | Coupon | date | Coupon as of next call date |
outstanding | |||||
Perpetual | 3.887% over five-year mid | ||||
notes 200,000 | 200,000 | Sep-16 | 6.332% | Jan-28 | swap rate |
Perpetual | 2.682% over five-year mid | ||||
notes 350,000 | 350,000 | April-18 | 5.901% | Oct-28 | swap rate |
Perpetual | 2.184% over five-year mid | ||||
notes 700,000 | 700,000 | Dec-20 | 1.5% | Jun-26 | swap rate |
Movement during 2022-2023
17.7.1.
At the end of 2022, the Company announced its decision not to call the euro
200 million of perpetual notes which had its first call date in January 2023.
17.7.2.
In September 2023, the Company announced its decision not to call the euro
350 million of perpetual notes which had its first call date in October 2023.
These perpetual notes are presented in the consolidated statement of financial position
as equity reserve attributable to its holders, which is part of the total equity of the Group.
The coupon is deferrable until payment resolution of a dividend to the shareholders. The
deferred amounts shall not bear interest.
The majority of the non-controlling interests is held indirectly by Aroundtown S.A. through
Notes to the consolidated financial statements
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184
18.1. DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENTS
As of 31 December 2023, the Group had the following share-based payment arrangements:
»
Incentive Share plan
On 25 June 2014, the Annual General Meeting has approved to authorize the Board of
Directors to issue up to one million shares for an incentive program for the directors,
key management personnel and senior employees. The incentive plan has up to four
years vesting period with target to enhance management’s long-term commitment to
the Company’s strategic targets. Main strategic targets are long-term improvement in
operational and financial targets such as increasing NAV per share, FFO per share and
further improvement in the Group’s rating to A-.
»
The key terms and conditions related to the programs are as follows:
Number | Weighted | Contractual life | |
Grant date | |||
of shares | vesting period | of the shares | |
1 January 2020 – | |||
558 thousands | 2.03 years | Up to 4 years | |
30 June 2027 |
18.2. RECONCILIATION OF OUTSTANDING SHARE OPTIONS
The number and weighted average of shares under the share incentive program and
replacement awards were as follows:
2023 | 2022 | |
Number of shares | Number of shares | |
’000 | ||
Outstanding on January 1 | 434 | 413 |
Granted during the year | 245 | 32 |
Exercised during the year (*) | (121) | (11) |
Outstanding on 31 December | 558 | 434 |
(*) of which 30 thousand (2022: 3 thousand) shares were transferred from the Company’s shares held in treasury
During the year, the total amount recognised as share-based payment was euro 1,862
thousand (2022: euro 2,571 thousand). It was presented as Property operating expenses
and as Administrative and other expenses in the consolidated statement of profit or loss
Notes to the consolidated financial statements
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185
Dresden
19.1. LOANS AND BORROWINGS
Weighted | ||||
average | Maturity | As at 31 December | ||
interest rate (*) | ||||
2023 | 2022 | |||
€’000 | ||||
Non-current | ||||
Bank loans | 4.2% | 2027-2082 | 862,619 | 318,772 |
Total non-current | 862,619 | 318,772 | ||
Current | ||||
Current portion of | ||||
4.2% | 2024 | 9,808 | 4,508 | |
long-term loans | ||||
Total current | 9,808 | 4,508 | ||
(*) As at 31 December 2023
All bank loans are generally non-recourse loans with the related assets serving, among
others, as a security. Approx. euro 2.2 billion (2022: euro 1.2 billion) of investment
properties are encumbered.
The financial covenants under the existing loan agreements include, amount others, Debt-
Service Coverage Ratio (DSCR) of 105-150% and LTV of 50-70%. As at 31 December 2023,
the Group is compliant with its financial covenants to the financing banks.
During the year the Group raised euro 550 million in new secured debt, repaid euro 4
million in near-term maturity bank loans and holds unused credit lines from several banks
in the amount of euro 300 million with no covenants and not subject to material adverse
effect clauses. See also note 32.
Notes to the consolidated financial statements
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19.2. STRAIGHT BONDS
As at 31 December
Nominal amount
Composition
Note
Effective coupon
Placement
Maturity
outstanding
2023
2022
’000
€’000
STRAIGHT BONDS | |||||||
Non - current | |||||||
Straight bond series E | (b) | EUR 194,400 | 1.50% | Apr-15 | Apr-25 | 191,520 | 200,387 |
Straight bond series G | (b) | EUR 577,400 | 1.38% | Aug-17 | Aug-26 | 570,487 | 590,128 |
Straight bond series H | EUR 255,000 | 2.00% | Oct-17 | Oct-32 | 245,400 | 244,312 | |
Straight bond series I | (c) | HKD 900,000 | (1) 1.1725% + 6M Euribor | Feb-18 | Feb-28 | 95,489 | 95,943 |
Straight bond series J | EUR 667,600 | 1.50% | Feb-18 | Feb-27 | 663,829 | 662,619 | |
Straight bond series K | CHF 125,000 | 0.96% | Mar-18 | Sep-26 | 134,714 | 126,590 | |
Straight bond series L | (e) | JPY 7,500,000 | 1.20% | Jun-18 | Jun-38 | 45,541 | 51,941 |
Straight bond series M | (d) | EUR 47,000 | (1) 1.39% + 6M Euribor | Jul-18 | Jul-33 | 48,864 | 46,241 |
Straight bond series N | EUR 88,000 | (1) 1.71% + 3M Euribor | Feb-19 | Feb-39 | 60,111 | 54,793 | |
Straight bond series O | EUR 15,000 | (1) 1.68% + 3M Euribor | Feb-19 | Feb-34 | 11,647 | 10,809 | |
Straight bond series P | HKD 290,000 | (1) 1.38% + 3M Euribor | Mar-19 | Mar-29 | 29,452 | 28,656 | |
Straight bond series Q | - | 131,849 | |||||
Straight bond series R | EUR 40,000 | 2.50% | Jun-19 | Jun-39 | 39,821 | 39,810 | |
Straight bond series U | EUR 80,000 | 0.75% | Jul-19 | Jul-25 | 79,937 | 79,897 | |
Straight bond series V | (f) | EUR 70,000 | (1) 1.50% | Aug-19 | Aug-34 | 67,816 | 61,796 |
Straight bond series W | (b) | - | 203,372 | ||||
Straight bond series X | EUR 1,000,000 | 0.125% | Jan-21 | Jan-28 | 986,347 | 982,962 | |
3,270,975 | 3,612,105 | ||||||
Current | |||||||
Straight bond series Q (2) | CHF 130,000 | 0.57% | Jun-19 | Jun-24 | 140,329 | - | |
Straight bond series W (2) | (b) | EUR 148,800 | 1.70% | Apr-20 | Apr-24 | 148,593 | - |
Accrued interest straight bonds (3) | 26,303 | 26,757 | |||||
315,225 | 26,757 | ||||||
Total straight bonds and accrued | |||||||
3,586,200 | 3,638,862 | ||||||
interest |
(1) including hedging impact
(2) presented in bond redemption in the consolidated statement of financial position
(3) presented in provisions for other liabilities and other charges in the consolidated statement of financial position
Notes to the consolidated financial statements
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187
As of 31 December 2023, the weighted average interest rate on the outstanding loans,
borrowings and bonds, aſter taking into account hedging impact, is 1.9% (2022: 1.3%).
As of 31 December 2023, the Company has maintained a euro 10 billion EMTN programme.
Movement during 2022-2023
(a)
On March 2, 2022, the Company redeemed euro million 450 principal amount of
convertible bond series F with 0.25% coupon (due March 2022) of which euro 186.7
million of principal amount were held by subsidiaries of Aroundtown S.A (“the ultimate
controlling party”).
(b)
During the year, the Group bought back euro 11.2 million, euro 55.9 million and euro
22.6 million principal amount of straight bond series E, W and G respectively for a
cumulative amount of euro 89.7 million.
(c)
The effective coupon rate for straight bond series I until February 2023 was 1.00%;
starting February 2023, 6M Euribor + 1.1725%.
(d)
The effective coupon rate for straight bond series M until July 2023 was 1.70%; starting
July 2023, 6M Euribor + 1.39%.
(e)
The effective coupon rate for straight bond series L until April 2023 was 1.40%; starting
April 2023, 1.20%.
(f)
The effective coupon rate for straight bond series V until August 2024 is 1.50%; starting
August 2024, 6M Euribor + 1.472%.
COVENANTS
The Company’s outstanding series of bonds contain a customary negative pledge clause
that prohibits the Company, so long as any of the Senior Notes remain outstanding, from
creating or having outstanding any Security Interest (other than a Permitted Security
Interest) upon any of its present or future business, undertaking, assets or revenues
(including any uncalled capital) to secure any Capital Markets Indebtedness, unless the
Company, before or at the same time in the case of the creation of a Security Interest and,
in any other case promptly, takes any and all action necessary to ensure that:
(i) all amounts payable by it under the Senior Notes and the Trust Deed are
secured by the Security Interest equally and ratably with the Capital Markets
Indebtedness to the satisfaction of the Trustee; or
(ii) such other Security Interest or other arrangement is provided either (i) as
the Trustee in its absolute discretion deems not materially less beneficial to the
interests of the Senior Noteholders or (ii) as is approved by an Extraordinary
Resolution of the Senior Noteholders.
The Company’s Series E bonds contain a substantially similar negative pledge.
Under its outstanding bond series, the Company has covenanted, among other things, the
following (capitalised terms have the meanings set forth in the relevant bond series):
1.
The Company undertakes that it will not, and will procure that none of its subsidiaries
will, up to (and including) the Final Discharge Date, incur any Indebtedness (other than
Refinancing Indebtedness) if, immediately aſter giving effect to the incurrence of such
additional Indebtedness and the application of the net proceeds of such incurrence:
a.
The sum of: (i) the Consolidated Indebtedness (less Cash and Cash Equivalents)
as at the Last Reporting Date; and (ii) the Net Indebtedness (less Cash and Cash
Equivalents) incurred since the Last Reporting Date would exceed 60% of the sum
of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at
the Last Reporting Date; (ii) ((in case of bonds other than the series E bonds) the
value of all assets acquired or contracted for acquisition by the Group as determined
at the relevant time in accordance with IFRS and the accounting principles applied
by the Company in the latest Financial Statements as certified by the auditors of
the Company, since the Last Reporting Date)/ ((in case of the Series E bonds) the
purchase price of any Real Estate Property acquired or contracted for acquisition by
the Group since the Last Reporting Date); and (iii) the proceeds of any Indebtedness
incurred since the Last Reporting Date (but only to the extent that such proceeds
were not used to acquire Real Estate Property or to reduce Indebtedness);) and
Notes to the consolidated financial statements
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188
b.
The sum of: (i) the Consolidated Secured Indebtedness (excluding the Series E
Bonds and less Cash and Cash Equivalents) as at the Last Reporting Date; and (ii)
the Net Secured Indebtedness (excluding the Series E Bonds and less Cash and Cash
Equivalents) incurred since the Last Reporting Date shall not exceed 45% of the sum
of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at
the Last Reporting Date; (ii) ((in case of bonds other than the Series E bonds) the
value of all assets acquired or contracted for acquisition by the Group as determined
at the relevant time in accordance with IFRS and the accounting principles applied
by the Company in the latest Financial Statements as certified by the auditors of the
Company, since the Last Reporting Date/ ((in case of Series E bonds) the purchase
price of any Real Estate Property acquired or contracted for acquisition by the Group
since the Last Reporting Date); and (iii) the proceeds of any Indebtedness incurred
since the Last Reporting Date (but only to the extent that such proceeds were not
used to acquire Real Estate Property or to reduce Indebtedness);
2. The Company undertakes that the sum of: (i) the Unencumbered Assets (less Cash and
Cash Equivalents) as at the Last Reporting Date; and (ii) the Net Unencumbered Assets
(less Cash and Cash Equivalents) newly recorded since the Last Reporting Date will at
no time be less than 125% of the sum of: (i) the Unsecured Indebtedness (less Cash and
Cash Equivalents) at the Last Reporting Date; and (ii) the Net Unsecured Indebtedness
(less Cash and Cash Equivalents) incurred since the Last Reporting Date;
3. Up to and including the Final Discharge Date, the Company undertakes that, on each
Reporting Date, the Consolidated Coverage Ratio will be at least 1.8 (excluding the
Series E bonds, for which the Consolidated Coverage Ratio will be at least 2.0);
“Financial Statements” means the annual audited consolidated financial statements
(including the management report) of the Company or the consolidated interim financial
statements (including the management report) of the Company, in each case as published
by the Issuer Company as at the Last Reporting Date and prepared in accordance with IFRS.
As at 31 December 2023 under its outstanding bond series the Group is compliant with its
financial covenants.
Notes to the consolidated financial statements
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GRAND CITY PROPERTIES S.A.
189
The table below details changes in the Group’s liabilities from financing activities aſter hedging impact, including both cash and non-cash changes. Liabilities arising from financing activities are
those for which cash flows, or future cash flows will be, classified in the Group’s consolidated statement of cash flows from financing activities.
Finance cash flows | Non-cash changes | ||||||
Finance | Other | Foreign | Other | Other | |||
€’000 | 31 Dec 2022 | expenses paid (6) | cash flows (1) | exchange effect | non-cash (2) | changes (3) | 31 Dec 2023 |
Straight bonds (4) | 3,638,862 | (46,295) | (83,334) | 5,833 | 14,967 | 56,167 | 3,586,200 |
Loans and borrowings (5) | 323,280 | (15,813) | 531,067 | - | - | 33,893 | 872,427 |
Lease liabilities | 57,422 | (4,066) | 48,377 | (380) | (269) | 4,031 | 105,115 |
4,019,564 | (66,174) | 496,110 | 5,453 | 14,698 | 94,091 | 4,563,742 | |
Finance cash flows | Non-cash changes | |||||||
Change in | ||||||||
Finance | Other | Foreign | liabilities | Other | Other | |||
€’000 | 31 Dec 2021 | expenses paid | cash flows (1) | exchange effect | held-for-sale | non-cash (2) | changes (3) | 31 Dec 2022 |
Convertible bond (4) | 449,965 | (563) | (450,000) | - | - | 405 | 193 | - |
Straight bonds (4) | 3,668,596 | (40,179) | - | 16,302 | - | (46,500) | 40,643 | 3,638,862 |
Loans and borrowings (5) | 358,249 | (3,210) | (36,326) | - | - | - | 4,567 | 323,280 |
Lease liabilities | 58,702 | (3,389) | - | 557 | (58) | 1,694 | (84) | 57,422 |
4,535,512 | (47,341) | (486,326) | 16,859 | (58) | (44,401) | 45,319 | 4,019,564 | |
(1)
other cash flows include proceeds, repayment (including amortisation) from financial institutions and others, net of related derivatives.
(2) other non-cash changes include discount and issuance cost amortisation as well as fair value adjustment of bonds and remeasurement of lease liabilities.
(3) other changes include interest accruals results on early repayment of debt and results on linked derivatives, as well as equity portion of the net proceeds from the sale of convertible bond F held in treasury.
(4) including accrued interest and bond redemption. see note 19.2.
(5) including current portion of long-term loans. see note 19.1.
Notes to the consolidated financial statements
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190
As at 31 December
2023
2022
€’000 | ||
Trade and other payables | 60,197 | 55,307 |
Prepayments received from tenants (*) | 173,539 | 144,252 |
Deferred income | 11,542 | 10,754 |
Other liabilities | 8,688 | 15,025 |
253,966 | 225,338 |
(*) The Group receives prepayments from tenants for ancillary services and other charges on a monthly basis. Once
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
Tenancy deposits | 47,884 | 44,154 |
Lease liabilities (see note 21.1) | 105,115 | 57,422 |
Long-term positions with non-controlling | ||
46,748 | 50,292 | |
interest and others | ||
199,747 | 151,868 |
21.1. LEASE LIABILITIES
Set out below are the carrying amounts of lease liabilities of the Group as a lessee and the
movements during the year:
2023 | 2022 | |
€’000 | ||
As at 1 January | 57,422 | 58,702 |
Additions, net | 48,377 | - |
Reclassification to held-for-sale | - | (58) |
Expenses | 3,417 | 2,251 |
Payments | (4,101) | (3,473) |
As at 31 December | 105,115 | 57,422 |
During the year, the Group entered into a finance lease agreement on a property in London
and received approximately euro 50 million.
As at 31 December 2023, all lease liabilities are related to right-of-use assets accounted for
€’000 | |
Balance as at 1 January 2022 | 39,778 |
Movement during the year | (7,676) |
Balance as at 31 December 2022 | 32,102 |
Movement during the year | 7,937 |
Balance as at 31 December 2023 | 40,039 |
Notes to the consolidated financial statements
I
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191
DIRECTORS AND EXECUTIVE MANAGEMENT PERSONNEL REMUNERATION
For the year ended 31 December 2023 | |||||
Chairman | |||||
of the | Independent | Independent | Independent | ||
Board of | director | director | director | ||
Directors | |||||
Total | |||||
Simone | |||||
Christian | Markus | Daniel | |||
Runge- | |||||
Windfuhr | Leininger (*) | Malkin (*) | |||
€’000 | Brandner | ||||
Fix remuneration | 85,714 | 25,000 | 56,000 | 112,000 | 278,714 |
Multi years fixed | |||||
62,880 | - | - | - | 62,880 | |
share incentives plan | |||||
Total remuneration | 148,594 | 25,000 | 56,000 | 112,000 | 341,594 |
(*) On 28 June 2023 Mr Markus Leininger replaced Mr Daniel Malkin as Independent director.
Mr. Refael Zamir, the Company’s CEO as of 31.12.2023, was entitled to a total remuneration
of euro 1,564 thousand, of which euro 844 thousand refer to multi year fix and variable share
incentive plan. The remuneration include monthly salary, annual bonus and supplementary
payments based on employer cost.
Mr. Idan Hadad, the Company’s CFO as of 31.12.2023, was entitled to a total remuneration
of euro 318 thousand, of which euro 92 thousand refer to multi year fix and variable share
incentive plan. The remuneration include monthly salary, annual bonus and supplementary
payments based on employer cost.
There were no other transactions between the Group and its directors and executive
23.2.
OTHER RELATED PARTY TRANSACTIONS AND BALANCES
23.2.1.
For the year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Provided services | 3,191 | 1,752 |
Purchased services | (1,194) | (500) |
Payables | 1,311 | 1,196 |
a.
In March 2022, the Company redeemed euro million 450 principal amount of convertible
bond series F with 0.25% coupon (due March 2022) of which euro 186.7 million of
principal amount were held by subsidiaries of Aroundtown S.A.
b.
During 2022, the Group sold financial assets to Aroundtown SA’s subsidiary for a total
consideration of euro 6.8 million, reflecting the market price based on quoted price as
at the transaction date.
c.
During 2023, the Group sold investment property to Aroundtown SA’s subsidiary for a
total consideration of euro 3.7 million (2022: euro 2.5 million), reflecting the fair value
of the property as at the transaction date.
d.
During 2023, the Group acquired investment property from Aroundtown SA’s subsidiary
for a total consideration of euro 3.2 million (2022: none), reflecting the fair value of the
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
192
24.1. DISPOSALS OF INVESTMENT PROPERTY DURING THE YEAR
During the year, the Group disposed several investment properties and subsidiaries which
held investment properties, The following table describes the amounts of assets and
liabilities disposed:
For the year ended 31 December | ||
2023 | 2022 | |
€’000 | ||
Investment property | 314,599 | 15,762 |
Other assets, net | (1,104) | - |
Deferred tax liabilities, net | (1,014) | - |
Total net assets disposed | 312,481 | 15,762 |
Non-controlling interests disposed | 1,884 | - |
Total consideration | 301,962 | 18,484 |
Profit (loss) from disposal of investment property | ||
(8,635) | 2,722 | |
and subsidiaries
24.2. ASSETS AND DISPOSAL GROUP HELD-FOR-SALE
The Group resolved an intention to sell several properties. These properties were identified
by the Group as either non-core, primarily due to the location of the properties, or mature
properties with lower-than-average upside potential in their current condition. The intention
of the Group to dispose non-core and mature properties is part of its capital recycling plan
of is following a strategic decision to increase the quality of its portfolio.
Some properties are expected to be disposed through sale of subsidiaries. Accordingly,
assets and liabilities relating to these subsidiaries ("Disposal Group”) and some properties
which are expected to be disposed through asset deals are presented as assets held-for-
sale and as liabilities held-for-sale in the consolidated statement of financial position.
Efforts to sell the properties have started and a sale is expected within twelve months.
As of 31 December 2023, the Group has signed contracts to sell approximately euro 70
million of investment property. See note 32.
The major classes of assets and liabilities comprising the Disposal Group classified as held-
for-sale are as follows:
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
ASSETS CLASSIFIED AS HELD-FOR-SALE | ||
Investment property | 195,641 | 330,853 |
Cash and cash equivalents | - | 1,763 |
Deferred tax assets | - | 1,219 |
Other assets | - | 10,356 |
Total assets classified as held-for-sale | 195,641 | 344,191 |
LIABILITIES CLASSIFIED AS HELD-FOR-SALE | ||
Deferred tax liabilities | 9,862 | 7,300 |
Other liabilities | 3,867 | 9,045 |
Total liabilities classified as held-for-sale | 13,729 | 16,345 |
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
193
Set out below, is an overview of financial assets, held by the Group as at 31 December 2023
and 31 December 2022:
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
FINANCIAL ASSETS AT AMORTISED COST: (1) | ||
Cash and cash equivalent (1) | 1,129,176 | 326,698 |
Trade and other receivables (2) | 391,076 | 362,537 |
Other non-current assets | 165,693 | 180,060 |
FINANCIAL ASSETS AT FAIR VALUE | ||
THROUGH PROFIT OR LOSS: | ||
Financial assets at fair value through profit or loss (3) | 185,408 | 184,463 |
Derivative financial assets (4) | 6,157 | 9,798 |
Total | 1,877,510 | 1,063,556 |
(1)
including assets held for sale
(2)
excluding non-current financial assets at fair value through profit or loss
(3)
including non-current financial assets at fair value through profit or loss included in other non-current assets
(see note 13)
(4)
Set out below, is an overview of financial liabilities, held by the Group as at 31 December
2023 and 31 December 2022:
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
FINANCIAL LIABILITIES AT AMORTISED COST: | ||
Trade and other payables (1) | 253,966 | 229,736 |
Tax payable | 17,006 | 17,493 |
Loans and borrowings (2) | 872,427 | 323,280 |
Straight bonds (3) | 3,559,897 | 3,612,105 |
Accrued interest on straight bonds | 26,303 | 26,757 |
Other long-term liabilities (1) | 203,615 | 156,217 |
Total | 4,933,214 | 4,365,588 |
(1) including liabilities held-for-sale.
(2) including current portion of long-term loan.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
194
25.3. RISKS MANAGEMENT OBJECTIVES AND POLICES
As at 31 December 2023, the Group’s principal financial liabilities, other than derivatives,
comprise loans and borrowings, straight bonds, trade and other payable, tax payable
and non-current liabilities. The Group’s principal financial assets include trade and other
receivables, cash and cash equivalent and other non-current asset. The Group also holds
investments in debt and equity instruments and enters into derivative transactions.
The Group is exposed to market risk, credit risk and liquidity risk. The Board of Directors
has overall responsibility for the establishment and oversight of the Company’s risk
management framework. The board of directors is supported by a risk committee that
advices on financial risks and the appropriate financial risk governance framework for the
Group. The Group’s risk management policies are established to identify and analyze the
risks faced by the Group, to set appropriate risk limits and controls, and monitor risks
and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and in the Group’s activities.
MARKET RISK
Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises three types of risk:
interest rate risk, currency risk and other price risk, such as equity price risk.
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to
the Group’s long-term debt obligations with floating interest rates. The Group manages
its interest rate risk by hedging long-term debt with floating rate using swap and cap
contracts. For additional information see note 26.
As at 31 December 2023, aſter taking into account the effect of the hedging, the interest
profile of the Group’s interest-bearing debt was as follows:
Nominal amount outstanding as at 31 December
2023 | 2022 | |
€’000 | ||
Fixed rate | 3,537,824 | 3,779,410 |
Capped rate | 428,812 | 53,930 |
Floating rate | 549,938 | 220,562 |
4,516,574 | 4,053,902 |
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in
interest rates on that portion of long-term debt affected, aſter the impact of hedging as
of the reporting date. With all other variables held constant, the Group’s profit before
tax and pre-tax equity are affected through the impact on floating rate long-term debt,
as follows:
Increase/decrease | Effect on profit before tax and pre-tax | |
in basis points | equity | |
€’000 | ||
100 | (6,624) | |
2023 | ||
-100 | 9,788 | |
100 | (2,692) | |
2022 | ||
-100 | 2,745 |
The Group had no long-term debt for which the benchmark rate had been replaced with an
alternative benchmark rate as at 31 December 2023.
FOREIGN CURRENCY RISK
The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to
the Group’s net investment in foreign subsidiaries and to several straight bonds issued in a
foreign currency.
The Company issued several straight bonds in different currencies and in fixed and
floating interest. The Company used cross currency swap contracts to hedge the fair
value risk derived from the changes in exchange rates and interest rates as explained
in note 26.1.
Due to the hedging above there is no material residual foreign currency risk.
In addition, the Company used forwards and put option contracts to hedge the fair value of
its net investment in foreign operation which operates in British pound (GBP) as explained
in note 26.3.
Notes to the consolidated financial statements
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195
EQUITY PRICE RISK
The Group’s listed and non-listed equity investments are susceptible to market price risk
arising from uncertainties about future values of the investment securities. The Group
manages the equity risk through diversification and by placing limits on individual and total
equity instruments. Reports on the equity portfolio are submitted to the Group’s senior
management on a regular basis.
As at 31 December 2023, the exposure to listed equity instruments was euro 74,618
CREDIT RISK
Credit risk is the risk that a counterparty will not meet its obligations under a financial
instrument or customer contract, leading to a financial loss. The Group is exposed to
credit risk from its operating activities (primarily trade and other receivables) and from
its financing activities, including cash and cash equivalents held in banks, derivatives and
other financial instruments.
TRADE AND OTHER RECEIVABLES
Customer credit risk is managed by the property managers subject to the Group’s
established policy, procedures and control relating to customer credit risk management.
Outstanding customer receivables are regularly monitored.
An impairment analysis is performed at each reporting date using a provision to measure
expected credit loss. The calculation reflects the probability-weighted outcome, the time
value of money and reasonable and supportable information that is available at the reporting
date about past events, current conditions and forecasts of future economic conditions.
The assessment of the correlation between historical observed default rates, forecast
economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive
to changes in circumstances and of forecast economic conditions. The Group’s historical
credit loss experience and forecast of economic condition may also not be representative of
customer’s actual default in the future.
The Group has no significant concentration of credit risk.
The maximum exposure to credit risk at the reporting date is the carrying value of each
class of financial assets disclosed in note 25.1.
The aging of rent receivables at the end of the reporting period that were not impaired
was as follows:
as at 31 December
2023
2022
€’000 | ||
Neither past due and past due 1–30 days | 22,382 | 14,842 |
Past due 31–90 days | 15,333 | 16,798 |
Past due above 90 days | 5,453 | 3,499 |
43,168 | 35,139 |
Management believes that the unimpaired amounts that are past due by more than 30
days are still collectible in full, based on the historical payment behavior and extensive
analysis of customer credit risk, including underlying customers’ credit ratings if they are
available.
FINANCIAL INSTRUMENTS AND CASH AND CASH EQUIVALENTS
Credit risk from balances with banks and financial institutions is managed by the Group’s
treasury department in accordance with the Group’s policy. Investments of surplus funds
are made only with approved counterparties and within credit limits assigned to each
counterparty. The limits are set to minimise the concentration of risks and therefore
mitigate financial loss through a counterparty’s potential failure to make payments.
The Group’s investment in financial instruments at fair value through profit or loss consist
of quoted debt and equity securities that are graded in the investment category.
The Group holds its cash and cash equivalents in high rated countries with high-rated
financial institutions. Concentration risk is mitigated by limiting the exposure to a single
counter party.
As at 31 December 2023, the Group has recorded euro 546 thousand (2022: 291 thousand)
Notes to the consolidated financial statements
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GRAND CITY PROPERTIES S.A.
196
LIQUIDITY RISK
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of loss.
The Group has procedures with the objective of minimizing such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of
committed credit facilities.
The following are the remaining contractual maturities at the end of 2023 and 2022 of financial liabilities, including estimated interest payments, the impact of derivatives and excluding the
impact of netting agreements:
Contractual cash flows including interest | |||||||
As at 31 December 2023 | Carrying amount | Total | 2 months or less | 2-12 months | 1-2 years | 2-3 years | More than 3 years |
€’000 | |||||||
FINANCIAL LIABILITIES | |||||||
Loans and borrowings (1) | 872,427 | 1,138,825 | 45 | 42,420 | 43,072 | 43,597 | 1,009,691 |
Straight bonds (2) | 3,559,897 | 3,848,878 | 18,774 | 289,570 | 312,442 | 739,406 | 2,488,686 |
Lease liabilities | 105,115 | 2,635,222 | - | 5,074 | 5,074 | 5,074 | 2,620,000 |
Trade and other payables | 253,966 | 253,966 | 42,328 | 211,638 | - | - | - |
Derivative financial liabilities (3) | 26,092 | 35,599 | 2,829 | 26,818 | 5,952 | - | - |
Total | 4,817,497 | 7,912,490 | 63,976 | 575,520 | 366,540 | 788,077 | 6,118,377 |
Contractual cash flows including interest | |||||||
As at 31 December 2022 | Carrying amount | Total | 2 months or less | 2-12 months | 1-2 years | 2-3 years | More than 3 years |
€’000 | |||||||
FINANCIAL LIABILITIES | |||||||
Loans and borrowings (1) | 323,280 | 381,103 | 46 | 11,567 | 11,091 | 11,418 | 346,981 |
Straight bonds | 3,612,105 | 3,956,500 | 17,148 | 19,889 | 361,442 | 318,993 | 3,239,028 |
Lease liabilities | 57,422 | 985,806 | - | 3,453 | 3,453 | 3,453 | 975,447 |
Trade and other payables | 225,338 | 225,338 | 37,556 | 187,782 | - | - | - |
Derivative financial liabilities (3) | 10,821 | 24,974 | - | 12,544 | 12,430 | - | - |
Total | 4,228,966 | 5,573,721 | 54,750 | 235,235 | 388,416 | 333,864 | 4,561,456 |
(1)
including current portion of long-term loans
(2) including bond redemption
Notes to the consolidated financial statements
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GRAND CITY PROPERTIES S.A.
197
25.3.4.
OPERATING RISK
Operational risk is the risk that derives from the deficiencies relating to the Group’s
information technology and control systems as well as the risk of human error and natural
disasters. The Group’s systems are evaluated, maintained and upgraded continuously.
25.3.5.
OTHER RISKS
Through ordinary course of business, the Company is exposed to various external risks. The
Risk Committee is constantly determining whether the infrastructure, resources, and systems
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 risk, liquidity risks, credit risks,
regulatory and legal risks, collection and tenant deficiencies, the need for unexpected capital
investments, and market downturn risk.
The Company 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.
Geopolitical situation involving Russia and Ukraine
On 24 February 2022, Russia initiated a full-scale invasion of Ukraine and escalating the
Russo-Ukraine War (the War) and hostilities have continued since then. The War has received
widespread international condemnation and in reaction to Russian hostilities many nations
and organisations, including Germany and the European Union, have announced sanctions
against Russia, Russian companies, and individuals in and from Russia. The Group is not
directly impacted by the War, as neither its portfolio nor its operations have direct exposure
to Ukraine or Russia. However, the Group is impacted by the indirect consequences of the
War. As a result of the War, inflationary pressures have increased, specifically heating and
energy costs, which have an impact on the operating costs of the Group. Such pressures
may also have an impact on the ability of the Group’s tenants to pay rent and/or for the
Group to recover expenses related to recoverable expenses from tenants. Furthermore, the
increased energy costs have led to a wider inflationary pressure. Higher levels of inflation
have impacted interest rates and borrowing costs, while increased volatility in the capital
markets have reduced the Group’s ability to raise capital at attractive prices, resulting in an
increase in its cost of capital and potentially limiting its growth opportunities. While much
of the volatility has reduced and price levels have reduced to some extent in recent periods,
risk of renewed price volatility remains, which could have negative financial impacts on the
Company.
As a result of the large number of refugees that have entered and are expected to continue
enter the European Union and Germany following the War. This has resulted in an increased
strain on the residential real estate market in Germany. This further exacerbates the
supply and demand mismatch, increase political pressure for home construction or market
intervention. The full effects are currently still unclear and will depend significantly on the
duration and final outcome of the Invasion as well as the distribution of refugees across the
European Union.
While the War is currently limited to Ukraine on one side and Russia and several of its allies
on the other, continued escalation may result in other countries joining the conflict and at
this stage the Group is unable to assess the full impact of such a scenario on the Company,
and the likelihood of its occurrence.
Inflationary environment
The COVID-19 pandemic, supply chain disruptions, the high amount of cash injected into the
market as a monetary response and the geopolitical situation around Russia and Ukraine,
among others, have resulted in a high inflationary environment. Inflationary pressure has
been particularly strong in energy prices, in particular for oil and gas, caused by the War, and
material prices. While in recent periods pressures have eased to a certain extent, inflation
remains above central bank targets. Furthermore, risks remain that may result in inflationary
pressures increasing once more. This may also result in tenant’s inability to bear the costs
that are passed through to them as part of the lease agreements. It cannot be ruled out that
losses of rent will occur in the future or that the Group will be unable to collect operating
costs from tenants and that the Group will lose considerable rental income. In order to
mitigate the risk, the Company is proactively informing tenants on their consumption of
energy and provides information on how to reduce consumption.
Higher levels of inflation particularly for energy and materials may have an impact on the
Group’s ability to acquire materials for capex measures at a reasonable price and increase
utility costs or result in delays across the Group’s operations. Furthermore, higher levels of
inflation across the economy may result in higher personnel expenses and expenses related to
external services, which could have a negative impact on the Group’s profitability. In addition,
higher levels of inflation have resulted in rapid and significant increases in interest rates and
consequently resulted in significant volatility in capital markets, which has a negative impact
on the cost and availability of new financing for the Group on one hand and may put further
upward pressure on discount rates and cap rates if prolonged, which could consequently have
a further adverse impact on the fair value of the Group’s assets and share price performance.
Notes to the consolidated financial statements
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GRAND CITY PROPERTIES S.A.
198
An increase in interest rates
In order to battle the increased inflation levels, the European Central Bank has raised
interest rate levels rapidly and has declared that it would maintain high interest levels at
least until inflation slows down and it reached the desired level. This has led to a significant
rise in interest rates in Germany and throughout the Eurozone and led to a decrease in real
estate valuations and investments, resulting in lower transaction level and lower demand
for real estate, among other effects. An increase in interest rates could adversely impact the
Group's business in a number of ways, including:
The discount and cap rates used to calculate the value of the Group’s properties recorded on
the Company’s balance sheet in accordance with International Accounting Standard (“IAS”)
IAS 40 tends to increase in an environment of rising interest rates, which in turn could result
in the Group’s properties having a lower fair value.
Although the Group’s current debt structure primarily involves debt at fixed interest rates
or, where variable interest rates apply, is predominantly subject to interest rate hedging
agreements, the increase in interest rates may have a negative impact on the Group’s ability
to refinance existing debt or incur additional debt on favourable terms. Financial institutions
such as banks may seek to reduce their exposure to the real estate sector and also might
be subject to increased equity requirements and balance sheet regulations resulting
in restraints to lend out money to customers which could make it more difficult for the
Group to obtain bank financing at desired terms. In general, rising interest rates (or market
expectations regarding future increases in interest rates) would make financing required
by the Group for its refinancing, acquisition, capital expenditure and/or other real estate
activities more expensive, which could reduce the Group’s profits.
When negotiating financing agreements or extending such agreements, the Group depends
on its ability to agree to terms and conditions that will provide for interest payments that will
not impair its profit targets, and for amortisation schedules that do not restrict its ability to
pay intended dividends. Further, the Group may be unable to enter into hedging instruments
that may become necessary if variable interest rates are agreed upon or may only be able to
do so at significant costs. If the current environment in which high rates prevail will remain
for a prolonged period, the Group’s financing costs, including costs for hedging instruments,
may increase, which would likely reduce the Group’s profits.
The Group’s equity includes a material amount of perpetual notes. Such notes include in their
terms a reset of their respective interest rates every five years (reset date), starting from the
first call date, based on a specified margin plus a 5-year swap rate (reset rate). If a reset date
falls in a period of high interest rates it is likely that such notes will carry a materially higher
interest going forward, thereby reducing the profits available to shareholders. Furthermore,
the Company generally aims to replace its perpetual notes issues on their first voluntary call
date by a new issue. In times of high interest rates, the rates that the Company would pay on
a new issuance may differ materially from the reset rate, it may therefore be uneconomical
for the Company to call the respective notes and issue new notes, as has been the case with
its notes with the first call date in January and in October 2023.
The willingness of purchasers to acquire real estate in an environment of rising interest
rates may be negatively affected, thereby restricting the Group's ability to dispose of its
properties on favourable terms when desired. Most purchasers finance their acquisitions
with lender provided financing through mortgages and comparable security (in Germany
so-called land charges). Lack of availability of such financing at attractive rates therefore
reduces demand for properties.
Any of the foregoing factors may have a material adverse effect on the Group’s business, net
assets, financial condition, cash flows and results of operations.
Climate related risks
The significant impact of human activity on ecosystems and the climate have become
apparent in recent years, with temperatures rising, severe weather events such as drought,
floods and wildfires occurring more frequently, changes in rainfall patterns and mean
global sea levels rising, as well as increased pressures on biodiversity, among others.
Consequently, climate risks have increased and environmental impacts have become more
important in the decision making of investors, lenders, regulators and consumers. As a
result, the Company does not only face changing physical climate risks but also transitional
climate risks resulting from changes in investor and consumer demand, from regulatory
changes as well as from other societal factors.
The Company faces several physical climate-related risks. As a result of changing climate
patterns severe weather events in the Group’s regions become more likely and severe,
which may result in more frequent flooding or other weather-related damages. The
Company actively attempts to identify these risks and implement measures to mitigate
the impact of such risks to the Company, for example through insurance. To better
understand the Company’s exposure to physical risks, the company has adopted a tool for
asset-level assessment of physical risk develop. This analysis will serve the Company in
determining which risks are material in order to develop adaptation solutions. However,
it cannot be guaranteed that the Company correctly identifies all risks and therefore may
be underinsured against such risks. Furthermore, increased occurrence of severe weather
events will likely result in higher insurance premiums. In addition, increased flood
risk as well as increasing sea levels put increased stress on dikes, levees and related
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
199
infrastructure which will likely result in higher costs for such infrastructure which in turn
may lead to higher fees and taxes to fund the increased costs, particularly impacting the
Group’s assets situated in regions affected by increased flood risk and/or rising sea levels.
While the above-mentioned insurance costs, taxes and fees can generally be passed on
to tenants through the service charges, in case of vacancies such costs are carried by the
Company.
In addition to physical climate-related risks the Company also faces transitional risks. As
a result of the more apparent impact of climate changes in recent years regulators have
increased their efforts to mitigate current as well as potential future impacts of climate
change through a wide range of regulations.
As part of its Climate Action Programme 2030, the German federal government has
introduced a fixed price for carbon dioxide emissions in the transport and real estate
sectors as from January 2021. The price per metric ton of carbon dioxide emitted as
heating or fuel emissions (CO
and CO
levy) was set at an initial price of euro 25.00 per
2
2
metric ton of carbon dioxide and will, based on the current regime, gradually increase to
euro 45.00 per metric ton until 2025 and increase further thereaſter. On 1 January 2023
the Carbon Dioxide Cost Sharing Act came into effect, according to which the landlord will
be obliged to bear part of the costs (previously carried in full by tenants). For residential
buildings, a 10-step tiered model is introduced that splits the CO2 costs based on the
emissions of the building. For residential buildings with a particularly poor energy balance
2
(>=52 kg CO
/m
/a), landlords shall bear 95 percent and tenants five percent of the CO
2
2
costs. However, if the building meets at least the very efficient standard (EH 55; <12 kg
2
CO
/m
/a), landlords do not have to bear any CO
costs. For non-residential buildings,
2
2
a 50-50 solution is regulated. The CO
costs will be divided equally between tenant and
2
landlord, unless another split is negotiated in the lease agreement. From 2025 a similar
tiered model is planned also for non-residential buildings. The shiſting of some or all of
the relevant costs to landlords will have a negative effect on the Company’s operating
margins and financial results.
Emerging regulations in the Group's regions pursuing a phase-out of fossil fuels and
improved energy efficiency present technological risks to the Company which requires
careful attention when planning maintenance and capex measures. Some examples are
Germany’s Building Energy Act (GEG), which bans the installation of new oil heating
systems in 2026, whereas the UK Government announced in September 2023 several
coming changes to the Heat and Buildings Strategy, one notable point being delaying the
banning the installation of gas boilers from 2026 now until 2035. At the EU level, the
EU Council and EU Parliament reached an agreement in December 2023 on the recast of
the Energy Performance of Buildings Directive (EPBD) to include new minimum energy
performance requirements for buildings that progressively increase over time, although the
specific requirements can only be known once national-level implementation commences
among member states who will define their own target pathways.
Noncompliance with
the energy requirements under the new EPBD would result in an inability to let the assets
and requires increased capital expenditures to become compliant. In the UK the Domestic
Minimum Energy Efficiency Standard limits letting of properties with EPC ratings F or
G, and although a bill for more aggressive requirements had been in the works it has
since been scrapped by the government and it remains unclear whether any further
requirements will be set. The Company continuously monitors changes in regulations
and aims to minimise the financial risk through pro-active carbon reduction and energy
efficiency policies and programmes.
The increased focus of regulators and market participants has additionally resulted in
increased reporting and transparency requirements for companies. Higher reporting and
transparency requirements result in increased administrative hurdles and costs for the
Group, negatively impacting its efficiency and financial results. Furthermore, the Group’s
sustainability strategy incorporates self-set targets for material environmental, social and
corporate governance matters (ESG). If any of these self-set ESG goals are not met, this could
damage the Group’s reputation. Considering the increasing focus of market participants and
lenders on sustainability and "green financing", this could have a negative impact on the
Group’s refinancing and access to further financing, for example, via the capital market or
by taking out loans, at all or on attractive terms. If the Group fails to meet expectations and
trends related to sustainability aspects in a timely manner or at all, there could be a decline
in demand from tenants. Furthermore, this could also lead to investors divesting from
the Group’s bonds or shares, as they also expect ESG goals to be met. From a regulatory
perspective, failure to achieve the sustainability goals may also have a negative impact on
the Group. For example, the introduction of the CO
levy, minimum energy performance
2
standards or further tightening of regulatory requirements to achieve alignment with the
targets of the Paris Agreement could directly or indirectly increase the Group’s costs or
decrease rental income. To take on a proactive approach, the Company has developed a CO
2
pathway to guide the investment in on-site renewable energy and building energy efficiency
improvements needed to achieve it’s 2030 emission reduction target while enabling further
emission reductions down the line.
In order mitigate risks related to CO
emissions, and in order to reach the Company’s
2
environmental targets, the Group is developing an investment program, which covers a
wide variety of activities involving both energy efficiency improvements and renewable
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
200
energy projects. The size and scope of the investment program depends on the availability
of governmental subsidies and grants, as is also subject to increasing cost of material.
Furthermore, potential new requirements set by the regulators or set as a market standard,
could increase the amount the Company would need to invest and potentially accelerate the
execution time of the investment program.
In 2022, the Company began the process of aligning to the Task Force on Climate-Related
Financial Disclosures (TCFD) Recommendations framework.
Although the TCFD has
been disbanded and integrated into the International Sustainability Standards Board
(ISSB), the framework’s core principles for corporate climate-related risk disclosures
have also been adopted by the European Sustainability Reporting Standards (ESRS) E1
Standard, with which the Company must be fully compliant in its reporting beginning
for the year 2024.
The early decision to align to best practices on climate-related risk
disclosures leaves the company in a good position for ensuring compliance, although it is
a process requiring continuous effort. As part of this process, the Company continuously
updates its climate-related risk assessment each year, with the most prominent and
emerging climate-related risks already integrated into the enterprise risk management
system. The Building Resilience Task Force, an interdepartmental team dedicated to this
effort, continues to further develop control mechanisms and risk mitigation measures for
The Group is exposed to certain risks relating to its ongoing business operations.
The primary risks managed using derivative instruments is interest rate risk and currency risk.
The Group’s risk management strategy and how it is applied to manage risk are explained
in note 25.3.
As at 31 December | |||
2023 | 2022 | ||
€’000 | |||
CURRENT AND NON-CURRENT DERIVATIVE | |||
FINANCIAL ASSETS | |||
Derivatives that are designated as hedging instruments | |||
26.1 | 56,185 | 41,155 | |
in fair value hedge | |||
Derivatives that are designated as hedging instruments | |||
26.2 | 8,679 | - | |
in cash flow hedge | |||
Derivatives that are designated as hedging instruments | |||
26.3 | 362 | 12,251 | |
in net investment hedge | |||
Derivatives that are not designated in hedge accounting | |||
26.4 | 6,157 | 9,798 | |
relationships | |||
71,383 | 63,204 | ||
CURRENT AND NON-CURRENT DERIVATIVE | |||
FINANCIAL LIABILITIES | |||
Derivatives that are designated as hedging instruments | |||
26.1 | 40,301 | 39,216 | |
in fair value hedge | |||
Derivatives that are designated as hedging instruments | |||
26.2 | 2,800 | - | |
in cash flow hedge | |||
Derivatives that are designated as hedging instruments | |||
26.3 | 26,092 | 10,821 | |
in net investment hedge | |||
69,193 | 50,037 | ||
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
201
26.1. DERIVATIVES DESIGNATED AS HEDGING
INSTRUMENTS IN FAIR VALUE HEDGE
As at 31 December 2023, the Group had foreign exchange rate swap agreements in place,
as follows:
(*)
Hedging instrument | Group receives | Group pays |
’000 | ||
Swap | HKD 900,000 | Euro 92,631 |
Swap | CHF 125,000 | Euro 116,233 |
Swap | JPY 7,500,000 | Euro 75,500 |
Swap | HKD 290,000 | Euro 32,768 |
Swap | CHF 130,000 | Euro 119,441 |
(*) all swaps are linked to bonds’ maturity
In addition, the Group has entered into several interest rate swap agreements. For further
information regarding the effective coupon rate see note 19.2.
The swaps are being used to hedge the exposure to changes in fair value of the Group’s
straight bonds which arise from foreign exchange rate and interest rate risks.
There is an economic relationship between the hedged items and the hedging instruments
as the terms of foreign exchange rate and interest rate swaps match the terms of the
hedged items as described above. The Group has established a hedge ratio of 1:1 for the
hedging relationships as the underlying risk of the foreign exchange rate and the interest
rate swaps is identical to hedged risk component. To test the hedge effectiveness, the
Group uses the hypothetical derivative method and compares the changes in the fair value
of the hedging instruments against the changes in fair value of the hedged items attribut-
able to the hedged risk.
The hedge ineffectiveness can arise from:
»
Different foreign exchange and interest rates’ curve applied to the hedge items and
hedging instruments
»
Differences in timing of cash flows of the hedged items and hedging instruments
»
The counterparties’ credit risk differently impacting the fair value movements of the
hedging instruments and hedged items
The impact of the hedging instruments on the consolidated statement of financial position
is, as follows:
Carrying amount
Net change in
Line item in the
fair value used | ||||
Risk | consolidated | |||
Assets | Liabilities | for measuring | ||
category | financial | |||
ineffectiveness | ||||
statements | ||||
for the year | ||||
€’000 | €’000 | €’000 | ||
As at 31 December 2023 | ||||
Derivative | ||||
Foreign exchange rate and | ||||
56,185 | 40,301 | financial assets/ | 20,725 | |
interest rate swaps | ||||
liabilities | ||||
As at 31 December 2022 | ||||
Derivative | ||||
Foreign exchange rate and | ||||
41,155 | 39,216 | financial assets/ | (41,200) | |
interest rate swaps | ||||
liabilities | ||||
The impact of the hedged items on the consolidated statement of financial position is, as
follows:
Net change in fair | |||
Line item in the | value used for | ||
Carrying amount | consolidated | measuring | |
financial statements | ineffectiveness | ||
for the year | |||
€’000 | €’000 | ||
As at 31 December 2023 | |||
Straight bonds | 633,963 | Straight bonds | (21,206) |
As at 31 December 2022 | |||
Straight bonds | 608,618 | Straight bonds | 43,249 |
The ineffectiveness recognised in the consolidated statement of profit or loss was euro 481
(2022: 2,049) thousand.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
202
26.2. DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS
IN CASH FLOW HEDGE
As at 31 December 2023, the Company had interest rate cap agreements in place, as follows:
Hedging
instruments (*)
Hedged item
Carrying amount
€’000 | |||
Interest rate on loans | |||
Caps | 375,300 | ||
and borrowings |
(*) all caps are linked to bank loans’ maturity.
The caps are being used to hedge the exposure to variability in cash outflows of the
Group’s loans which arise from interest rate risks.
There is an economic relationship between the hedged items and the hedging instruments.
The Group chose to designate the intrinsic value of the cap contracts as the hedging
instrument. The terms of the hedging instruments match the terms of the hedged
items as described and the Group has established a hedge ratio of 1:1 for the hedging
relationships as the underlying risk of the interest rate and the caps is identical to hedged
risk component.
To test the hedge effectiveness, the Group uses the hypothetical derivative method and
compares the changes in the fair value of the hedging instruments against the changes in
fair value of the hedged items attributable to the hedged risk. The hedge ineffectiveness
can arise from:
»
Different foreign exchange and interest rates’ curve applied to the hedge items and
hedging instruments.
»
Differences in timing of cash flows of the hedged items and hedging instruments.
»
The counterparties’ credit risk differently impacting the fair value movements of the
hedging instruments and hedged items.
The impact of the hedging instruments on the consolidated statement of financial
position is, as follows:
Carrying amount | ||||
Net change in | ||||
Line item in the | ||||
fair value used | ||||
Risk | consolidated | |||
Assets | Liabilities | for measuring | ||
category | financial | |||
ineffectiveness | ||||
statements | ||||
for the year | ||||
€’000 | €’000 | €’000 | ||
As at 31 December 2023 | ||||
Derivative | ||||
Caps | 8,679 | 2,800 | financial assets/ | 343 |
liabilities | ||||
As at 31 December 2022 | ||||
Derivative | ||||
Caps | - | - | financial assets/ | - |
liabilities |
The impact of the hedging instruments on the consolidated statement of financial
position is, as follows:
Net change in fair | |||
Line item in the | value used for | ||
Carrying amount | consolidated | measuring | |
financial statements | ineffectiveness | ||
for the year | |||
€’000 | €’000 | ||
As at 31 December 2023 | |||
Loans and borrowings | 375,300 | Loans and borrowings | (343) |
As at 31 December 2022 | |||
Loans and borrowings | - | Loans and borrowings | - |
The hedging gains and losses recognised in OCI before tax are equal to the change in fair
value used for measuring effectiveness. There is no ineffectiveness recognised in profit
or loss.
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
203
26.3. DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS IN NET
INVESTMENT IN FOREIGN OPERATION
The Group uses foreign exchange forward contracts as a hedge of its exposure to foreign
exchange risk on its investments in foreign subsidiaries.
The foreign exchange forward contracts are being used to hedge the Group’s exposure to
the GBP foreign exchange risk on these investments. Gains or losses on the retranslation
of the forward contracts are transferred to OCI to offset any gains or losses on translation
of the net investments in the subsidiaries.
There is an economic relationship between the hedged item and the hedging instruments
as the net investment creates a translation risk that will match the foreign exchange risk
on the forward contracts. The hedge ineffectiveness will arise when the amount of the
investment in the foreign subsidiaries becomes lower than the amount of the fixed rate
borrowing.
The impact of the hedging instruments on the consolidated statement of financial
position is, as follows:
Carrying amount | |||||
Line item | Net change in | ||||
Notional | in the | fair value used | |||
Risk | |||||
amount | Assets | Liabilities | consolidated | for measuring | |
category | |||||
outstanding | financial | ineffectiveness | |||
statements | for the year | ||||
GB£000 | €’000 | €’000 | €’000 | ||
As at 31 December | |||||
2023 | |||||
Derivative | |||||
financial | |||||
Foreign currency | assets and | ||||
1,315,000 | 362 | 26,092 | (32,568) | ||
forward contracts | derivative | ||||
financial | |||||
liabilities | |||||
As at 31 December | |||||
2022 | |||||
Derivative | |||||
financial | |||||
Foreign currency | assets and | ||||
1,565,000 | 12,251 | 10,821 | 97,668 | ||
forward contracts | derivative | ||||
financial | |||||
liabilities |
The impact of the hedged item on the consolidated statement of financial position is, as follows:
Net in fair value | ||
Foreign currency | ||
used for measuring | ||
translation | ||
ineffectiveness | ||
reserves | ||
for the year | ||
€’000 | ||
As at 31 December 2023 | ||
Net investment in | ||
44,301 | 32,568 | |
foreign subsidiaries | ||
As at 31 December 2022 | ||
Net investment in foreign | ||
(106,116) | (97,668) | |
subsidiaries |
The hedging gains and losses recognised in OCI before tax are equal to the change in fair value
used for measuring effectiveness. There is no ineffectiveness recognised in profit or loss.
26.4. DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The Group uses interest rate swaps, collars, caps and floors to manage its exposure to
interest rate movements on its bank borrowings. These derivative financial instruments are
The Group manages its capital to ensure that it will be able to continue as a going concern
while increasing the return to owners through striving to keep a low debt to equity ratio.
The management closely monitors Loan to Value ratio (LTV), which is calculated, on an
entity level or portfolio level, where applicable, in order to ensure that it remains within
its quantitative banking covenants and maintain a strong credit rating. The Group seeks
to preserve its conservative capital structure with a LTV to remain at a target below 45%.
As at 31 December 2023 and 2022 the LTV ratio was 37% and 36%, respectively, and
the Group did not breach any of its financial covenants, nor did it default on any other
of its obligations under its loan agreements. LTV covenant ratio may vary between the
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
204
The Group has entered into long-term rent agreements as a lessor of some of its investment
property. The future minimum rental income receivable under non-cancellable operating
leases is as follows:
As at 31 December | ||
2023 | 2022 | |
€’000 | ||
First year | 49,348 | 53,424 |
Second year | 41,067 | 46,860 |
Third year | 35,125 | 39,435 |
Fourth year | 32,597 | 31,333 |
Fifth year | 26,084 | 28,243 |
More than five years | 163,416 | 158,654 |
347,637 | 357,949 |
As at the reporting date, the Group had several financial commitments in total amount of
The Group does not have significant contingent assets and liabilities as at 31 December
Leipzig
Notes to the consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
205
The notes on pages 100 to 155 form an integral part of these consolidated financial statements
I
GRAND CITY PROPERTIES S.A.
206
The details of the significant holdings in the Group as at 31 December 2023 and 2022 are as follows:
As at 31 December | ||||
Place of incorporation | Principal activities | 2023 Holding % | 2022 Holding % | |
Significant subsidiaries held directly by the Company: | ||||
Grandcity Property Ltd. | Cyprus | Holding of investments | 94.80% | 94.80% |
Grand City Properties Holdings S.à r.l | Luxembourg | Holding of investments | 100% | 100% |
Grandcity Holdings Ltd. | Cyprus | Holding of investments | 100% | 100% |
Grand City Properties Holdings B.V. | the Netherlands | Holding of investments | 100% | 100% |
Grandcity Towers Ltd. | Cyprus | Holding of investments | 100% | 100% |
As at 31 December | ||||
Place of incorporation | Principal activities | 2023 Holding % | 2022 Holding % | |
Significant subsidiaries held indirectly by the Company: | ||||
Gutburg holding Limited | Cyprus | Holding of investments | 100% | 100% |
Noeran Limited | Cyprus | Holding of investments | 100% | 100% |
Carmiliana Limited | Cyprus | Holding of investments | 100% | 100% |
Garnet 1 Property S.à r.l | Luxemburg | Holding of investments | 100% | 100% |
GCP Real Estate Holdings GmbH | Germany | Holding of investments | 100% | 100% |
Sparol Limited | Cyprus | Holding of investments | 94% | 94% |
Garnet 2 Property S.à r.l | Luxemburg | Holding of investments | 100% | 100% |
Significant Group entities releated to investing in real estate properties in Germany and London and their mother companies.
The holding percentage in each entity equals to the voting rights the holder has in it.
a. Aſter the reporting period, the Group has successfully completed the sale of Euro 30 million of investment property held-for-sale.
b. Aſter the reporting period, the Group has signed, but not drawn yet, Euro 100 million of bank loan at 1.9% over 3m Euribor and 5 years maturity.
GRAND CITY PROPERTIES S.A.
I
The notes on pages 152 to 206 form an integral part of these consolidated financial statements
207
Berlin
208
To the Shareholders of
Grand City Properties S.A.
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 2023, and the consolidated statement of profit or loss, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, and notes to the consolidated financial statements, including
material accounting policy information and other explanatory information.
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 2023 and of its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with
IFRS Accounting Standards 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 Auditing (“ISAs”) as adopted for Luxembourg by the Commission de Surveillance du
Secteur Financier (“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 responsibilities 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
significance 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 15 and 24.2 to the consolidated financial statements for related disclosures.
In notes 2.3, 3.11 and 3.12 to the consolidated financial statements you find the corresponding
significant accounting judgements, estimates and assumptions, and the accounting policies,
respectively.
209
a) Why the matter was considered to be one of most significance in our audit of the
consolidated financial statements
As at 31 December 2023 the Group held a portfolio of investment properties with a fair value
of TEUR 8,629,083 (31 December 2022: TEUR 9,529,608) and investment properties within
assets classified as held for sale with a fair value of TEUR 195,641 (31 December 2022: TEUR
330,853).
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
discount and capitalization rates on the Group’s assets, future rent, occupancy rates, contract
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
prevailing 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 consolidated
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 Group 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,
and the Corporate Governance Statement but does not include the consolidated financial
statements and our report of the “réviseur d’entreprises 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 obtained
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 information, we
are required to report this fact. We have nothing to report in this regard.
210
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
consolidated financial statements in accordance with IFRS Accounting Standards 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 misstatement, whether due to fraud or error.
The Board of Directors is responsible for presenting and marking up the consolidated financial
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 reporting
process.
Responsibilities of the réviseur d'entreprises agréé for the audit of the
consolidated financial statements
The objectives of our audit are to obtain reasonable assurance about whether the
consolidated 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
judgment 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
responsive 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 internal
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
expressing 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
uncertainty 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
audit 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
statements 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
consolidated financial statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for our audit opinion.
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 significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
211
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards 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 Shareholders on 28 June
2023 and the duration of our uninterrupted engagement, including previous renewals and
reappointments, is twelve 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 information 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
statements 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
committee 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 2023 with relevant statutory requirements set out in the ESEF Regulation that
are applicable to consolidated financial statements.
For the Group it relates to:
y
Consolidated financial statements prepared in a valid xHTML format;
y
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 2023, identified as 5299002QLUYKK2WBMB18-2023-12-31-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 Properties
S.A. as at 31 December 2023, identified as 5299002QLUYKK2WBMB18-2023-12-31-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, 13 March 2024