AroundTown SA

Consolidated

Annual Report

For the year ended

December 31, 2022

AROUNDTOWN

S A

For the year ended

December 31, 2022

BERLIN

BERLIN

ALEXANDERPLATZ

AT has over

140,000 SQM

lettable space in the prime commercial

and tourist center Alexanderplatz

Hackescher Market

Dircksenstrasse

9k sqm

Alexanderplatz

Rathausstraße

11k sqm

Alexanderplatz

Karl-Liebknecht-Straße

34k sqm

Alexanderplatz

Karl-Liebknecht-Straße

24k sqm

Alexanderplatz

Karl-Liebknecht-Straße

6k sqm

Alexanderplatz

Alexanderstraße

55k sqm

Alexanderplatz

Bernhard-Weiß-Straße

2k sqm

Alexanderplatz

Train Station

Berlin TV Tower

content

BOARD OF DIRECTORS´REPORT

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of profit or loss

104

Consolidated statement of other comprehensive income

105

Consolidated statement of financial position

106

Consolidated statement of changes in equity

108

Consolidated statement of cash flows

110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements

112

AUDITOR’S REPORT

Report of the Réviseur d’Entreprises Agréé

THE BUSINESS & OPERATIONS

Key Financials

Aroundtown

Key Achievements

Letter from the CEO

The Strategy and Business Model

Key Strengths

Aroundtown’s Quality Portfolio

Capital Markets

ESG

Environmental, Social and Governance

MANAGEMENT DISCUSSION AND ANALYSIS

Notes on Business Performance

EPRA Performance Measures

Alternative Performance Measures

Responsibility Statement & Disclaimer

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FRANKFURT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Board Of Directors´Report

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

KEY FINANCIALS

in € millions unless otherwise indicated

1–12/2022

Change

1–12/2021

Revenue

1,609.9

22%

1,323.2

Net rental income

1,222.1

13%

1,085.7

Adjusted EBITDA

1,002.3

974.9

FFO I

362.7

353.2

FFO I per share (in €)

0.33

10%

0.30

FFO II

714.1

(26%)

968.6

ICR

5.2x

0.3x

4.9x

(Loss) proﬁt for the year

(457.1)

(142%)

1,078.1

Basic (loss) earnings per share (in €)

(0.58)

(205%)

0.55

Diluted (loss) earnings per share (in €)

(0.58)

(209%)

0.53

1) including AT‘s share in companies which AT has signiﬁcant inﬂuence, excluding the contributions from assets held for sale

2) including €404 million of impairment of goodwill

in € millions unless otherwise indicated

Dec 2022

Dec 2021

Total Assets

37,347.1

39,383.1

Total Equity

17,823.4

19,156.4

Investment property

27,981.0

29,115.9

Investment property of assets held for sale

909.1

1,009.3

Cash and liquid assets

(including those under held for sale)

2,718.7

3,244.1

Total ﬁnancial debt

(including those under held for sale)

14,805.8

15,588.2

Unencumbered assets ratio

(by rent)

82%

83%

Equity Ratio

48%

49%

Loan-to-Value

40%

39%

FINANCIAL POSITION HIGHLIGHTS

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BOARD OF DIRECTORS‘ REPORT

In € millions unless otherwise indicated

2022

Change

2021

EPRA NRV

12,289.1

(6%)

13,057.5

EPRA NRV per share (in €)

11.2

(3%)

11.5

EPRA NTA

10,135.2

(6%)

10,807.9

EPRA NTA per share (in €)

9.3

(2%)

9.5

EPRA NTA with RETT

10,775.3

(7%)

11,564.0

EPRA NTA with RETT per share (in €)

9.8

(4%)

10.2

EPRA NDV

10,515.2

24%

8,462.5

EPRA NDV per share (in €)

9.6

28%

7.5

EPRA Earnings

438.7

11%

393.7

EPRA Earnings per share (in €)

0.40

18%

0.34

EPRA LTV

55.4%

0.8%

54.6%

EPRA Net initial yield (NIY)

3.5%

0.1%

3.4%

EPRA 'Topped-up' NIY

3.5%

EPRA Vacancy

7.6%

(0.1%)

7.7%

EPRA Vacancy including JV

7.8%

EPRA Cost Ratio

(including direct vacancy costs)

27.8%

(1.9%)

29.7%

EPRA Cost Ratio

(excluding direct vacancy costs)

25.7%

(1.9%)

27.6%

EPRA Cost Ratio

(including direct vacancy costs,

excluding Covid-19 adjustment)

22.0%

2.4%

19.6%

EPRA Cost Ratio

(excluding direct vacancy costs,

excluding Covid-19 adjustment)

19.9%

2.4%

17.5%

EPRA PERFORMANCE MEASURES

Newly deﬁned to exclude RETT

Previously deﬁned as EPRA NTA and EPRA NTA per share

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Aroundtown

The Board of Directors of Aroundtown SA and its investees (the “Company”, “Aroundtown”, “AT”, or the “Group”), hereby submits the consolidated annual report as of December 31, 2022. The ﬁgures

presented are based on the consolidated ﬁnancial statements as of December 31, 2022, unless stated otherwise.

Aroundtown SA is a real estate company with a focus on income generating quality properties with value-add potential in central locations in top tier European cities primarily in Germany, the

Netherlands and London. Aroundtown invests in commercial and residential real estate which beneﬁts from strong fundamentals and growth prospects. Aroundtown invests in residential real estate

through its subsidiary Grand City Properties S.A. (“GCP”), a publicly traded real estate company that focuses predominantly on the German residential real estate market, as well as on the London

residential market. As of December 31, 2022, the Group’s holding in GCP is 60% excluding shares GCP holds in treasury (59% including these shares). GCP is consolidated in AT’s ﬁnancials starting

from July 1, 2021.

The Group’s unique business model and experienced management team led the Group to grow continuously since 2004, navigating successfully through all economic cycles.

The Group

CENTRALLY

LOCATED

PORTFOLIO IN

TOP TIER CITIES

Quality assets with a focus on large EU cities

primarily in Germany, Netherlands, and in London

Capital recycling by selling

non-core/mature assets

Income generating portfolio

with value-add potential

Attractive acquisitions below market

value and below replacement costs

Asset repositioning, increasing cash ﬂow,

quality, WALTs and value

Healthy capital structure

with a strong & conservative

ﬁnancial proﬁle

Extracting new building/conversion rights

on existing and new land & buildings

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FRANKFURT HBF & CBD

Approx.

200,000 SQM

lettable space in Frankfurt

prime centers, main central train

station and banking district

Banking District

Frankfurt Hauptbahnhof

(Central Train Station)

Frankfurt Stadtmitte

Bleichstraße

9k sqm

Intercontinental Frankfurt

Wilhelm-Leuschner Straße

28k sqm

Frankfurt HBF

Stuttgarter Straße

9k sqm

Frankfurt Ofﬁce Campus

Gutleutstraße

88k sqm

Frankfurt

Büro Center (FBC)

Mainzer Landstraße

43k sqm

Frankfurt HBF

Hafenstraße

20k sqm

View from Hafenstr. Office Tower

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Financial flexibility ensured due to high liquidity

and no near term debt maturities

€2.7BN CASH & LIQUID ASSETS

►

18% of debt

ABILITY TO DISPOSE DURING DIFFICULT MARKET CONDITIONS

►

€1.6BN signed in 2022 (of which €680m in Q4) and approx. €150m in Q1 2023-to-date

NEW BANK DEBT: ca. €480M IN 2022, ca. €160M IN Q1 2023-TO-DATE

►

Utilizing the strong banking relationship supported by high amount of unencumbered properties of €22bn

LIQUIDITY COVERS DEBT UNTIL THE END OF 2025

►

Cash and liquid assets, expected proceeds of signed disposals (not closed) and vendor loans cover debt maturities until the end of 2025

LARGE HEADROOM TO ALL BOND COVENANTS

►

Covenants are based on IFRS reported figures, considering the perpetual notes as equity.

PROACTIVE DEBT REPAYMENTS

►

ca. €1.1bn repaid in 2022 with 1y avg. maturity. Further €115m of 2025 bonds repurchased in 2023 YTD at a discount, extending the time to refinance further

€1BN UNDRAWN RCF

►

No MAC & maturities mostly in 2025

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Continuously improving ESG measures

Green building certifications:

55% of the Dutch portfolio is certi-

fied with BREEAM (30% in 2021).

9% of the commercial portfolio is

certified (5% in 2021).

Energy Investment Program:

Further investments in energy

efficient measures such as PV’s,

CHP’s, EV charging stations and

energy efficient renovations.

AT Foundation:

Funding social projects that sup-

port the health and well-being

of communities, disadvantaged

people & youth. ca. 90 projects

were supported in 2022.

High quality tenant service:

Commercial tenant service

center is now 24/7 available

and TÜV-certified. GCP’s

residential tenant service

center was already TÜV

certified with 24/7 availability

for many years.

Inclusion into indices:

Included in the Dow Jones Sustainability Index

and Bloomberg Gender Equality Index. These

come as a result of years of continuous improve-

ments in ESG processes.

Awards & ratings:

consecutive EPRA BPR Gold award & 5

consecutive EPRA sBPR Gold award. Maintained

strong Sustanalytics ratings (Top 5

) & improved

S&P Global CSA rating (Top 11

)

Working towards higher share of green building

certiﬁcations & reducing emissions and waste

Further commitment to well-being of

communities and high quality tenant service

Improvement in processes and policies,

consecutive awards and inclusion into indices









2023

ENVIRONMENT

SOCIAL

GOVERNANCE,

AWARDS & INDICES

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AMSTERDAM

Committed to

Sustainability

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ROTTERDAM

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Letter From

The CEO

Dear Stakeholders,

2022 was a challenging year for the real estate sector,

with rising inflation and interest rates, and economic

uncertainty. We nonetheless remained disciplined on

our main objective which was to maintain our financial

flexibility and tap the potential of our operational plat-

form. We continued to successfully dispose assets to

strengthen our balance sheet and increased focus on

our core businesses. The market environment is very

negative and challenging which puts the entire real

estate sector on fragile ground. However, we are confi-

dent in our ability to continue to lead the company to-

wards its long-term goals. We are happy to share with

you some of our achievements across our platform, as

well as our thoughts on the current environment.

MARKET & PORTFOLIO PERFORMANCE

The ofﬁce market in Germany and the Netherlands entered 2022 continuing to beneﬁt

from the pent-up demand from previous years caused by the Corona pandemic. How

ever, the trend was reversed when the war in the Ukraine broke out with its adverse

effects on supply chains, increasing energy cost, which together with other parameters

led to a very high increase in inﬂation. As a measure to hold back inﬂation, central

banks started to sharply increase interest rates with a potential recession looming

over our heads. The transaction market responded accordingly by showing restraint

and activity has signiﬁcantly slowed down. Share prices signiﬁcantly declined and

bond yields increased. On the operational side, we initially experienced stable market

demand but with a mixed picture. Businesses had entered this economic uncertainty

with a strong labor market and relatively healthy corporate balance sheets, but the

looming macro-economic risk and cost reduction measures led potential and existing

tenants to become more hesitant which extended the time needed to complete the

letting process with many requesting to scale down their ofﬁce spaces. On the supply

side, we have experienced negative momentum in new projects due to soaring con-

struction and ﬁnancing costs. Our ofﬁce portfolio is mostly protected against inﬂation

as most of our leases are CPI-indexed or have step-up rents. Thus, we were able de

liver 5.2% like-for-like rental income growth as of December 2022. Due to our strong

letting teams we also managed to keep our vacancy stable this year. Around 75% of

our ofﬁce tenants are governments or multi-national and large domestic corporations,

which is evidence to the quality of our tenant structure. Looking ahead, it is difﬁcult

to anticipate an outlook for the ofﬁce market since the possibility of a recession and

its magnitude remain uncertain. However, we continue to work hard and ﬁnd creative

solutions to address the challenges and embrace opportunities if and when they arise.

2022 was yet another year where German residential continued to provide stable and

resilient cash ﬂows. We were able to beneﬁt from this further by increasing our footprint

in the residential asset class during 2022 through an increased stake in GCP. Our current

holding rate in GCP is 60% compared to 44% at consolidation in 2021. During 2022, we

have seen further widening in the supply and demand imbalance in an already tight

housing market. Germany’s population grew further to a record level with the inﬂux of

Ukrainian refugees, while the new housing supply was well-below what was targeted

and required. Furthermore, due to increasing replacement costs and economic uncer-

tainty new supply is expected to further decrease which will exacerbate this imbalance.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Further, due to the higher mortgage rates, demand for ownership of condominiums

decreased and in return the demand for rental apartments increased. However, rising

energy prices had a higher cost burden for households, which may impact the ability

to increase rents until the cost pressure is resolved. Nonetheless, energy prices have

stabilized in recent months and government support is expected to mitigate most of

the risk. Additionally, the London residential portfolio displayed a strong performance

beneﬁtting also from an increased demand for rental units due to higher mortgage

rates.

The London residential portfolio continues to provide valuable diversiﬁcation,

also in terms of regulatory risk, where annual rent adjustments capture inﬂation

faster than in Germany. Overall, GCP had a like-for-like rental growth of 2.9% and a

record low vacancy of 4.2%. We believe the high demand in combination with low

supply will provide tailwinds and stability for the residential portfolio also in 2023.

2022 was a better year than 2021 for hotels as the recovery post-Corona has main

tained its momentum. In the ﬁrst quarter of 2022, the performance was highly impact

ed by restrictions and increasing infection rates due to the Corona pandemic. Late in

the second quarter, the recovery began after restrictions were lifted but proﬁtability

in the hotel industry was adversely impacted by cost inﬂation in utilities (especially

in energy) and staff, as well as staff shortages and other supply chain disruptions,

which impacted rent collection. In the second half of the year, the recovery picked

up speed driven especially by strong demand during summer months. As expected,

leisure continued to recover faster, returning to pre-pandemic levels while inter

national and business travel recovery was subdued due to remaining uncertainties

and the market environment. However, cost inﬂation pressures and staff shortages

continue to impact our rent collection. Thus, like-for-like rental growth of the hotel

portfolio was ﬂat as of year-end 2022. While we recognize that a potential recession

is a threat to the recovery, we expect that the hospitality industry will further improve,

with bottom-line growth to resume gradually as the recovery continues.

CAPITAL RECYCLING & HEALTHY BALANCE SHEET

In 2022, we demonstrated once again our competitive advantage in ﬁnding the right

buyers for our assets even in times of uncertainty. We signed €1.6 billion of assets

for disposal during 2022 across all locations and asset types, including development

rights, of which €680 million was signed in the fourth quarter of 2022. We continued

to sell approx. €150 million

in 2023 year-to-date, showing our ability to dispose

properties also in the most recent market environment. Since the beginning of 2020,

when the Covid pandemic started to spread across Europe, together with GCP, we

achieved approx. €8 billion of successful disposals over book value on average. In the

last periods we see a decreasing volume of transactions in the market due to a more

challenging ﬁnancing environment for buyers and a shift into a price discovery phase.

Thus, we experience a slower pace of disposals going forward. Notwithstanding that,

we are under no pressure to sell and will continue to sell opportunistically if we feel

terms are attractive and we can ﬁnd more accretive use for the disposal proceeds. The

disposal proceeds in 2022 were mostly used for debt repayments which amounted

to approx. €1.1 billion and further in January 2023, we repurchased €115 million of

2025 straight bonds at a discount, extending the time we need to reﬁnance further.

Additionally, disposal proceeds were also used on our share buyback program which

ended in 2022 and we bought back €255 million of shares mostly in the ﬁrst half

of 2022. The share buyback program ended at the end of 2022, however, the Board

can decide to initiate a new program should it see ﬁt. We have also distributed a

dividend of €0.23 per share in line with our dividend policy. Over one third of the

shareholders opted for scrip dividend, supporting cash preservation and contributing

to the equity base.

As bank ﬁnancing is currently more favorable compared to bond ﬁnancing, a large

pool of unencumbered assets provides us with the ﬂexibility to access the secured

lending market. We thus raised approx. €480 million of bank debt during 2022,

demonstrating our ability to access the secured lending market in a challenging

market environment. As a result, we have ample liquidity which mitigates the de

pendency on market conditions. As of December 2022, we have €2.7 billion of cash

and liquid assets and including expected proceeds from disposals that are signed

but not closed and vendor loans, the amount reaches to €3.9 billion which covers

debt maturities until the end of 2025. We have an additional liquidity potential of €1

billion from undrawn RCF’s and unencumbered investment properties of €22.2 billion.

VALUATIONS

Although values were stable for most of the year, the valuation trend has changed

in 2022, after years of positive gains.

Negative momentum from rate increases and

lower sentiment offset positive momentum from indexation and increasing replace

ment costs. The pressure on valuations resulted in a 3% valuation loss in Q4 2022,

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

with yield expansion outpacing in-place rental growth as well as very strong market

rental growth, both supported by high CPI-indexation and cost inﬂation in construc

tion and ﬁnancing costs for new supply.

In the residential market the demand and supply dynamics were favorable, but

increased rates and uncertainty put pressure on valuations also here which

resulted in a slight valuation loss of 1% in Q4 2022.

PERPETUAL NOTES

Perpetual notes are an important part of our capital structure especially as they provide

a security cushion in volatile times such as these. Perpetual notes are equity instru

ments as they are subordinated to debt with no maturity date, no default, no covenants

and coupon payments can also be deferred if the conditions deteriorate. At the end of

2022, the Board decided not to use our voluntary option to call the perpetual notes with

a call date in January 2023. The decision came after taking into consideration all our

options and thoroughly analyzing the implications of each. The decision not to call the

perpetual notes does not change the IFRS equity classiﬁcation and has thus no impact

on debt covenants. In the current market environment it is best for the company and all

its stakeholders to focus on preserving cash and reducing leverage. As the reset rates

of the notes were signiﬁcantly below new issuance rates, the Board decided not to use

our voluntary option to call the notes. These perpetual notes can be called at every

interest payment date and we will continue to assess all the options for the upcoming

perpetual note call dates.

As for our July 2023 perpetual notes, we continue to monitor

the perpetual notes market and seek for alternatives, however, currently we still see

signiﬁcantly higher new issuance rates in comparison to reset coupons.

ESG PROGRESS

We continued to work towards achieving our ESG targets and made great progress

across multiple fronts. We are happy to share with you some of our achievements

during the year. It is important to note that these achievements come as a result of

years of continuous improvements. Thanks to the hard work of our dedicated Sus

tainability team, we have achieved a uniﬁed approach across our platform and with

shared goals and passion across multiple teams, we were able to see results across

the full business spectrum.

nvironmental

On this front, our efforts were focused on working towards achieving a higher share

of green buildings and investing in measures to reduce emissions and waste. We

made further headway after the successful initiation of the pilot program in our Dutch

portfolio and certiﬁed

55%

of the portfolio with BREEAM, from 30% in 2021. Experi

ence and knowledge gained from this project is currently being implemented in our

German portfolio with our ﬁrst ofﬁce assets being certiﬁed and we expect gradual

progress in the coming periods. Regarding the Energy Investment Program, our in-

house energy department continued to successfully navigate us towards achieving

our carbon reduction goals and reducing our footprint. We made further investments

in energy efﬁcient measures such as installation of Photovoltaics, Combined Heat and

Power, EV charging stations and efﬁcient windows, lighting, roofs, façades and heat

ing systems. In addition, as part of our commitment to contribute to the biodiversity

surrounding our properties, we continued to add green facilities in our portfolio and

expanded our “Aroundtown buzzes” project. This project supports the survival of bees

in urban areas by installing beehives on the rooftop of our properties.

ocial

On the social front, our efforts were focused on making further commitments to the

well-being of our communities and increasing the quality of our tenant service. With

our Aroundtown Foundation, we engaged in numerous charities across our portfo

lio locations, working in close contact with local partners and authorities, such as

HORIZONT e.V., Berliner Lebenshilfe, Mutzkidz, wünschdirwas and Joblinge. The local

projects aimed at improving child and youth education & healthcare, eliminating

child poverty, preparing disadvantaged young people for the job market, providing

solidarity to the ethnic minorities, etc. An example of such projects is where we

supported two students in their scientiﬁc journey who went on to become world

champions in the RoboCup 2022 Bangkok competition. Our Social Days program

continued in 2022 where our employees were given opportunities to volunteer in

multiple projects with local communities. Furthermore, our People Development &

Talent Management team has further ramped up training and development opportu

nities, covering a wide range of soft and hard skills. In addition, beneﬁtting from the

high quality of GCP’s residential tenant service, we have integrated further support

channels for our commercial tenant service. As a result, we now provide a 24/7 tenant

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Barak Bar-Hen

March 29, 2023

support for the entire Group and both service centers are TÜV-certiﬁed, which places us

in a unique position compared to our peers.

overnance, Indices and Awards

During 2022, we improved processes, policies and sustainability reporting. The increased

level of recognition and awards that we received reﬂects years of continuous improve

ments in all ESG matters. In 2022, we achieved our near-term target of being included in

the Dow Jones Sustainability Index. Recently, both Aroundtown and GCP were included

in the Bloomberg Gender-Equality Index 2023, showing our serious commitment in pro

moting diversity and anti-discrimination. These inclusions added to our strong visibility

in other ESG indices such as S&P Europe 350 ESG Index and DAX 50 ESG Index. We main

tained our strong rating with Sustainalytics in the low risk category, ranked among top

percentile globally across all industries. In addition, we received the EPRA BPR Gold

award for the 6

time and EPRA sBPR Gold award for the 5

time consecutively, reﬂecting

our high standards of ﬁnancial transparency and sustainability reporting. You can ﬁnd

our Non-Financial Report 2021 and other sustainability related materials on our

website

We will update and publish our Non-Financial Report 2022, EPRA sBPR Report 2022, and

Sustainability Insights on our

website

by the end of April 2023.

We would like to thank our talented workforce once again

for their hard work, dedication, and commitment. With our

strong and diverse portfolio, large cash liquidity and finan-

cial flexibility, we are well-positioned to address new chal-

lenges and explore new opportunities that are ahead of us

in 2023.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

The Strategy and

Business Model

Sourcing and

targeting

acquisitions in

central locations

in top tier cities

with growth and

upside potentia

Acquisition and

takeover below

market prices

Repositioning

and operational

improvements

Robust cash

ﬂows

supported by

strong tenant structure,

while disposing

non-core and mature

properties. Disposals to

be channeled into debt

repayments

Value creation

Additionally

continuing to

extract value and

rights from the

properties

AT‘s value

creation starts

prior to acquisition

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

1) SOURCING AND TARGETING ACQUISITIONS IN CENTRAL LOCATIONS

IN TOP TIER CITIES WITH GROWTH AND UPSIDE POTENTIAL

Aroundtown’s property sourcing success stems from its unique network as well as

its reputation as a reliable real estate acquisition partner. The Group focuses on val

ue-add properties in central locations of top tier cities characterized by below market

rent levels, inefﬁcient cost or lease structure and/or vacancy reduction potential. With

almost two decades of experience in the real estate markets, the Group beneﬁts from

a preferred buyer status across its sourcing network. The Group sources deals from

a large and diverse deal sourcing base, such as receivers, banks, loan funds, broker

networks, distressed owners, private and institutional investors and court auctions.

The Group’s primary focus is on major cities and metropolitan areas with positive

demographic prospects.

The Group follows acquisition criteria which ensure that newly acquired properties

align with its business model. These criteria include:

Focus on central locations in top tier EU cities

Value-add potential through operational improvements

Cash ﬂow generating assets

Rent level per sqm below market level (under-rented properties)

Purchase price below replacement cost and below market values

Potential to reduce operational cost per sqm signiﬁcantly

Due to the experience and knowledge of its board and management, the Group is

able to consider all possible uses for properties that it acquires, including alter

ing the property’s primary use in order to target speciﬁc supply shortages in the

market. The Group believes that its business model provides it with a strong and

sustainable competitive advantage.

2) ACQUISITION AND TAKEOVER BELOW MARKET PRICES

After a potential property passes an initial screening, the property is further as

sessed in order to take into account the speciﬁc features of each project while

ensuring that the acquisition is in line with the Group’s overall business strategy. AT

believes that its experience in analyzing properties with value creation potential,

and in identifying both the potential risks and the upside potential of each property,

results in fast, but thorough and reliable, screening procedures.

Once a property is acquired, the actual takeover occurs swiftly and efﬁciently. Be

cause liquidity plays a signiﬁcant role in the acquisition of value-add properties, AT

beneﬁts strongly from its solid liquidity position and its ability to acquire properties

with existing resources and reﬁnance the acquisition at a later stage. The Group

also beneﬁts from a strong and experienced legal department, which, combined

with close and longstanding relationships with external law ﬁrms, enables AT to

complete multiple deals simultaneously.

3) REPOSITIONING AND OPERATIONAL IMPROVEMENTS

As a speciﬁc tailored business plan is constructed for each property, and the weak

nesses and strengths are identiﬁed pre-acquisition, the execution of the reposi

tioning process becomes smoother and faster. The business plan input is integrated

into AT’s IT/ software platform which enables the management to monitor all

operational and ﬁnancial parameters and fully control the repositioning progress.

The success of the repositioning of the properties is the result of the following

functions:

Operational and marketing initiatives

The initial repositioning activities aim at minimizing the time until the proﬁta

bility of the acquired properties is improved. Targeted marketing activities are

implemented to increase occupancy and thereby rental income. Vacancy reduction

initiatives are tailored to the speciﬁc property type. Procedures applied to AT’s

commercial properties include establishing a network of internal and external, as

well as local and nationwide letting brokers, offering promotional features and

building a reputation in the market for high service standards. For the Group’s

hotel assets, optimal operators are selected and a ﬁxed long-term lease contract

is entered into once the hotel is repositioned. Initiatives for the Group’s residential

properties target relationship building with potential tenants and the local com-

munity by collaborating with local municipalities, supporting community initiatives

and advertising on key real estate platforms.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Rent increase and tenant restructuring, assessed during the due diligence process,

are executed according to the property’s business plan. Furthermore, the opera

tional improvements the Group initiates improve the living quality or business

environment for existing and future tenants, resulting in increased demand for

these repositioned assets.

Having identiﬁed areas for operational improvements, the Group drills down on

cost saving opportunities on a per unit basis, making use of modern technologies

such as consumption-based meters. These efforts, combined with cost savings

achieved through vacancy reductions and economies of scale, enable the Group

to beneﬁt from a signiﬁcant improvement of the cost base and therefore higher

proﬁtability.

AT manages its entire real estate value chain across acquisition, letting, upkeep

and refurbishment. This integrated approach brings further efﬁciency beneﬁts, a

preferred landlord status and fast response times to its tenants.

Smart capex investments when required

AT addresses capex needs to keep the properties’ high standards and addresses

the requirements of its existing and prospective tenants. Capital improvements are

discussed in close coordination with committed tenants, allowing an efﬁcient and

cost-effective implementation of the investments. The carried-out investments are

followed up by AT’s experienced construction team.

The ﬁnancial feasibility of the proposed alterations is balanced against the lease

term, rental income and property acquisition cost and bears quick returns over the

investment period.

Relationship management

Aroundtown puts great emphasis on establishing strong relationships with its ten-

ants to reduce churn rates, to predict as well as strengthen the tenant structure and

thereby positively affect its cash ﬂows in the future. The Group aims to offer high

quality services for both potential and existing tenants. The Group pays great atten

tion to the industry in which its commercial tenants operate and to their individual

success factors. The Group also offers direct support to its tenants through add-

on facilities at its rental properties such as space extensions to facilitate growth

and smart space redesign to match modern ofﬁce layouts. The Group supports its

tenants through its TÜV- and ISO 9001:2015-certiﬁed commercial and residential

Service Centers with 24/7 availability via various channels. Furthermore, the Group

aims to establish personal relationships between its tenants and its asset and

property managers, providing them with personal contact points, which allows the

Group to react promptly to problems and proactively prolonging existing contracts

in order to optimize and secure long-term revenues.

4) ROBUST CASH FLOWS SUPPORTED BY STRONG TENANT

STRUCTURE

Aroundtown targets the generation of robust cash ﬂows throughout its operations.

This is supported by ongoing cost controls and long-term value creation through

repositioning and operational improvements and by extracting the upside poten

tial embedded in the portfolio, continuous optimization of the tenant structure and

thereby generating robust internal growth and cash ﬂows.

Capital recycling by selling non-core and mature assets

While the Group’s main focus is on extracting the potential of its portfolio, the

Group also pursues an accretive capital recycling of non-core and/or mature prop

erties. AT continuously analyzes its portfolio in terms of upside potential to lift

and focuses its resources on properties with higher upside. AT seeks to dispose

properties where most of the potential has been lifted or which are not in the

core locations of AT. The disposal of such properties enables capital recycling and

provides ﬁrepower to pursue new opportunities with high upside potential on one

hand and increases the quality of the portfolio on the other.

Addionally, proceeds

from disposals enable the Company to buy back debt, strengthen the balance sheet

and reduce leverage.

EXTRACTING BUILDING RIGHTS FROM UNUSED OR

UNDERUTILIZED LAND OR CONVERSION RIGHTS FROM EXISTING

PROPERTIES AND NEW LAND

As part of the value creation process, Aroundtown identiﬁes and extracts building

rights from unused or underutilized existing and new land and buildings and

conversion rights, providing an additional internal growth driver. AT assesses in-

ternally the best use for the rights and advances on to maintain the discussion

with authorities, engineers and architects in order to realize plans into permits.

Once the planning and permit phases are completed, Aroundtown analyzes each

project individually and decides the best way to realize the value into proceeds.

Aroundtown does not intend to fully build and develop all of the rights and esti

mates that most of the rights will be disposed.

LONDON

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EXPERIENCED BOARD AND MANAGEMENT

AT’s board and management can draw on a wealth of experience in the real estate

market and associated sectors. This enables the Group to continuously innovate,

make strategic decisions quickly and accurately, and successfully grow. The Group’s

remarkable growth in recent years has created two key beneﬁts in this regard: on

one hand, the ability to attract managers and employees that redeﬁne the industry,

and on the other hand the internalization of a knowledge and experience pool at a

fraction of the cost in relation to its portfolio.

This knowledge is communicated and utilized across the Group and its business

units which shapes its processes and operational improvements.

AT’s management possesses the knowledge that makes up its main competitive

advantage, the ability to extract the operational and value potential from its assets.

This includes the ability to execute the business plan successfully, which includes

executing vacancy reduction activities, establishing cost efﬁciency measures, set

ting rent increase processes, understanding tenant structures, and optimizing rental

contracts in terms of lease maturity and income security. Cross-sector experience

enables the extraction of the full value of the properties and operational experience

improves the monitoring and reduction of costs.

DEAL SOURCING AND ABILITY TO CREATE ACCRETIVE GROWTH

The Group’s acquisition track record over the past two decades has led it to become

a market leader and have a preferred acquirer status, primarily due to its professional

approach, fast and high execution rates, and reliability.

The Group has a proven track record of acquiring properties with various value-add

drivers and successfully extracting the upside potential. This activity is accompanied

by a pipeline and acquisition of attractive properties and the successful transition of

the existing properties into mature assets, generating secure long-term cash ﬂows.

This large network also enables Aroundtown to dispose properties.

QUALITY LOCATIONS IN TOP TIER CITIES

The Group’s assets are primarily located in two of Europe’s strongest economies

with AAA sovereign ratings: Germany and the Netherlands. Within these countries,

the Group focuses on central locations in top tier cities including Germany’s capital

Berlin, the ﬁnancial center Frankfurt, the wealthiest cities Munich and Hamburg, the

large metropolitan area of North Rhine-Westphalia, Netherlands’ ﬁnancial center

and capital Amsterdam, Europe’s biggest port Rotterdam and Germany’s dynamic

metropolitan regions in the east Dresden and Leipzig. The Group’s assets are further

diversiﬁed into other top cities with strong economic fundamentals, such as one

of Europe’s main ﬁnancial centers and most popular touristic destination, London.

CONSERVATIVE FINANCING STRUCTURE

AT’s conservative capital structure approach is reﬂected in a low LTV of 40% as of

December 31, 2022, below the limit of 45% established by the Board of Directors.

Aroundtown’s management views the conservative debt metrics as vital to secure

long-term ﬁnancial strength. The Company continuously analyzes ﬁnancing oppor

tunities and aims to take advantage of the optimal source of capital in each market

environment. In the current market environment the Company focuses on secured

ﬁnancing at relatively attractive rates.

Key Strengths

FINANCIAL POLICY

Aroundtown has set a ﬁnancial policy to improve its capital structure further:

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 & non-recourse bank loans

Dividend distribution of 75% of FFO I per share*

In addition to its conservative capital structure and strong track record in accessing cap-

ital markets that enables the Group to ﬁnance its future growth, the Group maintains a

robust liquidity position through a mix of operational cash ﬂow generation and balance

of cash and liquid assets which as of December 31, 2022 amounted to €2.7 billion.

Additionally, undrawn RCF’s of €1 billion (no MAC) and a high ratio of unencumbered

investment properties of 82% (by rent, €22.2 billion in total value) as of December 31,

2022 provide for additional ﬁnancial ﬂexibility.

*The decision is subject to market conditions and AGM approval

MAINZ

LEIPZIG

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Maintaining high

interest cover ratio

(ICR)

YEARS

1.4%

Average

debt maturity

Average

cost of debt

5.2

FY 2022

FY 2021

STABLE

Re-affirmed

in Dec 2022

BBB

INVESTMENT GRADE CREDIT RATING

AT has a ‘BBB+’ rating by Standard & Poor’s ratings services (“S&P”). S&P acknowledges AT’s strong business proﬁle and large

portfolio with great scale and diversiﬁcation, well balanced across multiple asset types and regions with no dependency on a

single asset type or region, together with a large and diverse tenant base and long lease structures. Since the initial credit rating

of ‘BBB-’ received from S&P in December 2015, AT’s rating was upgraded twice to the ‘BBB+’ rating.

Financing sources mix

Loan-To-Value

Board of Directors’ limit of 45%

Dec 2022

Dec 2021

39%

High unencumbered assets ratio

€22.2BN

Dec 2021

Dec 2022

83%

Straight and convertible bonds and schuldscheins

Loans & borrowings

Total Equity

of which Perpetual Notes

of which Mandatory Convertible Notes

Dec 2022

Dec 2021

41%

42%

55%

4.9

BERLIN

Aroundtown’s

Quality Portfolio

Residential

portfolio

32%

Commercial

portfolio

68%

43%

Ofﬁce

18%

Hotel

Logistics/Other & Retail

*including development rights & invest

and excluding properties held for sale

TOTAL PORTFOLIO: €28BN*

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

POPULATION DENSITY

IN GERMANY AND

THE NETHERLANDS

inhabitants per sqkm (Destatis & CBS, 2020)

1,000 - 4,790

300 - 1,000

150 - 300

100 - 150

36 - 100

Two of the strongest

economies in Europe with

AAA credit rating

Among the lowest

unemployment

levels in Europe

Among the

lowest debt/GDP

levels in Europe

8 of the 15 largest

metropolitans in the EU

are in Germany & The NL

Together making up

more than a quarter

of the EU‘s economy

Group Portfolio

Overview

Germany & The Netherlands:

85% of the portfolio

Rotterdam

Amsterdam

Utrecht

Frankfurt

Hannover

Wiesbaden

NRW

Mannheim

Mainz

Stuttgart

Dresden

Munich

Bremen

Hamburg

Berlin

Leipzig

Halle

Nuremberg-Fuerth

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

TENANT

High tenant diversiﬁcation with no material tenant or

industry dependency.

Commercial portfolio with approx. 3,500 tenants and

residential portfolio with very granular tenant base.

ASSET TYPE

The largest asset type is Ofﬁce (43%) and together

with Residential and Hotels, they make up 93% of the

portfolio.

INDUSTRY

Each location has different key industries and fundamentals

driving the demand.

Therefore, the Group‘s tenants are diversiﬁed into distinct

sectors, eliminating the dependency on a single industry.

LOCATION

The portfolio is focused on the strongest economies in

Europe: 85% of the Group‘s portfolio is in Germany and the

Netherlands, both AAA rated countries.

Focus on top tier cities of Germany and the Netherlands

and on London.

Well-distributed across multiple regions with a large footprint

in top tier cities such as Berlin, Munich, and Frankfurt.

*including development rights & invest

and excluding properties held for sale

Well-Diversified

Group Portfolio

with Focus on

Strong Value Drivers

Retail

Logistics/

Other

GROUP

ASSET TYPE

BREAKDOWN

December 2022 by value*

BERLIN

COLOGNE

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

High Geographical

Diversification

Berlin is the single largest

location. AT is a leading

landlord in Berlin across

multiple asset types.

*including development rights & invest and excluding properties held for sale

GROUP

REGIONAL

DISTRIBUTION

December 2022

by value*

Others

18%

Dresden/Leipzig/

Halle

Munich

London

Frankfurt

Rotterdam

Utrecht

Nuremberg

Bremen

Hannover

Stuttgart/BB

Amsterdam

Hamburg/LH

Wiesbaden/Mainz/

Mannheim

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

*Map representing approx. 95% of the portfolio and 97% including central Potsdam

Commercial

properties

Residential

properties

Central locations within top tier cities:

A Berlin example

BEST-IN-CLASS BERLIN PORTFOLIO

Mitte

Pankow

Reinickendorf

Spandau

Charlottenburg-

Wilmersdorf

Steglitz-

Zehlendorf

Tempelhof-

Schöneberg

Friedrichshain-

Kreuzberg

Neukölln

Treptow-

Köpenick

Marzahn-

Hellersdorf

Lichtenberg

84%

of the portfolio is located in top tier

neighborhoods including Charlotten-

burg, Wilmersdorf, Mitte, Kreuzberg,

Friedrichshain, Lichtenberg, Schöneberg,

Neukölln, Steglitz and Potsdam

16%

of the portfolio is well located primarily

in Reinickendorf, Spandau, Treptow,

Köpenick and Marzahn-Hellersdorf

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

TOP 4

OFFICE

CITIES:

Berlin, Munich, Frankfurt

and Amsterdam make up

62%

of the office portfolio.

AT is the largest office landlord

in Berlin, Frankfurt and Munich

among publicly listed peers

OFFICE: High Quality

Offices in Top Tier Cities

Rotterdam

Utrecht

Dresden/Leipzig/Halle

Wiesbaden/Mainz/Mannheim

Amsterdam

Nuremberg

Hamburg

Stuttgart

London

Other

Warsaw

Hannover

OFFICE

December 2022

by value

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Unique Key Industry Mix of Top Office Locations

Government

Healthcare

Biotech

Start-up, Fintech, IT

€

BERLIN

Media

MUNICH

Aviation/Transportation

FRANKFURT

AMSTERDAM

Finance

Info & Comm. Tech & IT

Advanced manufacturing

Exhibition & trade fair

Infrastructure

& transportation

Info & Comm. Tech

Insurance &

Finance

Chemicals/pharma

Start-up, Fintech, Agtech

Finance & trade

€

Aroundtown´s ofﬁce assets are well-diversiﬁed and

well-located across top tier cities in Europe with a

focus on Germany and the Netherlands, two of the

strongest and most stable economies in Europe

On top of geographical diversiﬁcation,

different macroeconomic characteristics of each

location provide AT with an additional layer of

diversiﬁcation in terms of industry exposure

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

BERLIN

DRESDEN

COLOGNE

AMSTERDAM

ROTTERDAM

LEIPZIG

MUNICH

BERLIN

STUTTGART

FRANKFURT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

HOTELS: Focus on

Central Locations

152 hotels across top locations with

fixed long-term leases with third

party hotel operators

AT’s hotel portfolio, valued at €4.7 billion as of December 2022, is well diver

siﬁed and covers a total of 1.5m sqm. The hotels are branded under a range

of globally leading branding partners which offer key advantages such as

worldwide reservation systems, global recognition, strong loyalty programs,

quality perception and beneﬁts from economies of scale.

Meuse

(Netherlands, Center Parcs)

Rome

London

Wiesbaden/Mainz/Mannheim

Hannover/ Braunschweig

Limburg

(Belgium, Center Parcs)

Paris

Brussels

Dresden/Leipzig/Halle

Hamburg/

Lüneburger Heide (Center Parcs)

Others

16%

Drenthe

(Netherlands, Center Parcs)

Eindhoven/Brabant

(Center Parcs)

Munich/BR

tralsund/Rügen/Usedom

Frankfurt

Stuttgart/BB

HOTELS

December 2022

by value

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Hotels leased to third party operators and franchised with various strong brands

and a large scale of categories which provides high flexibility for the branding of its assets

The largest share of the hotel portfolio is 4-star hotels with 87%, catching the

largest market share from tourism and business travel. The hotel assets are let

to hotel operators which are selected according to their capabilities, track record

and experience. AT’s management participates in the branding decision of the

hotel, applying its expertise in selecting the optimal brand.

HOTELS

DISTRIBUTION

BY STAR

CATEGORY

December 2022

by value

5 Stars

3 Stars

2 Stars

Focus on Quality and Operators

with Brand Recognition

DIVERSE EUROPEAN METROPOLITAN FOOTPRINT

Fixed long term leases with third party hotel operators

Aroundtown’s hotel assets are well-diversiﬁed and well-located across major European metropolitans,

with a focus on Germany.

The locations of AT’s hotel assets beneﬁt from a strong tourism industry since

they are some of Europe’s most visited cities as well as top business locations such as Berlin, Frankfurt,

Munich, Cologne, Paris, Rome, Brussels, London and Vienna.

High Geographical

Diversification

COLOGNE

BERLIN

LONDON

DAVOS

BERLIN

FRANKFURT

HAMBURG /

LÜNEBURGER HEIDE

Center Parcs

MEUSE

(Netherlands,

Center Parcs)

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Grand City

Properties

Residential portfolio

The residential portfolio is primarily held through a 60% stake in Grand City Properties (“GCP”) excluding

the shares GCP holds in treasury (59% including these shares) as of December 31, 2022. GCP is a leading

market player in the German residential market and a specialist in value-add opportunities in densely

populated areas, predominantly in Germany, as well as in London. GCP is a publicly listed real estate

company, traded on the Frankfurt Stock Exchange. Since July 1, 2021, GCP is consolidated in AT’s ﬁnancial

accounts, providing the Group with a well-balanced portfolio breakdown. GCP’s portfolio has a value of

€9.5 billion and operates at an in-place rent of €8.2/sqm and an EPRA vacancy of 4.2%. The portfolio

generates an annualized net rental income of €393 million and includes a strong value-add potential. GCP

holds 64k units in its portfolio with the properties spread across densely populated areas in Germany, with

a focus on Berlin, North Rhine-Westphalia and the metropolitan regions of Dresden, Leipzig and Halle,

as well as London. GCP’s portfolio includes a relatively small share of commercial properties which AT

reclassiﬁes into their relevant asset class. GCP puts a strong emphasis on growing relevant skills in-house

to improve responsiveness and generate innovation across processes and departments. Through its 24/7

Service Center and by supporting local community initiatives, GCP established industry-leading service

standards and lasting relationships with its tenants. For more information, please visit GCP’s

website

STABLE

Hamburg/Bremen

Nuremberg/Fürth/Munich

Mannheim/KL/ Frankfurt/Mainz

Others

11%

GCP

REGIONAL

DISTRIBUTION

December 2022

by value

BERLIN

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Further Portfolio Diversification

through Logistics/Other and Retail

Retail: Largest focus is on resilient essential goods tenants

and grocery-anchored properties catering strong and stable

demand from local residential neighborhoods

Amsterdam

Frankfurt/Mainz

Others

14%

Hamburg

Rostock

Dresden/Leipzig/Halle

Stuttgart/BB

RETAIL

December 2022

by value

BERLIN

Hamburg

Dresden/Leipzig/Halle

NRW

Stuttgart

Hannover

Others

Munich

LOGISTICS/

OTHER

December 2022

by value

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

DECEMBER 2022

Investment

properties

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualized

net rent

(in €M)

In-place rent

per sqm

(in €)

Value

per sqm

(in €)

Rental

yield

WALT

(in years)

Ofﬁce

10,796

3,474

11.2%

466

12.1

3,107

4.3%

4.4

Residential

8,342

3,685

4.0%

356

8.3

2,264

4.3%

Hotel

4,660

1,531

3.9%

237

13.3

3,044

5.1%

14.7

Logistics/Other

423

449

9.5%

4.8

942

5.6%

5.6

Retail

1,489

618

11.6%

10.1

2,407

4.6%

4.4

Development rights & Invest

2,271

Total

27,981

9,757

7.6%

1,151

10.3

2,635

4.5%

7.5

Total (GCP at relative consolidation)

24,188

8,136

8.2%

995

10.8

2,706

4.5%

7.6

ASSET TYPE OVERVIEW

REGIONAL OVERVIEW

DECEMBER 2022

Investment

properties

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualized

net rent

(in €M)

In-place rent

per sqm

(in €)

Value

per sqm

(in €)

Rental

yield

Berlin

6,267

1,491

6.3%

211

12.1

4,204

3.4%

NRW

3,844

1,974

7.2%

186

8.1

1,947

4.8%

London

1,917

264

4.8%

30.4

7,258

4.6%

Dresden/Leipzig/Halle

1,890

1,129

4.1%

6.9

1,674

4.8%

Frankfurt

1,779

517

13.8%

13.8

3,439

4.3%

Munich

1,756

522

11.0%

8.7

3,363

3.0%

Wiesbaden/Mainz/Mannheim

716

262

5.5%

11.2

2,729

4.9%

Amsterdam

606

159

12.9%

14.4

3,810

4.1%

Hamburg/LH

528

189

4.2%

12.0

2,798

5.2%

Hannover

280

156

12.8%

8.4

1,794

4.9%

Stuttgart/BB

280

121

14.7%

10.7

2,311

4.6%

Rotterdam

262

1.9%

13.8

2,637

6.8%

Utrecht

219

5.6%

12.7

2,605

6.0%

Other

5,366

2,790

8.3%

301

9.6

1,924

5.6%

Development rights & Invest

2,271

Total

27,981

9,757

7.6%

1,151

10.3

2,635

4.5%

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Capital Markets

KEY INDEX INCLUSIONS

Aroundtown’s share is a constituent of several major indices such as

MDAX, DAX 50 ESG,

FTSE EPRA/NAREIT Index Series, MSCI Index Series, S&P EUROPE 350, S&P EUROPE 350

ESG, Dow Jones Sustainability Index, STOXX Europe 600

as well as

GPR 250, GPR Global

Top 100 ESG

and

DIMAX

. These inclusions are the result of Aroundtown’s large market cap

and high trading volumes on the Prime Standard of the Frankfurt Stock Exchange (XETRA).

INVESTOR RELATIONS ACTIVITIES

The Group is proactively approaching a large investor audience in order to present its

business strategy, provide insight into its progress and create awareness of its overall

activities to enhance its perception in the market. AT participates in a vast amount of

various national and international conferences, roadshows, one-on-one presentations and

in virtual video conferences in order to present a platform for open dialogue. Explaining

its unique business strategy in detail and presenting the daily operations allow investors

to gain a full overview about the Group’s successful business approach. The most recent

information is provided on its website and open channels for communication are always

provided. Currently, AT is covered by 18 different research analysts on an ongoing basis,

with reports updated and published regularly.

excluding suspended

voting rights, including

the conversion impact of

mandatory convertible notes

Placement

Frankfurt Stock Exchange

Market segment

Prime Standard

Trading ticker

AT1

Initial placement

of capital

13.07.2015

Key index

memberships

DAX 50 ESG

MDAX

FTSE EPRA

NAREIT:

– Global

– Developed Europe

– Eurozone

– Germany

– Green Indexes

MSCI Index Series

S&P Europe 350

S&P Europe 350 ESG

Dow Jones Sustainability Index

STOXX Europe 600

GPR 250

GPR Global Top 100 ESG

DIMAX

AS OF DECEMBER 31, 2022

Number of shares

1,537,025,609

Number of shares,

base for share KPI

calculations

1,092,735,576

AS AT MARCH 28, 2023:

Shareholder Structure

Freeﬂoat: 54%

- of which Blackrock 8.4%

Shares held in treasury

: 31%

Avisco Group/Vergepoint

ii)

: 15%

12% are held held through TLG Immobilien AG,

voting rights suspended

ii)

controlled by Yakir Gabay

Market cap

€2.1 bn / €1.5 bn

(excl. treasury shares)

TRADING DATA

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

SHARE PRICE PERFORMANCE AND TOTAL RETURN SINCE INITIAL PLACEMENT OF CAPITAL (13.07.2015)

BERLIN

EPRA Germany (rebased) -26% total return

MDAX (rebased) +29% total return

Stoxx 600 (rebased) +44% total return

Aroundtown -46% total return

2015

2016

2017

2018

2019

2020

2021

2022

2023

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ESG

Environmental,

social and governance

COMMITMENT TO HIGH ESG STANDARDS

At Aroundtown, we are committed to generate sustainable value creation for all our

stakeholders and in this regard, we set ourselves high ESG standards to ensure the sus

tainability of our business practices. We aligned our business practices with the United

Nations Sustainable Development Goals because we are of the opinion that our long-term

success is tied to our corporate footprint. Therefore, we aim to create value while ensur

ing a minimal environmental footprint, leaving a positive social impact and maintaining

high standards of governance and transparency. We place great emphasis on a socially

responsible investment strategy that provides beneﬁts for all stakeholders: our society,

shareholders, employees, tenants, business partners and communities. For this reason, we

have incorporated ESG principles in all our departments, guided by our dedicated Sustain

ability Department. We have made additional progress towards achieving our long-term

ESG goals and are proud to share with you some of our initiatives and accomplishments

in this ESG reporting section.

With regard to

nvironmental, our efforts were focused on working towards achieving a

higher share of green buildings and investing in measures to reduce emissions and waste.

We made further headway after the successful initiation of the pilot program in our Dutch

portfolio and certiﬁed 55% of the portfolio with BREEAM, from 30% in 2021. Experience

and knowledge gained from this project is currently being implemented in our German

portfolio with our ﬁrst ofﬁce assets being certiﬁed and we expect gradual progress in the

coming periods. With regard to the Energy Investment Program, to achieve our carbon

reduction goals and reduce our footprint, we made further investments in energy efﬁcient

measures such as installation of Photovoltaics, Combined Heat and Power, EV charging

stations and efﬁcient windows, lighting, roofs, façade and heating systems.

With regard to

ocial, our efforts were focused on making further commitments to the

well-being of our communities and increasing the quality of our tenant service. With our

Aroundtown Foundation, we engaged in numerous charities across our portfolio locations

in order to support the development of our communities, working in close contact with

local partners and authorities, such as HORIZONT e.V., Berliner Lebenshilfe, Mutzkidz,

wünschdirwas and Joblinge. Our Social Days program continued in 2022 where our em

ployees were given opportunities to volunteer in multiple projects with local communities.

Furthermore, our People Development & Talent Management team has further ramped

up training and development opportunities, covering a wide range of soft and hard skills.

In addition, capitalizing on the high quality of our residential tenant Service Center, we

have integrated further support channels in our commercial tenant Service Center and

achieved 24/7 availability and TÜV and ISO certiﬁcation.

With regard to

overnance, we continued to improve processes, policies and sustainability

reporting. As a result of years of continuous improvements in all ESG matters, we have

once again received a high level of recognition and numerous awards.

In December 2022, we achieved our near-term target of being included in the Dow Jones

Sustainability Index. Recently, both Aroundtown and GCP were included in the Bloomberg

Gender-Equality Index 2023, showing our serious commitment in promoting diversity and

anti-discrimination. These inclusions added to our strong visibility in other ESG indices

such as S&P Europe 350 ESG Index and DAX 50 ESG Index. We maintained our strong

rating with Sustainalytics in the low risk category, ranked among top 5

percentile globally

across all industries. In addition, we received the EPRA BPR Gold award for the 6

time and

the EPRA sBPR Gold award for the 5

time consecutively, reﬂecting our high standards of

ﬁnancial transparency and sustainability reporting.

We have made updates to our sustainability reporting and all the materials can be found

on our

website

. In our upcoming audited Non-Financial Report 2022, you can see our per

formance and impact with regard to the management of ESG matters. The non-ﬁnancial

report will also contain the required disclosures for its activities in accordance with the

EU Taxonomy Regulation Article 8. Under the Sustainability Insights reports, you can ﬁnd

comprehensive accounts of about a dozen individual topics forming our Sustainable Busi

ness Strategy. Lastly, the EPRA sBPR report contains in-depth environmental disclosures

with relevant methodological notes.

All of Aroundtown’s Non-Financial, EPRA sBPR, and

Sustainability reports will be published on our

website

by the end of April 2023.

GOLD AWARDS FOR THE FINANCIAL AND SUSTAINABILITY REPORTING

FOR THE 6

AND 5

CONSECUTIVE YEAR, RESPECTIVELY

INCLUDED IN JANUARY 2023, AS A RESULT OF ITS SERIOUS COMMITMENT IN

PROMOTING DIVERSITY AND ANTI-DISCRIMINATION

MAINTAINED SUSTAINALYTICS RATING IN THE LOW RISK CATEGORY, RANKED

AMONG THE TOP 5

PERCENTILE GLOBALLY ACROSS ALL INDUSTRIES.

IMPROVED S&P GLOBAL CSA RATING (TOP 11

)

INCLUDED IN 2022, ADDING TO STRONG VISIBILITY IN ESG INDICES

SUCH AS S&P EUROPE 350 ESG INDEX AND DAX 50 ESG INDEX









2023

AMSTERDAM

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ENVIRONMENTAL RESPONSIBILITY

The Group considers environmental responsibility as an integral part of its integrated

sustainable business strategy which is complemented by the Group’s ESG and energy

efﬁciency policies. The Group established a comprehensive environmental policy that

reﬂects all aspects of energy management and environmental responsibility, with the aim

to reduce environmental pollution by installing sustainable energy systems which improve

energy and cost efﬁciency, while switching procured energy to renewable energy sources

with the goal of reducing its carbon footprint. This Energy and Environmental Policy has

undergone an update in late 2022 and early 2023 to improve underlying procedures and

better coordinate action towards the Group’s emissions target. The new policy promotes

a greater emphasis on improving the heating energy efﬁciency of buildings to reduce the

energy demand of the existing building stock.

Environmental factors are integral to the

Group’s business and are included in the investment strategy, due diligence process and

the business plan. Over the life cycle of the assets and as part of the repositioning pro

cess, the Group seeks to continuously reduce its environmental footprint. As part of this

process, the Group conducts regular environmental risk assessments. Environmental due

diligence and risk assessments include all aspects of environmental management, such as

water and waste management, climate risk, energy efﬁciency and greenhouse gases (GHG)

reduction potential. The Group’s efforts to reduce carbon emissions and generate clean

energy support the United Nations Sustainable Development Goals, particularly those

relating to Affordable and Clean Energy (#7) and Climate Action (#13).

The energy market is shifting towards more decentralized and renewable/green-based en

ergy. This has implications for the demand side of the real estate market since increasingly

more tenants demand sustainable solutions from their landlords. Therefore, it is important

for the Group to address these changes and improve its competitive position within the

market. In order to reduce its environmental footprint, as well as to improve attractive

ness of its properties with regard to sustainability and advanced green technology, the

Group launched a broad Energy Investment Program. The program supports the targeted

40% reduction in CO₂ emissions by 2030 by mainly investing in efﬁcient and renewable

energy generation and storage systems, electrical vehicle charging stations, smart meters

and advanced energy measurement software across the portfolio. The program is focused

around ﬁve core components:

The installation and operation of solar Photovoltaics (PV) production systems on

rooftops and parking areas

The installation of highly efﬁcient energy generating systems based on combined heat

and power production (CHP) or combined cooling heat and power (CCHP)

The implementation of electricity storage to support these solar, CHP and CCHP

systems. This will enable optimal management of energy consumption and production

and provide the necessary infrastructure for fast and ultrafast electric vehicle (EV)

charging stations to serve the Group, its tenants and its clients

The installation of EV charging stations

The implementation of smart meters combined with a total energy management

system (demand/response) to optimize the efﬁciencies in term of resource and costs

During 2022, the Group made further investments in energy efﬁcient measures such as

PV’s, CHP’s, EV charging stations and efﬁcient windows, lighting, roofs, façade and heating

systems. In 2022, the Group also executed further on its efforts to certify its portfolio with

green building credentials. The goal is to increase number of green buildings within the

portfolio to match AT’s integrated sustainable business strategy. The pilot project was

initiated in the Netherlands as there is a high demand from tenants for green buildings.

As a result, higher rents and occupancy can be achieved and capex for upgrades yields

positively immediately. As of the date of this report, 55% of the Dutch portfolio is certiﬁed

with BREEAM, from 30% in 2021. Based on experiences gained through this pilot project,

the strategy is being implemented in the German portfolio. Developments and major

refurbishments are aimed at certiﬁcation eligibility.

Energy, Carbon Emissions, Water and Waste Management

The objective of the Group is to reduce the consumption of energy with a high carbon foot

print by increasing the use of renewable energy and setting periodic emission reduction

targets. The Group has strategically decided on switching to higher efﬁciency systems. A

substantial share of the fossil-operated heating plants have already been switched, and

further units are being switched on an ongoing basis. Additionally, the Group employs

strategic partnerships with energy suppliers (gas and electricity), who must possess rele

vant certiﬁcations. Stipulated by the contractual limits set by the Group’s environmental

policy, providers monitor their energy consumption and keep to a high standard. The Group

has also set the goal to switch all electricity to Power Purchase Agreement (PPA) certiﬁed

renewable electricity from wind, hydroelectric and solar PV sources by 2027.

Furthermore, the Group believes that sustainable water and waste management pro

vides cost savings for tenants, and thus enhances the attractiveness of the assets for all

stakeholders. The Group installs remote water meters not only to detect water leaks and

unusual water usages more effectively but also to create awareness and inﬂuence tenant

behavior. The Group also implements water-saving measures in its assets’ sanitary facilities

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

to reduce water consumption.

Additional systems have been implemented in the Nether

lands that communicate water consumption trends to tenants in real-time to encourage

improved tenant behavior. With regards to waste management, the Group focuses its

efforts on increasing recycling rates by providing facilities to support waste separation at

its sites. The Group engages with tenants to promote better waste management practices

to further optimize waste and operational costs through waste management systems. It

is important to note that waste management measures are incentivized in Germany and

other locations of the portfolio. An example of such an incentive is having no charges for

recycled waste. The updated energy and environmental policy promotes further strength

ening of the Group’s water and waste strategy in coming periods.

Biodiversity

Protecting biological diversity is a key aspect of mitigating climate change and securing

food production and also plays an important role in the puriﬁcation of water and air.

Therefore, the Group sees it as a part of its corporate responsibility to not only minimize

the impacts it has on biodiversity but also to contribute positively. To minimize its impact,

the Group has taken on several measures outlined in its Biodiversity Policy, such as avoid

ing operating in areas that are recognized to have important biodiversity or near areas

with critical biodiversity, avoiding wood or wood products that have not been produced

through sustainable methods and instructing facility management companies not to use

herbicides or pesticides on its premises that could harm natural life. The Group contributes

positively to biodiversity by integrating biodiversity assessment into its due diligence

processes, working with external facility management companies to ensure the protection

and promotion of biodiversity, consulting with local authorities on the topic and promot

ing awareness for its own employees and business partners. The Group is committed to

regularly monitor and report on the implementation of its biodiversity achievements in its

sustainability reporting. The Group carried on with its past achievements and continued

to add green facilities in its portfolio and expanded its “Aroundtown buzzes” project. This

project ensures the survival of bees in urban areas by installing beehives on the rooftop

of AT’s properties.

Environmental Programs for Business Partners

The Group’s environmental and energy policy has been updated and will come into

effect in 2023. This policy governs the environmental strategy and its implementation

while the underlying procedures provide guidelines for the selection of technologies

and vendors. Business partners must sign a Code of Conduct as a mandatory component

of their contract, which requires them to comply with all relevant legal standards and to

possess relevant external certiﬁcations that help in assessing the environmental impact

of their activities and end products. As a result, Aroundtown is engaging its contracted

business partners to take actions to improve their environmental impact, an example

being certiﬁcation in accordance with the environmental norm ISO 14001. Aroundtown

also actively encourages business partners to innovate and present better systems,

technologies and methods in order to improve the overall environmental performance

of the supply chain.

For further information on the Group’s environmental responsibility, please see the 2021

Non-Financial Report, as well as relevant Sustainability Insights which are both available

on AT’s

website

. AT will update and publish its Non-Financial Report 2022, EPRA sBPR

Report 2022, and Sustainability Insights on its

website

by the end of April 2023 which

will give more details on the relevant ESG matters.

Contribution to

biodiversity

AMSTERDAM

BERLIN

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AMERSFOORT

ROTTERDAM

HILVERSUM

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

SOCIAL RESPONSIBILITY

The Group strongly believes in the shared beneﬁt of aligning its investment activities

with creating a positive social impact in its business relationships. The Group does so

by investing in the safety and well-being of its employees, tenants and communities,

as well as partnering only with suppliers that hold responsible values. AT promotes

transparency on its social responsibility measures and actions, which can be found in

the sustainability reporting materials published on AT’s

website

Responsible Employer

The Group is running high proﬁle programs with regards to Human Capital Development

which are outlined in its Commitment to Human Capital Development. A main part of the

Group’s success lies in its ability to attract, develop and retain qualiﬁed and motivated

employees. The Group believes that a diverse workforce brings value to the team and

therefore constantly guides its human capital to achieve maximum growth and perfor

mance by providing people with the means for success and keeping a focus on internal

promotion. Furthermore, the Group puts additional emphasis on gender equality. The

Group has implemented operating guidelines, monitoring systems and policies such as

Diversity Policy and Anti-Discrimination Policy to further reinforce the high standards in

the workplace that is governed by openness and respect. Being recognized in this aspect,

both Aroundtown and GCP were included in the Bloomberg Gender-Equality Index 2023.

In addition, the Group has signiﬁcantly increased its efforts regarding employee training

and development to support employees in their personal development and help improve

their competencies. The People Development & Talent Management organized and of

fered multiple training and development opportunities, such as the leadership program

and language courses in English and German. Additionally, an ESG training has been

introduced for all new employees and other specialized courses are available on the

Company’s online training platform. Furthermore, the Group is committed to the health,

safety and security of its employees. Beyond the topic of compliance, the Group sets its

own standards to increase the well-being of its employees. The Group imparts training

on a variety of safety measures and preventive behaviors, carries out periodic workstation

ergonomic assessments and invites employees to participate in activities to improve their

health. This includes a ﬁtness center, available free of charge to employees at the Berlin

headquarters, which offers a variety of classes.

Community Development

The Group seeks to contribute to the economic and social development of the communi

ties in which it operates and therefore it focuses on supporting initiatives which beneﬁt

directly the well-being, health, safety and economic development of its tenants, employ

ees and communities. The Community Involvement & Development Program includes

strategic development of relationships with local

stakeholders since the Group aims to

conduct its operations while being a responsible corporate citizen. The Group engages

in a number of activities that address regional needs and generate economic and social

development in its portfolio locations. Policies and procedures contain social and envi

ronmental impact assessments as well as periodic reviews of existing operations and

stakeholder engagement.

The Group believes that involvement with local communities and local authorities are

vital to establishing long-term partnerships. On this front, the Group has taken further

initiatives to increase its involvement. Building further on its previous relationships dur

ing 2022, the Aroundtown Foundation continued to engage with local communities and

participated in numerous charitable activities across the portfolio locations. The foun

dation aims to support the development of communities, working in close contact with

local partners. The Group’s activities contribute towards the United Nation’s Sustainable

Developments Goals, particularly those relating to Good Health and Well-being (#3), Qual

ity Education (#4), Gender Equality (#5), Reduced Inequality (#10), Sustainable Cities and

Communities (#11) and Partnerships for the Goals (#17).

For further information on the Group’s social responsibility, please see the 2021 Non-Fi

nancial Report, as well as relevant Sustainability Insights which are both available on

AT’s

website

. AT will update and publish its Non-Financial Report 2022, EPRA sBPR Report

2022, and Sustainability Insights on its

website

by the end of April 2023 which will give

more details on the relevant ESG matters.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FRANKFURT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AT Foundation

Community involvement across

the portfolio locations

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

CORPORATE GOVERNANCE

The Group places a strong emphasis on corporate governance, executed responsibly

by the Board of Directors and the management teams. The Group is proud of the

high conﬁdence of its investors, which is reﬂected in the impressive placement of

funds by major global investment banks. Among AT’s shareholders and bondholders

are the large international leading institutional investors and major global invest-

ment and sovereign funds.

Aroundtown follows very strict Code of Conducts which apply to its employees and

business partners, and include policies for Anti-Bribery, Anti-Corruption, Anti-Dis

crimination, Conﬂict of Interest and others.

Aroundtown is not subject to any compulsory corporate governance code of conduct

or respective statutory legal provisions. In particular, Aroundtown 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 domestic issuers, save for recommendations C.10 (with sole reference to its

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

Corporate Governance Code (Deutscher Corporate Governance Kodex). Aroundown

has therefore issued a declaration that it does not deviate from the aforemen

tioned recommendations of the German Corporate Governance Code. In general,

Aroundtown already complies with most of the principles and continues to take

steps to implement environmental, social and corporate governance best practices

throughout its business. The Group’s efforts support the United Nations Sustainable

Development Goals, particularly those relating to Peace, Justice and Strong Institu

tions (#16) and Partnerships for the Goals (#17).

The Group also became an active participant in the UN Global Compact in June

2022, one of the world’s largest corporate sustainability initiatives, signaling the

Group’s commitment to strong corporate governance through adherence the UNGC

Ten Principles.

Board of Directors

The Board of Directors makes decisions solely in the Group’s best interests and

independently of any conﬂict of interest. The Group is administered by a Board of

Directors that is vested with the broadest powers to perform in the Group’s inter

ests. 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

Group. This evaluation is also performed by the Audit and Risk Committees. The

Board of Directors currently consists of a total of six members, of which three are

independent and one is non-executive. The members are elected by the general

meeting of shareholders and resolve on matters on the basis of a simple majority,

in accordance with the articles of association. The number of directors, their term

and their remuneration are determined by the general meeting of shareholders and

the maximum term of directors’ appointment per election is six years according to

Luxembourg law, but directors may be re-appointed after such term.

The Board of Directors is provided with regular training on regulatory and legal

updates, sector-speciﬁc and capital markets subjects and ESG matters.

Annual General Meeting

The next Annual General Meeting of the shareholders is intended to take place on

June 28, 2023 in Luxembourg.

Members of the Board of Directors

The Annual General Meeting in 2022 approved the renewal of the mandates of all

the directors until the Annual General Meeting 2025.

Name

Position

Mr. Frank Roseen

Executive Director

Ms. Jelena Afxentiou

Executive Director

Mr. Ran Laufer

Non-Executive Director

Mr. Markus Leininger

Independent Director

Ms. Simone Runge-Brandner

Independent Director

Mr. Markus Kreuter

Independent Director

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Senior and Key Management

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 composi

tion, 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 the Luxembourg

Companies Act or the articles of association of the Group, 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 established an Audit Committee. The Board of Directors de

cides on the composition, tasks and term of the Audit Committee as well as the ap

pointment and dismissal of its members. 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 Group and, in particular, shall

monitor the independence of the approved independent auditor, the additional ser

vices 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. The

Audit Committee consists of the independent directors Mr. Markus Kreuter (Chairman),

Mr. Markus Leininger and Ms. Simone Runge-Brandner.

Risk Committee and Risk Ofﬁcer

The Board of Directors established a Risk Committee tasked with assisting and pro

viding expert advice to the Board of Directors in fulﬁlling its oversight responsibili

ties, relating to the different types of risks, recommending a risk management struc

ture including its organization and its process as well as assessing and monitoring

the effectiveness of risk management systems. The Risk Committee is supported by

the Risk Ofﬁcer, who brings a systematic and disciplined approach to evaluate and

improve the culture, capabilities, and practices integrated with strategy-setting and

execution. The Risk Ofﬁcer’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 compliance, in

particular, by reviewing the Group’s procedures for detecting risk, the effectiveness of

the Group’s risk management and internal control system and by assessing the scope

and effectiveness of the systems established by the management to identify, assess

and monitor risks. The Board of Directors decides on the composition, tasks and term

of the Risk Committee and the appointment and dismissal of its members. Members

of the Risk Committee are Mr. Markus Kreuter (Chairman), Mr. Markus Leininger, Mr.

Frank Roseen and Mr. Ran Laufer.

Internal Controls and Risk Management Systems

The Group closely monitors and manages any potential risk and sets appropriate

measures in order to mitigate the occurrence of any possible failure to a minimum.

The risk management is led by the Risk Committee, which constructs the risk manage

ment structure, organization and processes, and coordinates risk-related training. The

Risk Committee monitors the effectiveness of risk management functions throughout

the organization, ensures that infrastructure, resources and systems are in place for

Name

Position

Dr. Gerhard Cromme

Chairman of the Advisory Board

Mr. Yakir Gabay

Advisory Board Deputy Chairman

Mr. Claudio Jarczyk

Advisory Board Member

Mr. David Maimon

Advisory Board Member

Name

Position

Mr. Barak Bar-Hen

Co-CEO and COO

Mr. Eyal Ben David

CFO

Mr. Oschrie Massatschi

CCMO (Chief Capital Markets Ofﬁcer)

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

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

ment discipline. The Group categorizes the risk management systems into two main

categories: internal risk mitigation and external risk mitigation.

The internal controls and compliance of the Group is supervised by Mr. Christian

Hupfer, the CCO (Chief Compliance Ofﬁcer) of the Group.

Internal Risk Mitigation

Internal controls are constructed from ﬁve main elements:

Risk assessment – 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 in the organization and executes on

issues raised by internal audit impacting the risk management framework.

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 Group sets physical controls, compliance checks and

veriﬁcations such as cross departmental checks. The Group puts strong emphasis

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

separate parties. Payment veriﬁcations are cross checked and conﬁrmed with

budget and contract. Any payment exceeding a certain set threshold amount

requires additional approval by the head of the department as a condition for

payment.

Monitoring procedures – the Group monitors and tests unusual entries, mainly

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

sustainable control and organizational systems reduce the probability of errors

and mistakes signiﬁcantly. The management sees high importance in constantly

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

ESG-risk-related expenditures – the Group has included the identiﬁcation of

potential ﬁnancial liabilities and future expenditures linked to ESG risks in the

organizational risk assessment. Potential future expenditures on ESG matters and

opportunities are included in the ﬁnancial budget.

Compliance, Code of Conduct, Data Protection and Information

& Cyber Security

Safeguarding the Group from any reputational damage due to error or misconduct

is essential in maintaining the Group’s reputation. Therefore, enforcing responsible

behavior guided by integrity is a central tool for the management in terms of its

dealings. For this reason, the compliance and risk management teams are structured

accordingly and supplemented by internal audit procedures, covering all steps of

real estate investment and management chain. In order to stipulate ethical behavior

throughout its operations, Aroundtown implemented Code of Conducts for both its

employment contracts and business partners contracts which include policies that

prevent compliance violations and misconducts. These policies include Anti-Corrup-

tion, Diversity and Anti-Discrimination, Anti-Bribery, measures to prevent human right

violations and Data Protection Declaration and User Policy as well as a Whistleblow

ing Policy.

The Group agreed on binding standards to achieve an ethical business conduct with

in its Group, its employees and other personnel to expressly distance from corrupt

behaviors and unethical business and such principles shall be explicitly acknowl

edged by its business partners, too. The Code of Conduct which is mandatory for

Aroundtown’s business partners includes matters such as respecting and recognizing

employees’ rights pertaining to freedom of association and the exercise of collective

bargaining, providing fair remuneration in wages, refraining from child, forced and

compulsory labor, respecting the minimum age requirements within given countries

and providing a workplace free of harassment and discrimination of any kind.

The Code of Conduct for employees is supplemented by topical guidelines, the

Diversity Policy and Anti-Discrimination Policy. The diversity of perspectives from

differences in nationality, ethnicity, race, culture, age, gender, religion, ideology,

sexual identity, or physical ability are all respected. Discrimination on the basis

of any of these characteristics constitutes an infringement of basic human rights

and is explicitly prohibited throughout the Group. In addition to these general

requirements, the Group also promotes diversity in many different areas, such as a

professional and cultural background and talent pool. The commitment to diver

sity is guided by the Diversity Committee which implemented a diversity training

program during the orientation period for employees. Additionally, Aroundtown

is a signatory of the “Diversity Charter”. The details about the Group’s diversity

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

management and key ﬁgures can be found in its sustainability reporting materials

published on AT’s

website

The Group, in its employee Code of Conduct, has instruments in-place to prevent

and ﬁght violations of law, such as human rights violation, corruption and bribery.

The employees have reporting channels in case of a possible violation where the

measures are dealt with in conﬁdence to the full extent permitted by statutory law.

Reported issues are investigated by the Chief Compliance Ofﬁcer. Besides the re

porting channels, there is also a Whistleblowing Service conducted by an external

service provider, enabling for full anonymity. If any violation is to be found, certain

disciplinary measures are taken if preconditions in that respect are met.

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

Company is subject to several obligations under Regulation (EU) No. 596/2014 (Mar

ket Abuse Regulation, “MAR”). The Company notiﬁes pursuant to Article 19 para. 5

sub-para. 1 sentence 1 of MAR, all person discharging managerial responsibilities of

their obligations in the context of managers’ transactions. Memorandums, notiﬁca

tions and information are distributed regularly.

The Group has established procedures to protect the conﬁdentiality and integrity

of management information and data across all business process. Furthermore, the

Group had implemented a wide range of guidelines and provisions, with the rati

ﬁcation of the EU General Data Protection Regulation (GDPR), including enhanced

mandatory awareness training on GDPR. The Group has implemented Standard

Operating Procedures (SOPs) to ensure that all personal data stored and processed

in the course of the Group’s operations are safe from manipulation and misuse.

Additionally, the Group adopted an information security and privacy strategy in

order to maintain a high level of controls to help minimize the potential risks.

The diligence of the Group with regards to all compliance issues presents itself in

the pleasing level of zero compliance related violations. The Code of Conducts for

employees as well as business partners can be found on AT’s

website

External Risk Mitigation

As ordinary course of business, the Group 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 po

tential risks and exposures are related, inter alia, to volatility of interest rate risk,

inﬂation risk, liquidity risk, credit risk, regulatory and legal risks, collection and tenant

deﬁciencies, the need for unexpected capital investments, property damage risk and

market downturn risk. The Group sets direct and speciﬁc guidelines and boundaries

to mitigate and address each risk, hedging and reducing to a minimum the occurrence

of failure or potential default.

For information regarding Aroundtown’s risk management objectives and policies,

see page 171 (Note 26.3. Risks management objectives and policies).

Nomination Committee

The Board of Directors established a Nomination Committee to identify suitable

candidates for director positions and examine their skills and characteristics. The

Nomination Committee consists of the Independent Directors, Mr. Markus Leininger,

Mr. Markus Kreuter, and Ms. Simone Runge-Brandner.

Remuneration Committee

The Board of Directors established a Remuneration Committee to determine and

recommend to the Board the Remuneration policy for the Chairman of the Board, the

Executive Directors and Senior Management including evaluation of short-term per

formance-related remuneration to senior executives. The Remuneration Committee

consists of the Independent Directors, Mr. Markus Leininger, Mr. Markus Kreuter and

Ms. Simone Runge-Brandner.

ESG Committee

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

ESG processes. In addition, the Committee reviews and assesses the company’s con

tribution to sustainable development. The ESG Committee consists of Mr. Frank Ros

een and the Independent Directors, Mr. Markus Leininger (Chairman) and Mr. Markus

Kreuter, and is assisted by the Sustainability Department.

Shareholders’ Rights

The Group 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 shareholders of Aroundtown SA exercise their voting rights at

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

the general meeting of the shareholders, whereby each share is granted one vote.

The voting rights attached to shares held by TLG Immobilien AG in Aroundtown SA

are suspended. The suspension of the voting rights also applies to shares held and/

or acquired by Aroundtown SA, either directly or through subsidiaries, pursuant to

its buy-back programme. The Annual General Meeting of the shareholders takes

place at such place and time as speciﬁed in the notice of the meeting. At the Annual

General Meeting of the shareholders the Board of Directors presents, among others,

the directors report as well as consolidated ﬁnancial statements to the shareholders.

The Annual General Meeting resolves, among others, on the ﬁnancial statements of

Aroundtown, the appointment of the approved independent auditor of the Group

and the discharge to and appointment or re-election of the members of the Board

of Directors, in case their mandate is about the expire.

Compliance to the transparency law

The Company is committed to adhere to best practices in terms of corporate govern

ance by applying, among others, rules arising from the Luxembourg law of 11 January

2008 on transparency requirements for issuers, as amended (the

“Transparency Law”

In particular, the Company continuously monitors the compliance with the disclosure

requirements with respect to regulated information within the meaning of article 1

(10) (the

“Regulated Information”

) of the Transparency Law and therefore publish

es, stores with the Luxembourg Stock Exchange as the ofﬁcially appointed mecha

nism (OAM) and ﬁles with the Commission de Surveillance du Secteur Financier (the

“CSSF”

) the Regulated Information on an ongoing basis.

The quarterly, half-yearly and annual ﬁnancial reports, investor presentations, press

releases and ad-hoc notiﬁcations are available in the English language on the Com

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

its organization, its management and upcoming and past shareholder meetings, such

as its annual general meetings. 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.

The individual Aroundtown SA ﬁnancial statements are published annually in the

same day of Aroundtown SA consolidated report.

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”

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

the relevant information is available on page 154 (Note 20. Total equity) of this

consolidated annual report. In addition, the Company’s shareholding structure

showing each shareholder owning 5% or more of the Company’s share capital is

available on page 41

of this consolidated annual report and on the Company’s

website

, where the shareholding structure is updated as per shareholder notiﬁ

cations on a regular basis.

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”

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

following signiﬁcant shareholdings were reported to the Company until Decem

ber 31, 2022:

Shareholder name

Amount of Shares

Percentage of

voting rights

Aroundtown SA and its

wholly owned afﬁliate

288,045,215

18.74%

Avisco Group PLC /

Vergepoint Limited

230,660,516

15.01%

TLG Immobilien AG

183,936,137

11.97%

BlackRock, Inc.

128,547,671

8.36%

1) Total number of Aroundtown SA shares as of December 31, 2022: 1,537,025,609

2) Voting rights are suspended

3) Controlled by Yakir Gabay

4) Including 2.04% of total voting rights through ﬁnancial instruments

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

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 8.1 of the Articles of

Association. There are no special control rights attaching to the shares. The

voting rights attached to shares held by TLG Immobilien AG in the Company

are suspended. The suspension of the voting rights applies to any other shares

acquired by the Company, either directly or through subsidiaries, pursuant to

its buy-back programme.

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

page 160 (Note 21. Share-based payment agreements) of this consolidated

annual report.

f) With regard to article 11 (1) (f) of the Takeover Law, the Articles of Association

impose no voting rights limitations. However, the sanction of suspension of

voting rights automatically applies, subject to 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 according

ly. 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 lifted the moment the shareholder makes the

notiﬁcation.

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

Company was not aware of any agreements between shareholders that would

lead to a restriction on the transfer of shares or voting rights.

With regard to article 11 (1) (h) of the Takeover Law, according to article 15.1 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 annual general meet

ing 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. 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 share

holders, 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 51

of this consolidated annual report. According to article 14 of

the Articles of Association, any amendment to the Articles of Association made by

the general meeting of shareholders shall be adopted if (i) more than one half of

the share capital is present or represented and (ii) a majority of at least two-thirds

of the votes validly cast are in favour of adopting the resolution. In case the ﬁrst

condition is not reached, a second meeting may be convened, which may delib

erate regardless of the proportion of the share capital represented and at which

resolutions are taken at a majority of at least two-thirds of votes validly cast.

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 and a Nomination

Committee. Further details on the powers of the Board are described on

pages

51-55 and 100

of this consolidated annual report.

Pursuant to article 7.2 of the Articles of Association, the Board is authorized

to issue shares under the authorised share capital as detailed on page 154

(Note 20.1.1. Share capital) and page 160 (Note 21. Share-based payment

agreements)

of this consolidated annual report. According to article 8.7 of the

Articles of Association, the Company may redeem its own shares to the extent

and under the terms permitted by law. The Company concluded its previously

announced share buyback program at the end of 2022. Further details on the

Company’s concluded share buyback program are described on

pages 154-155

(Note 20.1.2. Treasury shares) of this consolidated annual report.

With regard to article 11 (1) (j) of the Takeover Law, the Company’s listed straight

bonds, perpetual notes and security issuances

(listed on pages 154-157 and 161-

165; and Note 20.1.1., Note 20.2. and Note 22.2.) 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 after a takeover.

DÜSSELDORF

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

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

in the event of a take-over 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.

Notes on Business

Performance

FRANKFURT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Year ended December 31,

2022

2021

in € millions

Revenue

1,609.9

1,323.2

Net rental income

1,222.1

1,085.7

Property revaluations and capital gains

(497.3)

809.7

Share of proﬁt from investment in equity-accounted investees

5.9

193.4

Property operating expenses

(694.9)

(533.0)

of which Extraordinary expenses for uncollected rent

(75.0)

(125.0)

Administrative and other expenses

(62.5)

(56.6)

Operating proﬁt

361.1

1,736.7

Adjusted EBITDA

2) 3)

1,002.3

974.9

Finance expenses

(184.8)

(180.4)

Current tax expenses

(117.4)

(100.3)

FFO I

362.7

353.2

FFO I per share (in €)

0.33

0.30

FFO II

714.1

968.6

Impairment of goodwill

(404.3)

Other ﬁnancial results

(194.1)

(162.1)

Deferred tax income (expenses)

82.4

(215.8)

(Loss) proﬁt for the year

(457.1)

1,078.1

SELECTED CONSOLIDATED INCOME STATEMENTS DATA

extraordinary expenses for uncollected rent due to the Covid pandemic

excluding extraordinary expenses for uncollected rent due to the Covid pandemic

including AT‘s share in the adjusted EBITDA of companies in which AT has signiﬁcant inﬂuence, excluding the contributions from commercial assets held for sale. For more

details regarding the methodology, please see pages

88-96

including AT‘s share in the FFO I of companies in which AT has signiﬁcant inﬂuence, excluding FFO I relating to minorities and contributions from commercial assets held for

sale. For more details regarding the methodology, please see pages

88-96

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

REVENUE

AT generated €1,610 million of revenues in 2022 (“FY 2022”), up by 22% compared

to €1,323 million generated in 2021 (“FY 2021”). Net rental income is the largest

portion of revenues which amounted to €1,222 million in 2022, up by 13% compared

to €1,086 million in 2021. This growth is mainly driven by the consolidation of GCP as

of July 1, 2021 and like-for-like net rental income growth which was partially offset

by disposals. As a result, GCP has contributed to the full 12 months period in 2022

while only contributing the second half of the year in 2021. Excluding GCP’s contri

bution, net rental income amounted to €827 million in 2022, reﬂecting a decrease of

8% compared to €894 million in 2021. This decrease is mainly driven by €1.6 billion

of disposals closed in 2022, as well as the full year impact of €2.3 billion disposals

closed in 2021. Total like-for-like amounted to 3.5% which is comprised of positive

3.7% in-place rent like-for-like and negative 0.2% occupancy like-for-like. The ofﬁce

portfolio had a like-for-like net rental income growth of 5.2%, supported by CPI in

dexation adjustments. The hotel portfolio’s like-for-like rent was ﬂat. The majority of

the commercial leases are CPI-indexed or have step-up rents, which supported the

rent increase in 2022. Regarding GCP, the residential real estate’s stable operations

were supported by tailwinds from the persistent supply-demand imbalance, resulting

in a 2.9% like-for-like rental growth as of December 2022. In addition, net rental

income increased further due to acquisition in the amount of approx. €470 million

in 2022. The majority of these were executed by GCP which were mainly completed

towards the end of the second half of 2022, primarily located in London and Berlin

and had only a partial impact on the current period.

AT generated €388 million of operating and other income in 2022, up by 63% compared

to €238 million generated in 2021, mainly due to the consolidation of GCP, additionally

impacted by cost inﬂation. Operating income is mainly linked to ancillary expenses that

are reimbursed by tenants such as utility costs (heating, energy, water, insurance, etc.)

and charges for services provided to tenants (cleaning, security, etc.). The leases in res

idential real estate have a higher share of ancillary expenses compared to commercial

real estate where net lease structures are more prevalent (e.g. hotels) and more of these

costs are directly incurred by the tenants. As a result, the increase in operating and other

income was higher than the increase in net rental income following the consolidation

of GCP and cost inﬂation. The increase in operating and other income is correlated with

the increase in purchased services as explained below in property operating expenses.

AT further breaks down its net rental income into the recurring long-term net rental

income and net rental income generated by properties marked for disposal. Since AT

intends to dispose the held-for-sale properties, AT views their contribution as non-re

curring and therefore presents this in a separate line item. The net rental income

from held-for-sale properties and disposed properties amounted to €18 million in

2022, lower compared to €23 million in 2021, mainly due to lower amount of held

for sale properties. AT completed €1.6 billion of disposals in 2022.

Correspondingly,

the recurring net rental income amounted to €1,204 million in 2022, up by 13%

compared to €1,063 million in 2021. The recurring net rental income also includes

immaterial rental income from properties classiﬁed as development rights & invest

which is excluded in the run rate.

RECURRING LONG-TERM

NET RENTAL INCOME

(in € millions)

+13%

FY 2022

FY 2021

1,063

1,204

Year ended December 31,

2022

2021

in € millions

Recurring long-term net rental income

1,204.1

1,063.2

Net rental income related to properties marked for disposal

18.0

22.5

Net rental income

1,222.1

1,085.7

Operating and other income

387.8

237.5

Revenue

1,609.9

1,323.2

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

PROPERTY REVALUATIONS AND CAPITAL GAINS

Property revaluations and capital gains amounted to a loss of €497 million in 2022,

compared to a gain of €810 million in 2021. Property revaluations amounted to a loss

of €540 million in 2022, compared to a gain of €744 million in 2021. Interest rate

increases adversely affect valuations whose impact is partially offset by rent increase

mainly from indexation and increasing replacement costs which combined resulted in

a negative 0.4% like-for-like as of December 2022 and negative 1.8% accounting for

capex. Although values were stable for most of 2022, this trend was reversed in Q4

2022, with yield expansion outpacing rental growth. Thus, AT got all of its portfolio

revalued and audited during Q4 2022 as part of the annual audit of 2022 by inde

pendent and qualiﬁed valuers and auditors. In Q4 2022, the value decrease was 3%.

AT completed €1.6 billion of disposals in 2022 around book value resulting in €43

million capital gains. The disposal margin over total costs including capex was 29%.

38% of the disposals were ofﬁces, 13% were hotels, 26% were development projects

and 23% were retail, logistics and other. Over one third of the disposals were located

in Berlin while the remaining were located in Dresden, Hamburg, Leipzig, Munich,

Stuttgart, Amsterdam, Wiesbaden and non-core locations across the UK, Netherlands

and Germany.

As of December 2022, the portfolio reﬂects an average value of €2,635 per sqm and

net rental yield of 4.5%, compared to €2,614 per sqm and 4.4% as of December 2021,

which has a signiﬁcant headroom to replacement costs.

SHARE OF PROFIT FROM INVESTMENT IN EQUITY-ACCOUNTED

INVESTEES

Share of proﬁt from investment in equity-accounted investees amounted to €6 million

in 2022, compared to €193 million in 2021. This item represents AT’s share of proﬁts

from investments which are not consolidated in AT’s ﬁnancial statements, but over

which AT has signiﬁcant inﬂuence. Prior to the consolidation of GCP as of July 1, 2021,

GCP was the main contributor to this line item and thus the result in 2021 included

GCP’s proﬁt for the ﬁrst half of the year, as well as a one-time revaluation gain of

€76 million recorded as part of the initial consolidation of GCP. The main equity-ac

counted investee as of December 2022 is the investment in Globalworth Real Estate

Investments Limited (“Globalworth” or “GWI”), a leading publicly listed ofﬁce landlord

in Central Eastern European markets, mainly in Warsaw and Bucharest. Due to the

change in market environment and negative revaluations in investees, AT recorded an

impairment of €31 million in 2022 mainly over its investment in GWI.

Nevertheless, the recurring contribution of the investees to the adjusted EBITDA and

FFO I were €59 million and €46 million in 2022, compared to €104 million and €69

million in 2021.

Year ended December 31,

2022

2021

in € millions

Share of proﬁt from investment in

equity-accounted investees

5.9

193.4

Year ended December 31,

2022

2021

in € millions

Property revaluations

(539.9)

744.1

Capital gains

42.6

65.6

Property revaluations and capital gains

(497.3)

809.7

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

PROPERTY OPERATING EXPENSES

Property operating expenses amounted to €695 million in 2022, higher compared

to €533 million in 2021, mainly driven by the consolidation of GCP, mirroring the

growth of the operating and other income, and additional provisions made in relation

to higher energy prices. Excluding GCP’s contribution, property operating expenses

decreased as a result of disposals and lower amount of extraordinary expenses for

uncollected rent, partially offset by cost inﬂation. The main portion of property op

erating expenses are ancillary expenses and purchased services which are mainly

recoverable from tenants such as utility costs (heating, energy, water, insurance, etc.),

charges for services provided to tenants (cleaning, security, etc.) and other services

contracted in relation to the operations of properties. Operating personnel expenses

amounted to €59 million in 2022, higher compared to €47 million in 2021, mainly

due to the consolidation of GCP and cost inﬂation. Other operating costs excluding

the extraordinary expenses for uncollected rent increased from €69 million in 2021

to €98 million in 2022. These costs include various expenses such as marketing,

letting and legal fees, transportation, travel, communications, insurance, IT and VAT.

AT has seen cost inﬂation across these items. Additionally, these costs include a

provision in relation to the signiﬁcant increase in utility expenses which might not

be fully recovered from tenants. The Company will examine and update this balance

from period to period. Proﬁtability of commercial tenants and household income of

residential tenants may have been harmed due to the inﬂationary pressures, which

could potentially impact the collection rates.

Property operating expenses further

include non-recurring extraordinary expenses for uncollected rent mainly in relation

to the hotel sector, which amounted to €75 million in 2022 compared to €125 million

in 2021. AT created extraordinary expenses for uncollected rent in response to the

impact and aftereffects of the Coronavirus pandemic, especially affecting the hotel

industry. The extraordinary expenses recorded during 2022 were lower compared to

2021 as lockdowns and other restrictions were less frequent and less strict in 2022,

as well as due to disposal of hotels. The rent collection in Q1 2022 was still heavily

impacted by restrictions and increasing infection rates. Recovery began end of Q2

2022 after restrictions were lifted and further progress in recovery in H2 2022 was

especially driven by higher demand during summer. However, proﬁtability in the

hotel industry remains adversely impacted by cost inﬂation in utilities (particularly

in energy costs) and staff, as well as staff shortages and supply chain disruptions,

which are delaying the full recovery in the hotel portfolio.

Excluding the extraordi

nary expenses for uncollected rent, property operating expenses amounted to €620

million in 2022, 52% higher compared to €408 million in 2021, mainly due to the

consolidation of GCP.

Year ended December 31,

2022

2021

in € millions

Ancillary expenses and purchased services

(390.8)

(238.1)

Maintenance and refurbishment

(51.1)

(37.8)

Personnel expenses

(58.6)

(46.8)

Depreciation and amortization

(21.1)

(15.9)

Other operating costs

(173.3)

(194.4)

of which Extraordinary expenses for uncollected rent

(75.0)

(125.0)

Property operating expenses

(694.9)

(533.0)

extraordinary expenses for uncollected rent due to the Covid pandemic

LEIPZIG

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

MAINTENANCE AND CAPEX

Maintenance and refurbishment expenses amounted to €51 million in 2022, higher

by 35% compared to €38 million in 2021, mainly due to the consolidation of GCP

and cost inﬂation. Excluding GCP, the increase was 6%. Residential real estate has a

higher share of maintenance expenses compared to commercial real estate where net

lease structures are more prevalent and some of these costs are directly incurred by

the tenants. As a result, the maintenance expense ratio over the average investment

property value (including properties held for sale) increased slightly to 0.17% in 2022

from 0.15% in 2021.

AT analyzes its portfolio for its capex needs in order to maintain the high quality of the

portfolio, increase its attractiveness and address the requirements of its existing and

prospective tenants. During 2022, AT invested €408 million in capex, reﬂecting a ratio of

1.4% over average investment property value (including properties held for sale), lower

in comparison to €433 million and 1.7% in 2021. Due to the current market environ-

ment, cash preservation has become an important objective for AT and capex projects

are carried out more selectively, resulting in a comparatively lower capex in 2022.

Since each capex project targets different goals, AT classiﬁes its capex into three main

categories: Expansion capex, Tenant improvements and Other capex. Expansion capex

includes activities that are targeted at creating additional income drivers or value gen-

eration potential which may result in additional lettable space or signiﬁcant enhance

ment of the existing space. These selective projects are typically new build, conversion

or major refurbishments and they are mainly done at high pre-let ratios. Expansion

capex additionally includes GCP’s pre-letting modiﬁcations and modernization capex.

Expansion capex accounted for 48% of the capex in 2022. Tenant improvements include

capex for ﬁt-out works that are targeted at retaining existing tenants or attracting new

tenants, supporting the quality of the tenant structure and extending the average lease

term. This item accounted for 24% of the capex in 2022. Other capex includes ongoing

capital expenditures that are targeted at sustaining the high quality of the portfolio

as well as improving sustainability standards that can result in a reduction of CO

emissions. This item also includes GCP’s repositioning capex. Other capex accounted

for 28% of the capex in 2022. The Group’s capex initiatives result in higher asset quality

and rental income as well as a stronger tenant structure which creates long-term cash

ﬂows and value.

Excluding GCP, total capex was approx. €265 million in 2022, lower compared to approx.

€375 million in 2021. Due to the current market environment, Aroundtown was more

selective in its commercial portfolio and spent less capex.

MAINTENANCE

(in € millions)

37.8

51.1

FY 2021

FY 2022

Maintenance ratio

over average

investment property

value (including

held for sale) is

0.17% in 2022

CAPEX

Other capex

18%

Expansion capex

55%

Tenant

improvements

27%

2021

€433m

RATIO OF

INVESTMENT

PROPERTY

(incl. held for sale):

1.4%

RATIO OF

INVESTMENT

PROPERTY

(incl. held for sale):

1.7%

Other capex

28%

Tenant

improvements

24%

Expansion capex

48%

2022

€408m

€265m

excl. GCP

€375m

excl. GCP

Excl. GCP

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ADMINISTRATIVE AND OTHER EXPENSES

AT recorded €63 million of administrative and other expenses in 2022, higher com

pared to €57 million in 2021, mainly as a result of the consolidation of GCP. Excluding

GCP’s contribution, administrative and other expenses increased due to general cost

inﬂation, offsetting the impact of higher efﬁciency. These expenses consist mainly of

administrative personnel expenses which amounted to €29 million in 2022, higher

compared to €26 million in 2021, mainly as a result of the larger platform. Adminis

trative and other expenses also include expenses such as fees for legal, professional,

consultancy, accounting and audit services, as well as sales, marketing, IT and other

administrative expenses. These expenses increased mainly as a result of cost inﬂation,

partially offset by a higher level of efﬁciency.

FINANCE EXPENSES

Finance expenses amounted to €185 million in 2022, 2% higher compared to €180

million in 2021, mainly due to the consolidation of GCP. Excluding GCP’s contribution,

ﬁnance expenses decreased due to debt repayments in 2021 and 2022.

Finance

expenses mainly include net interest on bonds and bank debt. During 2022, AT has

repaid approx. €1.1 billion of debt and raised approx. €480 million of new debt.

The repayments included repayments of bank loans, bonds and schuldscheins and

redemption of straight and convertible bond, with an average maturity of 1 year, en

abling to extend the average debt maturity. As of year-end 2022, AT has a cost of debt

of 1.4% with an average debt maturity of 5 years compared to 1.2% cost of debt and

5.7 years debt maturity as of year-end 2021. The cost of debt increased due to higher

interest rates seen in new ﬁnancing and in the variable portion of the existing debt,

as well as repayment of low cost but near-term debt. AT has a high hedging ratio of

96% at year-end 2022. However, given that some of the interest hedging instruments

mature in 2023, the hedging ratio in 2023 will be around 85%

if not re-hedged. AT

continues to maintain a high level of unencumbered assets (€22.2 billion at year-end

2022) which provides good access to the secured debt market.

OTHER FINANCIAL RESULTS

Other ﬁnancial results amounted to an expense of €194 million in 2022, higher

compared to an expense of €162 million in 2021, mainly due to the consolidation

of GCP. Other ﬁnancial results are composed mainly of items that are non-recurring

and/or non-cash with ﬂuctuating values and thus the result varies from one period

to another. Other ﬁnancial results in 2022 were mostly attributable to changes in

fair value of ﬁnancial assets and liabilities including traded securities and derivative

ﬁnancial instruments which were negatively impacted by the volatility in ﬁnancial

markets and changes in yields and foreign exchange rates. The increase in yields

and volatility negatively impacted the net fair value of interest hedging instruments

while the hedged debt is booked at amortized costs. Additionally, decreases in the

value of long-term ﬁnancial assets are also included in this line item. If AT’s bonds

would be booked at mark-to-market, the effect on the other ﬁnancial results would

be an income of several hundreds of millions of euros which would more than offset

Year ended December 31,

2022

2021

in € millions

Personnel expenses

(28.8)

(26.2)

Legal and professional fees

(12.1)

(9.7)

Audit and accounting expenses

(7.2)

(6.2)

Marketing and other administrative expenses

(14.4)

(14.5)

Administrative and other expenses

(62.5)

(56.6)

Year ended December 31,

2022

2021

in € millions

Finance expenses

(184.8)

(180.4)

Year ended December 31,

2022

2021

in € millions

Changes in fair value of ﬁnancial assets and liabilities,

buy-backs and early repayment costs, net

(168.6)

(115.4)

Finance-related costs

(25.5)

(46.7)

Other ﬁnancial results

(194.1)

(162.1)

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

these expenses. The results also include changes in contingent liabilities relating

to the takeover of TLG. Furthermore, derivatives were impacted by inﬂation index

ation hedging instruments on two of AT’s bonds. As the inﬂation increased in 2022

more than the pre-determined hedged level, an expense was recorded in the other

ﬁnancial results line, partially offset by an increase on the revenues line coming from

inﬂation-indexed leases.

Additionally, other ﬁnancial results included costs incurred as a result of debt re

payment activities to optimize the debt proﬁle, expenses related to new ﬁnancing,

currency hedging and others.

IMPAIRMENT OF GOODWILL

The impairment amount reﬂects the amount by which the carrying amount of an

asset or cash generating unit exceeds its recoverable amount.

During 2022, AT recorded €404 million of goodwill impairment as a result of the

annual goodwill impairment test on TLG and GCP. €141 million is attributed to the

goodwill on TLG and the remaining €263 million is attributed to the goodwill on GCP.

The goodwill is mainly attributed to deferred taxes and reduced due to revaluation

losses, as well as due to the reduced portfolio following disposal activity. Note that

all EPRA NAV KPI’s exclude the goodwill, therefore any change is neutral.

Year ended December 31,

2022

2021

in € millions

Impairment of goodwill

(404.3)

LONDON

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

TAXATION

Current tax expenses amounted to €117 million in 2022, higher compared to €100

million in 2021, mainly due to the consolidation of GCP, partially offset by the lower

portfolio size from disposals. Current tax expenses are comprised of corporate income

taxes and property taxes. Deferred taxes amounted to an income of €82 million in 2022,

compared to an expense of €216 million in 2021. The income in 2022 was mainly due

to the positive tax impact relating to revaluation loss and changes in the fair value of

ﬁnancial derivatives.

NET (LOSS) PROFIT & (LOSS) EARNINGS PER SHARE

AT generated a net loss of €457 million in 2022, compared to an income of €1,078

million in 2021, mainly due to non-cash negative fair value changes in the port

folio and in ﬁnancial assets and liabilities, as well as impairment of goodwill.

Correspondingly, a net loss of €645 million was attributed to shareholders in 2022,

compared to a net proﬁt of €642 million in 2021. The proﬁt attributable to non-con

trolling interests decreased from €330 million in 2021 to €70 million in 2022,

mainly due to lower proﬁts generated in companies with minority stake, such as

GCP. Proﬁt attributable to perpetual notes investors increased from €106 million in

2021 to €118 million in 2022, mainly due to the consolidation of GCP.

AT generated basic and diluted loss per share of €0.58 in 2022, compared to earn

ings per share of €0.55 and €0.53 recorded in 2021, respectively. The average share

count decreased by 5% between the periods, driven by the share buyback program,

partially offset by the impact of scrip dividends.

AT generated a total comprehensive loss of €441 million in 2022, compared to an

income of €1,186 million in 2021, also impacted by a decrease in total other com

prehensive income from €108 million in 2021 to €16 million in 2022 as a result of

the foreign currency translation effects of foreign operations offsetting the impact

of cash ﬂow hedges and the positive revaluation of owner-occupied property.

Year ended December 31,

2022

2021

in € millions

Current tax expenses

(117.4)

(100.3)

Deferred tax income (expenses)

82.4

(215.8)

Total current and deferred tax expenses

(35.0)

(316.1)

Year ended December 31,

2022

2021

in € millions

(Loss) proﬁt for the year

(457.1)

1,078.1

(Loss) proﬁt attributable to:

Owners of the Company

(645.1)

642.2

Perpetual notes investors

118.1

105.9

Non-controlling interests

69.9

330.0

Basic (loss) earnings per share (in €)

(0.58)

0.55

Diluted (loss) earnings per share (in €)

(0.58)

0.53

Weighted average basic shares (in millions)

1,109.9

1,168.2

Weighted average diluted shares (in millions)

1,111.3

1,169.4

(Loss) proﬁt for the year

(457.1)

1,078.1

Total other comprehensive income for the year, net of tax

15.8

107.7

Total comprehensive (loss) income for the year

(441.3)

1,185.8

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ADJUSTED EBITDA

Adjusted EBITDA is a key performance measure used to evaluate the operational

results of the Group, derived by deducting from the EBITDA non-operational items

such as revaluation and capital gains, extraordinary expenses and other adjust

ments. Additionally, in order to mirror the recurring operational results of the Group,

the results from investment in equity-accounted investees is subtracted as this also

includes the Group’s share in non-operational and non-recurring results generated

by these investees. Instead, to reﬂect their operational earnings, the Group includes

in its adjusted EBITDA its share in the adjusted EBITDA generated by investments

where the Group has a signiﬁcant inﬂuence in accordance with its effective holding

rate over the period. Prior to the third quarter of 2021, this line item was mostly

attributed to AT’s share in GCP’s adjusted EBITDA, however, starting from July 1,

2021, GCP is consolidated in AT’s ﬁnancial accounts.

AT generated an adjusted EBITDA before JV contribution of €944 million in 2022,

up by 8% compared to €871 million generated in 2021, mainly due to the full

period impact of GCP’s consolidation, supported by like-for-like net rental income

growth of 3.5%, overall offsetting partially the impact of disposals, cost inﬂation

and provisions made in relation to higher energy prices. Higher rents from CPI

indexation adjustments offset the higher costs due to inﬂation. Excluding GCP,

adjusted EBITDA before JV contribution decreased 12% year-over-year mainly due

to disposals. Including joint venture positions’ adjusted EBITDA contribution, the

Group generated an EBITDA of €1,002 million in 2022, up by 3% compared to €975

million, mainly driven by the full contribution of GCP in 2022 whereas in 2021 GCP

had a relative contribution in the ﬁrst half and full contribution in the second half,

offsetting the disposal impact.

Adjusted EBITDA excludes the effect of extraordinary expenses for uncollected rent

due to the Covid pandemic. Including this effect, adjusted EBITDA, Covid adjusted

amounted to €927 million in 2022, higher by 9% compared to €850 million in 2021.

Adjusted EBITDA accounts for other adjustments in the amount of €7.4 million

in 2022, related to non-cash expenses for employees’ share incentive plans and

other one-off costs related to the integration process with TLG from the merger.

Furthermore, AT conservatively does not include the contributions from commercial

properties marked for disposals since they are intended to be sold and therefore,

their contributions are non-recurring. The adjustment amounted to €12.4 million

in 2022, compared to €11.6 million in 2021.

Year ended December 31,

2022

2021

in € millions

Operating proﬁt

361.1

1,736.7

Total depreciation and amortization

21.1

15.9

EBITDA

382.2

1,752.6

Property revaluations and capital gains

497.3

(809.7)

Share of proﬁt from investment in equity-accounted investees

(5.9)

(193.4)

Other adjustments incl. one-off expenses related to TLG merger

7.4

8.1

Contribution of assets held for sale

(12.4)

(11.6)

Add back: Extraordinary expenses for uncollected rent

75.0

125.0

Adjusted EBITDA before JV contribution

943.6

871.0

Contribution of joint ventures' adjusted EBITDA

58.7

103.9

Adjusted EBITDA

1,002.3

974.9

other adjustment is expenses related to employees’ share incentive plans

extraordinary expenses for uncollected rent due to the Covid pandemic

the adjustment is to reﬂect AT‘s share in the adjusted EBITDA of companies in which AT has signiﬁcant

inﬂuence and that are not consolidated. GCP contributed to this line item until June 30, 2021. Starting

from July 1, 2021, GCP is consolidated

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FUNDS FROM OPERATIONS (FFO I, FFO II)

Funds from Operations I (FFO I) is an industry standard performance indicator, re

ﬂecting the recurring operational proﬁtability. FFO I starts by deducting the ﬁnance

expenses, current tax expenses and the contribution of perpetual notes from the

adjusted EBITDA. The calculation further includes the relative share in the FFO I

of joint venture positions and excludes the share in minorities’ operational proﬁts.

Prior to the third quarter of 2021, adjustment for joint venture positions included

AT’s share in GCP’s FFO I. Starting from July 1, 2021, GCP is consolidated in AT’s

ﬁnancial accounts and the minority share in GCP’s FFO I is deducted instead. Fur

thermore, AT makes an adjustment related to assets held for sale.

In addition, AT provides the FFO II, which is an additional key performance indi

cator used in the real estate industry to evaluate the operational recurring proﬁts

including the disposal gains during the relevant period.

FFO I amounted to €363 million in 2022, 3% higher than €353 million in 2021. The

like-for-like net rental income growth and the increased stake in GCP’s and TLG’s re

curring operational proﬁts were offset by the impact of disposals, cost inﬂation and

additional provisions made in relation to higher energy prices. The consolidation

of GCP has no material impact on FFO I as this ﬁgure already previously included

AT’s share in GCP’s FFO I. However, the increased holding rate in GCP from 44% at

consolidation to 60% at year-end 2022 reduced the minorities.

The contribution from commercial properties held for sale, which is excluded from

the FFO I, amounted to €7.8 million in 2022, higher compared to €4.8 million in

2021. Since the properties marked for disposal in 2021 had lower operational

proﬁts, the adjustment in 2022 is higher in comparison to 2021.

Since the pandemic, AT utilized disposal proceeds to repay debt and buy back

shares with a discount to NTA. This capital recycling strategy contributed towards

a relatively higher growth in the per share amount, partially offset by the impact of

scrip dividends. As a result, FFO I per share amounted to €0.33 in 2022, 10% higher

compared to €0.30 per share in 2021.

AT recorded an FFO II of €714 million in 2022, 26% lower than €969 million in

2021. AT completed €1.6 billion of disposals in 2022 with a 29% margin over their

cost values in comparison to €2.3 billion of disposals in 2021 with a 37% margin

over their cost values. High gains over cost value demonstrates AT’s strong track

record in value creation across its portfolio.

Year ended December 31,

2022

2021

in € millions

Adjusted EBITDA before JV contribution

943.6

871.0

Finance expenses

(184.8)

(180.4)

Current tax expenses

(117.4)

(100.3)

Contribution to minorities

(136.3)

(82.3)

Adjustments related to assets held for sale

4.6

6.8

Perpetual notes attribution

(118.1)

(105.9)

FFO I before JV contribution

391.6

408.9

Contribution of joint ventures' FFO I

46.1

69.3

Extraordinary expenses for uncollected rent

(75.0)

(125.0)

FFO I

362.7

353.2

FFO I per share (in €)

0.33

0.30

Weighted average basic shares (in millions)

1,109.9

1,168.2

FFO I

362.7

353.2

Result from the disposal of properties

351.4

615.4

FFO II

714.1

968.6

including the minority share in TLG‘s and GCP‘s FFO

the net contribution which is excluded from the FFO amounts to €7.8 million in 2022 and €4.8 million in 2021

the adjustment is to reﬂect AT‘s share in the FFO I of companies in which AT has signiﬁcant inﬂuence and that

are not consolidated. GCP contributed to this line item until June 30, 2021. Starting from July 1, 2021 GCP is

consolidated

extraordinary expenses for uncollected rent due to the Covid pandemic

weighted average number of shares excludes shares held in treasury and includes the conversion impact of

mandatory convertible notes; base for share KPI calculations

the excess amount of the sale price, net of transaction costs and total costs (cost price and capex of the disposed

properties)

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FFO I

(in € millions)

Year ended December 31,

2022

2021

in € millions

Net cash from operating activities

788.0

625.8

Net cash from investing activities

408.5

1,077.6

Net cash used in ﬁnancing activities

(1,763.5)

(2,606.5)

Net changes in cash and cash equivalents

(567.0)

(903.1)

Cash and cash equivalents as at the beginning of the year

2,873.0

2,692.1

Cash and cash equivalents from business combinations

1,069.7

Other changes*

(0.6)

14.3

Cash and cash equivalents as at the end of the year

2,305.4

2,873.0

* including change in balance of assets held for sale and movements in exchange rates on cash held

+3%

353

363

FY 2021

FY 2022

+10%

0.30

0.33

FY 2021

FY 2022

€788 million of net cash was provided by operating activities in 2022, 26% higher than €626 million

in 2021. The growth was mainly due to the consolidation of GCP, supported by growth in operational

proﬁts and like-for-like rents, as well as higher rent collection in hotel properties and higher amount of

cash dividends from joint venture positions. The growth was partially offset by the impact of disposals.

€409 million of net cash was received from investing activities in 2022, 62% lower compared to €1,078

million in 2021. In 2022, €1.3 billion of net cash was received from disposals, including deposits and

net of vendor loans granted. On the other hand, approx. €850 million of net cash was used for capex,

acquisition of assets, investment in associates and others, net of repayments. Cash proceeds in 2021

were higher mainly due to larger disposal activity.

€1.8 billion of net cash was used in ﬁnancing activities in 2022, 32% lower compared to €2.6 billion in

2021. The main cash uses during 2022 were the repayment and redemption of approx. €1.1 billion debt

(ca. €0.6 billion net of ca. €0.5 billion of new bank debt), approx. €255 million of dividend paid by the

Group, share buyback of €255 million and acquisition of GCP shares in the amount of over €280 million.

As a result, AT utilized its large cash balance from year-end 2021 and used €0.6 billion of net cash dur

ing 2022 to strengthen its balance sheet. Including other liquid assets, AT’s liquidity position amounts

to €2.7 billion at year-end 2022, which is 18% of the total debt position.

FFO I PER SHARE

(in €)

CASH FLOW

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

ASSETS

(a) Total assets

Total assets amounted to €37.3 billion at year-end 2022, 5% lower compared to

€39.4 billion at year-end 2021, mainly due to negative revaluations, utilizing the high

cash balance for debt repayments, and impairment of goodwill. Non-current assets

amounted to €32.5 billion at year-end 2022, 4% lower compared to €33.9 billion at

year-end 2021, mainly due to net disposals, negative revaluations and impairment

of goodwill.

(b) Investment property

Investment property is the largest item under non-current assets and amounted to

€28.0 billion at year-end 2022, 4% lower compared €29.1 billion at year-end 2021,

mainly due to net disposals and like-for-like value decline of 0.4%. During 2022, AT

completed €1.6 billion of disposals, of which €0.8 billion were sold from investment

property balance at the beginning of the period, and re-classiﬁed €0.7 billion into

held for sale balance – large majority of which are signed –, resulting in a lower

investment property balance. Since the war in Ukraine broke out and until 2023

year-to-date, the Group has signed €1.7 billion of disposals, of which €0.8 billion was

signed in Q4 2022 and Q1 2023-to-date, showing AT’s ability to sell during difﬁcult

market conditions. On the other hand, AT acquired approx. €470 million of properties

in 2022 which were mainly residential properties in Berlin and London through GCP.

In 2022, AT recorded property revaluations and capital gains of negative €497 million

which reﬂects a value decline of 1.8% on a like-for-like basis year-over-year, account

ing for capex. Although the values were stable for most of the year, this trend was

reversed in Q4 2022 due to higher yield expansion, partially offset by rent increase

mainly from indexation and increasing replacement costs. As a result, in Q4 2022, the

portfolio value decreased by 3%.

Goodwill and intangible assets amounted to €1.3 billion at year-end 2022, lower

compared to €1.7 billon at year-end 2021.

€600 million

of goodwill is related to the

consolidation of GCP and

€681

million is related to the TLG takeover. The impairment

amount reﬂects the amount by which the carrying amount of an asset or cash gen

erating unit exceeds its recoverable amount. During 2022, AT recorded €404 million

of goodwill impairment as a result of the annual goodwill impairment test on TLG

and GCP.

The goodwill is mainly attributed to deferred taxes and reduced due to

revaluation losses, as well as due to the reduced portfolio following disposal activity.

Note that all EPRA NAV KPI’s exclude the goodwill, therefore any change is neutral.

(d) Investment in equity-accounted investees

Investment in equity-accounted investees amounted to €1.3 billion at year-end 2022,

slightly higher compared to €1.2 billion at year-end 2021. This line item represents

the Group’s long-term investment in joint ventures in which the Group has a sig

niﬁcant inﬂuence, but which are not consolidated. The largest investment in this

item as at year-end 2022, which represents approx. 40% of the total balance of this

item, is AT’s stake in Globalworth, a leading publicly listed ofﬁce landlord in Central

Eastern European markets, mainly in Warsaw and Bucharest. The holding rate in

Globalworth is slightly above 30%, indirectly held through a joint venture with CPI

Property Group S.A. Due to the change in market environment and negative revalu

ations in investees, AT recorded an impairment of

€31 million

in 2022 mainly over

its investment in GWI. The remaining balance of equity-accounted investees mainly

include several positions in real estate properties and investment in real estate

related funds specialized among others in Proptech, digitalization and technology

in the real estate sector, as well as yielding real estate loan funds, which work in a

similar proﬁle to the Group’s loans-to-own investments and may provide future access

to attractive deals, and additional investments in co-working and renewable energy

projects. The balance increased in 2022 mainly due to several investments, net from

dividends distributed and a certain level of devaluations resulting from the recent

macro environment changes.

Dec 2022

Dec 2021

in € millions

Total Assets

37,347.1

39,383.1

Non-current assets

32,491.5

33,854.2

Investment property

27,981.0

29,115.9

Goodwill and intangible assets

1,308.1

1,717.3

Investment in equity-accounted investees

1,291.9

1,222.5

Other non-current assets

1,303.8

1,189.1

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

(e) Other non-current assets

Other non-current assets are mainly comprised of vendor loans that are related to

disposals, long-term ﬁnancial investments and loans-to-own assets.

Loans-to-own assets are asset-backed and yielding loans where, under certain con

ditions, the default of the loan will enable the Group to take over the underlying

asset at a material discount. Loans-to-own assets are provided to a diverse number

of property owners and sourced through the Group’s wide deal sourcing network

established over the years. At year-end 2022, the loans-to-own balance amounted to

approx. €550 million

, of which

approx. 60% is presented under the non-current assets

and the remaining

is presented under current assets. This item comprises of

approx.

20 loans given

to a variety of property owners, with maturities primarily within the

years

2023-2025, with an average

LTV of 65%, bearing interest rates of

3%-10%

and secured by the underlying property. The loans-to-own assets are expected to

be repaid or converted into properties and will reduce the Group’s leverage. After

the reporting date, over €50 million

of loans-to-own assets were repaid. Although

the loans-to-own balance is a relatively small part of the Group’s balance sheet, it is

extending the Group’s deal sourcing opportunities, which under certain circumstances

may provide attractive options for alternative acquisition opportunities.

Vendor loans support the facilitation of the transaction and were given to several

selected buyers of assets that were sold. The loans generally have a maturity of 1-3

years and are expected to be paid in installments from 2023-2025. The loans are

secured against the property sold at an LTV in the range of 50%-60% and in case

of default gives AT the ability to get the asset back with a signiﬁcant penalty to the

defaulted buyer (through a process involving a receiver). The balance as of year-end

2022 is €0.5 billion, compared to €0.3 billion at year-end 2021. The change results

from granting new vendor loans in connection with disposals in 2022. As of December

2022, the average interest rate of the vendor loans is ca. 3.4% due to the low risk. The

average interest rate is higher compared to year-end 2021 due to new vendor loans

granted at higher rates, as well as extensions at higher rates. The future liquidity

coming from the repayments of the vendor loans will reduce the Group’s leverage.

The ﬁnancial investments amounted to

€330 million which comprise about 20 invest-

ments mainly in real estate funds and secured ﬁnancial assets with the expectation

for long-term yield and potentially co-investments in their attractive deals.

The other non-current assets also include long-term deposits of

€70 million, €61

million of tenant deposits which are used as a security for rent payments, €53 million

of receivables due to revenue straight-lining effect arising from rent-free periods

granted to tenants and long-term minority positions in real estate properties and

other receivables.

Furthermore, non-current assets include long-term derivative ﬁnancial assets, de

ferred tax assets and advance payments and deposits which mainly refer to advance

payments for signed deals, deposits for deals in the due diligence phase and deposits

for committed capex programs.

Current assets amounted to €4.9 billion at year-end 2022, lower than €5.5 billion at

year-end 2021, mainly due to the cash utilization for debt repayments, cash dividend

distribution, portfolio investments, share buyback, and increasing holding rate in GCP.

Assets held for sale balance decreased from €1.0 billion and year-end 2021 to €0.9

billion at year-end 2022, due to disposals, partially offset by additional reclassiﬁca

tion of properties into held for sale. This balance consists of non-core and/or mature

assets that are intended to be sold within the next 12 months, of which approx. two

thirds are already signed as of the date of this report. The cash and liquid assets bal

ance amounted to €2.7 billion at year-end 2022. The cash inﬂow from operations and

disposals reinforced the high cash balance from year-end 2021 which was utilized

mostly for debt repayments in the amount of approx. €1.1 billion and an amount of

€255 million for share buybacks, with the remaining strengthening the balance sheet.

AT was able to increase its cash balance further by drawing new bank debt, capital

izing on its high amount of unencumbered assets and strong banking relationship.

AT has drawn approx. €480 million of bank debt, primarily in the second half of 2022,

Dec 2022

Dec 2021

in € millions

Current assets

4,855.6

5,528.9

Assets held for sale

922.0

1,029.2

Cash and liquid assets

2,718.7

3,244.1

Trade and other receivables

1,168.1

1,131.3

excluding cash in assets held for sale

including cash in assets held for sale, short term deposits and ﬁnancial assets at fair value through

proﬁt or loss

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

AVERAGE VALUATION PARAMETERS

2022

2021

Rental multiple

22.3

23.0x

Value per sqm

€ 2,635

€ 2,614

VALUATION ASSUMPTIONS SET BY

INDEPENDENT VALUERS

2022

2021

DCF method

Market rental growth p.a.

2.1%

1.8%

Average discount rate

5.6%

5.3%

Average cap rate

4.7%

4.5%

DECEMBER 2022

Investment

properties

(in €M)

Area

(in k sqm)

EPRA

vacancy

Annualized

net rent

(in €M)

In-place rent

per sqm

(in €)

Value

per sqm

(in €)

Rental

yield

WALT

(in years)

Ofﬁce

10,796

3,474

11.2%

466

12.1

3,107

4.3%

4.4

Residential

8,342

3,685

4.0%

356

8.3

2,264

4.3%

Hotel

4,660

1,531

3.9%

237

13.3

3,044

5.1%

14.7

Logistics/Other

423

449

9.5%

4.8

942

5.6%

5.6

Retail

1,489

618

11.6%

10.1

2,407

4.6%

4.4

Development rights & Invest

2,271

Total

27,981

9,757

7.6%

1,151

10.3

2,635

4.5%

7.5

Total (GCP at relative consolidation)

24,188

8,136

8.2%

995

10.8

2,706

4.5%

7.6

which provides additional liquidity and enables to prolong the debt maturity proﬁle.

Current assets also include €1.2 billion of trade and other receivables at year-end

2022, increasing compared to €1.1 billion at year-end 2021. This item includes

ap-

prox. €660 million

of operating costs and operational rent receivables, pre-paid ex

penses and tax assets. Operating cost receivables relate to ancillary services and

other charges billed to tenants. These services include utility and service costs such

as heating, water, insurance, cleaning, waste, etc.. These operating cost receivables are

mainly settled once per year against the advance payments received from the tenants

and, thus, is correlated to pre-payments for ancillary services received from tenants

presented under short-term liabilities. Due to the sharp increase in energy and heat

ing costs in 2022, the Group provided tenants, where relevant, with the option to

voluntarily increase ancillary payments to cover these expenses. In addition, current

assets include other short-term ﬁnancial assets with a maturity of less than 1 year,

made up of loans-to-own assets, vendor loans and other receivables in the amount

approx. €410 million

which is explained above as part of the non-current assets.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

LIABILITIES

Total liabilities amounted to €19.5 billion at year-end 2022, 3% lower compared to

€20.2 billion at year-end 2021, mainly due to debt repayments, net of new ﬁnancing.

Total debt from bank loans, bonds and schuldscheins amounted to €14.8 billion at

year-end 2022, 5% lower compared to €15.6 billion at year-end 2021. This was mainly

due to approx. €1.1 billion of debt repayments during 2022, offset by approx. €480

million of new bank ﬁnancing. The new bank debt was given at an average margin

of 1.2% plus Euribor and an average maturity of 6 years. The repayments included

repayment of bank loans, bonds and schuldscheins and redemption of straight and

convertible bond. The repaid and redeemed debt had a maturity of 1 year, enabling

to extend the average debt maturity schedule. AT has a long average debt maturity

of 5 years with no signiﬁcant maturities until 2025. After the reporting period, AT

repurchased €115 million (nominal value) of 2025 bonds (Series K and 32) at a dis

count. In addition, the Group has additional liquidity potential from undrawn credit

facilities of €1 billion (no MAC clause) with maturities mostly in 2025 and unen

cumbered investment properties of €22.2 billion. Given the fact that in the current

environment bank ﬁnancing is more attractive than the unsecured bond market, a

high balance of unencumbered assets provides the Group with additional ﬁnancial

ﬂexibility. Capitalizing on this and on its long-standing bank relationships, AT was

able to raise secured ﬁnancing.

Dec 2022

Dec 2021

in € millions

Short- and long-term loans and borrowings from ﬁnancial

institutions

1,398.4

1,166.2

Short- and long-term straight bonds, convertible bond and

schuldscheins

13,407.4

14,422.0

Deferred tax liabilities (including those under held for sale)

2,693.7

2,796.5

Short- and long-term derivative ﬁnancial instruments

and other long-term liabilities

1,011.8

858.4

Other current liabilities

1,012.4

983.6

Total Liabilities

19,523.7

20,226.7

including loans and borrowings under held for sale

excluding current liability items that are included in the lines above

Deferred tax liabilities amounted to €2.7 billion at year-end 2022, lower compared

to €2.8 billion at year-end 2021, mainly due to negative revaluations. Deferred tax

liabilities make up 14% of total liabilities and are non-cash items that are predom

inantly tied to revaluation gains, calculated conservatively by assuming theoretical

future property disposals in the form of asset deals and such the full corporate tax

rate is applied in relevant jurisdictions.

Short- and long-term derivative ﬁnancial instruments and other long-term liabilities

were higher compared to year-end 2021. Other long-term liabilities include tenancy

deposits, lease liabilities mainly in relation to right-of-use assets and non-current

payables to third parties. The derivative ﬁnancial instruments include a contingent

liability created as part of the takeover of TLG.

Other current liabilities amounted to €1,012 million at year-end 2022, slightly higher

compared to €984 million at year-end 2021, mainly due to classiﬁcation of liabili

ties into held for sale, also impacted by higher pre-payments for ancillary services

received from tenants, increasing in correlation with the operating cost receivables

under the current assets. Nevertheless, current assets cover current liabilities com-

fortably by approx. 4 times which is a testament to AT’s disciplined working capital

management

BERLIN

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

DEBT METRICS

AT’s disciplined debt management approach, strong credit proﬁle and high ﬁnancial

strength are reﬂected in the solid debt metrics. The LTV amounted to 40% at year-end

2022, slightly higher than 39% at year-end 2021, mainly due to share buybacks of

€255 million, approx. €255 million of dividend paid by the Group, the acquisition of

GCP shares in the amount of over €280 million, negative revaluations and partially

granting disposal proceeds as vendor loans which will be collected in the next pe-

riods and are not included in the LTV calculation. The LTV remains well-below the

internal limit of 45% set by the Board of Directors and has a signiﬁcant headroom to

bond covenants. For the EPRA LTV calculation, please refer to the EPRA performance

measures section later in this report.

The Group’s high operational proﬁtability and ﬁnancial discipline resulted in a high

ICR of 5.2x in 2022. An unencumbered investment property ratio of 82% (by rent)

with a total value of €22.2 billion (excluding held for sale assets) as at year-end 2022

highlights the Group’s ﬁnancial ﬂexibility and provides additional liquidity potential,

along with undrawn revolving credit facilities of €1 billion (no MAC clause).

LOAN-TO-VALUE (LTV)

Dec 2022

Dec 2021

in € millions

Investment property

27,934.1

29,206.3

Investment property of assets held for sale

909.1

1,009.3

Investment in equity-accounted investees

1,053.8

1,222.5

Total value (a)

29,897.0

31,438.1

Total ﬁnancial debt

14,805.8

15,588.2

Less: Cash and liquid assets

(2,718.7)

(3,244.1)

Net ﬁnancial debt (b)

12,087.1

12,344.1

LTV (b/a)

40%

39%

UNENCUMBERED ASSETS

Dec 2022

Dec

2021

in € millions

Rent generated by unencumbered assets

959.0

998.0

Rent generated by the total Group

1,166.9

1,197.4

Unencumbered assets ratio

82%

83%

Year ended December 31,

INTEREST COVER RATIO (ICR)

2022

2021

in € millions

Finance expenses

184.8

180.4

Adjusted EBITDA

956.0

882.6

ICR

5.2x

4.9x

including advance payments and deposits and inventory - trading property, excluding right-of-use assets

including only property related JV‘s starting from Dec 2022

including balances under held for sale

annualized net rent including the contribution from joint venture positions and excluding the net rent

from assets held for sale

including the contributions from assets held for sale, excluding extraordinary expenses for uncollected

rent due to the Covid pandemic

including the extraordinary expenses for uncollected rent due to the Covid pandemic, the ICR, Covid

adjusted amounted to 4.8x in 2022 and 4.2x in 2021

CONSERVATIVE LEVERAGE

(LTV)

Board of Directors’ limit of 45%

Dec 2022

Dec 2021

39%

40%

STABLE

Reafﬁrmed

in Dec 2022

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EQUITY

Total equity amounted to €17.8 billion at year-end 2022, 7% lower compared to €19.2

billion at year-end 2021, mainly due to negative revaluations, impairment of good

will, share buyback, dividends and lower non-controlling interest. Correspondingly,

shareholders’ equity decreased from €10.5 billion at year-end 2021 to €9.6 billion at

year-end 2022 and non-controlling interests decreased from €3.9 billion at year-end

2021 to €3.5 billion at year-end 2022. Since over one third of the shareholders opted

for scrip dividend, AT distributed €169 million of cash dividend in July 2022 and the

remaining was issued as company shares on the form of scrip dividend, contributing

to the equity base. Shareholders’ equity also includes mandatory convertible notes

which following IFRS accounting treatment are classiﬁed as equity attributable to

the owners of the Company. These mandatory convertible notes were converted into

shares in March

2023. There will be no impact from the conversion of the mandatory

convertible notes on the average number of shares used to calculate the Company’s

KPIs, as the impact has been included in the respective share counts since the issu-

ance of the notes. The non-controlling interest decreased mainly due to increase in

effective holding rate in GCP from 49% as at year-end 2021 to 60% as at year-end

2022 via participation in GCP’s scrip dividend in July 2022 and acquisition of shares.

The perpetual notes balance remained stable at €4.7 billion at year-end 2022. Fol

lowing IFRS accounting treatment, perpetual notes are classiﬁed as equity as they

do not have a repayment date, coupon payments are deferrable at the Company’s

discretion, they are subordinated to debt and do not have default rights nor cove

nants. The perpetual notes are equity to perpetuity under IFRS accounting treatment

regardless to the deﬁnition of rating agencies and therefore are considered as equity

for bond covenants in any scenario. At the end of 2022, the Board decided not to use

the voluntary option to call the perpetual notes with a call date in January 2023. The

decision came after taking into consideration all relevant options and was made

mainly since the rates of a potential new issuance were signiﬁcantly above the reset

rates of the notes. The decisions to preserve cash by not exercising the option to call

and not using the rating agency’s allowance to repay 10% without incurring a rating

penalty were also taken in consideration with the fact that the prevailing high un

certainty in the capital markets might result in a deteriorating access to capital. The

reset coupons were adjusted at the respective call date to 7.08% for AT’s perpetual

note and 6.33% for GCP’s perpetual note which will result in approx. €19.5 million

higher coupon for these two series on an annualized basis. These perpetuals can be

called at every interest payment date and the Company will continue to assess all

the options for its perpetual notes. Perpetual notes remain to be an important part

of the capital structure especially as they provide a security cushion in volatile times.

Dec 2022

Dec

2021

in € millions

Total equity

17,823.4

19,156.4

of which equity attributable to the owners of the Company

9,585.3

10,533.6

of which equity attributable to perpetual notes investors

4,747.7

of which non-controlling interests

3,490.4

3,875.1

Equity ratio

48%

49%

BONN

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA Performance

Measures

The European Public Real Estate Association (EPRA) is the widely-recognized market standard guidance and benchmark provider for the European real estate industry. EPRA’s best

practices recommendations dictate the ongoing reporting of a set of performance metrics intended 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 standardized EPRA performance measures provide additional relevant earnings,

balance sheet and operating metrics, and facilitate for the simple and effective comparison of performance-related information across the industry. The information presented

below is based on the Best Practice Recommendations by EPRA and on the materiality and importance of information.

in € millions unless otherwise indicated

2022

Change

2021

EPRA NRV

12,289.1

(6%)

13,057.5

EPRA NRV per share (in €)

11.2

(3%)

11.5

EPRA NTA

10,135.2

(6%)

10,807.9

EPRA NTA per share (in €)

9.3

(2%)

9.5

EPRA NTA with RETT

10,775.3

(7%)

11,564.0

EPRA NTA with RETT per share (in €)

9.8

(4%)

10.2

EPRA NDV

10,515.2

24%

8,462.5

EPRA NDV per share (in €)

9.6

28%

7.5

EPRA Earnings

438.7

11%

393.7

EPRA Earnings per share (in €)

0.40

18%

0.34

EPRA LTV

55.4%

0.8%

54.6%

EPRA Net initial yield (NIY)

3.5%

0.1%

3.4%

EPRA 'Topped-up' NIY

3.5%

EPRA Vacancy

7.6%

(0.1%)

7.7%

EPRA Vacancy including JV

7.8%

EPRA Cost Ratio (including direct vacancy costs)

27.8%

(1.9%)

29.7%

EPRA Cost Ratio (excluding direct vacancy costs)

25.7%

(1.9%)

27.6%

EPRA Cost Ratio (including direct vacancy costs, excluding Covid-19 adjustment)

22.0%

2.4%

19.6%

EPRA Cost Ratio (excluding direct vacancy costs, excluding Covid-19 adjustment)

19.9%

2.4%

17.5%

Newly deﬁned to exclude RETT

Previously deﬁned as EPRA NTA and EPRA NTA per share

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA NAV KPI’S

The European Public Real Estate Association (EPRA) provides three key Net Asset Value (NAV) metrics designed to provide stakeholders with the most relevant information on the fair

value of the Group’s assets and liabilities. With the evolving nature of their business models, real estate companies progressed into actively managed entities, engaging in non-prop

erty operating activities, actively recycling capital and accessing capital markets for balance sheet ﬁnancing. In line with these developments, EPRA has provided the market with the

following three NAV KPI’s: EPRA Net Reinstatement Value (EPRA NRV), EPRA Net Tangible Assets (EPRA NTA) and EPRA Net Disposal Value (EPRA NDV).

The EPRA NRV

’s purpose is to reﬂect the value of net assets required to re-build a company on a long-term basis assuming entities do not sell assets. Therefore, balance sheet items

that are not expected to crystallize in normal circumstances such as the fair value movements of ﬁnancial derivatives and deferred tax liabilities are added back to the equity. Addi

tionally, gross purchasers’ costs are added back since this metric is aiming to reﬂect what would be needed to recreate a company through the investment markets based on its capital

ﬁnancing structure.

The EPRA NTA

aims to reﬂect the tangible value of a company’s net assets assuming entities buy and sell assets, crystallizing certain levels of unavoidable deferred tax liabilities.

Therefore, EPRA NTA excludes intangible assets and goodwill, and adds back the portion of deferred tax liabilities that is not expected to crystallize as a result of long-term hold strategy.

The EPRA NDV

provides the shareholders with the value under the scenario that a company’s assets are sold or its liabilities are not held until maturity. For this purpose, it assumes

that deferred taxes, ﬁnancial instruments and other adjustments are calculated to the full extent of their liability, net of any resulting tax.

newly deﬁned to exclude RETT

previously deﬁned as EPRA NTA and EPRA NTA per share

excluding signiﬁcant minority share in deferred tax liabilities (DTL), as well as deferred tax assets on certain ﬁnancial instruments in line with EPRA recommendations. EPRA NRV additionally includes DTL of assets held for sale

excluding signiﬁcant minority share in derivatives

deducting the goodwill resulting from the business combination with TLG

deducting the goodwill resulting from the consolidation of GCP

excluding signiﬁcant minority share in intangibles

including the gross purchasers‘ costs of assets held for sale and relative share in GCP‘s relevant RETT. EPRA NTA with RETT includes only the gross purchasers‘ costs of properties where RETT optimization at disposal can be achieved

excluding shares in treasury and including the conversion impact of mandatory convertible notes, base for share KPI calculations

Dec 2022

Dec 2021

in € millions

EPRA NRV

EPRA NTA

with RETT

EPRA NDV

EPRA NRV

EPRA NTA

with RETT

EPRA NDV

Equity attributable to the owners of the Company

9,585.3

10,533.6

Deferred tax liabilities

2,281.2

1,882.6

2,274.3

1,870.1

Fair value measurement of derivative ﬁnancial instruments

(29.0)

113.8

Goodwill in relation to TLG

(680.6)

(822.0)

Goodwill in relation to GCP

(600.0)

(862.9)

Intangibles as per the IFRS balance sheet

(23.1)

(24.7)

Net fair value of debt

2,210.5

(386.2)

Real estate transfer tax

1,732.2

640.1

1,820.7

756.1

NAV

12,289.1

10,135.2

10,775.3

10,515.2

13,057.5

10,807.9

11,564.0

8,462.5

Number of shares (in millions)

1,094.2

1,132.7

NAV per share (in €)

11.2

9.3

9.8

9.6

11.5

9.5

10.2

7.5

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

The EPRA NAV KPI’s were impacted by the negative revaluations, cash dividends

and share buyback, offsetting operational proﬁts and reduction of minorities in GCP.

The reduction in goodwill had no impact on these KPI’s as they already excluded

the goodwill from the equity, thus any change is neutral. As the shares were bought

back at prices below the NAV, the EPRA per share KPI’s decreased at a lower rate than

in absolute amounts (or increased at a higher rate in the case of EPRA NDV). The

decrease in number of shares was partially offset by additional shares created by the

scrip dividend distribution in July 2022.

EPRA NRV

Accordingly, the EPRA NRV amounted to €12.3 billion at year-end 2022, 6% lower

compared to €13.1 billion at year-end 2021. The EPRA NRV per share decreased by

3% from €11.5 at year-end 2021 to €11.2 at year-end 2022 or by 1% adjusted for

dividends.

EPRA NTA

The EPRA NTA amounted to €10.1 billion at year-end 2022, lower by 6% compared to

€10.8 billion at year-end 2021. The EPRA NTA per share decreased by 2% from €9.5

at year-end 2021 to €9.3 at year-end 2022, or remained stable adjusted for dividends.

The EPRA NTA was reclassiﬁed in Dec 2022 to exclude RETT in order to align with

market standards. Former EPRA NTA was renamed as “EPRA NTA with RETT”.

As EPRA NTA aims to reﬂect the tangible value of a company’s net assets assuming

entities buy and sell assets, certain levels of deferred tax liabilities are assumed to be

crystallized. In this regard, AT adds back only the deferred tax liabilities with regards

to its long-term portfolio and this item is net of signiﬁcant minority share in deferred

tax liabilities, as well as deferred tax assets on certain ﬁnancial instruments in line

with EPRA recommendations. The remaining portfolio is treated as follows:

Investment property of assets held for sale:

Assets held for sale are properties which are expected to be disposed within the next

12 months. Conservatively, deferred taxes are not added back, although Aroundtown

has a track record of beneﬁtting from a lower tax ratio for its disposals due to the

disposal structure.

Retail portfolio:

Aroundtown actively seeks to reduce its share of retail portfolio on an opportunistic

basis. Therefore, deferred tax liabilities related to these properties are conservatively

not added back.

GCP’s portfolio cities classiﬁed as “Others”:

Aroundtown follows GCP’s approach to not add back deferred tax liabilities related

to these properties.

Development rights & Invest portfolio:

As an additional value creation driver, Aroundtown pursues a selective development

program which is designed to unlock further potential through identifying and selling

development rights at high gains or developing at high pre-let ratios. Since in the

current market environment the preference is to dispose those rights, Aroundtown

conservatively does not add back deferred tax liabilities related to these assets.

EPRA NTA with RETT

The EPRA NTA with RETT amounted to €10.8 billion at year-end 2022, lower by 7%

compared to €11.6 billion at year-end 2021. The EPRA NTA with RETT per share

decreased by 4% from €10.2 at year-end 2021 to €9.8 at year-end 2022 or by 2%

adjusted for dividends.

PORTFOLIO ITEMS

Dec 2022

in € millions unless

otherwise indicated

Fair value

as % of total

portfolio

as % of deferred

tax added back

to EPRA NTA per

classiﬁcation

Portfolio to be held long-term

24,196.6

84%

76%

Investment property of assets held for sale

909.1

Retail portfolio

1,114.7

GCP’s portfolio cities classiﬁed as “Others”

981.2

Development rights & Invest portfolio

1,688.5

Total

28,890.1

100%

fair value breakdown according to exact portfolio classiﬁcation may vary following the main use approach used to determine

the deferred tax

excluding the signiﬁcant minority share in DTL and others

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

With regards to the gross purchasers’ costs, Aroundtown adds back the costs related

to properties which enable a RETT optimization at disposal. The corporate structure

enables Aroundtown to sell properties through share deals and therefore RETT and

purchasers’ costs are optimized. Aroundtown has a clear track record of optimizing RETT

through disposals in share deals. IFRS valuations conservatively deduct the RETT and

purchasers’ costs, regardless of Aroundtown’s corporate structure or its intention to dis

pose properties. Therefore, in properties which enable RETT optimization, the EPRA NTA

with RETT adds back the purchasers’ costs. These are mainly properties in Germany that

can be sold through share deals without the need of restructuring. They account to 33%

of all investment properties including held for sale.

EPRA NDV

The EPRA NDV amounted to €10.5 billion at year-end 2022, 24% higher compared

to €8.5 billion at year-end 2021. Due to increased capital market volatility, the net

fair value of debt was lower than the book value of debt at year-end 2022 and the

difference, net of tax impact, is added back to the equity, resulting in an increase of

EPRA NDV. The EPRA NDV per share increased 28% from €7.5 at year-end 2021 to

€9.6 at year-end 2022 or by 31% adjusted for dividends.

Dec 2022

PORTFOLIO BREAKDOWN

Portion of the

portfolio

Adding RETT

Properties for which RETT optimization at disposal

can be achieved

33%

Yes

Properties which require restructuring or for which

RETT optimization at disposal is not possible

67%

EPRA NTA

(/ps) *

EPRA NDV

(/ps)

EPRA NRV (/ps)

EPRA NAV PER SHARE KPI‘S

(in €)

Dec 2020

Dec 2021

Dec 2022

Dec 2020

Dec 2021

Dec 2022

Dec 2020

Dec 2021

Dec 2022

+35%

+4%

+1%

11.1

8.9

7.1

11.5

9.5

7.5

11.2

9.3

9.6

* newly deﬁned to exclude RETT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA EARNINGS

EPRA Earnings is intended to serve as a key indicator of the Group’s underlying op

erational proﬁts for the year in the context of a European real estate company. Given

AT’s strategic joint venture investments, the proportional share in these joint venture

investments’ EPRA Earnings for the year is included in accordance with the average

holding rate for the period. Prior to the third quarter of 2021, these contributions

were mostly attributed to GCP. Starting from July 1, 2021, GCP is consolidated in AT’s

ﬁnancial accounts and the minority share in GCP’s EPRA Earnings is deducted instead.

As the Funds from Operations (FFO I) is the widely-recognized industry standard KPI

for operational performance, an additional reconciliation from the EPRA Earnings to

the FFO I is provided below.

EPRA Earnings amounted to €439 million in 2022, 11% higher compared to €394

million in 2021. The increase is mainly due to growth in operational proﬁts – driven

by the consolidation of GCP, increased stake in GCP, like-for-like rental growth, and

acquisitions –, lower extraordinary expenses for uncollected rent due to the Covid

pandemic, higher JV contribution (excl. GCP in H1 2021), reduction in ﬁnance expenses

due to debt repayments and lower ﬁnance-related costs due to relatively lower debt

repayments. These were partially offset by disposals, cost inﬂation and additional pro

visions made in relation to higher energy prices. EPRA Earnings per share amounted

to €0.40 in 2022, 18% higher compared to €0.34 per share in 2021, which increased

at a higher rate than EPRA Earnings due to the share buyback program, partially

offset by scrip dividends.

Year ended December 31,

2022

2021

in € millions

Earnings per IFRS income statement

(457.1)

1,078.1

Property revaluations and capital gains

497.3

(809.7)

Impairment of goodwill

404.3

Changes in fair value of ﬁnancial assets and liabilities,

buy-backs and early repayment costs, net

168.6

115.4

Deferred tax income (expenses)

(82.4)

215.8

Share of proﬁt from investment in equity-accounted investees

(5.9)

(193.4)

Adjustment for investment in equity-accounted investees

46.1

66.6

EPRA Earnings contribution to minorities

(132.2)

(79.1)

EPRA Earnings

438.7

393.7

Weighted average basic shares (in millions)

1,109.9

1,168.2

EPRA Earnings per share (in €)

0.40

0.34

Bridge to FFO I

Add back: Total depreciation and amortization

21.1

15.9

Add back: Finance-related costs

25.5

46.7

Add back: Other adjustments incl. one-off expenses rela

ted to TLG merger

7.4

8.1

Less: FFO items mainly related to investments in equity-

accounted investees

1) 2)

(4.1)

(0.5)

Less: FFO contribution from asset held for sale

(7.8)

(4.8)

Less: Perpetual notes attribution

(118.1)

(105.9)

FFO I

362.7

353.2

FFO I per share (in €)

0.33

0.30

including AT‘s share in joint venture positions. GCP contributed to this line item until June 30, 2021. Starting

from July 1, 2021 GCP is consolidated

additionally adjusting for the minority share in GCP‘s FFO adjustments

weighted average number of shares excludes shares held in treasury and includes the conversion impact

of mandatory convertible notes; base for share KPI calculations

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA LTV

Dec 2022

in € millions

Consolidated

(as reported)

Share of joint

ventures

Share of material

associates

Material non-

controlling interests

Proportionate

consolidation

Total ﬁnancial debt

14,805.8

657.3

(1,753.2)

13,709.9

Foreign currency derivatives

(121.5)

17.7

(103.8)

Equity attributable to perpetual notes

investors

4,747.7

(489.9)

4,257.8

Net payables

EPRA Gross debt

19,432.0

657.3

(2,225.4)

17,863.9

Less:

Cash and liquid assets

(2,718.7)

(62.3)

188.0

(2,593.0)

EPRA Net debt

16,713.3

595.0

(2,037.4)

15,270.9

Investment property

27,934.1

1,262.2

(4,192.9)

25,003.4

Investment property of assets held for sale

909.1

38.2

(154.3)

793.0

Owner-occupied property

80.5

(21.8)

58.7

Intangibles as per the IFRS balance sheet

27.6

(4.5)

23.1

Net receivables

115.2

82.6

(93.7)

104.1

Financial assets

1,048.6

549.2

(36.4)

1,561.4

EPRA Total property value

30,115.1

1,932.2

(4,503.6)

27,543.7

EPRA LTV

55.5%

55.4%

EPRA LTV

including balances under held for sale

including advance payments and deposits and inventory - trading property, excluding right-of-use assets

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA LTV

Dec 2021

in € millions

Consolidated

(as reported)

Share of joint

ventures

Share of material

associates

Material non-

controlling interests

Proportionate

consolidation

Total ﬁnancial debt

15,588.2

682.1

(2,501.1)

13,769.2

Foreign currency derivatives

(76.9)

14.3

(62.6)

Equity attributable to perpetual notes

investors

4,747.7

(628.6)

4,119.1

Net payables

EPRA Gross debt

20,259.0

682.1

(3,115.4)

17,825.7

Less:

Cash and liquid assets

(3,244.1)

(139.0)

604.0

(2,779.1)

EPRA Net debt

17,014.9

543.1

(2,511.4)

15,046.6

Investment property

29,206.3

1,229.0

(5,265.8)

25,169.5

Investment property of assets held for sale

1,009.3

39.6

(95.3)

953.6

Owner-occupied property

66.0

(22.0)

44.0

Intangibles as per the IFRS balance sheet

32.4

(7.7)

24.7

Net receivables

123.7

75.9

(101.0)

98.6

Financial assets

966.1

437.0

(152.7)

1,250.4

EPRA Total property value

31,403.8

1,781.5

(5,644.5)

27,540.8

EPRA LTV

54.2%

54.6%

including balances under held for sale

including advance payments and deposits and inventory - trading property, excluding right-of-use assets

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

The EPRA LTV is a metric that aims to assess the leverage of shareholder equity

within a real estate company. The main difference between EPRA LTV and the Group’s

calculated LTV is the wider categorization of liabilities and assets with the largest

impact coming from the inclusion of perpetual notes as debt, inclusion of ﬁnancial

assets in the property value and proportionate consolidation adjustments. Under IFRS,

the Group’s perpetual notes are considered as equity as they do not have a maturity

date, are subordinated to all debt types and do not carry covenants. As a result, the

Group views its LTV metric as a better measure of leverage, as it more closely matches

the LTV under its debt covenants. Nevertheless, for enhanced transparency the Group

will continue to present both metrics going forward.

Aroundtown recorded an EPRA LTV of 55.4% at year-end 2022, slightly higher com

pared to 54.6% at year-end 2021 mainly due to share buybacks of €255 million,

approx. €255 million dividend paid by the Group, the acquisition of GCP shares in the

amount of over €280 million and negative revaluations.

LEIPZIG

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA NET INITIAL YIELD (NIY) AND ‘TOPPED-UP’ NIY

The EPRA Net Initial Yield (NIY) is calculated by subtracting the non-recoverable op

erating costs from the net rental income as of the end of the period and dividing the

result by the fair value of the full property portfolio plus an allowance for estimated

purchasers’ costs. EPRA ‘Topped-up’ NIY is an additional calculation that factors into

consideration the effects of rent-free period and other lease incentives. Given the

strategic investment in joint venture positions, they are proportionately consolidated

in accordance with the holding rate at the end of the period.

The EPRA NIY amounted to 3.5% at year-end 2022, higher compared to 3.4% at

year-end 2021. While like-for-like rental income grew at 3.5% year-over-year, yield

expansion due to increase in interest rates outpaced the rental growth towards the

end of the year and resulted in a like-for-like value decline of 1.8% accounting for

capex, thus resulting in an increase of EPRA NIY year-over-year. The EPRA ‘Topped-up’

NIY remained stable at 3.5% at year-end 2022.

Dec 2022

Dec 2021

in € millions

Investment property

27,981.0

29,115.9

Investment property of assets held for sale

909.1

1,009.3

Share of JV investment property

1,195.3

1,194.1

Less: Classiﬁed as Development rights & Invest

(2,271.3)

(2,073.1)

Complete property portfolio

27,814.1

29,246.2

Allowance for estimated purchasers' costs

1,959.3

2,112.7

Grossed up complete property portfolio value

29,773.4

31,358.9

End of period annualized net rental income

1,255.7

1,267.6

Operating costs

(216.6)

(187.8)

Annualized net rent, after non-recoverable costs

1,039.1

1,079.8

Notional rent expiration of rent-free periods or

other lease incentives

15.1

15.9

Topped-up net annualized rent

1,054.2

1,095.7

EPRA NIY

3.5%

3.4%

EPRA 'TOPPED-UP' NIY

3.5%

including AT‘s share in joint venture positions

to reach annualized operating costs, cost margins were used for each respective periods

FRANKFURT

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

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. It is calcu

lated by dividing the market rental value of the vacant space in the portfolio by

the annualized rental value of the portfolio, including vacancy at market rents. The

EPRA Vacancy including JV further includes AT’s share in joint venture investments,

including its holding rate in Globalworth, the leading publicly listed ofﬁce landlord

in Central Eastern European markets, mainly in Warsaw and Bucharest.

EPRA Vacancy decreased from 7.7% at year-end 2021 to 7.6% at year-end 2022. The

disposal of assets with higher-than-average vacancy offset the negative 0.2% like-

for-like occupancy. EPRA Vacancy including JV remained stable at 7.8% as of year-end

2022. Aroundtown has observed an increase in market ERV’s due to inﬂation driven

indexations.

EPRA VACANCY INCLUDING JV

Dec 2022

Dec 2021

in € millions

Estimated Rental Value (ERV) of the vacant space including JV

103.6

106.0

Dec annualized net rent including vacancy rented at ERV

including JV

1,324.4

1,353.3

EPRA VACANCY INCLUDING JV

7.8%

EPRA VACANCY

Dec 2022

Dec 2021

in € millions

Estimated Rental Value (ERV) of the vacant space

95.2

97.8

Dec annualized net rent including vacancy rented at ERV

1,246.1

1,274.6

EPRA VACANCY

7.6%

7.7%

including AT‘s share in joint venture positions

BERLIN

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

The EPRA Cost Ratios provide an overview of a company’s op

erating cost structure and provide for increased comparability

across companies. The cost ratios are derived by dividing the

administrative expenses and property operating expenses (in

cluding non-recoverable service charges) by the net rental in

come. The ratio is calculated both including and excluding the

direct vacancy costs. Given the strategic importance of its joint

venture investments, AT includes in its calculations their relative

contributions at the average holding rate during the year. Prior

to the third quarter of 2021, these contributions were mostly

attributed to GCP. Starting from July 1, 2021, GCP is consolidated

in AT’s ﬁnancial accounts.

The EPRA Cost ratios in 2022 amounted to 27.8% including di-

rect vacancy costs and 25.7% excluding direct vacancy costs,

lower compared to 29.7% and 27.6% in 2021, respectively. The

decrease is driven by lower extraordinary expenses for uncol

lected rent, disposal of assets with higher cost margins and

like-for-like net rental income growth, offsetting the cost in

ﬂation and provisions made in relation to higher energy prices.

Excluding the extraordinary expenses for uncollected rent, cost

ratios were 22.0% and 19.9% in 2022, higher compared to 19.6%

and 17.5%, due to cost inﬂation which outpaced the growth in

net rental income.

including AT‘s share in joint venture positions. GCP contributed to this line item until June 30, 2021. Starting from July 1, 2021 GCP is consolidated

extraordinary expenses for uncollected rent due to the Covid pandemic

Year ended December 31,

2022

2021

in € millions

Administrative and other expenses

62.5

56.6

Maintenance and refurbishment

51.1

37.8

Ancillary expenses and purchased services, net

3.0

0.6

Personnel expenses

58.6

46.8

Other operating costs

173.3

194.4

Depreciation and amortization

21.1

15.9

Share of equity-accounted investees

13.4

30.8

Exclude:

Depreciation and amortization

(21.1)

(15.9)

EPRA Costs (including direct vacancy costs)

361.9

367.0

Direct vacancy costs

(27.6)

(25.9)

EPRA Costs (excluding direct vacancy costs)

334.3

341.1

Extraordinary expenses for uncollected rent

(75.0)

(125.0)

EPRA Costs (including direct vacancy costs, excluding Covid-19 adjustment)

286.9

242.0

EPRA Costs (excluding direct vacancy costs, excluding Covid-19 adjustment)

259.3

216.1

Revenue

1,609.9

1,323.2

Less: Operating and other income

(387.8)

(237.5)

Add: Share of net rental income from equity-accounted investees

79.1

149.9

Net rental income

1,301.2

1,235.6

EPRA Cost Ratio (including direct vacancy costs)

27.8%

29.7%

EPRA Cost Ratio (excluding direct vacancy costs)

25.7%

27.6%

EPRA Cost Ratio (including direct vacancy costs, excluding

Covid-19 adjustment)

22.0%

19.6%

EPRA Cost Ratio (excluding direct vacancy costs, excluding

Covid-19 adjustment)

19.9%

17.5%

EPRA COST RATIOS

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Alternative

Performance Measures

Aroundtown follows the real estate reporting criteria and provides Alternative Performance

Measures. These measures provide more clarity on the business and enables benchmarking

and comparability to market levels. In the following section, Aroundtown presents a detailed

reconciliation for the calculations of its Alternative Performance Measures.

ADJUSTED EBITDA

The adjusted EBITDA is a performance measure used to evalu

ate the operational results of the Group by deducting from the

EBITDA

, which includes the

Total depreciation and amortization

on top of the

Operating proﬁt

, non-operational items such as the

Property revaluations and capital gains

and

Share of proﬁt from

investment in equity-accounted investees

, as well as

Contributions

of assets held for sale

. Aroundtown adds to its adjusted EBITDA

a non-recurring and/or non-cash item called

Other adjustments

incl. one-off expenses related to TLG merger

, other adjustment

being the expenses for employees’ share incentive plans. In or

der to reﬂect only the recurring operational proﬁts, Aroundtown

deducts the

Share of proﬁt from investment in equity-accounted

investees

as this item also includes non-operational profits

generated by Aroundtown’s equity accounted investees. Instead,

Aroundtown includes in its adjusted EBITDA its share in the

adjusted EBITDA generated by investments where Aroundtown

has signiﬁcant inﬂuence in accordance with its economic hold

ing rate over the period. This line item is labelled as

Contribu-

tion of joint ventures’ adjusted EBITDA.

Prior to the third quarter

of 2021, this line item was mostly attributed to Aroundtown’s

share in GCP’s adjusted EBITDA, however, starting from July 1,

2021, GCP is consolidated in Aroundtown’s ﬁnancial accounts.

Aroundtown created extraordinary expenses for uncollected

rent due to Covid pandemic in response to the impact of Coro

navirus on the hotel industry. Adjusted EBITDA excludes (adds

back) these expenses which are called

Extraordinary expenses

for uncollected rent.

Adjusted EBITDA Calculation

Operating Proﬁt

(+) Total depreciation and amortization

(=) EBITDA

(-) Property revaluations and capital gains

(-) Share of proﬁt from investment in equity-accounted investees

(+) Other adjustments incl. one-off expenses related to TLG merger

(-) Contribution of assets held for sale

(+) Add back: Extraordinary expenses for uncollected rent

(=) Adjusted EBITDA before JV contribution

(+) Contribution of joint ventures‘ adjusted EBITDA

(=) Adjusted EBITDA

Named as „Fair value adjustments, capital gains and other income“ in FY 2017

Named as „Share in proﬁt from investment in equity-accounted investees“ in

FY 2017, 2018, 2019 and 2020

Including expenses related to employees‘ share incentives plans and one-off

expenses related to TLG merger. Prior to the takover of TLG, it was named as

„Other adjustments“ in FY 2017 and only related to share incentive plans. In

FY 2018 and 2019, it was shown together with contribution of assets held for

sale under an item called „Other adjustments“

Named as „Adjusted EBITDA relating to properties marked for disposal“ in FY

2017. In FY 2018 and 2019, it was shown together with expenses related to

employees‘ share incentive plans under an item called „Other adjustments“.

Named as „Contribution from assets held for sale“ in FY 2020

Extraordinary expenses for uncollected rent due to the Covid pandemic. The

adjustment started in 2020 after the Covid pandemic in order to reﬂect the

recurring adjusted EBITDA excluding these extraordinary expenses

Named as „Adjusted EBITDA commercial, recurring long-term“ in FY 2017 and

„Adjusted EBITDA commercial portfolio, recurring long-term“ in FY 2018, 2019

and 2020

The adjustment is to reﬂect AT‘s share in the adjusted EBITDA of companies

in which AT has signiﬁcant inﬂuence and that are not consolidated. GCP con

tributed to this line item until June 30, 2021. Starting from July 1, 2021, GCP

is consolidated. Named as „Adjustment for GCP adjusted EBITDA contribution“

in FY 2017, „Adjustment for GCP and other joint venture positions adjusted

EBITDA contribution“ in FY 2018 and 2019, „Adjustment for GCP‘s and other

investments‘ adjusted EBITDA contribution“ in FY 2020

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

FUNDS FROM OPERATIONS I (FFO I)

Funds from Operations I (FFO I) is an industry standard perfor

mance indicator for evaluating operational recurring proﬁts of a

real estate ﬁrm. Aroundtown calculates

FFO I

by deducting from

the

Adjusted EBITDA before JV contribution

, the

Finance expenses,

Current tax expenses, Contribution to minorities

and adds back

Adjustments related to assets held for sale. Adjustments related to

assets held for sale

refers to ﬁnance expenses and current tax ex

penses related to assets held for sale.

Contribution to minorities

additionally include the minority share in GCP’s FFO I (starting

from July 1, 2021) and the minority share in TLG’s FFO I ex

cluding the contribution from assets held for sale. Aroundtown

additionally deducts the

Perpetual notes attribution

to reach at

FFO I before JV contribution

. Prior to 2021, this ﬁgure did not

deduct the perpetual notes attribution.

Due to the deduction of the

Share of proﬁt from investment in

equity-accounted investees

in the adjusted EBITDA calculation

which includes the operational proﬁts from those investments,

Aroundtown adds back its relative share in the FFO I of joint

venture positions in accordance with the holding rate over the

period to reﬂect the recurring operational proﬁts generated by

those investments. This item is labelled as

Contribution of joint

ventures’ FFO I

. Prior to the third quarter of 2021, this item was

mostly attributed to Aroundtown’s share in GCP’s FFO I, however,

starting from July 1, 2021, GCP is consolidated in Aroundtown’s

ﬁnancial accounts. Aroundtown created

Extraordinary expenses

for uncollected rent

due to the Covid pandemic in response to the

impact of Coronavirus on the hotel industry. Therefore, Around

town’s

FFO I

includes these expenses.

FFO I per share

is calculated by dividing the

FFO I

by the

Weighted average basic shares

which excludes the shares held

in treasury and includes the conversion impact of mandatory

convertible notes.

In FY 2020 and FY 2021, Aroundtown additionally showed

FFO I

before extraordinary Covid adjustment

and

FFO I per share before

extraordinary Covid adjustment

(named as

FFO I before Covid

and

FFO I per share before Covid

in FY 2020), which excluded the

Ex-

traordinary expenses for uncollected rent

. Starting from FY 2022,

this line item is not shown in the table to maintain the focus

on the main FFO I KPI.

FUNDS FROM OPERATIONS II (FFO II)

Funds from Operations II (FFO II) is an additional measure

ment used in the real estate industry to evaluate operational

recurring proﬁts including the impact from disposal activities.

To derive the

FFO II

, the

Results from disposal of properties

are

added to the

FFO I

. The results from disposals reﬂect the proﬁt

driven from the excess amount of the sale price, net of transac

tions costs, to cost price plus capex of the disposed properties.

Funds From Operations (FFO I) Calculation

Adjusted EBITDA before JV contribution

(-) Finance expenses

(-) Current tax expenses

(-) Contribution to minorities

(+) Adjustments related to assets held for sale

(-) Perpetual notes attribution

(=) FFO I before JV contribution

(+) Contribution of joint ventures' FFO I

(-) Extraordinary expenses for uncollected rent

(=) FFO I

Including minority share in GCP‘s FFO I (since the consolidation in Q3 2021)

and TLG‘s FFO (since the takeover in Q1 2020). Named as „Contribution from

minorities“ in FY 2017

Named as „FFO relating to properties marked for disposal“ in FY 2017, „Other

adjustments“ in FY 2018 and 2019.

Named as „Adjustment for accrued perpetual notes attribution“ in FY 2017,

2018 and 2019

Named as „FFO I commercial portfolio, recurring long-term“ in FY 2017, 2018,

2019 and 2020. In order to align FFO I better with the market standards,

Aroundtown started deducting perpetual notes attribution from its main FFO

I KPI in 2020 and from this line item in 2021

The adjustment is to reﬂect AT‘s share in the FFO I of companies in which

AT has signiﬁcant inﬂuence and that are not consolidated. GCP contributed

to this line item until June 30, 2021. Starting from July 1, 2021 GCP is con

solidated. Named as „Adjustment for GCP FFO I contribution“ in FY 2017, „Ad

justment for GCP‘s and other joint ventures‘ FFO I contribution“ in FY 2018

and 2019, „Adjustment for GCP‘s and other investments‘ FFO I contribution“

in FY 2020

Extraordinary expenses for uncollected rent due to the Covid pandemic

In order to align this KPI better with market standards, in 2020, Aroundtown

started deducting the perpetual notes attribution from this KPI. Named as

„FFO I after perpetual notes attribution“ in FY 2017, 2018 and 2019

Weighted average number of shares excludes shares held in treasury and in

cludes the conversion impact of mandatory convertible notes; base for share

KPI calculations

In order to align this KPI better with market standards, in 2020, Aroundtown

started deducting the perpetual notes attribution from FFO I. Named as „FFO I

per share after perpetual notes attribution“ in FY 2017, 2018 and 2019

FFO I Per Share Calculation

(b) Weighted average basic shares

(=) (c/b) FFO I per share

Funds From Operations II (FFO II) Calculation

FFO I

(+) Result from the disposal of properties

(=) FFO II

The excess amount of the sale price, net of transaction costs and total costs

(cost price and capex of the disposed properties)

Prior to 2020, since the main FFO I KPI did not deduct perpetual notes at-

tribution, FFO II included these attributions. In order to align FFO I better

with market standards, in 2020, Aroundtown started deducting the perpetual

notes attribution

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

LOAN-TO-VALUE (LTV)

The Loan-to-Value (LTV) is a measurement aimed at reﬂect

ing the leverage of a company. The purpose of this metric is to

assess the degree to which the total value of the real estate

properties can cover ﬁnancial debt and the headroom against

a potential market downturn. With regards to Aroundtown’s in

ternal LTV limit due to its conservative ﬁnancial policy, the LTV

shows as well the extent to which Aroundtown can comfortably

raise further debt to ﬁnance additional growth.

Total value

calculated by adding together the

Investment property

which

includes

Advance payments and deposit

and

Inventories – trading

property

but excludes the right-of-use assets,

Investment property

of assets held for sale

and

Investment in equity-accounted investees

which starting from Dec 2022 include only property related

JV’s.

Net ﬁnancial debt

is calculated by deducting the

Cash and

liquid assets

from the

Total ﬁnancial debt

which is a sum of

Short-

and long-term loans and borrowings from ﬁnancial institutions

and

Short- and long-term straight bonds, convertible bond and

schuldscheins

Cash and liquid assets

are the sum of

Cash and cash

equivalents, Short-term deposits

and

Financial assets at fair value

through proﬁt or loss,

as well as cash balances of assets held for

sale. Aroundtown calculates the LTV ratio through dividing the

Net ﬁnancial debt

by the

Total value

INTEREST COVER RATIO (ICR) AND DEBT

SERVICE COVER RATIO (DSCR)

The Interest Cover Ratio (ICR) is widely used in the real

estate industry to assess the strength of a ﬁrm’s credit

proﬁle. The multiple indicates the degree to which

Aroundtown’s operational results are able to cover its debt

servicing.

ICR

is calculated by dividing the

Adjusted EBITDA

including the contributions from assets held for sale by the

Finance expenses

. ICR previously included the contribution

from joint venture positions in both the ﬁnance expenses

and adjusted EBITDA but it was reclassiﬁed during 2021 to

exclude these contributions in order to reﬂect the interest

cover ratio of the Group’s standalone operations excluding

its joint venture investments, as well as to simplify this KPI.

Aroundtown additionally provides the

ICR, Covid adjusted

which is calculated by dividing the

Adjusted EBITDA

including extraordinary expenses for uncollected rent due

to the Covid pandemic and the contributions from assets

held for sale by the

Finance expenses

Aroundtown discontinued presenting DSCR as it is not

part of its bond covenants. The DSCR is calculated by

dividing the

Adjusted EBITDA

including the contributions

from assets held for sale by the sum of

Finance expenses

and

Amortizations of loans from ﬁnancial institutions and

others

. When it was reported in FY 2018 and FY 2019, DSCR

included the contribution from joint venture positions but

following the reclassiﬁcation of ICR, these contributions

are excluded.

Previously included contributions from joint venture positions and named as

„Group ﬁnance expenses“ in FY 2018, 2019 and 2020

Including the contributions from assets held for sale and previously included con

tributions from joint venture positions

LTV Calculation

(+) Investment property

(+) Investment property of assets held for sale

(+) Investment in equity-accounted investees

(=) (a) Total value

(+) Total ﬁnancial debt

4) 5)

(-) Cash and liquid assets

(=) (b) Net ﬁnancial debt

(=) (b/a) LTV

Including advance payments and deposits and inventories – trading property,

excluding the right-of-use assets

Named as „Assets held for sale“ in FY 2019 and FY 2018 and „Investment

properties classiﬁed as held for sale“ in FY 2017

Including only property related JV‘s starting from Dec 2022

Total of bank loans, straight bonds, schuldscheins and convertible bond and

exluding lease liabilities

Including balances under held for sale

Annualized net rent including the contribution from joint venture positions

and excluding the net rent from assets held for sale

UNENCUMBERED ASSETS RATIO

The Unencumbered assets ratio is an additional indicator to

assess Aroundtown’s financial flexibility. As Aroundtown is

able to raise secured debt over the unencumbered asset, a

high ratio of unencumbered assets provides Aroundtown with

additional potential liquidity. Additionally, unencumbered as

sets provide debt holders of unsecured debt with a headroom.

Aroundtown derives the

Unencumbered assets

ratio

from the

division of

Rent generated by unencumbered assets

Rent gen-

erated by the total Group. Rent generated by unencumbered assets

is the net rent on an annualized basis generated by assets

which are unencumbered, including the contribution from joint

venture positions but excluding the net rent from assets held

for sale. In parallel,

Rent generated by the total Group

is the

net rent on an annualized basis generated by the total Group

including the contribution from joint venture positions but

excluding the net rent from assets held for sale.

EQUITY RATIO

Equity Ratio

is the ratio of

Total Equity

divided by

Total Assets

each as indicated in the consolidated ﬁnancial statements.

Aroundtown believes that Equity Ratio is useful for inves

tors primarily to indicate the long-term solvency position of

Aroundtown.

Equity Ratio Calculation

(a) Total Equity

(b) Total Assets

(=) (a/b) Equity Ratio

Unencumbered Assets Ratio Calculation

(a) Rent generated by unencumbered assets

(b) Rent generated by the total Group

(=) (a/b) Unencumbered Assets Ratio

ICR Calculation

(a) Finance expenses

(b) Adjusted EBITDA

(=) (b/a) ICR

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Previously included contributions from joint venture positions and named as

„Group ﬁnance expenses“ in FY 2018, 2019 and 2020

Including the contributions from assets held for sale and previously included con

tributions from joint venture positions

Including extraordinary expenses for uncollected rent due to the Covid pandemic

Previously included contributions from joint venture positions and named as

„Group amortization of loans from ﬁnancial institutions“ in FY 2018 and 2019.

Named as „Amortizations of loans from ﬁnancial institutions“ in FY 2017

Named as „Total Group ﬁnance expenses and amortizations of loans“ in FY 2018

and 2019

ICR, Covid Adjusted Calculation

(a) Finance expenses

2) 3)

(=) (c/a) ICR, Covid adjusted

DSCR Calculation

(a) Finance expenses

(d) Amortization of loans from ﬁnancial institutions and others

(=) (e=a+d) Total ﬁnance expenses and amortizations of loans

(b) Adjusted EBITDA

(=) (b/e) DSCR

NET DEBT-TO-EBITDA AND NET DEBT-TO-

EBITDA INCLUDING PERPETUAL NOTES

The

Net debt-to-EBITDA

is used in the real estate industry

to measure the leverage position of a company. This KPI

highlights the ratio of ﬁnancial liabilities to the Compa

ny’s recurring operational proﬁts and thereby indicates

how much of the recurring operational proﬁts are avail

able to debt holders. Aroundtown calculates its

Net debt-

to-EBITDA

ratio by dividing the

Net ﬁnancial debt

as at the

balance sheet date by the

adjusted EBITDA

(annualized)

The

Net ﬁnancial debt

is deﬁned above under

Loan- to-Value

ratio. The

adjusted EBITDA (annualized)

includes contri

bu-

tions from assets held for sale and joint venture positions

and excludes extraordinary expenses for uncollected

rent due to the Covid pandemic. The

adjusted EBITDA (an-

nualized)

is calculated by adjusting the adjusted EBITDA

to reﬂect a theoretical full year ﬁgure. This is done by

multiplying the adjusted EBITDA of the period by 4 if it is

the three-month period result, by 2 if it is the six-month

period result and by 4/3 if it is the nine-month period

result. For the full year, there is no adjustment made.

Aroundtown additionally provides the

Net debt-to-EBITDA

including perpetual notes

ratio by adding its

Equity attrib-

utable to perpetual notes investors

as at the balance sheet

date to the

Net ﬁnancial debt

. Although AT’s perpetual

notes are 100% equity instruments under IFRS, credit

rating agencies, including S&P, can apply an adjustment

to such instruments and consider AT’s perpetuals as 50%

equity and 50% debt. Additionally, some equity investors

may ﬁnd an adjustment that adds the full balance of per

petual notes to the net debt as relevant. For enhanced

transparency, AT additionally provides this KPI including

the full balance sheet amount of

Equity attributable to

perpetual notes investors

See LTV calculation for the breakdown

Including the contributions from assets held for sale and joint venture positions,

excluding extraordinary expenses for uncollected rent due to the Covid pandemic.

See the explanation above for the annualization adjustment

Net Debt-to-EBITDA Calculation

(a) Net ﬁnancial debt

(b) Adjusted EBITDA (annualized)

(=) (a/b) Net debt-to-EBITDA

Net Debt-to-EBITDA Including Perpetual Notes Calculation

(a) Net ﬁnancial debt

(b) Equity attributable to perpetual notes investors

(=) [(a+b)/c] Net debt-to-EBITDA including perpetual notes

EPRA NAV KPI’S

EPRA NET REINSTATEMENT VALUE (EPRA NRV)

The EPRA NRV is deﬁned by the European Public Real Estate

Association (EPRA) as a measure to highlight the value of a

company’s net assets on a long-term basis, assuming entities

never sell assets. This KPI aims to represent the value required

to rebuild the company. Aroundtown’s

EPRA NRV

calculation

begins by adding to the

Equity attributable to the owners of the

Company

the

Deferred tax liabilities

which includes balances in

assets held for sale and excludes signiﬁcant minority share in

deferred tax liabilities, as well as excluding deferred tax assets

on certain ﬁnancial instruments in line with EPRA recommen

dations. Aroundtown also adds/deducts

Fair value measurement

of derivative ﬁnancial instruments

which includes the derivative

ﬁnancial instruments related to interest hedging and excludes

signiﬁcant minority

share in derivative ﬁnancial instruments.

These items are added back in line with EPRA’s standards

as they are not expected to materialize on an ongoing

and

long-term basis. Aroundtown

then

deducts the

Goodwill in re-

lation to TLG, Goodwill in relation to GCP

and adds

Real estate

transfer tax

which is the gross purchasers’ costs in line with

EPRA’s standards which includes Aroundtown’s

share in TLG’s

and GCP’s relevant real estate transfer taxes (RETT).

Following

the consolidation of GCP, the goodwill recognized in relation

to GCP became

relevant

for

EPRA NRV calculations.

EPRA

NRV

per share

is calculated by dividing the

EPRA NRV

by the

Number

of shares

which excludes the treasury shares and includes the

conversion impact of mandatory convertible notes.

The EPRA NAV was discontinued by EPRA starting from FY

2020. Following EPRA guidelines, Aroundtown provided the

bridge between the former EPRA NAV and the new EPRA

NRV in its FY 2020 report and discontinued reporting EPRA

NAV thereafter. The main difference between the former

EPRA NAV and the EPRA NRV is the addition of real estate

transfer taxes in the EPRA NRV.

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Excluding signiﬁcant minority share in deferred tax liabilities (DTL), as well

as deferred tax assets on certain ﬁnancial instruments in line with EPRA

recommendations, including DTL of assets held for sale

Excluding signiﬁcant minority share in derivatives

Deducting the goodwill resulting from the business combination with TLG

Deducting the goodwill resulting from the consolidation of GCP

Including the gross purchasers‘ costs of assets held for sale and relative

share in TLG’s and GCP‘s relevant RETT

Excluding shares in treasury and including the conversion impact of manda

tory convertible notes, base for share KPI calculations

EPRA NRV and EPRA NRV Per Share Calculation

Equity attributable to the owners of the Company

(+) Deferred tax liabilities

(+/-) Fair value measurement of derivative ﬁnancial instruments

(-) Goodwill in relation to TLG

(-) Goodwill in relation to GCP

(+) Real estate transfer tax

(=) (a) EPRA NRV

(b) Number of shares (in millions)

(=) (a/b) EPRA NRV per share

Excluding signiﬁcant minority share in deferred tax liabilities (DTL), as well as

deferred tax assets on certain ﬁnancial instruments in line with EPRA recom

mendations

Excluding signiﬁcant minority share in derivatives

Deducting the goodwill resulting from the business combination with TLG

Deducting the goodwill resulting from the consolidation of GCP. Prior to the con

solidation of GCP as of July 1, 2021, there was an adjustment related to surplus

on investment in GCP, named as „Goodwill as per the IFRS balance sheet (related

to GCP surplus)“

Excluding signiﬁcant minority share in intangibles

Newly deﬁned in Dec 2022 to exclude RETT

Including only the gross purchasers‘ costs of properties where RETT optimiza

tion at disposal can be achieved. Additionally including relative share in GCP‘s

relevant RETT

Previously deﬁned as „EPRA NTA“ or „EPRA NTA per share“ in FY 2020 and FY 2021

Excluding shares in treasury and including the conversion impact of mandatory

convertible notes, base for share KPI calculations

EPRA NTA (& per share) and EPRA NTA with RETT (& per share) Calculation

Equity attributable to the owners of the Company

(+) Deferred tax liabilities

(+/-) Fair value measurement of derivative ﬁnancial instruments

(-) Goodwill in relation to TLG

(-) Goodwill in relation to GCP

(-) Intangibles as per the IFRS balance sheet

(=) (a) EPRA NTA

(+) (b) Real estate transfer tax

(=) (c=a+b) EPRA NTA with RETT

(a) EPRA NTA

(d) Number of shares (in millions)

(=) (a/d) EPRA NTA per share

(d) Number of shares (in millions)

(=) (c/d) EPRA NTA with RETT per share

EPRA NET TANGIBLE ASSETS (EPRA NTA)

AND EPRA NTA with RETT

The EPRA NTA is deﬁned by the European Public Real Estate

Association (EPRA) as a measure to highlight the value of a

company’s net tangible assets assuming entities buy and sell

assets, thereby crystallizing certain levels of unavoidable de

ferred taxes. Aroundtown’s

EPRA NTA

calculation begins by

adding to the

Equity attributable

the owners of the Company

the

Deferred tax liabilities

which excludes the deferred tax lia

bilities of properties held for sale, retail portfolio, development

rights & invest portfolio, GCP’s portfolio cities classiﬁed as

“Others” and signiﬁcant minority share in deferred tax liabili

ties, as well as excluding deferred tax assets on certain ﬁnan

cial instruments in line with EPRA recommendations. Around-

town also adds/deducts

Fair value measurement of derivative

ﬁnancial instruments

which includes the derivative ﬁnancial in

struments related to interest hedging and excludes signiﬁcant

minority share in derivative ﬁnancial instruments. Furthermore,

Aroundtown deducts the

Goodwill in relation to TLG, Goodwill

in relation to GCP

and

Intangibles as per the IFRS balance sheet

which excludes signiﬁcant minority share in intangibles. The

EPRA NTA

was reclassiﬁed in Dec 2022 to exclude

RETT

in order

to align better with market standards. The

EPRA NTA per share

is calculated by dividing the

EPRA NTA

by the

Number of shares

which excludes the treasury shares and includes the conver

sion impact of mandatory convertible notes. The

EPRA NTA with

RETT

adds gross purchasers’ cost of properties which enable

RETT optimization at disposal based on track record, including

the relative share in GCP’s relevant RETT. The

EPRA NTA with

RETT per share

is calculated by dividing the

EPRA NTA with RETT

Number of shares

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA NET DISPOSAL VALUE (EPRA NDV)

The EPRA NDV is deﬁned by the European Public Real Estate

Association (EPRA) as a measure that represents the share-

holders’ value under a disposal scenario, where deferred

taxes, ﬁnancial instruments and certain other adjustments

are calculated to the full extent of their liability, net of any

resulting tax. Aroundtown calculates its

EPRA NDV

by de

ducting from the

Equity attributa

ble to the owners of the Com-

pany

, the

Goodwill in relation to TLG

and

Goodwill in relation to

GCP

and deducting/adding the

Net fair value of debt

which

is the difference between the market value of debt and the

book value of debt, adjusted for taxes. The

EPRA NDV per

is calculated by dividing the

EPRA NDV

by the

Number

of shares

which excludes the treasury shares and includes

the conversion impact of mandatory convertible notes.

The EPRA NNNAV was discontinued by EPRA starting from

FY 2020. Following EPRA guidelines, Aroundtown provided

the bridge between the former EPRA NNNAV and the new

EPRA NDV in its FY 2020 report and discontinued reporting

EPRA NNNAV thereafter. The main difference between the

former EPRA NNNAV and the EPRA NDV is the exclusion of

deferred tax liabilities in the EPRA NDV and goodwill relat

ed to GCP surplus prior to the consolidation of GCP as of

July 1, 2021.

EPRA EARNINGS

The EPRA Earnings is deﬁned by the European Public Real

Estate Association (EPRA) as the earnings from operation

al activities and serves as an indicator of a company’s un

derlying operational proﬁts for the period in context of a

European real estate company. Aroundtown calculates its

EPRA Earnings

by deducting from the

Earnings per IFRS in-

come statement

, the

Property revaluations and capital gains

and

Impairment of goodwill,

non-cash and non-linear proﬁt

or loss items

adding back

Changes in fair value of ﬁnancial

assets and liabilities, buy-backs and early repayment costs,

net

a non-cash and non-operational expense item, adding

back

Deferred tax income (expenses)

in line with long-term

real estate business model, deducting the

Share of

proﬁt

from investment in equity-accounted investees

and adding

back

their recurring earnings called

Adjustment for investment

in equity-accounted investees

and deducting

EPRA Earnings

contribution to minorities

. With regard to

Adjustment for in-

vestment in equity-accounted investees

, given Aroundtown’s

strategic joint

venture investments, the proportional share

in these joint venture investments’ EPRA Earnings for the

year is included in accordance with the average holding

rate throughout the year. Prior to the third quarter of 2021,

these contributions were mostly attributed to GCP. Start

ing from July 1, 2021, GCP is consolidated in AT’s ﬁnancial

accounts and the minority share in GCP’s EPRA Earnings is

deducted instead.

EPRA Earnings per share

is calculated by dividing the

EPRA

Earnings

by the

Weighted average basic shares

which ex-

cludes the shares held in treasury and includes the conver

sion impact of mandatory convertible notes.

As FFO I is the widely-recognized indicator for a compa

ny’s operational performance, an additional reconciliation

is provided from the

EPRA Earnings

to the

FFO I

. In this re-

gard, on top of

EPRA Earnings, Total depreciation and amortiza-

tion, Finance-related costs

and

Other adjustments incl. one-off

expenses related to TLG merger

are added back.

Other adjust-

ments incl. one-off expenses related to TLG merger

are share-

based payments and one-off expenses related to TLG merger.

Furthermore,

FFO items mainly related to investments in eq-

uity-accounted investees, FFO contribution from assets held for

sale

and

Perpetual notes attribution

are deducted. FFO items

related to investment in equity-accounted investees refers to

Aroundtown’s share in GCP’s FFO I bridge adjustment for its

depreciation, ﬁnance-related costs, adjustment for perpetual

notes attributions and other FFO adjustments, additionally

adjusting for the minority share in these adjustments starting

from the third quarter of 2021.

Deducting the goodwill resulting from the business combination with TLG

Deducting the goodwill resulting from the consolidation of GCP. Prior to the

consolidation of GCP as of July 1, 2021, there was an adjustment related to

surplus on investment in GCP, named as „Goodwill as per the IFRS balance

sheet (related to GCP surplus)“

Excluding shares in treasury and including the conversion impact of manda

tory convertible notes, base for share KPI calculations

EPRA NDV and EPRA NDV Per Share Calculation

Equity attributable to the owners of the Company

(-) Goodwill in relation to TLG

(-) Goodwill in relation to GCP

(+/-) Net fair value of debt

(=) (a) EPRA NDV

(b) Number of shares

(=) (a/b) EPRA NDV per share

EPRA Earnings and EPRA Earnings Per Share Calculation

Earnings per IFRS income statement

(-) Property revaluations and capital gains

(-) Impairment of goodwill

(-) Changes in fair value of ﬁnancial assets and liabilities, buy-backs

and early repayment costs, net

(+) Deferred tax income (expenses)

(-) Share of proﬁt from investment in equity-accounted investees

(+) Adjustment for investment in equity-accounted investees

4) 5)

(-) EPRA Earnings contribution to minorities

(=) (a) EPRA Earnings

(b) Weighted average basic shares

(=) (a/b) EPRA Earnings per share

Named as „Fair value adjustments, capital gains and other income“ in FY 2017

Named as „Changes in fair value of ﬁnancial assets and liabilities, net“ in FY

2017, 2018, 2019, 2020 and 2021

Named as „Share in proﬁt from investment in equity-accounted investees“ in

FY 2017, 2018, 2019 and 2020

In FY 2017, 2018 and 2019, share of proﬁt from investment in equity-accoun

ted investees and adjustment for investment in equity-accounted investees

were summed up and presented in a single line item called „Adjustments for

investment in equity-accounted investees“

Including AT‘s share in joint venture positions. GCP contributed to this line

item until June 30, 2021. Starting from July 1, 2021 GCP is consolidated

Additionally adjusting for the minority share in GCP‘s FFO to EPRA Earnings

bridge. Named as „Contribution from minorities“ in FY 2017 and „Contribution

to minorities“ in FY 2018, 2019 and 2020

Weighted average number of shares excludes shares held in treasury and in

cludes the conversion impact of mandatory convertible notes; base for share

KPI calculations

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA NET INITIAL YIELD (NIY) AND EPRA

‘TOPPED-UP’ NIY

The EPRA Net Initial Yield (NIY) and EPRA ‘Topped-up’ NIY are

comparable yield measures provided by EPRA for portfolio

valuations. The

EPRA NIY

calculation begins by subtracting the

non-recoverable

Operating costs

from

End of period annualized

net rental income

which includes Aroundtown’s share in joint

venture positions’ net rental income and net rental income

from assets held for sale. In order to reach annualized operat

ing costs, Aroundtown uses cost margins for each respective

periods. This

Annualized net rent, after non-recoverable costs

is divided by the

Grossed up complete property portfolio value

which is the sum of

Complete property portfolio

and

Allowance

for estimated purchasers’ costs

. The

Complete property portfolio

is the sum of

Investment property, Investment property of assets

held for sale

and

Share of JV investment property

, excluding the

part of the portfolio that is

Classiﬁed as Development rights

& Invest

. On the other hand,

EPRA ‘Topped-up’ NIY

divides the

Topped-up net annualized rent

which includes additionally

No-

tional rent expiration of rent-free periods or other lease incen-

tives

by the

Grossed up complete property portfolio value

EPRA VACANCY

The EPRA Vacancy is a key benchmark for providing com

parable vacancy reporting across real estate companies.

Around

town provides

EPRA Vacancy

and

EPRA Vacancy includ-

ing JV

EPRA

Vacancy

is calculated by dividing the

Estimated

Rental Value (ERV) of the vacant space

by the

Dec annualized

net rent including vacancy rented at ERV

. This ﬁgure was pre

viously deﬁned as EPRA Vacancy - Commercial portfolio but

it was renamed following the consolidation of GCP as of

July 1, 2021.

EPRA Vacancy including JV

includes the con-

tribution from joint venture positions and is calculated by

dividing the

Estimated Rental

Value (ERV) of the vacant space

including JV

by the

Dec annualized net rent including vacancy

rented at ERV including JV

. This ﬁgure

was previously deﬁned

as EPRA Vacancy - Group portfolio.

Named as „Investment properties of assets held for sale“ in FY 2017, 2018

and 2019

Named as „Share of GCP investment property“ in FY 2017

Named as „Classiﬁed as development rights and new buildings“ in FY 2018

and 2019. Prior to that, such classiﬁcation did not exist

Including AT‘s share in joint venture positions

Including the net rent contribution of assets held for sale

To reach annualized operating costs, cost margins were used for each respec

tive periods

EPRA NIY and ´TOPPED-UP´ NIY Calculation

(+) Investment property

(+) Investment properties of assets held for sale

(+) Share of JV investment property

(-) Classiﬁed as Development rights & Invest

(=) Complete property portfolio

(+) Allowance for estimated purchasers' costs

(=) (a) Grossed up complete property portfolio value

(+) End of period annualized net rental income

4) 5)

(-) Operating costs

(=) (b) Annualized net rent, after non-recoverable costs

(+) Notional rent expiration of rent-free periods or other

lease incentives

(=) (c) Topped-up net annualized rent

(=) (b/a) EPRA NIY

(=) (c/a) EPRA 'TOPPED-UP' NIY

Named as „Estimated Rental Value (ERV) of the vacant space - Group portfolio“

in FY 2020. The breakdown of the calculation wasn‘t provided prior to that

Named as „Dec annualized net rent including vacancy rented at ERV - Group

portfolio“ in FY 2020. The breakdown of the calculation wasn‘t provided prior

to that

Named as „EPRA Vacancy - Group portfolio“ in FY 2017, 2018, 2019 and 2020

Named as „Estimated Rental Value (ERV) of the vacant space - Commercial

portfolio“ in FY 2020. The breakdown of the calculation wasn‘t provided prior

to that

Named as „Dec annualized net rent including vacancy rented at ERV - Com

mercial portfolio“ in FY 2020. The breakdown of the calculation wasn‘t pro

vided prior to that

Named as „EPRA Vacancy - Commercial portfolio“ in FY 2017, 2018, 2019 and

2020

EPRA Vacancy Including JV Calculation

(a) Estimated Rental Value (ERV) of the vacant space including JV

(b) Dec annualized net rent including vacancy rented at ERV including JV

(=) (a/b) EPRA Vacancy including JV

EPRA Vacancy Calculation

(d) Dec annualized net rent including vacancy rented at ERV

(=) (c/d) EPRA Vacancy

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA COST RATIOS

The EPRA Cost Ratios are key benchmarks provided by

Aroundtown in line with EPRA guidelines in order to en-

able meaningful measurement of changes in its operat

ing costs, as well as to provide for

increased

comparabil-

ity across

companies. The

EPRA

Costs

is derived by adding

together the

Administrative and other expenses, Maintenance

and refurbishment, Ancillary expenses and purchased services,

net, Personnel expenses, Other operating costs

and

Share of eq-

uity-accounted investees

which refers to Around

town’s share

in joint venture positions’ EPRA costs (including direct

vacancy costs). Prior to the third quarter of 2021, these

contributions were mostly attributed to GCP. Starting from

July 1, 2021, GCP is consolidated in Aroundtown’s ﬁnancial

accounts. The EPRA Costs exclude

Depreciation and amor-

tization

if includ

ed above and include

Extraordinary expens-

es for uncollected rent

due to the Covid pandemic. To reach

EPRA Cost Ratio (including direct vacancy costs)

, the sum is

then divided by the

Net rental income

, which is derived by

deducting from the

Revenue

, the

Operating and other income

but adding

Share of net rental income from equity-accounted

investees

, reﬂecting Aroundtown’s share in

joint venture po-

sitions’ net rental income. Similar to the EPRA Costs, prior

to the third quarter of 2021, these contributions from joint

venture positions were mostly attributed to GCP. Starting

from July 1, 2021, GCP is consolidated in Aroundtown’s ﬁ

nancial accounts. The

EPRA Cost Ratio (excluding direct va-

cancy costs)

is derived by dividing the

EPRA Costs (excluding

direct vacancy costs)

, which deducts

Direct vacancy costs

(including Aroundtown’s share in joint venture positions’

direct vacancy costs)

from

EPRA Costs (including direct vacan-

cy costs)

, by the

Net rental

income

. Aroundtown additionally

provides EPRA Costs Ratios excluding Covid-19 adjust-

ments. The

EPRA Cost Ratio (including

direct vacancy costs,

excluding Covid-19 adjustment)

is derived by dividing the

EPRA

Costs (including direct vacancy costs, excluding Covid-19 adjust-

ment)

, which adds back the

Extraordinary expenses for uncol-

lected rent

to the

EPRA Costs

(

including direct vacancy costs)

, by

Net rental income

. The EPRA

Cost Ratio (excluding direct vacancy

costs, excluding Covid-19 adjustment)

is derived by dividing the

EPRA Costs (excluding direct vacancy costs, excluding Covid-19

adjustment)

, which adds back the

Extraordinary expenses for

uncollected rent

to the

EPRA Costs (excluding direct vacancy

costs)

, by

Net rental income

EPRA Cost Ratios Calculation

(+) Administrative and other expenses

(+) Maintenance and refurbishment

(+) Ancillary expenses and purchased services, net

1) 2)

(+) Personnel expenses

(+) Other operating costs

(+) Depreciation and amortization

(+) Share of equity-accounted investees

Exclude:

(-) Depreciation and amortization

(=) (a) EPRA Costs (including direct vacancy costs)

(-) (b) Direct vacancy costs

(=) (c=a-b) EPRA Costs (excluding direct vacancy costs)

(-) (d) Extraordinary expenses for uncollected rent

(=) (e=a-d) EPRA Costs (including direct vacancy costs, excluding

Covid-19 adjustment)

(=) (f=c-d) EPRA Costs (excluding direct vacancy costs, excluding

Covid-19 adjustment)

(+) Revenue

(-) Operating and other income

(+) Share of net rental income from equity-accounted investees

(=) (g) Net rental income

(=) (h=a/g) EPRA Cost Ratio (including direct vacancy costs)

(=) (i=a/g) EPRA Cost Ratio (excluding direct vacancy costs)

(=) (j=a/g) EPRA Cost Ratio (including direct vacancy costs, excluding

Covid-19 adjustment)

(=) (k=a/g) EPRA Cost Ratio (excluding direct vacancy costs,

excluding Covid-19 adjustment)

Named as „Net Ancillary expenses and purchased services“ in FY 2019 and FY 2020

These items were summed up and presented together as „Operational expenses“

in FY 2017 and FY 2018

Including AT‘s share in joint venture positions. GCP contributed to this line item

until June 30, 2021. Starting from July 1, 2021 GCP is consolidated

Prior to IFRS 16 reclassiﬁcation, ground rents were excluded from EPRA Costs in

FY 2017 and 2018. Following the reclassiﬁcation, ground rents are no longer part

of operating expenses

Extraordinary expenses for uncollected rent due to the Covid pandemic. The ad

justment started in 2020 after the Covid pandemic in order to reﬂect the recurring

costs excluding these extraordinary expenses

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

EPRA LOAN-TO-VALUE (EPRA LTV)

The EPRA LTV is a metric that aims to assess the leverage of

shareholder equity within a real estate company. The main

difference between EPRA LTV and the Company’s calculated

LTV is the wider categorization of liabilities and assets with

the largest impact coming from the inclusion of perpetual

notes as debt, inclusion of ﬁnancial assets in the net assets

and proportionate consolidation adjustments.

EPRA LTV

calculated by dividing the

EPRA Net debt

EPRA Total prop-

erty value.

EPRA Net debt

is derived by deducting

Cash and

liquid assets

from

EPRA Gross debt

Cash and liquid assets

are

deﬁned under LTV section above.

EPRA Gross debt

is the sum

Total ﬁnancial debt

described under LTV section above,

an adjustment related to

Foreign currency derivatives

Equi-

ty attributable to perpetual notes investors

and

Net payables

EPRA Total property value

is the sum of

Investment property

described under the LTV section,

Investment property of as-

sets held for sale

Owner-occupied property

Intangibles as per

the IFRS balance sheet

Net receivables

and

Financial assets

Net payables

Net receivables

is the sum of

Trade and oth-

er receivables

and

Other non-current assets

(both of which

excluding loans-to-own assets and vendor loans), net of

Trade and other payables, Other non-current liabilities

(ex-

cluding lease liabilities),

Tax payable

and

Provisions for

other liabilities

and

accrued expenses

, including balances in

held for sale.

Net receivables

are larger than

Net payables

absolute values, the netted sum is shown in

EPRA Total prop-

erty value

, otherwise in

EPRA Net debt

Financial assets

are the

sum of loans-to-own assets and vendor loans. The calcula

tion above reaches at

EPRA LTV – Consolidated (as reported)

Following EPRA guideline, Aroundtown adds its

Share of

joint ventures

and deducts

Material non-controlling interests

relating to GCP and TLG for all respective items where rele

vant which results in

EPRA LTV – Proportionate consolidation

also named as

EPRA LTV

EPRA LTV Calculation

(+) Total ﬁnancial debt

(+/-) Foreign currency derivatives

(+) Equity attributable to perpetual notes investors

(+) Net payables

(=) EPRA Gross debt

(-) Cash and liquid assets

(=) (a) EPRA Net debt

(+) Investment property

(+) Investment property of assets held for sale

(+) Owner-occupied property

(+) Intangibles as per the IFRS balance sheet

(+) Net receivables

(+) Financial assets

(=) (b) EPRA Total property value

(=) (a/b) EPRA LTV

The components are described under the LTV section

If Net receivables are larger than Net payables in absolute values, the netted

sum is shown in EPRA Total property value, otherwise in EPRA Net debt

Following EPRA guidelines, Aroundtown adds its share of joint ventures and

deducts material non-controlling interests relating to GCP and TLG for all

items where relevant

AROUNDTOWN

BOARD OF DIRECTORS‘ REPORT

Frank Roseen

Executive Director

Jelena Afxentiou

Executive Director

By order of the Board of Directors, March 29, 2023

Responsibility

statement

To the best of our knowledge, the consolidated ﬁnancial statements of

Aroundtown SA, prepared in accordance with the applicable reporting

principles for ﬁnancials statements, give a true and fair view of the assets,

liabilities, ﬁnancial position and proﬁt or loss of the Group, and the man

agement report of the Group includes a fair review of the development of

the business, and describes the main opportunities, risks, and uncertainties

associates with the Group.

Disclaimer

The ﬁnancial data and results of the Group are affected by ﬁnancial and

operating results of its subsidiaries. Signiﬁcance of the information pre

sented in this report is examined from the perspective of the Company

including its portfolio with the joint ventures. In several cases, additional

information and details are provided in order to present a comprehensive

representation of the subject described, which in the Group’s view is es

sential to this report.

Opinion

We have audited the consolidated ﬁnancial statements of Aroundtown SA and its sub

sidiaries (the “Group”), which comprise the consolidated statement of ﬁnancial posi

tion as at 31 December 2022, and the consolidated statements of proﬁt or loss, other

comprehensive income, changes in equity and cash ﬂows for the year then ended, and

notes to the consolidated ﬁnancial statements, including a summary of signiﬁcant

accounting policies.

In our opinion, the accompanying consolidated ﬁnancial statements give a true and fair

view of the consolidated ﬁnancial position of the Group as at 31 December 2022 and

of its consolidated ﬁnancial performance and its consolidated cash ﬂows for the year

then ended in accordance with International Financial Reporting Standards (IFRSs) as

adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law

of 23 July 2016 on the audit profession (“Law of 23 July 2016”) and with International

Standards on Auditing (“ISAs”) as adopted for Luxembourg by the Commission de Sur

veillance 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 “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

a) Why the matter was considered to be one of most signiﬁcance in our audit of the

consolidated ﬁnancial statements for the year ended 31 December 2022?

We refer to the accounting policies at note 2.3 “Signiﬁcant accounting judgments,

estimates and assumptions”, note 3.13 “Investment Property”, note 3.15 “Non-current

assets held for sale” and note 16 “Investment Property” in the consolidated ﬁnancial

statements of Aroundtown SA.

As at 31 December 2022 the Group held a portfolio of investment property with a fair

value of MEUR 27,981.0 (31 December 2021: MEUR 29,115.9) and investment property

within assets held for sale with a fair value of MEUR 1,009.3 (31 December 2021:

MEUR 909.1).

The valuation of investment property is a signiﬁcant judgement area and is under

pinned by a number of assumptions.

The

fair value measurement of investment property is inherently subjective and re

quires valuation experts and the Group’s management to use certain assumptions re

garding 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 de

REPORT OF THE RÉVISEUR

D’ENTREPRISES AGRÉÉ

Report on the audit of the consolidated financial statements

velopment 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 in its fair value.

The Group uses external valuation reports issued by external independent profession

ally qualiﬁed valuers to determine the fair value of its investment property.

The external valuers were engaged by management and performed their work in com

pliance with the Royal Institute of Chartered Surveyors (“RICS”) Valuation – Professional

Standards, TEGoVA European Valuations Standards and IVSC International Valuation

Standard.

The Valuers used by the Group have considerable experience of the markets in which

the Group operates. In determining a property’s valuation, the valuers take into account

property-speciﬁc characteristics and information such as the current tenancy agree

ments 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 include but are 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 by Aroundtown SA 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 internal property valuation specialist, on a sample

basis, we tested the accuracy and completeness of inputs used by the external

valuers, as well as appropriateness of valuation parameters used, such as discount

capitalisation rates, market rents per square meter and capital expenditure, vacancy

rates, comparable price per square meter and development cost;

In case a valuation was performed considering the highest and best use, we assessed,

on a sample basis, the appropriateness of the special assumptions considered, and

whether these assumptions were technically possible, legally permissible and

ﬁnancially feasible;

Through the involvement of our internal property valuation specialist, on a sample

basis, we assessed the valuation process and signiﬁcant assumptions and critical

judgement areas by benchmarking the key assumptions to external industry data

and comparable property transactions, in particular the yields applied;

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 infor

mation 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.

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 IFRSs as adopted by the European

Union, and for such internal control as the Board of Directors determines is necessary to

enable the preparation of consolidated ﬁnancial statements that are free from material

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 un

less 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 profes

sional 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 com

plied with relevant ethical requirements regarding independence, and to communicate

with them all relationships and other matters that may reasonably be thought to bear

on our independence, and where applicable, actions taken to eliminate threats or safe

guards applied.

From the matters communicated with those charged with governance, we determine

those matters that were of most signiﬁcance in the audit of the consolidated ﬁnancial

statements of the current period and are therefore the key audit matters. We describe

these matters in our report unless law or regulation precludes public disclosure about

the matter.

Report on other legal and regulatory requirements

We have been appointed as “réviseur d’entreprises agréé” by the Shareholders on 18

November 2022 and the duration of our uninterrupted engagement, including previous

renewals and reappointments, is six 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 con

solidated 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 2022 with relevant statutory requirements set out in the ESEF Reg

ulation that are applicable to consolidated ﬁnancial statements.

For the Group it relates to:

•

Consolidated ﬁnancial statements prepared in a valid xHTML format;

•

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 Aroundtown SA as at 31 De

cember 2022, identiﬁed as 529900H4DWG3KWMBMQ39-2022-12-31-en.zip, have been

prepared, in all material respects, in compliance with the requirements laid down in

the ESEF Regulation.

Our audit report only refers to the consolidated ﬁnancial statements of Aroundtown SA

as at 31 December 2022, identiﬁed as 529900H4DWG3KWMBMQ39-2022-12-31-en.zip,

prepared and presented in accordance with the requirements laid down in the ESEF

Regulation, which is the only authoritative version.

Luxembourg, 29 March 2023

KPMG Audit S.à r.l.

Cabinet de révision agréé

Muhammad Azeem

Partner

BERLIN

102

consolidated financial statements

103

Consolidated statement of profit or loss

Year ended December 31,

Note

2022

2021

in € millions

Revenue

1,609.9

1,323.2

Property revaluations and capital gains

(497.3)

809.7

Share of proﬁt from investment in equity-accounted investees

5.9

193.4

Property operating expenses

(694.9)

(533.0)

Administrative and other expenses

(62.5)

(56.6)

Operating proﬁt

361.1

1,736.7

Impairment of goodwill

15.1

(404.3)

Finance expenses

(184.8)

(180.4)

Other ﬁnancial results

(194.1)

(162.1)

(Loss) proﬁt before tax

(422.1)

1,394.2

Current tax expenses

12.2

(117.4)

(100.3)

Deferred tax income (expenses)

12.3

82.4

(215.8)

(Loss) proﬁt for the year

(457.1)

1,078.1

(Loss) proﬁt attributable to:

Owners of the Company

(645.1)

642.2

Perpetual notes investors

118.1

105.9

Non-controlling interests

69.9

330.0

(Loss) proﬁt for the year

(457.1)

1,078.1

Net (loss) earnings per share attributable to the owners of the Company (in €)

Basic (loss) earnings per share

13.1

(0.58)

0.55

Diluted (loss) earnings per share

13.2

(0.58)

0.53

Consolidated statement of other comprehensive income

Year ended December 31,

Note

2022

2021

in € millions

(Loss) proﬁt for the year

(457.1)

1,078.1

Other comprehensive income (loss):

Items that are or may be reclassiﬁed subsequently to proﬁt or loss, net of tax:

Foreign operations – foreign currency translation difference, net of investment hedges of foreign operations

(33.3)

21.5

Cash ﬂow hedges and cost of hedging

33.8

65.4

Equity-accounted investees – share of other comprehensive income

20.8

Items that will not be reclassiﬁed to proﬁt or loss, net of tax:

Revaluation of property, plant and equipment

15.3

Total comprehensive (loss) income for the year

(441.3)

1,185.8

Total comprehensive (loss) income attributable to:

Owners of the Company

(626.1)

741.8

Perpetual notes investors

118.1

105.9

Non-controlling interests

66.7

338.1

Total comprehensive (loss) income for the year

(441.3)

1,185.8

Consolidated statement of financial position

As at December 31,

2022

2021

Note

in € millions

ASSETS

Property and equipment

199.7

132.0

Goodwill and intangible assets

1,308.1

1,717.3

Investment property

27,981.0

29,115.9

Advance payments and deposits

136.1

155.8

Investment in equity-accounted investees

1,291.9

1,222.5

Derivative ﬁnancial assets

26.1

205.8

236.1

Other non-current assets

1,303.8

1,189.1

Deferred tax assets

12.3

65.1

85.5

Non-current assets

32,491.5

33,854.2

Cash and cash equivalents

26.3.2

2,305.4

2,873.0

Short-term deposits

137.5

27.5

Financial assets at fair value through proﬁt or loss

26.1

266.5

339.8

Inventories – trading property

88.0

Trade and other receivables

1,168.1

1,131.3

Derivative ﬁnancial assets

26.1

46.8

36.3

Assets held for sale

16.2.2

931.3

1,033.0

Current assets

4,855.6

5,528.9

Total assets

37,347.1

39,383.1

Consolidated statement of financial position (continued)

As at December 31,

2022

2021

Note

in € millions

EQUITY

Share capital

20.1.1

15.4

Treasury shares

20.1.2

(3,033.7)

(2,937.3)

Retained earnings and other reserves

12,603.6

13,455.5

Equity attributable to the owners of the Company

9,585.3

10,533.6

Equity attributable to perpetual notes investors

20.2

4,747.7

Equity attributable to the owners of the Company and perpetual notes investors

14,333.0

15,281.3

Non-controlling interests

20.3

3,490.4

3,875.1

Total equity

17,823.4

19,156.4

LIABILITIES

Loans and borrowings

22.1

1,266.0

1,091.8

Straight bonds and schuldscheins

22.2

13,307.4

13,934.6

Derivative ﬁnancial liabilities

26.2

431.7

394.7

Other non-current liabilities

567.2

433.0

Deferred tax liabilities

12.3

2,662.3

2,766.0

Non-current liabilities

18,234.6

18,620.1

Current portion of long-term loans and loan redemptions

22.1

22.9

56.2

Straight and convertible bonds

22.2

100.0

487.4

Trade and other payables

666.0

620.9

Tax payable

93.6

112.6

Provisions for other liabilities and accrued expenses

201.0

235.3

Derivative ﬁnancial liabilities

26.2

12.9

30.7

Liabilities associated with assets classiﬁed as held for sale

16.2.2

192.7

63.5

Current liabilities

1,289.1

1,606.6

Total liabilities

19,523.7

20,226.7

Total equity and liabilities

37,347.1

39,383.1

The Board of Directors of Aroundtown SA authorized these consolidated ﬁnancial statements for issuance on March 29, 2023

Frank Roseen

Executive Director

Jelena Afxentiou

Executive Director

Consolidated statement of changes in equity

Attributable to the owners of the Company

capital

premium

and capital

reserves

Cash ﬂow

hedge and

cost of hedge

reserves

Treasury

Equity

attributable to

Retained

the owners of

earnings

the Company

Equity

attributable

to perpetual

notes

investors

Equity

attributable to

the owners of

the Company

and perpetual

notes investors

Non-

controlling

interests

Total

equity

Note

Balance as at January 1, 2022

(Loss) proﬁt for the year

Other comprehensive (loss) income for the year,

net of tax

Total comprehensive (loss) income for the year

Transactions with owners of the Company

Contributions and distributions

Share buy-back program

20.1.2

Equity settled share-based payment

Dividend distributions to the owners

20.1.3

of the Company

Total contributions and distributions

Changes in ownership interests

Initial consolidations and deconsolidations

20.3.1

Transactions with non-controlling interests

20.3.1

(NCI), dividends distributed to NCI and others

Total changes in ownership interests

Transactions with perpetual notes investors

Payment to perpetual notes investors

Total transactions with perpetual notes investors

Balance as at December 31, 2022

15.4

5,529.8

(16.4)

(2.2)

(325.2)

(327.4)

5,186.0

24.2

35.4

59.6

(2,937.3)

(254.6)

2.3

155.9

(96.4)

(3,033.7)

in € millions

7,901.5

10,533.6

(645.1)

19.0

(645.1)

(626.1)

(254.6)

0.1

(169.3)

(423.8)

101.6

7,358.0

9,585.3

4,747.7

118.1

(118.1)

4,747.7

15,281.3

3,875.1

(527.0)

69.9

19.0

(3.2)

(508.0)

66.7

(254.6)

0.1

(169.3)

(423.8)

26.3

101.6

(477.7)

101.6

(451.4)

(118.1)

14,333.0

3,490.4

19,156.4

(457.1)

15.8

(441.3)

(254.6)

0.1

(169.3)

(423.8)

26.3

(376.1)

(349.8)

(118.1)

17,823.4

Consolidated statement of changes in equity (continued)

Attributable to the owners of the Company

capital

premium

and capital

reserves

Cash ﬂow

hedge and

cost of hedge

reserves

Treasury

Retained

earnings

Equity

attributable to

the owners of

the Company

Equity

attributable

to perpetual

notes

investors

Equity

attributable to

the owners of

the Company

and perpetual

notes

investors

Non-

controlling

interests

Total

equity

Note

in € millions

Balance as at January 1, 2021

Proﬁt for the year

Other comprehensive loss for the year,

net of tax

Total comprehensive income (loss)

for the year

Transactions with owners of the Company

Contributions and distributions

Share buy-back program

Equity settled share-based payment

Dividend distribution

Total contributions and distributions

Changes in ownership interests

Share buy-back in subsidiaries

Transactions with non-controlling interests

(NCI), dividends to NCI and deconsolidations

Business combination with Grand City

Properties S.A.

Total changes in ownership interests

Transactions with perpetual notes investors

Issuance of perpetual notes, net

of perpetual notes buy-back

Payment to perpetual notes investors

Total transactions with perpetual notes investors

Balance as at December 31, 2021

20.1.2

20.3.1

20.2

15.4

5,752.4

38.2

(37.2)

61.4

(2,621.6)

7,315.8

642.2

10,424.8

3,132.9

105.9

13,557.7

2,025.3

330.0

8.1

15,583.0

642.2

748.1

1,078.1

99.6

107.7

38.2

0.5

(237.6)

61.4

(444.1)

1.8

146.4

642.2

741.8

105.9

847.7

338.1

1,185.8

(444.1)

2.3

(91.2)

(237.1)

(295.9)

(19.8)

(9.0)

(47.5)

(533.0)

1,250.0

(533.0)

(260.6)

(303.1)

2,075.4

(533.0)

(9.0)

(269.6)

(47.5)

(350.6)

(19.8)

1,230.2

3,305.6

(23.7)

(19.8)

(56.5)

(76.3)

1,250.0

364.7

(105.8)

1,173.7

1,511.7

2,685.4

(23.7)

341.0

(105.8)

15.4

(23.7)

5,529.8

24.2

(2,937.3)

7,901.5

(23.7)

258.9

4,747.7

235.2

15,281.3

3,875.1

235.2

10,533.6

19,156.4

Consolidated statement of cash flows

Year ended December 31,

2022

2021

Note

in € millions

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss) proﬁt for the year

(457.1)

1,078.1

Adjustments for the proﬁt:

Depreciation and amortization

14, 15

21.1

15.9

Property revaluations and capital gains

497.3

(809.7)

Share of proﬁt from investment in equity-accounted investees

(5.9)

(193.4)

Impairment of goodwill

15.1

404.3

Finance expenses and other ﬁnancial results

378.9

342.5

Current and deferred tax expenses

35.0

316.1

Share-based payment

21.2

5.4

5.9

Change in working capital

(29.1)

(61.3)

Dividend received

34.8

24.3

Tax paid

(96.7)

(92.6)

Net cash from operating activities

788.0

625.8

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from (payments for) disposals (acquisitions) of property, equipment and intangible assets, net

(26.4)

22.9

Proceeds from disposals of investment property and proceeds from associates

1,286.5

1,994.0

Acquisitions of investment property and associates, investment in capex and advances paid

(730.3)

(815.0)

Investments in traded securities and other ﬁnancial assets, net

(121.3)

(124.3)

Net cash from investing activities

408.5

1,077.6

Consolidated statement of cash flows (continued)

Year ended December 31,

2022

2021

Note

in € millions

CASH FLOWS FROM FINANCING ACTIVITIES

Share buy-back program

20.1.2

(254.6)

(444.1)

Share buy-back in subsidiaries

20.3.1

(269.6)

Payments to mandatory convertible notes investors and proceeds from issuance, net

(11.9)

(10.5)

Proceeds (payments) from (to) perpetual notes investors, net of buy-back

(118.1)

235.2

Buy-back and redemption of bonds

22.3

(829.2)

(699.7)

Proceeds (repayments) from (of) loans from ﬁnancial institutions and others, net

22.3

225.0

(595.1)

Amortization of loans from ﬁnancial institutions and others

22.3

(13.3)

(14.9)

Transactions with non-controlling interests

20.3.1

(340.8)

(277.4)

Dividend paid to the owners of the Company

20.1.3

(169.3)

(252.0)

Dividend paid to non-controlling interests

20.3.1

(86.6)

(77.4)

Proceeds from hedge derivative relations and others

39.2

Interest and other ﬁnancial expenses paid, net

22.3

(203.9)

(201.0)

Net cash used in ﬁnancing activities

(1,763.5)

(2,606.5)

Net changes in cash and cash equivalents

(567.0)

(903.1)

Cash and cash equivalents as at January 1

2,873.0

2,692.1

Assets held for sale – change in cash

16.2.2

(5.5)

(1.8)

Cash and cash equivalents from initial consolidation of GCP

1,069.7

Effect of movements in exchange rates on cash held

4.9

16.1

Cash and cash equivalents as at December 31

2,305.4

2,873.0

Notes to the consolidated

financial statements

1. GENERAL

1.1 Incorporation and principal activities

Aroundtown SA (the “Company” or “Aroundtown”), a public limited liability company

(Société Anonyme), incorporated under the laws of the Grand Duchy of Luxembourg,

having its registered ofﬁce at 37, Boulevard Joseph II, L-1840 Luxembourg (formerly:

40, Rue du Curé, L-1368, Luxembourg). Aroundtown’s ordinary shares are listed on the

Prime Standard of the Frankfurt Stock Exchange and included in the MDAX index of

the Deutsche Börse (symbol: AT1).

Aroundtown is a real estate company with a focus on income generating quality prop

erties with value-add potential in central locations in top tier European cities, primarily

in Germany, Netherlands and London. Aroundtown invests in commercial and residential

real estate which beneﬁts from strong fundamentals and growth prospects.

These consolidated ﬁnancial statements for the year ended December 31, 2022 consist

of the ﬁnancial statements of the Company and its investees (the “Group”).

1.2 Group rating

Aroundtown’s credit rating is ‘BBB+’ with a stable outlook given by Standard and Poor’s

(S&P). The rating of ‘BBB+’ also applies to the Company’s unsecured debt. The Group`s

subordinated perpetual notes’ rating is ‘BBB-’.

Grand City Properties S.A.’s (a subsidiary of the Company, “GCP”) corporate credit rating

is ‘BBB+’ with a stable outlook given by S&P, and ‘Baa1’ given by Moody’s Investors

Service (Moody’s). The ‘BBB+’ and ‘Baa1’ ratings also apply to the GCP’s unsecured debt,

and the GCP`s subordinated perpetual notes are rated ‘BBB-’ and ‘Baa3’, by S&P and

Moody’s, respectively.

Aroundtown’s and GCP’s credit ratings were reafﬁrmed by the rating agencies in

December 2022.

1.3 Definitions

Throughout these notes to the consolidated ﬁnancial statements following deﬁnitions apply:

The Company

Aroundtown SA

The Group

The Company and its investees

Subsidiaries

Companies that are controlled by the Company (as deﬁned in IFRS 10) and whose

ﬁnancial statements are consolidated with those of the Company

Associates

Companies over which the Company has signiﬁcant inﬂuence (as deﬁned in IAS

28) and that are not 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

GCP

Grand City Properties S.A. (subsidiary of the Company; listed for trade in the Prime

Standard of the Frankfurt Stock Exchange)

TLG

TLG Immobilien AG (subsidiary of the Company)

Related parties

As deﬁned in IAS 24, additionally see note 24

The reporting

period

The ﬁnancial year ended on December 31, 2022

2. BASIS OF PREPARATION

2.1 Statement of compliance

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 comprehensive income, consolidated statement of

ﬁnancial position and consolidated statement of cash ﬂows’ items related to the year

ended December 31, 2021 have been reclassiﬁed to enhance comparability with 2022

ﬁgures and are marked as “reclassiﬁed”.

The consolidated ﬁnancial statements were authorized for issuance by the Company’s

board of directors on March 29, 2023.

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:

Financial assets at fair value through proﬁt or loss;

Investment property is measured at fair value;

Owner-occupied properties are measured at fair value;

Investment in equity-accounted investees – measured using the equity method;

Derivative ﬁnancial assets and liabilities – measured at fair value;

Assets and liabilities classiﬁed as held for sale – measured at fair value less costs to sell;

Deferred tax assets and liabilities – measured at the amount expected to be paid to

(recovered from) the tax authorities, using the tax rates and tax laws that have been

enacted or substantially enacted by the end of the reporting period.

2.3 Signiﬁcant accounting judgments, estimates and assumptions

The preparation of consolidated ﬁnancial statements in accordance with IFRS as adopt

ed by the EU 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 reassessed on a regular basis. Revisions

in accounting estimates are recognized in the period during which the estimate is re-

vised, 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.

Judgments

In the process of applying the Group’s accounting policies, management has made the

following judgments, which have the most signiﬁcant effect on the amounts recognized

in the consolidated ﬁnancial statements:

●

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 terms not constituting a major part of the eco

nomic 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.

●

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 promise 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 simultane

ously receive and consume the beneﬁts provided by the Group. With respect to the

sale of property, the Group concluded 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 prop

erty 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 ser

vices 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 recognized 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.

●

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 com

bination, 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 recognized.

●

Interest rate benchmark reform (“IBOR reform”)

Economically equivalent

– IBOR (“Interbank Offered Rates”) 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 risk-

free rates (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 after 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 derecognized.

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 be

tween 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.

Hedge accounting

- 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 bench

mark with an 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 ap

plies when the hedged item has already transitioned from IBOR to an RFR and also

to exposures that will transition via fallback to an RFR when certain benchmark

interest rate ceases on January 1, 2022.

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

these 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.

Valuation of investment property -

The Group uses external valuation reports issued

by independent professionally qualiﬁed valuers to determine the fair value of its

investment property. Changes in its fair value are recognized in the consolidated

statement of proﬁt or loss.

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 de

velopment 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.

Valuation of ﬁnancial assets and liabilities -

Some of the Group’s assets and liabili

ties 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 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 makes assumptions that are

mainly based on market conditions existing at the end of each reporting period.

Taxes -

Signiﬁcant judgment is required in determining the provision for income

taxes. There are transactions and calculations for which the ultimate tax determi

nation is uncertain during the ordinary course of business. The Group recognizes

liabilities for anticipated tax audit issues based on estimates of whether addi

tional 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 in the period in which such determination is made.

Deferred tax assets are recognized for unused tax losses to the extent that it is

probable that taxable proﬁt will be available against which the losses can be

utilized. Signiﬁcant management judgement is required to determine the amount

of deferred tax assets that can be recognized, based upon the likely timing and

the level of future taxable proﬁts, together with future tax planning strategies.

Impairment of ﬁnancial assets measured at amortized cost

When measuring expect-

ed 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.

Impairment of investments in associates -

The Group periodically evaluates the recov

erability of investments in associates whenever indicators of impairment are present.

Indicators of impairment include such items as declines in revenues, earnings or cash

ﬂows or material adverse changes in the economic or political stability of a particu

lar country, which may indicate that the carrying amount of the investment is not

recoverable. If facts and circumstances indicate that investment in associates may be

impaired, the recoverable amount associated with this investment (being the higher

of fair value less costs of disposal and value in use, that is the present value of the

future cash ﬂows expected to be derived from the investment) would be compared

to its carrying amounts to determine if a write down to fair value is necessary.

Impairment of non-ﬁnancial assets (property, equipment and intangible assets) -

When

there is an indication that an asset may be impaired or when annual impair

ment testing for an asset is required, the Group estimates the asset’s recover

able amount. An asset’s recoverable amount is the higher of an asset’s or Cash

Generating Unit (CGU)’s fair value less costs of disposal and its value in use. The

recoverable amount is determined for an individual asset, unless the asset does

not generate cash inﬂows that are largely independent of those from other assets

or groups of assets. In assessing value in use, the estimated future cash ﬂows are

discounted to their present value using a pretax discount rate that reﬂects cur

rent market assessments of the time value of money and the risks speciﬁc to the

asset. In determining fair value less costs of disposal, recent market transactions

are taken into account. If no such transactions can be identiﬁed, an appropriate

valuation model is used. A previously recognized impairment loss is reversed

only if there has been a change in the assumptions used to determine the asset’s

recoverable amount since the last impairment loss was recognized.

Impairment of goodwill -

Goodwill is not amortized but is reviewed for impairment

at least once a year. For the purpose of impairment testing, goodwill is allocated

to each of the Group’s CGUs (or groups of CGUs) expected to beneﬁt from the syn

ergies of the business combination. CGUs to which goodwill has been allocated

are tested for impairment annually, or more frequently when there is an indication

that the unit may be impaired. If the recoverable amount of the CGU is lower than

the carrying amount of the unit, the impairment loss is allocated ﬁrst to reduce the

carrying amount of any goodwill allocated to the unit and then to the other assets

of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An

impairment loss recognized for goodwill is non reversable in subsequent periods.

Legal claims

In estimating the likelihood of outcome of legal claims ﬁled against

the Company and its investees, the Group relies on the opinion of their legal

counsels. These estimates are based on the legal counsels’ best professional

judgment, taking into account the stage of proceedings and historical legal prec

edents in respect of the different issues. Since the outcome of the claims will be

determined in court, the results could differ from these estimates.

Property leases - estimating the incremental borrowing rate

The Group cannot read

ily 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 sim

ilar 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 are available.

2.4 Functional and presentation currency

The Group’s consolidated ﬁnancial statements are presented in euro, which is also the

Group’s functional currency, and reported in millions of euros rounded to one decimal

point, unless stated otherwise.

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 of the transaction. Monetary as

sets 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 recognized 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 recognized 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 recognized in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign cur

rency 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 us

ing 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 recognized in other

comprehensive income or proﬁt or loss are also recognized 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-mon

etary asset or non-monetary liability relating to advance consideration, the date of

the transaction is the date on which the Group initially recognizes 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.

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 recognized in other comprehensive income

under the header of Foreign operations – foreign currency translation difference, net

of investment hedges of foreign operations and accumulated in the equity as share

premium and capital reserves. Upon 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 ad

justments 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.

As at December 31, 2022, the Group’s main foreign exchange rates versus the euro

were as follows:

EUR/GBP

EUR/USD

(“British Pound”)

(“US Dollar”)

December 31, 2022

0.887

1.067

December 31, 2021

0.840

1.133

Average rate during the year 2022

0.853

1.053

Average rate during the year 2021

0.860

1.183

Changes (in %):

Year ended December 31, 2022

5.6%

(5.8%)

Year ended December 31, 2021

(6.5%)

(7.7%)

3. SIGNIFICANT ACCOUNTING POLICIES

3.1 Changes in accounting policies and disclosures

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 2022, but either not relevant or do not have an impact

on the consolidated ﬁnancial statements of the Group. The Group has not early adopted

any standard, interpretation or amendment that has been issued but is not yet effective.

See note 3.31.

These amendments did not have any signiﬁcant impact on the consolidated ﬁnancial

statements of the Group.

The following amendments were adopted and effective by the EU during 2022:

With effective date of 1, January 2022:

●

Amendments to IFRS 3 Business Combinations

The amendments replace a reference to a previous version of the IASB’s Con

ceptual Framework with a reference to the current version issued in March 2018

without signiﬁcantly changing its requirements. The amendments add an exception

to the recognition principle of IFRS 3 Business Combinations to avoid the issue

of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities

that would be within the scope of IAS 37 Provisions, Contingent Liabilities and

Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires

entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the

Conceptual Framework, to determine whether a present obligation exists at the

acquisition date. The amendments also add a new paragraph to IFRS 3 to clarify

that contingent assets do not qualify for recognition at the acquisition date.

These amendments had no impact on the consolidated ﬁnancial statements of

the Group as there were no contingent assets, liabilities and contingent liabilities

within the scope of these amendments arisen during the period.

●

Amendments to IAS 16 Property, Plant and Equipment

The amendment prohibits entities from deducting from the cost of an item of prop

erty, plant and equipment, any proceeds of the sale of items produced while bringing

that asset to the location and condition necessary for it to be capable of operating

in the manner intended by management. Instead, an entity recognizes the proceeds

from selling such items, and the costs of producing those items, in proﬁt or loss.

These amendments had no impact on the consolidated ﬁnancial statements of the

Group as there were no sales of such items produced by property, plant and equipment

made available for use on or after the beginning of the earliest period presented.

●

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

An onerous contract is a contract under which the unavoidable costs (i.e., the costs

that the Group cannot avoid because it has the contract) of meeting the obligations

under the contract exceed the economic beneﬁts expected to be received under it.

The amendments specify that when assessing whether a contract is onerous or

loss-making, an entity needs to include costs that relate directly to a contract to

provide goods or services include both incremental costs (e.g., the costs of direct

labour and materials) and an allocation of costs directly related to contract activities

(e.g., depreciation of equipment used to fulﬁl the contract as well as costs of con

tract management and supervision). General and administrative costs do not relate

directly to a contract and are excluded unless they are explicitly chargeable to the

counterparty under the contract.

These amendments had no material impact on the consolidated ﬁnancial statements

of the Group.

●

Annual Improvements to IFRSs 2018-2020 Cycle

IFRS 1 First-time Adoption of International Financial Reporting Standards

The amendment permits a subsidiary that elects to apply paragraph D16(a) of

IFRS 1 to measure cumulative translation differences using the amounts reported

in the parent’s consolidated ﬁnancial statements, based on the parent’s date of

transition to IFRS, if no adjustments were made for consolidation procedures

and for the effects of the business combination in which the parent acquired the

subsidiary. This amendment is also applied to an associate or joint venture that

elects to apply paragraph D16(a) of IFRS 1.

These amendments had no impact on the consolidated ﬁnancial statements of

the Group as it is not a ﬁrst-time adopter.

IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of

ﬁnancial liabilities

The amendment clarifies the fees that an entity includes when assessing

whether the terms of a new or modiﬁed ﬁnancial liability are substantially

different from the terms of the original ﬁnancial liability. These fees include

only those paid or received between the borrower and the lender, including fees

paid or received by either the borrower or lender on the other’s behalf. There is

no similar amendment proposed for IAS 39 Financial Instruments: Recognition

and Measurement.

These amendments had no impact on the consolidated ﬁnancial statements of

the Group as there were no modiﬁcations of the Group’s ﬁnancial instruments

during the period.

IFRS 16 Leases

–

amendment of illustrative example 13 to remove the

illustration of payments from the lessor relating to leasehold improvements,

to remove any confusion about the treatment of lease incentives.

IAS 41 Agriculture – Taxation in fair value measurements

The amendment removes the requirement in paragraph 22 of IAS 41 that entities

exclude cash ﬂows for taxation when measuring the fair value of assets within

the scope of IAS 41.

These amendments had no impact on the consolidated ﬁnancial statements of

the Group as it did not have assets in scope of IAS 41 as at the reporting date.

3.2 Basis of consolidation

The consolidated ﬁnancial statements comprise the ﬁnancial statements of the Com

pany and its subsidiaries as at December 31, 2022. 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:

Power over the investee (i.e., existing rights that give the current ability to direct the

relevant activities of the investee)

Exposure, or rights, to variable returns from its involvement with the investee

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:

The contractual arrangement(s) with the other vote holders of the investee

Rights arising from other contractual arrangements

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. Con

solidation 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.

Unrealized gains arising from transactions with equity-accounted investees are elim

inated against the investment to the extent of the Group’s interest in the investee.

Unrealized losses are eliminated in the same way as unrealized 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 account

ed 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 recog

nized 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 in

terests and other components of equity, and is recognized in the consolidated statement

of proﬁt or loss under ‘Property revaluations 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 recognized in other comprehensive income

and accumulated in equity, the amounts previously recognized 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 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 subsidiaries to

bring their accounting policies into line with those of the Group.

3.3 Property acquisitions not part of business combination

Where property is acquired, via corporate acquisitions or otherwise, management con

siders the substance of the assets and activities of the acquired entity in determining

whether the acquisition represents the acquisition of a business. Where such acqui

sitions 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 values at the acquisition date. Such a transaction or event does not

give rise to goodwill.

3.4 Business combinations and goodwill

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 con

tribute 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 organized 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 meas

ured 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-con

trolling 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.

Acquisition-related costs are expensed as incurred and included in administrative and

other expenses in the consolidated statement of proﬁt or loss.

Any contingent consideration to be transferred by the acquirer will be recognized 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

recognized in the consolidated 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 recognized 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 in

formation 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 identiﬁable assets acquired and liabil

ities assumed for appropriate classiﬁcation and designation in accordance with the con

tractual 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

recognized at their fair value at the acquisition date, except that

Deferred tax assets or liabilities and liabilities or assets related to employee beneﬁt

arrangements are recognized and measured in accordance with IAS 12 Income Taxes

and IAS 19 Employee Beneﬁts, respectively;

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

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.

Any excess amount identiﬁed between the fair value of the asset or liability and their

carrying amount upon initial recognition is amortized in accordance with the accounting

treatment applicable to the respective underlying asset or liability.

Goodwill is initially measured at cost being the excess of the aggregate of the consider

ation transferred over the net identiﬁable assets acquired and liabilities assumed upon

the business combination. 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 be recognized 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 (deﬁned as a “bargain purchase”) is

immediately recognized in proﬁt or loss.

If the initial accounting for a business combination is incomplete by the end of the re

porting period in which the combination occurs, the Group reports provisional amounts

for the items for which the accounting is incomplete. Those provisional amounts are ad

justed during the measurement period, or additional assets or liabilities are recognized,

to reﬂect new information obtained about facts and circumstances that existed at the

acquisition date that, if known, would have affected the amounts recognized at that date.

Goodwill acquired in a business combination is, from the acquisition date, allocated

to each of the Group’s CGUs or groups of CGUs that are expected to beneﬁt from the

synergies of the combination, irrespective of whether other assets or liabilities of the

acquiree are assigned to those units. Each unit or group of units to which the goodwill

is allocated shall represent the lowest level within the entity at which the goodwill

is monitored for internal management purposes and not be larger than an operating

segment as deﬁned by IFRS 8.

At the Group, each real estate property generally meets the requirements for classiﬁca

tion as a CGU. As part of internal management, the real estate properties are grouped

under managed portfolio clusters (TLG and GCP which is a public company, and the

rest). These portfolio clusters are the lowest level within the Group at which goodwill is

monitored for internal management purposes hence the impairment test is performed at

property portfolio level of the acquiree. Other cash-generating assets that are expected

to beneﬁt from the synergies of the business combination and form part of the recov

erable amount (e.g., investment in ﬁnancial assets) are included within the same CGU.

Goodwill is subsequently measured at cost less any accumulated impairment losses

(that are non-reversable in following years) as described above in the Estimates and

assumptions section (part of note 2.3) and is not subject to amortization. An impairment

testing is performed on an annual basis and whenever events or circumstances indicate

on impairment arise.

Where goodwill has been allocated to a CGU or a group of CGUs and part of the opera

tion within that unit is disposed of, the goodwill associated with the operation disposed

of is included in the carrying amount of the operation when determining the gain or

loss on disposal. Goodwill disposed of in these circumstances is measured based on the

relative values of the operation disposed of and the portion of the CGU or group of CGUs.

A single real estate asset that forms part of the CGU under a managed portfolio cluster

that is monitored together for internal management purposes does not constitute an

operation within this group of CGUs. As such, disposals of single properties do not result

in a derecognition of goodwill.

3.5 Investments in associates and equity-accounted investees

An associate is an entity over which the Group has signiﬁcant inﬂuence and that is neither

a subsidiary nor an interest in a joint venture. Signiﬁcant inﬂuence is the power to partic

ipate in the ﬁnancial and operating policy decisions of the investee but is not control or

joint control over those policies. A jointly controlled entity is an entity in which two or more

parties have interest.

The results and assets and liabilities of associates and equity-accounted investees are incor

porated in these consolidated ﬁnancial statements using the equity method of accounting,

except when the investment is classiﬁed as held for sale, in which case it is accounted for in

accordance with IFRS 5 Non current Assets Held for Sale and Discontinued Operations. Under

the equity method, an investment in an associate is initially recognized in the consolidated

statement of ﬁnancial position at cost and adjusted thereafter to recognize the Group’s

share of the consolidated statement of proﬁt or loss and other comprehensive income of

the associate. When the Group’s share of losses of an associate exceeds the Group’s interest

in that associate (which includes any long term interests that, in substance, form part of the

Group’s net investment in the associate), the Group discontinues recognizing its share of

further losses. Additional losses are recognized only to the extent that the Group has incurred

legal or constructive obligations or made payments on behalf of the associate. In the event of

changes in the net assets of an investee that are recognized directly in the investee’s equity,

the Group accounts these for as equity transaction in the consolidated ﬁnancial statements.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the

identiﬁable assets, liabilities and contingent liabilities of an associate recognized at the

date of acquisition is recognized as goodwill, which is included within the carrying amount

of the investment. Any excess of the Group’s share of the net fair value of the identiﬁable

assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is

recognized immediately in proﬁt or loss.

The requirements of IAS 36 are applied to determine whether it is necessary to recog

nize any impairment loss with respect to the Group’s investment in an associate. In the

event of impairment indicators, the entire carrying amount of the investment (including

goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as

a single asset by comparing its recoverable amount (higher of value in use and fair

value less costs to sell) with its carrying amount; any impairment loss recognized forms

part of the carrying amount of the investment. Any reversal of that impairment loss is

recognized in accordance with IAS 36 to the extent that the recoverable amount of the

investment subsequently increases.

When an entity in the Group transacts with its associate, proﬁts and losses resulting

from the transactions with the associate are recognized in the Group’s consolidated

ﬁnancial statements, however only to the extent of interests in the associate that are

not related to the Group.

3.6 Revenue recognition

The Group’s key sources of income include:

●

Rental income

●

Revenue from contracts with customers - services to tenants including management

charges and other expenses recoverable from tenants

●

Other revenue

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 in

come which is recognized when it arises. Initial direct costs incurred in negotiating and

arranging an operating lease are capitalized to the investment property and recognized

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 pay

ments. Accordingly, tenant lease incentives are recognized 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 con

trols the speciﬁed services before transferring them to the customer and therefore

records this revenue on a gross basis.

Other revenue

Other revenue includes mainly management fee, consulting fees as well as income from

loans in connection with real estate transactions. This income is included in revenue

in the consolidated statement of proﬁt or loss.

3.7 Finance income and expenses and other ﬁnancial results

Finance income comprises interest income on funds invested.

Finance expenses comprise interest expense on bank loans, third party borrowings

and bonds.

The interest portion of the lease payment is part of the “Interest and other ﬁnancial

expenses paid, net” in the consolidated statements of cash ﬂows.

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-time payments.

Financial expenses are recognized as they are incurred in the consolidated statement

of proﬁt or loss, using the effective interest rate (EIR) method.

3.8 Current tax and property taxes

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 recognized directly in other comprehensive income

or equity is recognized in other comprehensive income or in equity and not in the

consolidated 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.

Property taxation includes taxes on the holding of real estate property

3.9 Deferred tax

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 recognized for all taxable temporary differences, except

●

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.

●

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 recognized for all deductible temporary differences, the car

ryforward of unused tax credits and any unused tax losses. Deferred tax assets are

recognized 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 utilized, except:

●

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 busi

ness combination and, at the time of the transaction, affects neither the accounting

proﬁt nor taxable proﬁt or loss.

●

In respect of deductible temporary differences associated with investments in subsid

iaries, branches and associates and interests in joint arrangements, deferred tax assets

are recognized 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 utilized.

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 utilized. Unrecognized deferred tax assets

are re-assessed at each reporting date and are recognized 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 realized 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 recognized

on subsequent changes to the taxable and temporary differences. Deferred tax relating

to items recognized outside proﬁt or loss is recognized outside proﬁt or loss.

Deferred tax items are recognized 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 recognized subsequently if there is new in

formation 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 recognized 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 realize 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.

3.10 Property and equipment

Owner-occupied properties are measured at fair value less accumulated depreciation

and impairment losses recognized after the date of revaluation. Valuations are per

formed 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 revalua

tion deﬁcit of the same asset previously recognized in proﬁt or loss, the increase is

recognized in proﬁt and loss. A revaluation deﬁcit is recognized in the statement of

proﬁt or loss, except to the extent that it offsets an existing surplus on the same asset

recognized in the asset revaluation surplus.

The rest property and equipment items are measured at cost less accumulated depre

ciation and impairment losses.

Equipment includes furniture, ﬁxtures and ofﬁce equipment and is measured at cost

less accumulated depreciation and impairment losses.

Depreciation is recognized 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

7-50

Buildings

2-3

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 of equipment 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 derecognized 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, plant and equipment is

determined as the difference between the sales proceeds and the carrying amount of

the asset and is recognized in the consolidated statement of proﬁt or loss.

3.11 Goodwill and intangible assets

The intangible assets of the Group consist of goodwill and software. Goodwill arising

on the acquisition of subsidiaries is measured at cost less accumulated impairment

losses and the applied accounting policy is elaborated in the business combinations

and goodwill section.

Expenditure on research activities is recognized in proﬁt or loss as incurred. Develop

ment expenditure is capitalized 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 de

velopment and to use or sell the asset. Otherwise, it is recognized in proﬁt or loss as

incurred. Subsequent to initial recognition, development expenditure is measured at

cost less accumulated amortization and any accumulated impairment losses.

Other intangible assets that are acquired by the Group and have deﬁnite useful lives

are measured at cost less accumulated amortization and any accumulated impairment

losses. Subsequent expenditure is capitalized only when it increases the future eco

nomic beneﬁts embodied in the speciﬁc asset to which it relates. All other expenditure

is recognized in proﬁt or loss as incurred.

Amortization 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 recognized in proﬁt or loss.

The estimated useful lives for current and comparative periods are as follows:

Software

20 - 33

Amortization methods, useful lives and residual values are reviewed at each reporting

date and adjusted if appropriate.

3.12 Deferred income

Deferred income represents income which relates to future periods

●

Prepayments

The Group receives prepayments from tenants for ancillary services and other charg

es (heating, water, insurance, cleaning etc.) on a monthly basis. These prepayments

received from tenants are mainly settled once a year against the operating cost re

ceivables. By the time of settlement, the prepayment and operating costs receivable

balances are presented gross in the consolidated statement of ﬁnancial position.

●

Tenancy deposits

Tenancy deposits are paid to ensure the property is returned in a good condition.

The tenancy deposits can also be used if a loss of rent occurs.

3.13 Investment property

Investment property comprises completed property and property under development

or re-development that is held, or to be 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 that comprises a portion that is occupied for use by, or in

the operations of, the Group, and that can be sold separately or leased under ﬁnancial

lease, shall be accounted for separately as owner-occupied property as per IAS 16 or IFRS

16, depending on the case, and classiﬁed as property and equipment in the consolidated

statement of ﬁnancial position.

Investment property is measured initially at cost, including directly attributable expendi

ture 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 recognized 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). For a transfer

from investment property to owner-occupied property, the deemed cost for subsequent ac

counting is the fair value at the date of change in use. If owner-occupied property becomes

an investment property, the Group accounts for such property in accordance with the policy

stated under property, equipment and intangible assets up to the date of change in use.

Investment property is derecognized either when has been disposed of (i.e. at the date

the recipient obtains control of the investment property in accordance with the require

ments 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 recognized 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 invest

ment property, the Group considers the effects of variable consideration, the existence of

a signiﬁcant ﬁnancing component, non-cash consideration, and consideration payable to

the buyer (if any) in accordance with the requirements for determining the transaction

price in IFRS 15.

Refer to the note 3.15 “Non-current assets held for sale” on the accounting for invest

ment property classiﬁed by held for sale.

3.14 Trading property (Inventories)

Property acquired or being constructed for sale in the ordinary course of business, rather

than to be held for rental or capital appreciation, is held as inventory property and is

measured at the lower of cost and net realizable value (NRV).

Property that has been initially deﬁned as investment property and is subsequently

intended for sale in the ordinary course of business or in the process of construction or

development for such sale, is transferred to trading property (inventories) when there

is evidence of a change intention. The deemed cost for subsequent accounting is the

fair value at the date of change in use.

Cost incurred in bringing each property to its present location and condition includes:

●

Freehold and leasehold rights for land

●

Amounts paid to contractors for development

●

Planning and design costs, costs of site preparation, professional fees for legal ser

vices, property transfer taxes, development overheads and other related costs

NRV is the estimated selling price in the ordinary course of the business, based on mar

ket prices at the reporting date, less estimated costs of completion and the estimated

costs necessary to make the sale.

When an trading property is sold, the carrying amount of the property is recognized

as an expense in the period in which the related revenue is recognized. The carrying

amount of trading property recognized in proﬁt or loss is determined with reference

to the directly attributable costs incurred on the property sold and an allocation of any

other related costs based on the relative size of the property sold.

For presenting of the disposal results of a trading property, the Group identiﬁes whether

the sale of a trading property forms part of its ordinary activities or not. In case it does,

recognition of the revenue and expense will be as described above. Otherwise, the

resulting gain or loss will be presented in net, outside of the Group’s revenue, under

the line item property revaluation, capital gains and other income in the consolidated

statement of proﬁt or loss.

3.15 Non-current assets held for sale

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 consolidated

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 interest in its former subsidiary after the sale.

3.16 Financial instruments

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.

(a)

Financial assets

(1) Initial recognition and measurement

Financial assets are classiﬁed, at initial recognition, as subsequently measured at am

ortized cost, fair value through other comprehensive income, or fair value through

proﬁt or loss.

The classiﬁcation of ﬁnancial assets at initial recognition depends on the ﬁnancial

asset’s 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 3.6.

In order for a ﬁnancial asset to be classiﬁed and measured at amortized 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 recognized on the trade date, i.e., the date that the Group commits to

purchase or sell the asset.

(2) Subsequent measurement

For the purposes of subsequent measurement, ﬁnancial assets are classiﬁed in

four categories:

Financial assets at amortized cost (debt instruments)

Financial assets at fair value through OCI with recycling of cumulative gains

and losses (debt instruments)

Financial assets designated at fair value through OCI with no recycling of

cumulative gains and losses upon de-recognition (equity instruments)

Financial assets at fair value through proﬁt or loss

Financial assets at amortized cost (debt instruments)

The Group measures ﬁnancial assets at amortized cost if both of the following

conditions are met:

●

The ﬁnancial asset is held within a business model with the objective to hold

ﬁnancial assets in order to collect contractual cash ﬂows, and

●

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 amortized cost are subsequently measured using the EIR meth

od and are subject to impairment. Gains or losses are recognized in proﬁt or loss

when the asset is de-recognized, modiﬁed or impaired refer to expected credit loss

model in determined impairment.

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:

●

The ﬁnancial asset is held within a business model with the objective of both

holding to collect contractual cash ﬂows and selling, and

●

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 recognized in consolidated

statement of proﬁt or loss and computed in the same manner as for ﬁnancial assets

measured at amortized cost. The remaining fair value changes are recognized in

OCI. Upon de-recognition, the cumulative fair value change recognized 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 invest

ments 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 recognized 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 pur

pose of selling or repurchasing in the near term. Derivatives, including separated

embedded derivatives, are also classiﬁed as held for trading unless they are des

ignated 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 amortized 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 recog

nized in the consolidate statement of proﬁt or loss.

Dividends on equity instruments are recognized as revenue 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-ﬁnan

cial 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 val

ue through proﬁt or loss. Embedded derivatives are measured at fair value with

changes in fair value recognized 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 embed

ded derivative is required to be classiﬁed entirely as a ﬁnancial asset at fair value

through proﬁt or loss.

(3) De-recognition

Financial asset (or, where applicable, part of a ﬁnancial asset or part of a group of

similar ﬁnancial assets) is primarily de-recognized (i.e., removed from the Group’s

consolidated statement of ﬁnancial position) when:

●

The rights to receive cash ﬂows from the asset have expired, or

●

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 recognize the transferred asset to the

extent of its continuing involvement. In that case, the Group also recognizes 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.

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 amount of consideration that the Group could be required to repay.

(4)

Impairment of ﬁnancial assets

The Group recognizes an allowance for expected credit loss for all ﬁnancial assets 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 recognized 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, irre

spective 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 pos

sible 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

after 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 recognizes

a loss allowance based on lifetime ECLs at each reporting date. The Group has es

tablished 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 default when internal or external infor

mation 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. Irrespec

tive 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 there is no reasonable

expectation of recovering the contractual cash ﬂows.

(b)

Financial liabilities

(1) Initial recognition and measurement

Financial liabilities are classiﬁed, at initial recognition, as ﬁnancial liabilities at fair

value through proﬁt or loss or at amortized cost.

All ﬁnancial liabilities are recognized initially at fair value and, in the case of loans

and borrowings and payables, net of directly attributable transaction costs and are

subsequently expensed via EIR.

(2) Subsequent measurement

The measurement of ﬁnancial liabilities depends on their classiﬁcation, as de

scribed 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 hedg

ing 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 recognized 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 amortized cost

This is the category most relevant to the Group. After initial recognition, inter

est-bearing loans and borrowings are subsequently measured at amortized cost

using the EIR method. Gains and losses are recognized in proﬁt or loss when the

liabilities are de-recognized as well as through the EIR amortization process.

Amortized 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.

(3) De-recognition

A ﬁnancial liability is de-recognized 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 carrying amounts is recognized in

the consolidated statement of proﬁt or loss.

(c)

Interbank Offered Rates (IBOR) Reform

IBOR reform Phase 2 requires, as a practical expedient, for changes to the basis for deter

mining 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 be

fore and after 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 derecognized. Therefore, as ﬁnancial instruments

transition from IBOR to RFRs, the Group applies judgement to assess whether the tran

sition 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.

(d)

Offsetting of ﬁnancial instruments

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 recognized amounts and there is an intention to settle on a net basis,

or to realize the assets and settle the liabilities simultaneously.

3.17 Share capital

Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the

issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

3.18 Mandatory convertible notes

Mandatory convertible notes are classiﬁed as equity, and coupon related to the note

holders is recognized in the consolidated statement of changes in equity. Both the

noteholders and the Company may convert the notes into Company’s shares using a

ﬁxed ratio that does not vary with changes in fair value. At maturity, the unconverted

notes are mandatorily converted into shares. The Company may, at its sole discretion,

elect to defer the payment of interest on the notes (Arrears of Interest). Arrears of

Interest are presented as liability and must be paid by the Company upon conversion

event and should not compound interest. Issuance costs incurred are deducted from

the initial carrying amount of the notes.

3.19 Convertible bonds

Convertible bonds, that can be converted to share capital of the Company or of a

subsidiary of the Company 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 deter

mined using a market rate for an equivalent non-convertible instrument. This amount

is classiﬁed as a ﬁnancial liability measured at amortized 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 recognized

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 sub

sequent 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 recognized.

On conversion, the ﬁnancial liability is reclassiﬁed to equity and no gain or loss is

recognized in the consolidated statement of proﬁt or loss.

3.20 Treasury shares

When own shares are repurchased, the amount of the consideration paid including

direct acquisition costs is recognized as a deduction from equity. Repurchased own

shares are classiﬁed as treasury shares, presented in the treasury share reserve and

are not revaluated after the acquisition. When treasury shares are subsequently sold or

delivered, the amount received is recognized as an increase in equity and the resulting

surplus or deﬁcit on the transaction is presented in the share premium.

3.21 Perpetual notes

Perpetual notes have no maturity date and may only be redeemed by the Group, at its

sole discretion, on certain dates. The perpetual notes are recognized as equity attrib

utable 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 bear interest.

3.22 Derivative ﬁnancial instruments and hedge accounting

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

recognized 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:

●

Fair value hedges when hedging the exposure to changes in the fair value of a

recognized asset or liability or an unrecognized commitment.

●

Cash ﬂow hedges when hedging the exposures to variability in cash ﬂows that is

either attributable to a particular risk associated with a recognized asset or liability

or a highly probable forecast transaction or the foreign currency risk in an unrec

ognized ﬁrm commitment.

●

Hedges of a net investment in foreign operations.

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 man

agement 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 the following effectiveness

requirements:

●

There is ‘an economic relationship’ between the hedged item and the hedging instrument.

●

The effect of credit risk does not ‘dominate the value changes’ that result from that

economic relationship.

●

The hedge ratio of the hedging relationship is the same as that resulting from the

quantity of the hedged item that the Group hedges and the quantity of the hedging

instrument that the Group 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:

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. After 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.

Fair value hedges

The change in the fair value of a hedging instrument is recognized 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 recognized in the consolidated statement of proﬁt or loss.

In cases that the Group designates only the spot element of swap contracts as a hedg

ing instrument, the forward element is recognized in OCI and accumulated in a com

ponent of equity under hedge reserves as time period related element and amortized

to the consolidated statement of proﬁt or loss over the hedged period.

If the hedged item is derecognized, the unamortized fair value is recognized immedi

ately in proﬁt or loss.

Hedge of net investments in foreign operations

Hedges of a net investment in a foreign operation, including a hedge of monetary item

that is accounted for as part of the net investment, are accounted for as follows:

●

The Group designates the spot element of a non-derivative ﬁnancial liability and

forward contracts as the hedging instrument.

●

The forward element is recognized as cost of hedging and accumulated in a separate

component of equity under hedge reserves.

●

Gains or losses on the hedging instrument relating to the effective portion of the

hedge are recognized as OCI while any gains or losses relating to the ineffective

portion are recognized 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

Interbank offered rates (IBOR) reform

The Group applies the temporary reliefs provided by the IBOR reform Phase 1 amend

ments, 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 the hedged item has

already transitioned from IBOR to an RFR.

3.23 Cash and cash equivalents

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 of three months or less, that

are readily convertible to a known amount of cash and are subject to an insigniﬁcant

risk of changes in value.

3.24 Property operating expenses

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 statement of proﬁt or loss. 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 property valuation.

3.25 Operating segments

Operating segments are components of the Group that meet the following three criteria:

●

are engaged in business activities from which they may earn revenues and incur

expenses, including revenues and expenses relating to intragroup transactions;

●

whose operating results are regularly reviewed by the Group’s Chief Operating De

cision Maker (CODM) to make decisions about resources to be allocated to the

segment and assess its performance; and

●

for which separate ﬁnancial information is available.

The Group has two reportable operating segments for which the revenue, net operating

income and revaluation gains from investment property is regularly monitored.

3.26 Comparatives

Where necessary, comparative ﬁgures have been adjusted to conform to changes in

presentation in the current period, and marked as “reclassiﬁed”.

3.27 Earnings per share

Earnings per share are calculated by dividing the net proﬁt attributable to owners

of the Company by the weighted average 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 share-based payments for employee) 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 in earnings of investees is included

based on the diluted earnings per share of the investees, multiplied by the number

of shares held by the Company.

3.28 Share-based payment transactions

The grant-date fair value of equity-settled share-based payment awards granted to

employees is generally recognized as an expense, with a corresponding increase in

equity, over the vesting period of the awards. The amount recognized 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 recog

nized is based on the number of awards that meet the related service and non-market

performance conditions at the vesting date.

3.29 Provisions for other liabilities and accrued expenses

Provisions are recognized when there is a present obligation, either legal or construc-

tive, 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 reporting date.

3.30 Leased assets

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, ex

cept for short-term leases and leases of low-value assets. The Group recognizes lease

liabilities to make lease payments and right-of-use assets representing the right to

use the underlying assets.

(a) Right-of-use assets

The Group recognizes 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 recognized,

initial direct costs incurred, and lease payments made at or before the commence

ment date less any lease incentives received.

In addition, the Group leases properties that meet the deﬁnition of investment

property. These right-of-use assets are classiﬁed and presented as part of the line

item ‘Investment property’ in the consolidated statement of ﬁnancial position and

subsequently measured at fair value.

(b) Lease liabilities

At the commencement date of the lease, the Group recognizes 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 pay

ments) 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 guar-

antees. 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

recognized as expenses 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. After 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 in

dex 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 the cash payments for interest portion of lease liability under

“interest and other ﬁnancial expenses, net” and the cash payments for principal

portion of lease liability under “Amortization of loans from ﬁnancial institutions

and others” in the consolidated statement of cash ﬂows.

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 recognized as expense on a straight-line basis over

the lease term.

Group as a lessor

Refer to accounting policies on rental income in note 3.6.

3.31 Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effec

tive, up to the date of issuance of the Group’s ﬁnancial statements are disclosed below.

The Group intends to adopt these new and amended standards and interpretations, if

applicable, when they become effective.

The following amendments were adopted by the EU, but not yet effective in 2022:

●

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 differ

ences may arise on initial recognition of an asset and liability in a transaction that

is not a business combination and affects neither accounting nor taxable proﬁt. For

example, this may arise upon recognition of a lease liability and the corresponding

right-of-use asset applying IFRS 16 at the commencement date of a lease.

Following the amendments to IAS 12, an entity is required to recognize the related

deferred tax asset and liability, with the recognition of any deferred tax asset being

subject to the recoverability criteria in IAS 12.

The IASB also adds an illustrative example to IAS 12 that explains how the amend-

ments are applied.

The amendments apply to transactions that occur on or after the beginning of the

earliest comparative period presented. In addition, at the beginning of the earliest

comparative period an entity recognizes:

A deferred tax asset (to the extent that it is probable that taxable proﬁt will be

available against which the deductible temporary difference can be utilized)

and a deferred tax liability for all deductible and taxable temporary differences

associated with:

Right-of-use assets and lease liabilities

Decommissioning, restoration and similar liabilities and the corresponding

amounts recognized as part of the cost of the related asset

The cumulative effect of initially applying the amendments as an adjustment

to the opening balance of retained earnings (or other component of equity, as

appropriate) at that date

●

Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and

Errors: Deﬁnition of Accounting Estimates

●

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice State-

ment 2: Disclosure of Accounting policies

●

Amendments to IFRS 17: Initial Application of IFRS 17 and IFRS 9 – Comparative

Information

The amendments are effective for annual reporting periods beginning on or after

January 1, 2023, with earlier application permitted, and are not expected to have a

material impact on the Group. The Group has not early adopted any standard, inter

pretation or amendment that has been issued but is not yet effective.

LONDON

4. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

4.1 Fair value hierarchy

The following tables present the Group’s ﬁnancial assets and liabilities measured and presented at fair value as at December 31, 2022, and as at December 31, 2021, on a recurring

basis under the relevant fair value hierarchy, and for those measured and presented at amortized cost which their carrying amount signiﬁcantly differs from the fair value. For all other

ﬁnancial instruments, the carrying amount is an approximation of their fair value.

As at December 31, 2022

As at December 31, 2021

Fair value measurement using

Carrying

amount

Total fair

value

Quoted

prices in ac-

tive market

(Level 1)

Signiﬁcant

observable

inputs

(Level 2)

Signiﬁcant

unobserva-

ble inputs

(Level 3)

Carrying

amount

Total

fair

value

Quoted

prices in

active

market

(Level 1)

Signiﬁcant

observable

inputs

(Level 2)

Signiﬁcant

unobserva-

ble inputs

(Level 3)

in € millions

FINANCIAL ASSETS

Financial assets at fair value through proﬁt or loss

(1)

466.4

196.7

231.7

38.0

605.6

300.4

282.9

22.3

Derivative ﬁnancial assets

252.6

272.4

Total ﬁnancial assets

719.0

196.7

484.3

38.0

878.0

300.4

555.3

22.3

FINANCIAL LIABILITIES

Straight and convertible bonds and schuldscheins

(2)

13,407.4

10,110.6

9,820.1

290.5

14,422.0

14,886.6

14,314.5

572.1

Loans and borrowings

1,288.9

1,242.6

1,148.0

1,168.3

Derivative ﬁnancial liabilities

444.6

425.4

Total ﬁnancial liabilities

15,140.9

11,797.8

9,820.1

1,977.7

15,995.4

16,480.3

14,314.5

2,165.8

(1) includes current and non-current

(2) the carrying amount excludes accrued interest

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 maximize 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 in

strument 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 Company’s policy is to recognize transfers into and transfers out of fair value hi

erarchy levels as at the end of the reporting period.

When the fair value of ﬁnancial assets and ﬁnancial liabilities recorded in the consolidat

ed 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 ﬂow (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 es

tablishing 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

4.2 Valuation techniques used to determine fair values

The following methods and assumptions were used to estimate the fair values:

●

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 ﬂow

method with observable inputs.

●

There is an active market for the Company’s listed equity investments and quoted

debt instruments.

●

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 manage

ment judgment after considering the period of restrictions and the nature of the

underlying investments.

●

The Company enters into derivative ﬁnancial instruments with various counterpar

ties, principally ﬁnancial institutions with investment grade credit ratings. Interest

rate and foreign exchange swap and forward 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 pres

ent 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 currencies,

interest rate curves and forward rate curves.

5. BUSINESS COMBINATIONS WITH GRAND CITY

PROPERTIES S.A. IN JULY 2021

During July 2021, the Group concluded on obtaining de facto control over Grand City

Properties S.A. Prior to the takeover, the Group’s holding rate in GCP was 43.8% (excluding

GCP’s own shares held in treasury), and the effective holding rate was 44.3%, including

shares received from GCP’s scrip dividend in July 2021. The de facto control arose despite

holding less than 50% of the voting rights and followed a thorough analysis of several cu

mulative circumstances that indicated on the sustainable ability of the Company to con

trol GCP. These circumstances included, inter alia, the continuous increase in the holding

rate by the Company over time, the Group’s historical attendance levels in GCP’s annual

general meeting, and the widely dispersed composition of GCP’s shareholding structure.

Considering practicality and materiality level, the initial consolidation of GCP com

menced on July 1, 2021 (acquisition date was concluded to be on July 13, 2021). From

then and until December 31, 2021, GCP contributed revenue in the amount of €264.9

million and net proﬁt of €500.5 million to the consolidated Group’s results. Had the

initial consolidation occurred on January 1, 2021, the consolidated revenue and con

solidated net proﬁt (excluding share of proﬁt from investment in equity-accounted

investments for the six-month period ended June 30, 2021, during which GCP was

accounted for at equity) for the period would have been increased by €259.2 million

and €157.1 million, respectively.

The fair value of the equity interest in GCP held by the Group prior to the initial

consolidation, including direct minority interests in subsidiaries of GCP, amounted to

€2,665.9 million and was reviewed by a professional advisor. The remeasurement to

fair value of the equity interest in GCP, previously accounted for as equity-accounted

investee, resulted in a gain of €75.7 million on initial consolidation. The amount has

been included in share of proﬁt from investment in equity-accounted investees in the

consolidated statement of proﬁt or loss in 2021. The Group did not incur signiﬁcant

acquisition-related costs.

The following table summarizes the recognized amounts of identified assets and

liabilities assumed as at the date of the initial consolidation:

in € millions

Total identiﬁable assets

10,918.3

Total identiﬁable liabilities

(5,789.9)

Net identiﬁable assets and liabilities acquired

5,128.4

Measurement of fair values

The valuation techniques used for measuring the fair value of the material identiﬁable as

sets acquired and liabilities assumed as well as the consideration assumed were as follows:

Investment

property,

property

classiﬁed as

“Property and

Equipment”,

properties held

for sale

•

Discounted cash ﬂows 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 projec-

tion 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.

•

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.

•

Residual value approach

- the residual value assesses the various factors asso-

ciated 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 undevel-

oped or sub optimally utilized.

Financial assets

at fair value

through proﬁt

or loss

•

Quoted prices.

•

Discounted cash ﬂow method with observable inputs where possible, but where

this was not feasible, a degree of judgement was required in establishing fair

values. Judgements include considerations of input such as liquidity risk, credit

risk and volatility.

Derivative

ﬁnancial assets

and liabilities

Interest rate and foreign exchange swap and forward 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

currencies, interest rate curves and forward rate curves.

Loans and bor

rowings

Discounted cash ﬂow method with observable inputs where possible, but where

this was not feasible, a degree of judgement was required in establishing fair

values. Judgements include considerations of input such as liquidity risk, credit

risk and volatility.

Straight and

convertible

bonds

•

Quoted prices

•

Discounted cash ﬂow method with observable inputs where possible, but where

this was not feasible, a degree of judgement was required in establishing fair

values. Judgements include considerations of input such as liquidity risk, credit

risk and volatility.

Consideration

transferred

Discounted cash ﬂow with unobservable inputs of the estimated operating proﬁt of

GCP with key input parameters of WACC rate of 3% and growth rate of 0.75%, adjusted

by the fair value of the loans and borrowings (that is based on quoted prices for the

traded instruments and on DCF using market observable inputs for the non-traded

instruments), carrying amount of excess of cash and deposits and fair value of other

liquid assets (that is based on quoted prices).

Deferred tax liabilities and deferred tax assets were recognized and measured in ac

cordance with IAS 12.

The fair value of other identiﬁable assets acquired and liabilities

assumed approximate their carrying amounts, since interest receivable/payable is either

close to current market rates or the instruments are short-term in nature.

Goodwill arose from the acquisition has been recognized as follows:

in € millions

Total consideration

2,665.9

GCP’s identiﬁable net assets

5,128.4

Non-controlling interests

(2,075.4)

Perpetual notes from GCP

(1,250.0)

GCP’s net assets attributable to the Company

1,803.0

Goodwill recognized

862.9

The goodwill recognized is attributable mainly to deferred tax liabilities initially con

solidated and ﬁnancial synergies expected to be achieved following the integration of

GCP and the Company. The goodwill is not expected to be deductible for tax purposes.

For additional information about the impairment of the goodwill see note 15.1.

Post obtaining control over GCP, the Group has been continuously increasing its hold

ing in GCP with both active acquisition of shares and opting for scrip dividend in July

2022. The effective holding rate (reﬂecting the voting rights in GCP) as at December

31, 2022 reached to 60.11%.

6. OPERATING SEGMENTS

6.1 Reportable segments

Products and services from which reportable segments derive their revenues and net

operating income

Information reported to the Group’s CODM for the purposes of resource allocation and

assessment of segment performance is based on Aroundtown’s commercial portfolio

and GCP’s portfolio, and contains the segments’ revenue, net operating income and

property revaluation and capital gains. The Group’s reportable segments under IFRS 8

are therefore as follows:

Commercial

portfolio

The portfolio includes mainly ofﬁce and hotel properties. The Group’s assets are well-di

versiﬁed and well-located across top tier cities in Europe with a focus on Germany and

the Netherlands.

GCP portfolio

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

in densely populated areas predominantly in Germany and London. GCP’s portfolio,

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

31, 2022, consists of 64 thousand units, located in densely populated areas with a

focus on Berlin, 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.

6.2 Segment revenues and net operating income

The following is an analysis of the Group’s revenue and results by reportable segment:

Year ended December 31, 2022

in € millions

Commercial

GCP

Total

Adjust-

Note

Total

portfolio

segments

ments

Segment revenue

1,029.1

582.5

1,611.6

(1.7)

1,609.9

Net operating income

621.6

316.2

937.8

(1.7)

936.1

Property revaluations and capital gains

(615.1)

117.8

(497.3)

Impairment of goodwill

(141.4)

(262.9)

(404.3)

Share of proﬁt from equity-accounted investees

5.9

Administrative and other expenses

(62.5)

Depreciation and amortization

14, 15

(21.1)

Finance expenses

(184.8)

Other ﬁnancial results

(194.1)

Loss before tax

(422.1)

Current tax expenses

(117.4)

Deferred tax income

82.4

Loss for the year

(457.1)

Year ended December 31, 2021

in € millions

Commercial

GCP

Total

Adjust-

Note

portfolio

segments

ments

Segment revenue

1,058.8

265.2

1,324.0

(0.8)

Total

1,323.2

Net operating income

651.4

155.5

806.9

(0.8)

806.1

Property revaluations and capital gains

295.2

514.5

809.7

Share of proﬁt from equity-accounted investees

193.4

Administrative and other expenses

(56.6)

Depreciation and amortization

14, 15

(15.9)

Finance expenses

(180.4)

Other ﬁnancial results

(162.1)

Proﬁt before tax

1,394.2

Current tax expenses

(100.3)

Deferred tax expenses

(215.8)

Proﬁt for the year

1,078.1

Segment revenue, net operating income and revaluation and capital gains represent the

results earned by each segment without allocation of the depreciation and amortiza-

tion, administration expenses, share of proﬁts from equity-accounted investees, ﬁnance

expenses, and tax expenses. These are the measures reported to the Group’s CODM for

the purpose of resource allocation and assessment of segment performance. The geo-

graphical disaggregation is not considered by the Group’s CODM in how the operating

results are monitored – for the geographical distribution of revenue and investment

property see notes 7 and 16, respectively.

The comparative ﬁgures represent GCP portfolio’s contribution since the initial consol

idation with GCP that took place in July 2021.

7. REVENUE

Year ended December 31,

2022

2021

in € millions

Net rental income

1,222.1

1,085.7

Operating and other income

387.8

237.5

1,609.9

1,323.2

Geographical distribution of revenue

Year ended December 31,

Country

2022

2021

in € millions

Germany

1,195.2

944.5

The Netherlands

159.1

155.4

United Kingdom

173.9

146.2

Belgium

26.0

Others

55.7

51.1

1,609.9

1,323.2

The Group is not exposed to signiﬁcant revenue derived from an individual customer.

8. PROPERTY REVALUATIONS AND CAPITAL GAINS

Year ended December 31,

2022

2021

in € millions

Property revaluations

(539.9)

744.1

Capital gains

42.6

65.6

(497.3)

809.7

9. PROPERTY OPERATING EXPENSES

Year ended December 31,

2022

2021

in € millions

Ancillary expenses and purchased services

(390.8)

(238.1)

Maintenance and refurbishment

(51.1)

(37.8)

Personnel expenses

(58.6)

(46.8)

Depreciation and amortization

(21.1)

(15.9)

Other operating costs

(*)

(173.3)

(194.4)

(694.9)

(533.0)

(*) the Group recognized an allowance for expected credit loss and other impairment on trade and other

receivables in the total amount of €104.5million (2021: €156.4 million), also containing an allowance for

impairment due to the Covid pandemic impact

As at December 31, 2022, the Group had 1,705 employees (2021: 1,631 employees). On

average, the Group had 1,688 employees (2021: 1,202 employees).

The amount of direct operating expenses (including maintenance and refurbishment)

arising from investment property that generates net rental income during the year

amounted to €690.5 million (2021: €529.5 million). The amount of direct operating

expenses (including maintenance and refurbishment) arising from investment proper

ty that did not generate net rental income during the year amounted to €4.4 million

(2021: €3.5 million).

10. ADMINISTRATIVE AND OTHER EXPENSES

Year ended December 31,

2022

2021

in € millions

Personnel expenses

(28.8)

(26.2)

Legal and professional fees

(12.1)

(9.7)

Audit and accounting expenses

(7.2)

(6.2)

Marketing and other administrative expenses

(14.4)

(14.5)

(62.5)

(56.6)

The following table shows the breakdown of audit, audit-related, tax and other services

rendered by KPMG audit ﬁrm network and by other audit ﬁrms:

KPMG

Network

Year ended December 31,

2022

2021

in € millions

Other

audit ﬁrms

KPMG

Network

Other

audit ﬁrms

Audit services

4.3

2.7

3.5

0.3

0.1

2.3

0.1

0.4

Audit-related services

0.1

Tax and other services

0.1

0.4

4.5

3.2

3.9

2.8

11.

FINANCE EXPENSES AND OTHER FINANCIAL RESULTS

Year ended December 31,

2022

2021

in € millions

Finance expenses

Interest to ﬁnancial institutions, bonds and

(173.9)

(166.9)

third parties, net

Finance expenses on lease liabilities

(10.9)

(13.5)

(184.8)

(180.4)

Other ﬁnancial results

Changes in fair value of ﬁnancial assets and liabilities,

(168.6)

(115.4)

buy-backs and early repayment costs, net

Finance-related costs

(25.5)

(46.7)

(194.1)

(162.1)

12. TAXATION

12.1 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% (2021: 24.94%).

The German subsidiaries containing real estate property are subject to taxation under

the laws of Germany. Income taxes are calculated using a federal corporate tax of 15.0%

for December 31, 2022 (2021: 15.0%), plus an annual solidarity surcharge of 5.5% on

the amount of federal corporate taxes payable (aggregated tax rate: 15.825%). When

applicable, an additional effective rate of approximately 14.5% is imposed as German

trade tax (Gewerbesteuer). German property taxation includes taxes on the holding of

real estate property based on the location and size of the property.

The Cypriot subsidiaries are subject to taxation under the laws of Cyprus. The corpo

ration tax rate for Cypriot companies is 12.5% (2021: 12.5%). Under certain conditions

interest income of the Cypriot companies may be subject to special defense contri

bution at the rate of 30.0% (2021: 30.0%). In such cases this interest will be exempt

from corporation tax. In certain cases, dividends received from abroad may be subject

to special defense contribution at the rate of 17.0% (2021: 17.0%). 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 Dutch subsidiaries are subject to taxation under the laws of the Netherlands. The

Dutch corporation tax rate for the ﬁnancial year 2022 is 25.8% (reduced rate of 15%

applies to taxable income up to €395 thousand) (2021: 25.0% and 15%, respectively).

The UK subsidiaries containing real estate property, are subject to taxation under the

laws of the United Kingdom. Income taxes are calculated using a federal corporate tax

(also for capital gains) of 19.0% for December 31, 2022 (2021: 19.0%). From April 1,

2023, the UK corporation tax rate will increase from 19.0% to 25.0% on proﬁts of over

GBP 250 thousand. Where there are UK group subsidiaries this threshold is divided by

the number of UK group entities.

Subsidiaries in other jurisdictions are subject to corporate tax rate of up to 27.9%

(2021: 28.2%).

12.2 Current tax expenses

Year ended December 31,

2022

2021

in € millions

Corporate income tax

(69.0)

(56.3)

Property tax

(48.4)

(44.0)

(117.4)

(100.3)

12.3 Movements in the deferred tax assets and liabilities

Deferred tax liabilities

Derivative

Fair value

ﬁnancial

gains on

instruments and

investment

other deferred tax

property

liabilities

in € millions

Balance as at December 31, 2020

23.0

1,861.5

Total

1,884.5

Charged to:

Consolidated statement of proﬁt or loss

9.3

215.5

224.8

Other comprehensive income

(0.3)

14.1

Initially consolidated in business

(0.1)

717.5

combinations (see note 5)

Disposed of through deconsolidations and others

(43.4)

13.8

717.4

(43.4)

Transfer to liabilities held for sale

(1.9)

Netting of deferred taxes

(*)

(29.2)

Balance as at December 31, 2021

31.9

2,734.1

2,766.0

Charged to:

Consolidated statement of proﬁt or loss

(18.1)

(58.6)

(76.7)

Other comprehensive income

28.2

(1.1)

27.1

Disposed of through deconsolidations and others

(24.4)

Transfer to liabilities held for sale and others

(33.0)

Netting of deferred taxes

(*)

3.3

Balance as at December 31, 2022

42.0

2,620.3

2,662.3

As at December 31,

2022

2021

in € millions

Excess of deferred tax liabilities

2,597.2

2,680.5

As at December 31, 2022, the Group did not recognize cumulative deferred tax liabilities

on fair value gains on investment property amounting to €529.4

million (2021: €535.7

million) due to the initial recognition exception on acquisitions that did not meet the

deﬁnition of business combination.

Deferred tax assets

Derivative

ﬁnancial

instruments and

other deferred

tax assets

loss carried

forward, net

Total

in € millions

Balance as at December 31, 2020

37.8

11.4

49.2

Charged to:

Consolidated statement of proﬁt or loss

15.1

(6.1)

9.0

Other comprehensive income

6.7

Initially consolidated in business

combination (see note 5)

0.6

49.4

50.0

Disposed of through deconsolidations and others

(1.1)

Transfer (to) from assets held for sale

(0.4)

1.3

0.9

Netting of deferred taxes

(*)

(29.2)

Balance as at December 31, 2021

59.8

25.7

85.5

Charged to:

Consolidated statement of proﬁt or loss

2.3

3.4

5.7

Other comprehensive income

(30.4)

Disposed of through deconsolidations and others

(2.0)

Transfer from assets held for sale and others

3.0

Netting of deferred taxes

(*)

3.3

Balance as at December 31, 2022

31.7

33.4

65.1

(*) deferred tax assets and liabilities are netted against each other when the same taxable entity and the same

taxation authority are involved, as well as the realization period and tax nature legally allow to set off

current tax assets against current tax liabilities. As a result, as at December 31, 2022, a cumulative amount

of €167.2 million was netted (2021: €170.5 million)

As at December 31, 2022, the Group had not recognized cumulative deferred tax assets

on carried forward losses amounting to €210.7

million (2021: €83.6 million), as it was

not considered probable that there would be future taxable proﬁts available in the

relevant entities.

12.4 Reconciliation of effective tax rate

(Loss) proﬁt before tax

Year ended December 31,

2022

2021

in € millions

(422.1)

1,394.2

24.94%

(105.3)

347.7

Tax using domestic rate

Tax computed at the statutory tax rate

Decrease in taxes on income resulting from

the following factors:

(1.5)

(48.2)

80.7

(45.1)

32.3

61.1

29.4

35.0

316.1

(8.3)

22.7

Group’s share in earnings from companies

accounted for as equity-accounted investees

Effect of different tax rates of subsidiaries

operating in other jurisdictions

Effect of change in tax rates

Income and expenses on which the Group

did not recognize deferred tax and others

Total current and deferred tax expenses

Effective tax rate (in %)

13. NET EARNINGS PER SHARE ATTRIBUTABLE TO THE

OWNERS OF THE COMPANY

13.1 Basic earnings per share

The calculation of basic earnings per share for the year ended December 31, 2022, is

based on the loss attributable to the owners of €645.1 million (2021: proﬁt of €642.2

million), and a weighted average number of ordinary shares outstanding of 1,109.9

million (2021: 1,168.2 million), calculated as follows:

(Loss) proﬁt attributed to the shareholders (basic)

Year ended December 31,

2022

2021

in € millions

(Loss) proﬁt for the year, attributable to the owners

(645.1)

642.2

of the Company

Weighted average number of ordinary shares (basic)

Year ended December 31,

2022

2021

in millions of shares

Issued ordinary shares on January 1, net of treasury shares

1,103.6

1,148.4

Scrip dividend and share incentive effect

(*)

14.0

18.7

Mandatory convertible notes effect

27.7

Shares buy-back effect

(*)

(35.4)

(26.6)

Weighted average number of ordinary shares

1,109.9

1,168.2

Basic (loss) earnings per share (in €)

(0.58)

0.55

(*) weighted average

amount

STUTTGART

13.2 Diluted earnings per share

The calculation of diluted earnings per share for the year ended December 31, 2022,

is based on loss attributable to the shareholders of €645.2 million (2021: proﬁt of

€620.0 million), and a weighted average number of ordinary shares outstanding after

adjustment for the effects of all dilutive potential ordinary shares of 1,111.3 million

(2021: 1,169.4 million), calculated as follows:

(Loss) proﬁt attributed to the shareholders (diluted)

Year ended December 31,

2022

2021

in € millions

(Loss) proﬁt for the year, attributable to the owners

(645.1)

642.2

of the Company (basic)

Dilutive effect of the Company’s share of loss in investees

(0.1)

(22.2)

(Loss) proﬁt for the year, attributable to the owners

(645.2)

620.0

of the Company (diluted)

Weighted average number of ordinary shares (diluted)

Year ended December 31,

2022

2021

in millions of shares

Issued ordinary shares on January 1, net of treasury shares

1,103.6

1,148.4

Scrip dividend and share incentive effect

(*)

15.4

19.9

Mandatory convertible notes effect

27.7

Shares buy-back effect

(*)

(35.4)

(26.6)

Weighted average number of ordinary shares

1,111.3

1,169.4

Diluted (loss) earnings per share (in €)

(0.58)

0.53

(*) weighted average

amount

14.

PROPERTY AND EQUIPMENT

Furniture,

Owner-

ﬁxtures and

occupied

Total

ofﬁce

properties

(a)

equipment

in € millions

COST

Balance as at December 31, 2020

1.6

46.4

48.0

Additions, net

3.8

26.2

30.0

Initially consolidated in business

61.8

13.0

74.8

combination (see note 5)

Balance as at December 31, 2021

67.2

85.6

152.8

Additions, net

63.1

Revaluations

18.2

Held for sale

(0.2)

Balance as at December 31, 2022

85.4

148.5

233.9

DEPRECIATION

Balance as at December 31, 2020

10.8

Depreciation for the year

1.2

8.8

10.0

Balance as at December 31, 2021

1.2

19.6

20.8

Depreciation for the year

3.7

9.7

13.4

Balance as at December 31, 2022

4.9

29.3

34.2

CARRYING AMOUNT

Balance as at December 31, 2021

66.0

132.0

Balance as at December 31, 2022

80.5

119.2

199.7

(a) owner-occupied properties are measured at fair value less accumulated depreciation and im

pairment losses and are classiﬁed in accordance with the fair value hierarchy (see note 4). Since

one or more of the signiﬁcant input parameters is not based on observable market data, the fair

value measurement is included in level 3. The revaluation amount presented is before tax

UTRECHT

146

15.

GOODWILL AND INTANGIBLE ASSETS

Computer

software

Goodwill

and other

Total

intangible

COST

assets

in € millions

Balance as at December 31, 2020

836.1

10.8

846.9

Additions, net

5.7

Initially consolidated combination

862.9

14.6

(see note 5)

877.5

Balance as at December 31, 2021

1,699.0

31.1

1,730.1

Additions, net

2.8

Balance as at December 31, 2022

1,699.0

33.9

1,732.9

IMPAIRMENT / DEPRECIATION

Balance as at December 31, 2020

4.5

2.4

6.9

Depreciation for the year

5.9

Balance as at December 31, 2021

4.5

8.3

12.8

Depreciation for the year

7.7

Impairment for the year

404.3

(see note 15.1)

404.3

Balance as at December 31, 2022

408.8

16.0

424.8

CARRYING AMOUNT

Balance as at December 31, 2021

1,694.5

22.8

1,717.3

Balance as at December 31, 2022

1,290.2

17.9

1,308.1

15.1 Annual impairment test of goodwill

In July 2021, following the business combination with GCP, goodwill in the amount of €862.9 million was

recognized (see note 5). This followed the recognition of €822.0 million in 2020 arising from the business

combination with TLG. The goodwill initially recognized in both business combination transactions is attributable

mainly to deferred tax liabilities initially consolidated therein; while most of the identiﬁable assets and assumed

liabilities were initially recognized at their fair value, the deferred tax liabilities were calculated pursuant to IAS

12 principles and reﬂected the nominal tax values of the variance between the real estate portfolios’ carrying

amount for tax purposes and their fair value.

The Group considers the operational real estate portfolios under TLG and GCP as each one being a single CGU

for internal management purposes to which the full amount of goodwill is allocated. For GCP, there are some

additional assets allocated to the CGU that are expected to beneﬁt from the business combination. The Company

assesses on an annual basis the impairment of each of the goodwill items by comparing the carrying amount of

the CGU (together with the attributed goodwill and adjusted for the amount of the deferred tax liability based

on temporary differences initially recognized in the business combination but not reversed at the date of the

impairment test) to their recoverable amount. The recoverable amount of a CGU is calculated as the higher of

(a) fair value less costs of disposal and (b) value in use.

For testing of the goodwill on TLG, the carrying CGU amount as at December 31, 2022, amounted to €3,736.1

million (2021: €4,207.4 million) (being the investment property, goodwill and deferred tax liabilities recognized

during the business combination but not reversed). The carrying amount was compared to the recoverable

amount being the fair value of the CGU less assumed costs of disposal that amounted to €3,594.7 million (2021:

recoverable amount of €4,266.0 million, being the fair value less costs of disposal) and therefore concluded

with an impairment of €141.4 million for 2022 (2021: no impairment). The Company assumed the fair value

less costs of disposal as of December 31, 2022, was higher than the value in use, mainly due to the expected

increasing cost of capital that would affect the discounted cash ﬂows model on which the value in use is based.

For testing of the goodwill on GCP, the examination had to include all the business units and activities within

the group of GCP to which the goodwill relates (i.e., the CGU assets being the investment property and speciﬁc

additional ﬁnancial assets) and amounted to €10,221.0 million as at December 31, 2022 (2021: €9,814.6 million).

The carrying amount was compared to the recoverable amount being the fair value of the CGU less assumed

costs of disposal that amounted to €9,958.1 million (in 2021: recoverable amount of €9,875.4 million was

calculated, being the value in use of the CGU – based on DCF calculation using the main unobservable input

parameters of: projected cashﬂows of three years pursuant to the Group’s anticipation and communicated

guidance; WACC – 3.25%; growth rate – 1.00%; per sensitivity analysis that assumed increase of up to 20 basis

points in both the WACC and the growth rate, the impairment test result of 2021 would still conclude on no

impairment) and therefore concluded an impairment of €262.9 million for 2022 (2021: no impairment).

The fair value of the investment property used in the impairment tests of TLG and GCP are included in the

investment property valuations of the Company and whose key parameters are elaborated in note 16.3. The

assumed costs of disposal parameter utilized in the impairment assessments was 75 basis points. Any change

of +/- 5 basis points in the assumed costs of disposal would lead to a further / less impairment of €6.7 million.

16. INVESTMENT PROPERTY

16.1. Reconciliation of investment property

Year ended December 31,

2022

2021

Note

(*)

Level 3

(*)

Level 3

in € millions

Balance as at January 1

29,115.9

21,172.4

Plus: investment property classiﬁed as held for sale

1,009.3

830.2

Total investment property

30,125.2

22,002.6

Initially consolidated from business combinations

8,420.3

Acquisitions

469.2

669.4

Modernizations, pre-letting modiﬁcations and capital expenditures

407.5

432.8

Disposals

16.2.1

(1,431.3)

(2,193.5)

Transfer to trading property

(86.1)

Effect of foreign currency exchange differences

(140.6)

135.6

Fair value adjustments

(539.9)

744.1

Total investment property

28,890.1

30,125.2

Less: investment property classiﬁed as held for sale

16.2.2

(909.1)

(1,009.3)

Balance as at December 31

27,981.0

29,115.9

(*) classiﬁed in accordance with the fair vale hierarchy. Since one or more of the signiﬁcant inputs is not based on

observable market data, the fair value measurement is included in level 3 (see note 4.1 for deﬁnition)

Geographical distribution of investment property

(*)

As at December 31,

2022

2021

in € millions

Germany

21,313.5

22,258.0

The Netherlands

2,379.5

2,394.4

United Kingdom

2,392.8

2,618.8

Belgium

615.5

600.0

Other locations

1,279.7

1,244.7

27,981.0

29,115.9

(*) excluding investment property classiﬁed as held for sale

16.2 Disposals and assets / liabilities held for sale

16.2.1 Disposals of investment property and trading property

The following table describes the amounts of assets and liabilities disposed as part

of deconsolidation of companies and asset deals took place during 2022 and 2021:

As at December 31,

2022

2021

in € millions

Investment property

1,431.3

2,193.5

(*)

Trading property

103.2

Other assets, net

10.4

1.5

Deferred tax liabilities, net

(22.4)

(43.5)

Total net assets disposed of

1,522.5

2,151.5

Non-controlling interests deconsolidated

(3.2)

(21.7)

Total consideration

(**)

(1,561.9)

(2,195.4)

Capital gains

42.6

65.6

(*) the Group disposed of trading property with a carrying amount of €88.6 million, including costs of sale,

for a consideration of €103.2 million. The total outcome of €14.6 million gain has been presented as

part of the property revaluations and capital gains in the consolidated statement of proﬁt or loss, of

which €3.5 million capital loss was recognized in the reporting period

(**) the sales consideration in 2022 includes vendor loans granted by the Group as a seller in the volume

of €243.1 million (2021: €220.7 million), presented as part of other non-current assets or trade and

other receivables (for the current portion thereof) in the consolidated statement of ﬁnancial position.

For further information about the vendor loans’ terms, see note 18 (3)

16.2.2

Disposal group classified as 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 or asset

type of the properties, or mature properties which upside mainly has been lifted.

The intention of the Group to dispose of non-core and / or mature properties is

part of its capital recycling plan and is following a strategic decision to increase

the quality of its portfolio and utilize the disposal proceeds into the share buy-back

and debt repayments.

Some properties are expected to be disposed through sale of subsidiaries. Accord

ingly, 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. As at December 31, 2022, efforts to sell the properties have started

and the sales are expected to be completed within twelve months.

The major classes of assets and liabilities comprising the Disposal Group classiﬁed

as held for sale are as follows:

As at December 31,

2022

2021

in € millions

Assets classiﬁed as held for sale

1,009.3

3.8

19.9

1,033.0

18.2

30.5

14.8

63.5

Investment property

909.1

Cash and cash equivalents

9.3

Other assets

12.9

Total assets classiﬁed as held for sale

931.3

Liabilities classiﬁed as held for sale

Loans and borrowings

109.5

Deferred tax liabilities

31.4

Other liabilities

Total liabilities classiﬁed as held for sale

51.8

192.7

16.3 Measurement of fair value

The fair value of the properties of the Group is determined at least once a year by exter

nal, independent and certiﬁed valuers, who are specialist in valuing real estate properties.

The prime valuers, responsible for a major part of the portfolio are Jones Lang LaSalle,

Savills and CBRE (the “Appraisers”), they are considered as the market leading valuers

in the European real estate market. The fair value of the properties was prepared in

accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation – Global

Standards (current edition) as well as the standards contained within The European Group

of Valuers Associations (TEGoVA) European Valuations Standards, and in accordance with

International Valuation Standards Council (IVSC) International Valuation Standard (IVS),

the International Accounting Standard (IAS) of the 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 Appraisers. Therefore, the valuation is based on internationally recognized

standards.

As part of the engagement, the Company and the valuers conﬁrm that there is no actual

or potential conﬂict of interest that may have inﬂuenced the valuers’ status as external

and independent. The valuation fee is determined on the scope and complexity of the

valuation report.

The fair value of the investment property is determined using the following valuation

methods:

●

Discounted cash ﬂow method

Under the DCF method, fair value is estimated using assumptions regarding the bene

ﬁts 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 inter

est. 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, re

development, and refurbishment. The appropriate durations are typically driven by

market behavior that is a characteristic of the class of real property.

Periodic cash ﬂows are typically estimated as gross income less vacancy, non-recov

erable 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.

●

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.

In general, enquiries have been made to 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

tenants’ 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.

●

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 sub-optimally utilized. The residual value

is determined by ﬁrst calculating the net capital value of the property after comple

tion 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 fol

lowing 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.

As at December 31, 2022, 95% (2021: 93%) of investment property have been valued

using the discounted cash ﬂows method, nearly 5% using the residual value approach

(2021: 5%) and less than 1% using the comparable approach (2021: 2%).

MUNICH

The key assumptions used to determine the fair value of the investment property are

further discussed below:

As at December 31,

2022

2021

Signiﬁcant

Valuation technique

Range (weighted average)

unobservable inputs

Rent growth p.a. (%)

0.2 – 3.0 (2.1)

0.2 – 2.5 (1.8)

Long-term vacancy rate (%)

0.0 – 4.1 (1.0)

0.0 – 13.0 (1.1)

DCF method

Discount rate (%)

2.5 – 12.8 (5.6)

2.3 – 11.8 (5.3)

Capitalization rate (%)

1.7 – 15.1 (4.7)

1.7 – 16.8 (4.5)

Market comparable

Price per sqm (in €)

1,200 – 16,800 (4,800)

1,670 – 17,700 (6,570)

approach

Rent price per sqm (in €)

10.0 – 41.1 (21.5)

8.5 – 45.0 (18.0)

Sales price per sqm (in €)

3,000 – 9,700 (8,000)

3,300 – 17,700 (9,750)

Residual value

approach

Development cost per sqm (in €)

1,000 – 5,500 (3,600)

740 – 5,520 (3,330)

Developer margin (%)

9.0 – 20.0 (12.8)

7.5 - 18.0 (12.1)

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. Sig

niﬁcant 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 accompa

nied 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.

The table below presents the weighted average and range of the discount rate and

capitalization rate for nearly all the portfolio, per asset type:

2022

As at December 31,

2021

Asset type

Parameter

Discount

rate

Capitalization

rate

Discount

rate

Capitalization

rate

Ofﬁce

Hotel

Residential

Retail

Logistics/

wholesale/

other

Range

Average

Range

Average

Range

Average

Range

Average

Range

Average

2.5% - 9.5%

3.3% - 12.0%

2.5% - 10.0%

5.0%

3.0% - 11.8%

6.3%

2.3% - 8.0%

4.8%

3.3% - 9.9%

5.7%

3.1% - 10.5%

5.1%

2.5% - 12.3%

4.5%

2.8% - 10.3%

4.9%

1.7% - 7.4%

3.9%

2.8% - 10.4%

5.4%

2.2% - 16.8%

4.3%

5.4%

4.9%

3.3% - 12.8%

3.1% - 10.6%

6.8%

5.3%

2.5% - 7.0%

1.7% - 7.3%

4.6%

3.6%

3.5% - 11.0%

3.4% - 9.0%

6.2%

5.5%

3.0% - 10.3%

2.2% - 15.1%

5.1%

4.3%

●

Highest and best use

As at December 31, 2022, the current use of all investment property is considered the

highest and best use, except for 11.1% (2021: 10.8%) of the investment property, for

which the Group determined that fair value based on the development and 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 achieving increased rental value and

implementing development projects, the value of these properties is maximized and

reﬂect the value expected for realization of the investments.

17. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES

17.1 Reconciliation of investment in

equity-accounted investees

Year ended December 31,

2022

2021

in € millions

Balance as at January 1

1,222.5

3,177.4

Additions, net

109.6

587.8

Dividends received (cash and scrip)

(34.8)

(84.1)

Share of proﬁt from investees

5.9

193.4

Changes through OCI and other equity reserves

(11.3)

13.9

Initial consolidation

(2,665.9)

Balance as at December 31

1,291.9

1,222.5

The carrying amount as of December 31, 2022, includes 349.1 million (2021: €150.5 million) of loans

given to associate companies.

17.2 Details of material equity-accounted investees

All the investments included in the equity-accounted investee balance are accounted for using the equity method in these consolidated ﬁnancial statements as set out in the Group’s

accounting policies in note 3.

Details of each of the Group’s material equity-accounted investees as at December 31, 2022 are as follow:

Principal

Place of

Main place of

Rate of effective ownership interest held by the Group

Name of investee

Note

activity

incorporation

principal activities

as at December 31,

2022

2021

in %

Globalworth Real Estate Investments Limited

(1)

Real estate

Guernsey

Poland and Romania

30.31

(through 50% in Tevat Limited)

(1)

during 2021, the Group transferred its holdings in Globalworth (22.02%) to a subsidiary of a newly established joint arrangement entity named Tevat Limited, incorporated in Cyprus (“the JV”), held 50/50 with a third party. The

third party transferred their holdings in Globalworth to the JV as well, alongside a tender offer mutually submitted by the two JV partners to the remaining shareholders of Globalworth. The tender resulted with the JV acquiring

an additional stake of 9.24% (20.5 million shares) for a cash settlement of €7.0 per share. Following the tender offer and the restructuring of the shares as described above, the Group holds 50% in the JV which as at December 31,

2022, held 60.63% in Globalworth (2021: 60.63%). The joint arrangement’s principles are that decisions about the relevant activities require the unanimous consent of the two 50/50 JV partners (that led to the conclusion pursuant

to which the Group has joint control over the JV), and the accounting treatment of it follows the same approach taken so far as an equity-accounted investee

DRESDEN

17.3 Summarized ﬁnancial information in respect of the Group’s

material equity-accounted investees is set out below:

As at and for the year ended December 31

Globalworth Real Estate

Investments Limited

2022

2021

in € millions

Current assets

329.0

582.0

Of which cash and cash equivalents

163.8

418.7

Non-current assets

3,039.9

3,045.5

Of which investment property

2,945.5

2,966.1

Current liabilities

82.3

426.3

Non-current liabilities

1,615.3

1,462.6

Of which loans, borrowings and bonds

1,433.6

1,285.6

Equity attributable to the owners

1,656.5

1,738.6

Revenue

239.3

219.4

Finance expenses, net

49.8

53.8

Current and deferred tax expenses

(4.9)

14.6

Net (loss) proﬁt attributed to the owners

(16.1)

47.5

Total comprehensive income (loss)

(21.5)

47.5

attributed to the owners

Quoted market price per share (in €)

4.1

5.9

Group’s share of (loss)

proﬁt in the investee

(1.7)

21.5

Dividends received in the Group from the investee

19.2

15.7

Impairment of investment

(23.2)

Reconciliation of the above summarized

ﬁnancial information to the carrying amount:

Equity attributable to the owners

1,656.5

1,738.6

Group’s interest

30.31%

Group’s share

502.1

527.0

Surplus on investment

24.3

43.5

Total carrying amount of equity-accounted

526.4

570.5

investee

17.4 Aggregate information of investment in equity-accounted

investees that are not individually material

As at and for the year ended

December 31,

2022

2021

in € millions

The Group’s share of proﬁt

30.8

44.1

The Group’s share of other comprehensive (loss) income

(11.3)

3.7

The Group’s share of total comprehensive income

19.5

47.8

Dividends received in the Group from the investees

15.6

8.6

Aggregate carrying amount of the Group’s interests and

765.5

652.0

loans in these investments

18. OTHER NON-CURRENT ASSETS

As at December 31,

2022

2021

Note

in € millions

Tenancy deposits

61.2

60.1

Trade receivables

53.1

61.0

Investment in non-current ﬁnancial assets

972.2

779.0

Financial assets at fair value through proﬁt or loss

199.9

265.8

Others

17.4

23.2

1,303.8

1,189.1

(1)

tenancy deposits mainly include several months net rent from the tenants which is paid at the beginning of

the lease. The deposits are considered a security payment by the tenant. The Group can primarily use these

funds, when the tenant has unpaid debts or causes damages to the property. Experience shows that the

majority of the leases are long term and therefore the deposits are presented as long term assets

(2)

consists of mainly the revenue straight-lining effect arising from the rent-free granted to tenants

(3)

consists of mainly non-current investments in loans connected with future real-estate transactions (with

maturities between 2024-2031 and an annual interest rate of up to 10% p.a.), long-term deposits and the

non-current portion of the loans provided by the Group as a seller (vendor loans). These vendor loans have

maturities between 2023 and 2025, carrying weighted average interest rates of 3.4% p.a. and are secured

against the properties sold at an LTV in the range of 50%-60%

(4)

includes mainly investment in various real estate funds

19. TRADE AND OTHER RECEIVABLES

As at December 31,

2022

2021

Note

in € millions

Rent and other receivables

91.8

125.3

Operating costs receivables

454.7

397.5

Prepaid expenses

23.9

67.3

Tax receivable from authorities

91.0

11.4

Other short-term ﬁnancial assets

506.7

529.8

1,168.1

1,131.3

(1)

operating costs receivables represent an unconditional right to consideration in exchange for services that

the Group has transferred to tenants. The Group recognizes an operating income based on contractual rights

for providing ancillary services and for other charges billed to tenants, as the performance obligations are sa

tisﬁed, that is, as services are rendered. Mainly once a year,

the operating cost receivables are settled against

prepayments received from tenants on operating costs

(2)

the balance includes the current portion of vendor loans granted by the Group as part of the sale transactions

(see note 18 (3) for the vendor loans’ terms), other loans in connection with future real estate transactions

and other short-term receivables

The Group recognized an allowance for expected credit losses and other impairments on

trade and other receivables in the total amount of €133.2 million (2021: €156.4 million)

through the property operating expenses in the consolidated statement of proﬁt or loss.

20. TOTAL EQUITY

20.1 Equity attributable to the owners of the Company

20.1.1

Share capital

2022

Number of shares

Authorized

As at December 31,

2021

in € millions

Number of shares

in € millions

Ordinary shares of

3,000,000,000

€0.01 each

30.0

3,000,000,000

30.0

Issued and fully paid

Balance as at January 1

1,537,025,609

15.4

1,537,025,609

15.4

Balance at the end

1,537,025,609

of the year

15.4

1,537,025,609

15.4

Issued capital

There were no movements in the share capital during the years 2021 and 2022.

20.1.2

Treasury shares

2022

2021

Number of shares

Balance at January 1

433,459,625

388,629,499

Treasury shares initially consolidated

3,000,000

Acquired during the year

70,123,968

71,478,246

Delivered as part of scrip dividend

distributions (see note 20.1.3)

(31,134,933)

(29,280,757)

Delivered as part of share-based payment

(467,308)

(367,363)

Balance at December 31

471,981,352

433,459,625

Rate from the total share capital of the

Company (in %)

30.71

28.20

In March 2021, the Company’s Board of Directors resolved on a buy-back program (the

“Program”) to acquire the Company’s own shares, following authorization received by the

Ordinary General Meeting (OGM) held in May 2020. The Program was initially planned to

reach volume of €500 million and maximum of 100 million shares and expected to be

ﬁnalized by June 30, 2022. In February 2022, the Company’s Board of Directors resolved

on increasing the volume of the Program by additional €500 million (to a total amount

of €1 billion), up to a maximum of additional 100 million shares (and in total to 200

million shares) and extended it to run until December 31, 2022.

Since commencement of the Program and by December 31, 2022 (the end date), the Group

has acquired 141.6 million of its own shares. During the year 2022, 70.1 million shares

were acquired for a total amount of €254.6 million (during 2021: 71.5 million shares for

a total amount of €444.1 million).

As part of the business combinations with GCP that took place in July 2021, the Company

initially consolidated its own shares at their fair value upon takeover.

The shares bought back and which are held in treasury by the Company and the Compa

ny’s wholly owned afﬁliates are suspended from voting and dividend rights. In other cases,

shares held in treasury are also suspended from voting rights but entitled to dividends.

20.1.3 Dividend distributions

On June 29, 2022, the shareholders’ Annual General Meeting (AGM) resolved upon the

distribution of the dividend attributed to 2021 ﬁnancial year in the amount of €0.23 per

share from the share premium, in accordance with the proposal of the Company’s Board

of Directors. The Company provided the shareholders with the option receive their net

dividend in the form of Aroundtown shares (“Scrip Dividend”). The results and payment

took place in July 2022 and concluded in delivering 31,134,933 shares from the Com

pany’s treasury shares (€155.9 million, based on the shares’ original cost), and a cash

payment of €169.3 million.

During 2021 there was the settlement of the dividend distributed in December 2020

and the one distributed in June 2021 – both together resulted in delivering 29,280,757

shares from the Company’s treasury shares (€147.0 million, based on the shares’ original

cost), and a cash payment of €252.0 million.

20.1.4

Share premium and other reserves

The capital reserves include share premium derived directly from the capital increas

es that took place since the date of incorporation (including the proceeds received by

placing the mandatory convertible note) and from conversions of convertible bonds

into ordinary shares and can be distributed at any time. The account also consists of the

share-based payment reserve, and the other comprehensive income components arising

from the hedge accounting and the foreign currency translations.

Legal reserve

The Company is required to allocate a minimum of 5% of its annual net increase to a

legal reserve after deduction of any losses brought forward, until this reserve equals

10% of the subscribed share capital. The appropriation to legal reserve is affected after

approval of the annual general meeting of the shareholders. This reserve is presented

under Share premium and capital reserves in the consolidated statement of changes in

shareholders equity and cannot be distributed. As of December 31, 2022, the legal reserve

amounted to €1.1 million.

BREMEN

20.2 Perpetual notes

20.2.1

Overview of the Group’s perpetual notes

As described in the signiﬁcant accounting policies, these notes are accounted for as equity instruments – the issuer may, at its sole discretion, elect to defer the payment of coupons on

the notes. These unpaid coupon arrears must be paid by the issuer 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. Any such deferred amounts shall not be compounded. The principal value of the notes

may be redeemed at the issuer’s sole discretion and on certain dates as detailed below under “Next possible Call Date”. If the Group decides not to redeem the perpetual note, the annual

coupons rates for following periods are updated according to the “Next Reset Margin”.

Set below are the outstanding nominal values as of December 31, 2022:

Issuer

Note

Currency

Nominal amount

in original

currency

Nominal amount

in euro

Annual coupon

rate until next

reset date

Next possible

Call Date

Next Reset Margin

in € millions

ATF Netherlands B.V.

20.2.3, 20.2.5

EUR

368.9

3.75

01/2023

4.375 + 5Y Mid-Swap

Grand City Properties S.A.

20.2.4, 20.2.5

EUR

200.0

2.75

01/2023

3.637 + 5Y Mid-Swap

AT Securities B.V.

(a), (b)

USD

641.5

561.1

2.34

07/2023

3.546 + 5Y Mid-Swap

Grand City Properties S.A.

20.2.4

EUR

350.0

2.5

10/2023

2.432 + 5Y Mid-Swap

Aroundtown SA

EUR

400.0

2.125

01/2024

2.0 + 5Y Mid-Swap

Aroundtown SA

(a), (b)

GBP

400.0

447.9

3.0

06/2024

4.377 + 5Y Mid-Swap

Aroundtown SA

EUR

600.0

3.375

09/2024

3.98 + 5Y Mid-Swap

Aroundtown SA

EUR

500.0

2.875

01/2025

3.46 + 5Y Mid-Swap

Grand City Properties S.A.

20.2.4

EUR

700.0

1.5

06/2026

2.184 + 5Y Mid-Swap

Aroundtown SA

20.2.2

EUR

600.0

1.625

07/2026

2.419 + 5Y Mid-Swap

(a)

effective euro coupon rate using cross-currency swap

(b)

the euro amount is based on the historical rate as of placement of the notes

20.2.2

Issuance of perpetual notes

On January 15, 2021, the Company issued €600 million nominal value of perpetual

notes with a ﬁrst reset date on July 15, 2026 (“First Reset Date”). The notes carry

1.625% coupon p.a. from and including interest commencement date up to but

excluding the First Reset Date. The notes will carry 5-year Mid-Swap plus a mar

gin of 2.419% from the First Reset Date ending on but excluding July 15, 2031.

A margin of 2.669% for each reset period which falls in the period commencing

on and including July 15, 2031, and ending on (but excluding) July 15, 2046, and

a margin of 3.419% for each reset period which falls on or after July 15, 2046.

20.2.3

Buy-back of perpetual notes

In January 2021, the Company launched a buy-back tender offer for its wholly

owned subsidiary’s 3.75% €600 million outstanding perpetual notes that resulted

in a nominal value of €231.1 million that was bought-back for a total amount

of €243.6 million. The nominal value left outstanding after settling the tender

offer was €368.9 million.

20.2.4

Perpetual notes initially consolidated

As part of the business combination with GCP in July 2021, the Company initially

consolidated the following series of perpetual notes:

€200 million nominal value initially consolidated at a price of 102.69% of

the principal amount. These perpetual notes are of unlimited duration and

can be called back by the Group only on certain contractually ﬁxed dates or

occasions. Up until the ﬁrst call date in January 2023, the perpetual notes

shall bear a coupon rate of 2.75% p.a. In case the Group does not exercise

its call right at that point, the coupon rate applied until the next call date

(January 2028) shall correspond to the 5-year Mid-Swap rate plus a margin

of 3.637% p.a. The mark-up will increase by 0.25% as of January 2028 and by

another 0.75% as of January 2043.

€350 million nominal value initially consolidated at a price of 102.64% of

the principal amount. These perpetual notes are of unlimited duration and

can be called back by the Group only on certain contractually ﬁxed dates or

occasions. Up until the ﬁrst call date in October 2023, the perpetual notes

shall bear a coupon rate of 2.5% p.a. In case the Group does not exercise

its call right at that point, the coupon rate applied until the next call date

(October 2028) shall correspond to the 5-year Mid-Swap rate plus a margin

of 2.432% p.a. The mark-up will increase by 0.25% as of October 2028 and by

another 0.75% as of October 2043.

€700 million nominal value initially consolidated at a price of 97.92% of

the principal amount. These perpetual notes are of unlimited duration and

can be called back by the Group only on certain contractually ﬁxed dates or

occasions. Up until the ﬁrst call date in June 2026, the perpetual notes shall

bear a coupon rate of 1.5% p.a. In case the Group does not exercise its call

right at that point, the coupon rate applied until the next call date (June

2031) shall correspond to the 5-year Mid-Swap rate plus a margin of 2.184%

p.a. The mark-up will increase by 0.25% as of June 2031 and by another

0.75% as of June 2046.

20.2.5. Decision not to exercise redeem options

In November 2022, following a decision made by the board of directors of the

Company and of GCP, the companies announced on their decision not to exer

cise their option to voluntarily redeem their perpetual notes with ﬁrst call date

in January 2023 (“the Perpetuals”). The decision was an economic decision and

reﬂected the prevailing market conditions. The increased ﬁnancing rates of new

perpetual notes to be potentially used as a replacement of the Perpetuals, are

signiﬁcantly higher than the step-up rate provided for in the terms and conditions

of the Perpetuals, making a redemption at this point uneconomical. The Company

and GCP have the option to call the Perpetuals at every future coupon payment

date. As stipulated in the terms and conditions of the Perpetuals, the coupon for

the period starting from January 2023 will be the 5-year Mid-Swap rate plus a

margin of 4.375% per annum (for the notes issued by ATF Netherlands B.V.) –

7.078% p.a., and 5-year Mid-Swap rate plus a margin of 3.637% per annum (for

the notes issued by GCP) – 6.332% p.a.

20.3 Non-controlling interests

20.3.1

Reconciliation of non-controlling interests

Note

in € millions

Balance at December 31, 2020

2,025.3

Share of proﬁt for the year

330.0

Share of OCI for the year

8.1

Share buy-back in subsidiaries

(1)

(260.6)

Transactions and dividend with/to NCI, and deconsolidations

(2)

(303.1)

Business combination with GCP

(3)

2,075.4

Balance as at December 31, 2021

3,875.1

Share of proﬁt for the year

69.9

Share of OCI for the year

(3.2)

Transactions and dividend with/to NCI and deconsolidations

(2)

(451.4)

Balance as at December 31, 2022

3,490.4

(1)

During 2021, TLG has conducted two tender offers to buy-back its own shares. Both tender offers

that were announced in December 2020 and February 2021, concluded in January 2021 and in

March 2021, and resulted in buying-back 6.4 million of TLG shares for a total amount of €155.3

million. The impact on the Company’s consolidated ﬁnancial statements was reduction of non-con

trolling interests in the amount of €154.2 million.

From the date of initial consolidation (July 2021) until December 31, 2021, GCP has executed buybacks

of 5.1 million of its own shares for an amount of €114.3 million. The impact on the Company’s consoli

dated ﬁnancial statements was reduction of non-controlling interests in the amount of €106.4 million.

(2) Transactions in 2021

During 2021, the Company increased its holding rate in subsidiaries within the Group, mainly in

TLG (increase in holding rate of approximately 8.6% to 88.02% as at December 31, 2021) and GCP

(increase in holding rate of approximately 4.5% since initial consolidation to 48.8% as at Decem

ber 31, 2021), that led to a total decrease of €247.7 million in the NCI amount (the negative cash

effect of these acquisitions amounted to €277.4 million).

An amount of €21.7 million of NCI decreased due to deconsolidations that took place during the

period following the disposal transactions of investment property. Additionally, the Group subsi

diaries distributed dividends to the NCI in the amount of €32.6 million (the negative cash effect of

the dividends amounted to €77.4 million since it also included the €44.8 million dividend paid to

the NCI in GCP that has been initially consolidated in July 2021 as “dividend payable” hence was

not part of the movement of €32.6 million presented above).

Transactions in 2022

An amount of €26.3 million of NCI increased due to initial consolidations of €29.5 million that

took place during 2022, offset by €3.2 million of deconsolidated NCI.

During 2022, the Company increased its holding rate in subsidiaries within the Group, mainly in

GCP (increase in holding rate of approximately 11.3% to 60.11% as at December 31, 2022), that led

to a total decrease of €427.1 million in the NCI amount (the negative cash effect of these acquisi

tions amounted to €376.8 million). The effect on the shareholders’ equity was increase of €101.6

million that reﬂected the variance between the NCI book value and acquisition price). Furthermore,

the Group subsidiaries distributed dividends to the NCI in the cash amount of €86.6 million. In

addition, the NCI increase due to cash injection of €36.0 million made by JV partner.

(3)

Refer to note 5

The following are subsidiaries that have material NCI:

20.3.2 TLG Immobilien AG

TLG Immobilien AG is an Aktiengesellschaft (stock corporation) incorporated in

Germany with its registered ofﬁce at 1 Alexanderstraße, 10178 Berlin, Germany

(formerly: 12 Hausvogteiplatz, 10117 Berlin, Germany). It holds and operates com

mercial real estate in Germany. The main activities consist of the operation of

real estate businesses, such as the letting, management, acquisition, disposal and

development of ofﬁce, retail and hotel properties.

Summary of the ﬁnancial information of the subsidiary, including business combi

nation adjustments (together: “Financial Information”), and holding rate from the

Group’s point of view:

As at and for the year ended December 31,

2022

2021

NCI percentage (also reﬂects the voting rights)

11.84%

11.98%

as at the year-end

in € millions

Accumulated amount of NCI presented in the Group

400.7

394.2

Proﬁt allocated to NCI presented in the Group

23.6

34.2

Dividend paid to NCI

11.9

16.4

Financial Information of TLG:

Current assets

501.0

830.1

Of which cash and cash equivalents

141.1

306.4

Non-current assets

5,065.7

5,604.9

Of which investment property

3,422.7

3,928.3

Current liabilities

231.9

489.8

Non-current liabilities

2,161.1

2,872.8

Of which loans, borrowings and bonds

1,185.6

1,824.6

Total equity

3,173.7

3,072.4

Net asset attributable to NCI

375.9

368.2

Revenue

201.7

215.3

Net proﬁt

200.2

213.0

Cash ﬂows from operating activities

181.0

156.5

Cash ﬂows from investing activities

662.1

585.6

Cash ﬂows used in ﬁnancing activities

(1,008.4)

(959.7)

Net change in cash and cash equivalents

(165.3)

(217.6)

On December 9, 2021, TLG was delisted from trading in the Frankfurt Stock Ex

change, after a public tender offer that the Company announced to the minority

shareholders of TLG, whereby 3.7 million shares have been tendered for a cash

consideration of €31.67 for each TLG share. The offer was designed to satisfy the

criteria for a revocation of the TLG shares’ admission to trading on the regulated

market of the Frankfurt Stock Exchange.

20.3.3. Grand City Properties S.A.

Grand City Properties S.A. was incorporated in Grand Duchy of Luxembourg as

a Société anonyme (public limited liability company). Its registered ofﬁce is at

37, Boulevard Joseph II, L-1840 Luxembourg (formerly: 1 Avenue du Bois, L-1251

Luxembourg).

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

in densely populated areas, predominantly in Germany as well as London. GCP’s

strategy is to improve its properties through targeted modernization and inten

sive tenant management and create value by subsequently raising occupancy

and rental levels. GCP’s shares are listed on the Prime Standard of the Frankfurt

Stock Exchange.

Summary of the ﬁnancial information of the subsidiary, including business com

bination adjustments (together: “Financial Information”), and holding rate from

the Group’s point of view:

As at and for the year ended

December 31,

2022

(*)

2021

NCI percentage (also reﬂects the voting rights) as

39.89%

51.20%

at the year-end

in € millions

Accumulated amount of NCI presented in the Group

1,800.0

2,112.4

Proﬁt allocated to NCI presented in the Group

108.5

239.7

OCI allocated to NCI presented in the Group

(3.3)

8.1

Dividend paid to NCI

44.4

44.8

Financial Information of GCP:

Current assets

1,134.0

1,679.2

Of which cash and cash equivalents

324.9

895.5

Non-current assets

10,008.7

9,883.2

Of which investment property

9,447.6

9,321.6

Current liabilities

308.7

775.9

Non-current liabilities

5,134.0

5,251.6

Of which loans, borrowings and bonds

4,096.3

4,200.3

Total equity

5,700.0

5,534.9

Net asset attributable to Perpetual notes investors

1,253.8

Net asset attributable to NCI

1,773.8

2,191.9

Revenue

577.0

264.9

Net proﬁt

225.0

493.8

Total OCI

(8.5)

15.2

Total comprehensive income

216.5

509.0

Cash ﬂows from operating activities

216.1

112.1

Cash ﬂows from investing activities

(150.6)

(83.0)

Cash ﬂows used in ﬁnancing activities

(633.9)

(204.4)

Net change in cash and cash equivalents

(568.4)

(175.3)

(*) the comprehensive income and cash ﬂow amounts from 2021 refer to the period from July 2021,

whereby business combination took place

In July 2021, the Group obtained effective control over GCP (see note 5), and grad

ually increased its holdings up to 48.80% by December 31, 2021. By December 31,

2022, the Group continued with actively acquiring participations in GCP as well

as opting for shares in the GCP scrip dividend and reached the effective holding

rate of 60.11%.

21.

SHARE-BASED PAYMENT AGREEMENTS

21.1 Description of share-based payment arrangements

As at December 31, 2022, the Group has the following share-based payment arrangements:

Share incentive plan

The annual general meeting has approved to authorize the board of Directors to issue

up to 8.5 million shares for an incentive plan for the board of directors, key manage

ment and senior employees. The incentive plan has a vesting period of up to 4 years

with speciﬁc milestones to enhance management’s long-term commitment to Around

town’s strategic targets.

The key terms and conditions related to program are as follows:

Grant date

Number of shares

(in thousands)

Contractual life of the

incentive

January 2019 – July 2026

2,552

Up to 4 years

21.2 Reconciliation of outstanding share options

The number and weighted average number of shares under the share incentive program

and replacement awards were as follows:

2022

2021

Number of shares

in thousands

Outstanding on January 1

2,924

2,433

Granted during the year, net

433

1,138

Exercised during the year

(*)

(805)

(647)

Outstanding on December 31

2,552

2,924

(*) in accordance with the terms and conditions of the incentive share plan, the Group withheld 338 thousand

(2021: 280 thousand) shares equal to the monetary value of the employees’ tax obligation from the total

number of shares exercised. As a result, only 467 thousand (2021: 367 thousand issued by the Company)

shares were delivered from the Company’s treasury shares to employees across the Group

During the year, the total amount recognized as share-based payment was €5.4 million

(2021: €5.9 million). The amount was presented as administrative and other expenses

and property operating expenses in the consolidated statement of proﬁt or loss and as

creation of other reserve in the consolidated statement of changes in equity.

22.

LOANS, BORROWINGS, BONDS AND SCHULDSCHEINS

22.1 Composition

As at December 31,

2022

2021

Weighted average

interest rate as at

Maturity

in € millions

December

31, 2022

Non-current

(5)

Bank loans

(1) -

2.4%

2024-2082

1,266.0

1,091.8

Straight bonds and schuldscheins

1.3%

2024-2039

13,307.4

13,934.6

Total non-current

14,573.4

15,026.4

Current

Bank loans

(6)

2.4%

2023

11.2

15.0

Loan redemptions

(6)

2.0%

2023

11.7

41.2

0.75% +

Straight bond

2023

100.0

221.7

Euribor (6M)

Convertible bond

265.7

Total current

122.9

543.6

(1)

most of the bank loans have the serving assets as their main security (as at December 31, 2022, €140 million

are unsecured). The Group is in compliance with its obligations (including loan covenants) to the ﬁnancing

banks under the existing loan agreements

(2)

as at December 31, 2022, approximately €5.8 billion of the investment property is encumbered (2021: appro

ximately €5.3 billion)

(3)

during 2021, the Group initially consolidated €368.0 million of bank loans and repaid a net amount of nearly

€0.6 billion utilizing the proceeds from sale of investment property

(4)

during 2022, the Group raised from ﬁnancial institutions a net amount of €244.9 million

(5) non-current bank loans amounting to €109.5 million are presented as liabilities associated with assets clas-

siﬁed as held for sale and are expected to be repaid alongside with the sales

(6) including accrued interest

22.2 Bonds and schuldscheins composition

Set out below, is an overview of the Group’s bonds and schuldscheins as at December 31, 2022, and December 31, 2021:

Series

Note

Currency

Nominal amount in

original currency

Nominal amount

in euro

Coupon rate (p.a.)

Contractual

maturity

Carrying amount as

at December 31,

Carrying amount as

at December 31,

as at December 31, 2022

2022

2021

in millions

in € millions

Non-current portion

Series H

(a) (b) (c)

USD

400.0

372.4

1.365

03/2032

337.7

361.0

Series NOK

(a) (b) (c)

NOK

750.0

79.3

0.818

07/2027

70.6

74.2

Series I

EUR

251.0

1.88

01/2026

246.5

247.6

Series J

GBP

500.0

563.7

3.00

10/2029

551.2

580.1

Series K

22.2.3

EUR

690.1

1.00

01/2025

691.0

684.1

Series L

(b) (c) (f)

USD

150.0

125.2

1.75

02/2038

123.4

131.6

Series M

(c)

CHF

250.0

223.6

0.73

01/2025

241.5

253.5

Series N

EUR

800.0

1.63

01/2028

785.7

783.1

Series O

EUR

305.2

2.00

11/2026

301.0

301.9

Series P

(b) (c) (g)

AUD

250.0

157.6

1.605

05/2025

151.9

158.8

Series Q

22.2.3

GBP

3.25

07/2027

94.3

Series R

(b) (c) (h)

CAD

250.0

164.3

1.70

09/2025

167.7

172.4

Series S

(e)

EUR

100.0

0.75 + Euribor (6M)

08/2023

99.9

Series T

(b) (i)

EUR

150.0

2.00

09/2030

149.9

Series U

EUR

75.0

2.97

09/2033

73.4

73.6

Series V

EUR

50.0

2.70

10/2028

49.7

49.6

Series W

EUR

76.0

3.25

11/2032

74.7

74.8

Series X

(c)

CHF

100.0

91.5

1.72

03/2026

101.4

96.6

Series Y

22.2.3 (e)

EUR

1.35 + Euribor (6M)

02/2026

99.0

Series Z

22.2.3 (e)

EUR

0.9 + Euribor (6M)

02/2024

124.4

Series 27

(b) (c)

HKD

430.0

48.3

1.62

03/2024

48.6

51.7

Series 28

(b) (c) (j)

USD

600.0

530.9

1.75

03/2029

527.7

524.0

Series 29

(b) (c) (k)

NOK

1,735.0

179.0

1.75

03/2029

173.2

148.8

Series 30

(b) (c) (l)

GBP

400.0

468.6

1.75

04/2031

369.0

465.3

Series 31

(c)

JPY

7,000.0

61.3

1.42

05/2029

53.5

49.6

Series

Note

Currency

Nominal amount in

original currency

Nominal amount

in euro

Coupon rate (p.a.)

Contractual

maturity

Carrying amount as

at December 31,

Carrying amount as

at December 31,

as at December 31, 2022

2022

2021

in millions

in € millions

Non-current portion

(continued)

Series 32

22.2.3

EUR

784.0

0.63

07/2025

775.8

788.4

Series 33

EUR

600.0

1.45

07/2028

592.1

590.8

Series 34

(b) (c)

NOK

500.0

45.9

1.055

07/2025

47.5

50.0

Series 36

EUR

600.0

1.50

05/2026

614.0

618.2

Series 38

EUR

1,000.0

0.00

07/2026

985.1

981.0

Series 39

EUR

1,250.0

0.375

04/2027

1,224.3

1,218.8

GCP series E

22.2.2

EUR

205.6

1.50

04/2025

211.4

215.3

GCP series G

22.2.2

EUR

600.0

1.38

08/2026

624.0

630.8

GCP series H

22.2.2

EUR

255.0

2.00

10/2032

279.2

281.7

GCP series I

(b) (c) (m) 22.2.2

HKD

900.0

92.6

1.00

02/2028

102.0

108.6

GCP series J

22.2.2

EUR

667.6

1.50

02/2027

697.7

704.9

GCP series K

22.2.2 (c)

CHF

125.0

116.2

0.96

09/2026

130.0

124.8

GCP series L

22.2.2 (c)

JPY

7,500.0

75.5

1.40

06/2038

53.1

57.2

GCP series M

22.2.2 (b) (n)

EUR

47.0

1.70

07/2033

45.3

44.2

GCP series N

(b) 22.2.2

EUR

88.0

1.71 + Euribor (3M)

02/2039

75.8

107.2

GCP series O

(b) 22.2.2

EUR

15.0

1.68 + Euribor (3M)

02/2034

13.2

17.2

GCP series P

(b) (c) 22.2.2

HKD

290.0

32.8

1.38 + Euribor (3M)

03/2029

31.9

36.0

GCP series Q

22.2.2 (c)

CHF

130.0

119.4

0.57

06/2024

132.9

127.4

GCP series R

22.2.2

EUR

40.0

2.50

06/2039

46.3

46.7

GCP series U

22.2.2

EUR

80.0

0.75

07/2025

81.3

81.8

GCP series V

22.2.2 (b) (o)

EUR

70.0

1.50

08/2034

63.8

72.1

GCP series W

22.2.2

EUR

204.7

1.70

04/2024

207.2

212.7

GCP series X

22.2.2

EUR

1,000.0

0.13

01/2028

978.7

974.5

Total non-current portion

13,307.4

13,934.6

Series

Note

Currency

Nominal amount in

original currency

Nominal amount

in euro

Coupon rate

(p.a.)

Contractual

maturity

Carrying amount as

at December 31,

Carrying amount as

at December 31,

as at December 31, 2022

2022

2021

in millions

in € millions

Series S

(e)

EUR

100.0

0.75 + Euribor (6M)

08/2023

100.0

Series 37

22.2.3

EUR

221.7

0.38

09/2022

221.7

GCP – convertible bond series F

22.2.2 22.2.3

EUR

263.3

0.25

03/2022

265.7

Total current portion

100.0

487.4

Total accrued interest on bonds

and schuldscheins

(d)

123.7

123.3

(a) coupon and principal are linked to Consumer Price Index (CPI) through derivative instruments

(b)

effective coupon in euro

(c)

the Company / GCP hedged the currency risk of the principal amount until maturity

(d)

presented as part of the provisions and current liabilities in the consolidated statement of ﬁnancial position

(e) schuldschein

(f)

the Company hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.75% p.a., semi-annually until Q1-2023, and 1.780% p.a. plus Euribor (6M), semi-annually

for the following years until maturity

(g)

the Company hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.605% p.a., semi-annually until Q2-2023, and 1.244% p.a. plus Euribor (6M), semi-annually

for the following years until maturity

(h)

the Company hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.7% p.a., semi-annually until Q3-2023, and 2.72% p.a. plus Euribor (6M), semi-annually

for the following years until maturity

(i)

the Company hedged the interest rate risk, the effective annual euro coupon is 2.0% until Q3-2023, and a semi-annual coupon of 2.266% p.a. plus Euribor (6M) for the following years until maturity

(j)

for the following years until maturity

(k)

the Company hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.75% p.a. until Q1-2023, and 2.52% p.a. plus Euribor (6M), semi-annually for the following

years until maturity

(l)

the Company hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.75% p.a. until Q2-2023, and 2.11% p.a. plus Euribor (6M), semi-annually for the following

years until maturity

(m)

GCP hedged the currency risk of the principal amount and coupon with a cross-currency swap; the effective annual euro coupon is 1.00% p.a. until Q1-2023, and 1.1725% p.a. plus Euribor (6M), semi-annually for the following years

until maturity

(n)

GCP hedged the interest rate risk, the effective annual euro coupon is 1.7% until Q3-2023, and a semi-annual coupon of 1.39% p.a. plus Euribor (6M) for the following years until maturity

(o)

GCP hedged the interest rate risk, the effective annual euro coupon is 1.5% until Q3-2024, and a semi-annual coupon of 1.472% p.a. plus Euribor (6M) for the following years until maturity

22.2.1

Issuance of bond in 2021

In December 2021, the Company completed the placement of a €1,250 million

straight bonds Series 39, maturing in April 2027 and carrying a 0.375% annual

coupon, for a consideration that reﬂected 97.965% of the principal amount. The

bond was issued under the EMTN Programme.

22.2.2

Bonds in GCP initially consolidated in July 2021

As part of the business combination with GCP in July 2021, the Company initially

consolidated an aggregate euro value of €4,000.2 million of straight bonds series

in both euro and other foreign currencies having an aggregated euro nominal

value of €3,850.0 million. The bonds’ maturities were between 2024 (except one

series of €52.0 million nominal value that matured and fully repaid in July 2021)

and 2039, and the effective interest rate varies between 0.13% and 2.5% p.a. GCP

uses derivative instruments to hedge the foreign currency risk in all its straight

bonds’ foreign currency principals.

Additionally, the Company initially consolidated €290.2 million of convertible

bond series (having nominal value of €280.8 million), convertible into shares of

GCP, that matured in March 2022 (see note 22.2.3) and carried annual interest

rate of 0.25%.

22.2.3

Buy-back and redemption of bonds

During 2021 and 2022, the Company completed the early repayments and re

demptions of some of its bonds and schuldscheins. The purpose of the early

repayments follows the utilization of the real estate disposal proceeds and is

part of the Group’s pro-active debt optimization strategy with the aim to extend

the average debt maturity and reduce the cost of debt.

Set forth are the amounts early repaid and redeemed upon maturity during the

year 2022:

Bond /

schuldschein

Currency

Original

maturity

Nominal value bought-back

Outstanding

nominal value as at

December 31, 2022

in millions

(original currency)

in € millions

in millions

(original currency)

Series F of GCP

(convertible

bond) (a)

EUR

03/2022

263.3

Fully redeemed

Series K

EUR

01/2025

9.9

690.1

Series Q

GBP

07/2027

81.1

97.3

Fully redeemed

Series Y

EUR

02/2026

100.0

Fully redeemed

Series Z

EUR

02/2024

125.0

Fully redeemed

Series 32

EUR

07/2025

16.0

784.0

Series 37

EUR

09/2022

221.7

Fully redeemed

Total nominal

value bought-

back / redeemed

833.2

(a)

the convertible bond series F of GCP matured in March 2022 and the outstanding €263.3 million

nominal value was repaid to the bondholders, where no conversion to shares of GCP has occurred.

Upon maturity, an amount of €186.7 million nominal value of convertible bond series F of GCP

was held by the Group afﬁliates and has been repaid to them accordingly

Set forth are the amounts early repaid and redeemed upon maturity during the year 2021:

Straight bond

Currency

Original

maturity

Nominal value bought-back

Outstanding nominal

value as at

December 31, 2021

in millions

(original currency)

in € millions

in millions

(original currency)

Series D

EUR

05/2022

102.0

Fully redeemed

Series E

EUR

07/2024

236.0

Fully redeemed

Series I

EUR

01/2026

249.0

251.0

Series O

EUR

11/2026

194.8

305.2

Series Q

GBP

07/2027

318.9

371.8

81.1

Series X

CHF

03/2026

100.0

93.2

100.0

Series 35

EUR

11/2024

30.4

Fully redeemed

Series 37

EUR

09/2022

378.3

221.7

GCP - Series F

(convertible)

EUR

03/2022

17.5

263.3

GCP - Series E

EUR

04/2025

32.0

205.6

GCP - Series W

EUR

04/2024

74.9

204.7

Total nominal

value

bought-back /

redeemed

1,779.9

HANNOVER

165

22.3 Reconciliation of movement of liabilities to cash flow arising from financing activities

The table below details changes in the Group’s liabilities from ﬁnancing activities, 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.

Financing cash ﬂows

Non-cash changes

31.12.2021

Finance

expenses paid

Other cash ﬂows

Acquisition

(disposal) of

subsidiaries, net

Foreign

exchange effect

Change in

liabilities

held for sale

Other

(1)

Other changes

(2)

31.12.2022

in € millions

Straight bonds and schuldscheins

(3)

14,279.4

(169.8)

(565.9)

(175.8)

(2.9)

166.1

13,531.1

Convertible bond

(3)

265.9

(0.3)

(263.3)

(2.5)

0.2

Loans, borrowings and others

(4)

1,148.0

(24.3)

213.9

(91.3)

42.6

1,288.9

Lease liability

167.9

(9.5)

(2.2)

85.0

(1.7)

(6.0)

0.9

13.6

248.0

Net derivative ﬁnancial

liabilities and others

153.0

(156.6)

195.6

192.0

16,014.2

(203.9)

(617.5)

85.0

(334.1)

(97.3)

191.1

222.5

15,260.0

Financing cash ﬂows

Non-cash changes

31.12.2020

Finance

expenses paid

Other cash ﬂows

Acquisition

(disposal) of

subsidiaries, net

Foreign

exchange effect

Change in

liabilities

held for sale

Other

(1)

Other changes

(2)

31.12.2021

in € millions

Straight bonds and schuldscheins

(3)

10,589.9

(167.3)

(693.9)

4,023.2

256.3

(1.6)

272.8

14,279.4

Convertible bond

(3)

(0.3)

(17.7)

290.5

(7.1)

0.5

265.9

Loans and borrowings

(4)

1,376.8

(18.4)

(592.0)

368.0

(18.2)

(4.8)

36.6

1,148.0

Lease liability

105.9

(6.9)

(1.5)

59.2

0.9

(3.2)

5.1

8.4

167.9

Net derivative ﬁnancial (assets)

liabilities and others

284.0

(8.1)

(4.6)

62.5

(78.0)

(102.8)

153.0

12,356.6

(201.0)

(1,309.7)

4,803.4

179.2

(21.4)

(111.2)

318.3

16,014.2

(1)

other non-cash changes include discount and issuance cost amortization for the bonds, unrealized revaluation gains and remeasurement of lease liabilities

(2)

other changes include interest accruals and results on early repayment of debt

(3) including accrued interest

(4)

including current portion of bank loans, loan redemptions and credit facility

22.4 Covenants and negative pledge as deﬁned in the bonds and

schuldscheins’ Terms and Conditions

This note provides an overview of certain covenants of the Company under its series of

bonds (other than the perpetual notes, which do not contain ﬁnancial covenants, and

the mandatory convertible bonds) which are outstanding as at 31 December 2022. The

complete terms and conditions of each series of bonds are set forth in the relevant

bond documentation. Capitalised terms used in this note have the meanings set forth

in the terms and conditions of the relevant series of bonds.

Save for one of the Company’s outstanding series of bonds (Series 36), which contains

a similar provision, 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 any Reﬁnancing Indebtedness) if, immediately after giving

effect to the incurrence of such additional Indebtedness and the application of the net

proceeds of such incurrence: the sum of:

(a)

(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) in

curred since the Last Reporting Date would exceed 60 per cent. (depending on the

relevant series of bonds) of the sum of (without duplication): (i) the Total Assets

(less Cash and Cash Equivalents) as at the Last Reporting Date; and (ii) 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 (or, as the case may be, 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

(b)

(i) the Consolidated Secured Indebtedness (excluding the GCP Series E Bonds, as the

case may be, and in each case less Cash and Cash Equivalents) as at the Last Reporting

Date; and (ii) the Net Secured Indebtedness (excluding the GCP Series E Bonds, as the

case may be, and in each case less Cash and Cash Equivalents) incurred since the Last

Reporting Date shall not exceed 45 per cent. of the sum of (without duplication): (i)

the Total Assets (less Cash and Cash Equivalents) as at the Last Reporting Date; (ii) 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 (or, as the case may be, 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).

In most of the Company’s outstanding series of bonds (excluding Series 36), 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 per cent. 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.

The Company undertakes that, on each Reporting Date, the Interest Coverage Ratio will

be at least 1.8 (excluding one series of standalone bonds, for which the Consolidated

Coverage Ratio will be at least 2.0).

Save for two of the Company’s series of bonds, which contains similar provisions, 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 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 rateably with the Capital Markets Indebted

ness to the satisfaction of the Trustee; or

(ii)

such other Security Interest or other arrangement is provided either (i) as the Trus

tee 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 Schuldscheins have similar provisions relating to covenants and

a negative pledge.

The exposure of the Company to interest rate risk in relation to ﬁnancial instru

ments is reported in note 26.3.1.1 to the ﬁnancial statements. There have been

no breaches in covenants during the year and up to the date of approval of these

consolidated ﬁnancial statements.

23.

OTHER NON-CURRENT LIABILITIES

As at December 31,

2022

2021

in € millions

Tenancy deposits

67.8

62.4

167.9

202.7

433.0

Lease liability (see note 23.1)

248.0

Non-current payables

251.4

567.2

23.1 Lease liability

Set out below are the carrying amounts of lease liabilities of the Group and the

movements during the year:

As at December 31,

2022

2021

in € millions

As at 1 January

167.9

105.9

Additions (disposals), net

86.9

0.4

Interest expenses

10.9

13.5

Payments

(*)

(11.7)

(8.4)

Initially consolidated in business combination with GCP

59.7

Transferred to liabilities held for sale

(6.0)

(3.2)

Balance at December 31

248.0

167.9

(*) the cash payments for interest portion are presented under “interest and other ﬁnancial expenses paid, net”

and the cash payments for principal portion under “Amortizations of loans from ﬁnancial institutions and

others” in the consolidated statement of cash ﬂows (see also note 22.3)

24.

RELATED PARTY TRANSACTIONS

Related party transactions (as deﬁned in IAS 24 Related Party Disclosures) performed

by / with the Company and its afﬁliated undertakings and key management personnel

are set out below, as well as the identity and nature of the related party and transaction.

Related parties are companies which have the ability to control or exercise signiﬁcant

inﬂuence over the Group entities, or which the Group entities control or exercises

signiﬁcant inﬂuence over. Related persons are the members of the Board of Directors

and the executive management of the Company.

24.1 Key Management remuneration

The members of the board of directors and the chief ofﬁcers of the Company (“Key

Management”) are considered as related parties to the Company pursuant to IAS 24.

The remuneration to and transactions with Key Management are set out below:

Members of the Board of Directors

Year ended December 31, 2022

Non-

Executive directors

executive

Independent directors

director

in € thousands

Ms.

Fixed and

Ms.

Mr.

Mr. Frank

Mr. Ran

Simone

variable

Jelena

Markus

Total

Roseen

(3)

Laufer

(3)

Runge-

incentive

Afxentiou

Leininger

Kreuter

Brandner

(4)

Salary, fees and

supplementary

440

266

190

100

162

100

1,258

payments

(1)

incentive

200

135

335

program

(2)

Total

640

401

190

100

162

Remuneration

100

1,593

(1)

based on employer’s costs, excluding VAT

(2)

multi-year ﬁxed and variable share incentive program

(3)

also includes the remuneration for the position as a director in TLG

(4)

also includes the remuneration for the position as an independent director in GCP

Chief ofﬁcers

Mr. Barak Bar-Hen, the Company’s Chief Executive Ofﬁcer (Co-CEO) and Chief Operating

Ofﬁcer, was entitled to a total remuneration of €1,585 thousand, of which €1 million

was in bonus for former period.

Mr. Eyal Ben David, the Company’s Chief Financial Ofﬁcer, was entitled to a total

remuneration of €2,151 thousand, of which €1,632 thousand was in the form of share

incentives.

Mr. Oschrie Massatschi, the Company’s Chief Capital Markets Ofﬁcer, was entitled to a

total remuneration of €573 thousand, of which €81 thousand was in the form of share

incentives.

Mr. Klaus Krägel stepped down from his position as the Company’s Chief Development

Ofﬁcer in July 2022. His remuneration in 2022 amounted to €126 thousand.

The Company granted loans of up to €4.5m to Key Management. The loans are payable

from 2023 and until 2025 and bear annual interest rate of between 1.6% and 3%.

There were no other transactions between the Company and its key management

personnel, except as described in note 21.

24.2 Other related party transactions

The transactions and balances with related parties are as follows:

Year ended December 31,

2022

2021

in € millions

Consulting services income

1.9

Interest income on loans to associates

18.1

3.0

Consulting services expenses

(0.2)

Rental and operating expenses

(0.6)

As at December 31,

2022

2021

in € millions

Loans to associates

(*)

349.1

151.5

(*) the loans given to associates carry interest rate in the range between 4% and 13% p.a. (2021: range between

3% and 8% p.a.) and measured at amortized cost. An expected credit loss allowance of €2.7 million was

recognized and presented as part of the carrying amount

Since the business combination with GCP, Aroundtown group companies acquired

€186.7 million nominal value of convertible bond series F (issued by GCP, see note

22.2) for its fair value as of that date. During March 2022, GCP fully repaid this bond

as the maturity date arrived.

25.

TRADE AND OTHER PAYABLES

As at December 31,

2022

2021

in € millions

Trade and other payables

158.5

144.0

354.9

43.3

78.7

Prepayments received from tenants on operating costs

366.7

Deferred income

60.1

Other current liabilities

80.7

666.0

620.9

COLOGNE

26.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

26.1 Financial assets

Set out below, is an overview of ﬁnancial assets, held by the Group as at December 31,

2022 and December 31, 2021:

As at December 31,

2022

2021

Note

in € millions

Financial assets at amortized cost:

Trade and other receivables

1,179.0

1,145.3

Cash and cash equivalents

2,314.6

2,876.8

Short-term deposits

137.5

27.5

Loans to associates

24.2

349.1

151.5

Other non-current assets

1,304.4

1,190.1

Financial assets at fair value through proﬁt or loss:

Financial assets at fair value through proﬁt or loss

266.5

339.8

Derivative ﬁnancial assets

60.3

62.9

Total ﬁnancial assets

5,611.4

5,793.9

(1)

including assets held for sale

(2)

those ﬁnancial assets consist of bonds, shares, alternative investments and other trade debt securities

(3)

excluding derivative ﬁnancial assets designated as hedging instruments in hedge relationships in the

amount of €192.3 million (2021: €209.5 million)

26.2 Financial liabilities

Set out below, is an overview of ﬁnancial liabilities, held by the Group as at December

31, 2022 and as at December 31, 2021:

As at December 31,

2022

2021

Note

in € millions

Financial liabilities at amortized cost:

Trade and other payables

670.8

628.0

Tax payable

94.2

112.7

Loans and borrowings

1,398.4

1,166.2

Straight bonds and schuldscheins

13,407.4

14,156.3

Convertible bond

265.7

Accrued interest on straight bonds,

22.2

123.7

123.3

convertible bond and schuldscheins

Other long-term liabilities

569.5

434.8

Financial liabilities at fair value through proﬁt or loss:

Derivative ﬁnancial liabilities

240.7

255.7

Total ﬁnancial liabilities

16,504.7

17,142.7

(1)

including liabilities held for sale

(2)

including liabilities held for sale and loan redemptions

(3)

excluding derivative ﬁnancial liabilities designated as hedging instruments in hedge relationships in the

amount of €203.9 million (2021: €169.7 million)

26.3 Risks management objectives and polices

The Group’s principal ﬁnancial liabilities, other than derivatives, comprise loans and

borrowings, convertible, straight bonds and schuldscheins, 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 assets.

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

advises 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.

26.3.1

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.

26.3.1.1

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

(mainly to EURIBOR rates). The Group manages its interest rate risk by hedging

long-term debt with ﬂoating rate using swap, collar and cap contracts.

As at December 31, 2022, after considering the effect of the hedging, the

interest proﬁle of the Group’s interest-bearing debt was as follows:

As at December 31,

2022

2021

in € millions

Fixed rate

(*)

13,855.7

14,760.1

Capped rate

304.6

269.1

Floating rate

536.0

540.8

14,696.3

15,570.0

(*) of which €1.8 billion (book value) is expected to be shifted from ﬁxed into ﬂoating rate throug

hout 2023 ﬁnancial year

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, after the

impact of hedging. 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:

As at

December 31,

Increase / decrease

in basis points

Effect on proﬁt before

tax and pre-tax equity

in € millions

2022

+100

-100

(6.8)

8.2

2021

+100

-100

(3.4)

(1.0)

The Group had no long-term debt for which the benchmark rate had been

replaced with an alternative benchmark rate as at December 31, 2022.

As elaborated in note 22, starting 2023 financial year, certain hedging

ﬁnancial instruments will be linked to the Euribor and therefore, subsequent

to December 31, 2022, such linkages are expected to affect respectively the

aforementioned amounts.

26.3.1.2. 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 used cross-currency swap contracts to hedge the fair value

and cash ﬂow risk derived from the changes in exchange rates and interest

rates as explained in note 26.4.2.1 and 26.4.2.2.

Due to the hedging above there is no material residual foreign currency risk.

In addition, the Company used forward contracts to hedge the currency risk

of its net investment in foreign operation which is denominated in GBP as

explained in note 26.4.2.3.

26.3.1.3. 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.

26.3.2. 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, loans as a seller and loans connected with future real-

estate transactions) and from its ﬁnancing activities, including cash and cash

equivalents held in banks, derivatives and other ﬁnancial instruments. The

Group’s maximum credit risk is represented by the ﬁnancial assets’ carrying

amount (see note 26.1).

Trade and other receivables

Customer credit risk is managed by the property managers subject to the

Group’s established policy and control procedures 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 aging of rent receivables at the end of the year that were not impaired was

as follows:

As at December 31,

2022

2021

in € million

Not past due and past due 1–30 days

32.6

46.5

Past due 31–90 days

25.9

31.8

Past due above 90 days

8.8

22.1

67.3

100.4

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 minimize the concentration of risks and therefore mitigate ﬁnancial loss

through a counterparty’s potential failure to make payments.

The Group’s investment in equity and debt instruments at fair value through proﬁt

or loss consists of quoted securities that are graded in the investment category.

The Group holds its cash and cash equivalents and its derivative instruments

with high-rated banks and ﬁnancial institutions. Concentration risk is mitigated

by not limiting the exposure to a single counter party. The Company has

performed an expected credit loss calculation on the cash and cash equivalents

accounts and presented the current balance net of the ECL provision that

amounted to €3.5 million as at December 31, 2022 (2021: €2.1 million).

The composition of cash and cash equivalents was as follows:

As at December 31,

2022

2021

in €

million

Cash at banks

1,562.8

2,748.0

Cash deposits of up to three months

742.6

125.0

Total cash and cash equivalents

2,305.4

2,873.0

None of the cash and cash equivalents items are restricted.

Credit line

The Group ensures accessible additional liquidity by maintaining active

revolving credit facilities (RCF) from various ﬁnancial institutions. As at

December 31, 2022, the Group had RCF with weighted maturity of 2 years, all

undrawn.

The main terms and conditions including covenants, pledge and negative

pledge of the RCF are similar to those of the bonds’ detailed in note 22.4, with

relevant adjustments.

ESSEN

26.3.3. 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 available committed credit facilities as described above in the credit line section.

The following are the remaining contractual maturities of ﬁnancial liabilities, including estimated interest payments, the impact of derivatives and excluding the impact of

netting agreements as at December 31, 2022 and as at December 31, 2021:

As at December 31, 2022

Contractual cash ﬂows including interest

Carrying amount

Total

2 months or less

2-12 months

1-2 years

2-3 years

More than 3 years

in € millions

Non-derivative ﬁnancial liabilities

Loans and borrowings

(1)

1,288.9

1,490.0

2.8

45.1

101.1

194.8

1,146.2

Straight bonds and schuldscheins

(2)

13,531.1

14,932.8

45.1

245.5

591.1

2,565.4

11,485.7

Lease liability

248.0

1,774.9

2.6

9.2

11.8

11.9

1,739.4

Trade and other payables

158.5

26.5

132.0

Total

15,226.5

18,356.2

77.0

431.8

704.0

2,772.1

14,371.3

As at December 31, 2021

Contractual cash ﬂows including interest

Carrying amount

Total

2 months or less

2-12 months

1-2 years

2-3 years

More than 3 years

in € millions

Non-derivative ﬁnancial liabilities

Loans and borrowings

(1)

1,148.0

1,252.1

2.0

69.8

188.1

102.3

889.9

Straight bonds and schuldscheins

(2)

14,279.4

14,982.2

43.0

125.4

163.3

661.9

13,988.6

Convertible bond

(2)

265.7

263.6

Lease liability

167.9

1,537.7

1.5

8.1

9.3

9.2

1,509.6

Trade and other payables

144.0

24.0

120.0

Total

16,005.0

18,179.6

70.5

586.9

360.7

773.4

16,388.1

(1)

including current portion of long-term loans and loan redemptions and excluding loans classiﬁed as held for sale

(2)

the carrying amount includes accrued interest

(1)

including current portion of long-term loans and loan redemptions and excluding loans classiﬁed as held for sale

(2)

the carrying amount includes accrued interest

26.3.4. 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.

26.3.5. Other risks

The general economic environment prevailing internationally may affect the

Group’s operations to a great extent. Economic conditions such as inﬂation,

unemployment, and development of the gross domestic product are directly

linked to the economic course of every country and any variation in these and

the economic environment in general may create chain reactions in all areas,

hence affecting the Group.

The Group’s portfolio is located in major cities and strong markets throughout

Germany, The Netherlands, United Kingdom and others. The current regional

distribution structure enables the Group on one hand to beneﬁt of economic

scale, and on the other provides a diverse, well allocated and risk-averse

portfolio.

Geopolitical situation around Russia-Ukraine war

On February 24, 2022, following several months of increasing escalation, Russia

announced the beginning of a “special military operation” in Ukraine. Following the

announcement, Russia started moving military forces into Ukraine and launched

missile strikes and air-strikes at targets across Ukraine, initiating a full-scale invasion

of Ukraine (the Invasion) and hostilities have continued since then. The Invasion has

received widespread international condemnation and in reaction to Russian hostilities

many nations and organizations, including Germany and the European Union, have

announced sanctions against Russia, Russian companies, and individuals in and from

Russia. These sanctions, as well as increased uncertainty resulting from the Invasion,

have so far resulted in increased volatility in ﬁnancial markets and increases in prices

for a range of commodities, particularly in energy prices, among others.

The Group is not directly impacted by the Invasion, 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 Invasion. As a result of the Invasion,

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,

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. 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 Invasion. This is 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 and lead

to higher utilization of already limited construction capacity, which may result in

increased construction costs and delays, particularly in the event that the crisis is

prolonged. 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 Invasion 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, have further resulted in a high inﬂationary environment. Inﬂationary

pressure has been particularly strong in energy prices, in particular for oil and gas,

caused by the Invasion, and material prices, and there is much uncertainty as to the

development of prices in the near future. 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.

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 already resulted in increases in

interest rates and volatility in capital markets, which has a negative impact on the cost

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.

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 continue to do so 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 could result in a

decrease in the attractiveness of real estate investments, resulting in lower demand

for real estate and broad declines in real estate valuations, among other effects. This

could lead to an increased default on loan repayments, which also could cause banks

to increase their interest rates. 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 favorable terms. Financial institutions such

as banks may also 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 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 amortization 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 market uncertainty, 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 2023, which may impact market expectations and the

Company’s access to capital.

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 favorable 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. As a result, 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-related 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,

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, historically

through insurance and now

with the addition of developing an amended approach to CapEx planning. However, it

cannot be guaranteed that the Company correctly identiﬁes all risks and therefore may

under- or over insure against such risk. 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 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 es expected 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 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 thereafter. 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 CO

levy (previously carried in full by tenants). For residential buildings, a

10-step tiered model is introduced that splits the CO

costs based on the emissions of

the building. For residential buildings with a particularly poor energy balance (>=52

kg CO

/a), landlords shall bear 95 percent and tenants ﬁve percent of the CO

costs.

However, if the building meets at least the high efﬁciency standard (EH 55; <12 kg

/a), landlords do not have to bear any CO

costs. For non-residential buildings,

a 50-50 solution is regulated. The CO

costs will be divided equally between tenant

and landlord, unless another split is negotiated in the lease agreement. From 2025 a

similar tiered model is planned also for non-residential buildings. The shifting of some

or all 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 and the UK’s Heat and Buildings Strategy banning gas

boilers from new builds in 2026 and then entirely banning installation of gas boilers

starting in 2035. At the EU level, the Energy Performance of Buildings Directive (EPBD)

was updated in 2021, and national-level iterations are rolling out. The European

Parliament has passed a further updated EPBD bill which will require renovation of

non-residential buildings to an E grade by 2027, and D by 2030, with later deadlines

for residential buildings of E by 2030 and D by 2033.

This recast of the EPBD must be

approved by member states before becoming law. In the UK the Domestic Minimum

Energy Efﬁciency Standard limits letting of properties with EPC ratings F or G, with a

bill proposal under review which would prohibit lettings in buildings with EPC ratings

D or lower from 2025 for new lettings and 2028 for existing leases. 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 not investing or no longer investing in 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, further regulatory tightening in the form of the CO

levy, minimum

energy performance standards or other measures 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

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 to mitigate risks related to CO

emissions, and in order to reach the Company’s

environmental targets, the Group is developing an investment program, which covers

a wide variety of activities involving both energy efﬁciency improvements and

renewable 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 order to align with best practices on assessing, responding to, and reporting on

climate-related risks, the Company has committed to begin the process of aligning

to the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations

framework. As part of this process, the Company launched a climate-related risk

assessment in 2022, with the most prominent climate-related risks already integrated

into the enterprise risk management system. The Building Resilience Task Force was

also launched to further develop control mechanisms and risk mitigation measures for

climate-related risks. To better understand the Company’s exposure to physical risks,

an analysis was commissioned involving the development of physical risk trends in

four climate change scenarios through 2100. This analysis has informed the Company

in determining which risks are material in order to begin developing adaptation

solutions. Further details on ESG related issues can be found in the Group’s Non-

Financial Report and Sustainability Insights.

MANNHEIM

HAMBURG/

LÜNEBURGER HEIDE (CENTER PARCS)

179

26.4 Hedging activities and derivatives

26.4.1. Derivative financial instruments

Note

Derivative ﬁnancial assets

As at December 31,

2022

2021

in € millions

Derivatives that are designated as hedging

instruments in cash ﬂow hedge

26.4.2.1

43.5

16.1

Derivatives that are designated as hedging

instruments in fair value hedge

26.4.2.2

144.2

193.4

Derivatives that are designated as hedging

instruments in net investment hedge

26.4.2.3

4.6

Derivatives that are not designated as hedge

accounting relationships

60.3

62.9

252.6

272.4

Derivative ﬁnancial liabilities

Derivatives that are designated as hedging

26.4.2.1

4.9

31.8

instruments in cash ﬂow hedge

Derivatives that are designated as hedging

instruments in fair value hedge

26.4.2.2

185.7

36.8

Derivatives that are designated as hedging

instruments in net investment hedge

26.4.2.3

13.3

101.1

Derivatives that are not

designated as hedge

accounting relationships

240.7

255.7

444.6

425.4

26.4.2. Hedge accounting relationships

26.4.2.1. Cash flow hedges

As at December 31, 2022, the Company had foreign exchange rate and

interest rate swap agreements in place, as follows:

Bond

Hedging

instrument

(*)

Notional currency

Company

receives

(in notional

currency

millions)

Company

pays – in €

millions

Series H

FX-Swap

United States Dollar

400.0

372.4

Series NOK

FX-Swap

Norwegian Krone

750.0

79.3

Series 27

FX-Swap

Hong Kong Dollar

430.0

48.3

Series 34

FX-Swap

Norwegian Krone

500.0

45.9

(*) all swaps are linked to bonds’ maturity

Under cross-currency contracts, the Group agrees to exchange cash ﬂows in

different currencies calculated on agreed notional principal amounts. Such

contracts enable the Group to mitigate the risk of changing foreign exchange

rates on its cash ﬂows.

The fair value of cross-currency swaps at the reporting date is determined by

discounting the future cash ﬂows using the curves at the reporting date and

the credit risk inherent in the contract and is disclosed below.

As the critical terms of the cross-currency swap contracts and their

corresponding hedged items are the same, the Group performs a qualitative

assessment of effectiveness and it is expected that the value of the cross-

currency swap contracts and the value of the corresponding hedged items

will systematically change in opposite direction in response to movements

in the underlying interest rates. The main sources of hedge ineffectiveness

in these hedge relationships are minor initial fair values of the hedging

instruments and the effect of the counterparty and the Group’s own credit

risk on the fair value of the cross-currency swap contracts, which is not

reﬂected in the fair value of the hedged item attributable to the change in

foreign exchange rates.

The impact of the hedging instruments on the consolidated statement of

ﬁnancial position is, as follows:

Carrying amount

Risk Category

Assets

Liabilities

Line item in the

consolidated

ﬁnancial

statements

Net change in

fair value used

for measuring

ineffectiveness

for the year

in € millions

As at December 31, 2022

Foreign exchange rate

and interest rate swaps

43.5

4.9

Derivative

ﬁnancial assets /

liabilities

72.9

As at December 31, 2021

Foreign exchange rate

and interest rate swaps

16.1

31.8

Derivative

ﬁnancial assets /

liabilities

90.2

The impact of the hedged items on the consolidated statement of ﬁnancial

position is, as follows:

Carrying

amount

Line item in the

consolidated

ﬁnancial

statements

Net change in

fair value used

for measuring

ineffectiveness

for the year

in € millions

As at December 31, 2022

Straight bonds

530.8

Straight bonds

(74.0)

As at December 31,

2021

Straight bonds

510.6

Straight bonds

(90.2)

The ineffectiveness recognized in the consolidated statement of proﬁt or

loss was a loss of €1.1 million (2021: €0.0 million).

26.4.2.2. Fair value hedges

As at December 31, 2022, the Company had foreign exchange rate and

interest rate swap agreements in place, as follows:

Bond

Hedging

instrument

(*)

Notional currency

Company receives

–in notional

currency millions

Company

pays – in €

millions

Series L

FX-Swap

United States Dollar

150.0

125.2

Series M

FX-Swap

Swiss Franc

250.0

223.6

Series P

FX-Swap

Australian Dollar

250.0

157.6

Series R

FX-Swap

Canadian Dollar

250.0

164.3

Series X

FX-Swap

Swiss Franc

100.0

91.6

Series 28

FX-Swap

United States Dollar

600.0

530.9

Series 29

FX-Swap

Norwegian Krone

1,735.0

179.0

Series 30

FX-Swap

British Pound

400.0

468.6

Series 31

FX-Swap

Japanese Yen

7,000.0

61.3

GCP series I

FX-Swap

Hong Kong Dollar

900.0

92.6

GCP series K

FX-Swap

Swiss Franc

125.0

116.2

GCP series L

FX-Swap

Japanese Yen

7,500.0

75.5

GCP series P

FX-Swap

Hong Kong Dollar

290.0

32.8

GCP series Q

FX-Swap

(*) all swaps are linked to bonds’ maturity

Swiss Franc

130.0

119.4

In addition, the Company has entered into several interest rate swap

agreements. For further information regarding the effective coupon rate

see note 22.2.

The swaps are being used to hedge the exposure to changes in fair value

of the Company’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 swaps match

the terms of the hedged items. The Group has established a hedge ratio

of 1:1 for the hedging relationships as the underlying risk of the foreign

exchange 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 attributable to the

hedged risk.

The hedge ineffectiveness may 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 move-

ments 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

Risk Category

Assets

Liabilities

Line item in the

consolidated

ﬁnancial

statements

Net change in

fair value used

for measuring

ineffectiveness

for the year

in € millions

As at December 31, 2022

Foreign exchange rate

and interest rate swaps

144.2

185.7

Derivative

ﬁnancial assets/

liabilities

(213.5)

As at December 31,

2021

Foreign exchange rate

and interest rate swaps

193.4

36.8

Derivative

ﬁnancial assets/

liabilities

54.6

The impact of the hedged items on the consolidated statement of ﬁnancial

position is as follows:

Carrying

amount

Line item in the

consolidated

ﬁnancial

statements

Net change in

fair value used

for measuring

ineffectiveness

for the year

in € millions

As at December 31, 2022

Straight bonds

2,342.9

Straight bonds

218.3

As at December 31,

2021

Straight bonds

2,667.4

Straight bonds

(52.2)

The ineffectiveness recognized in the consolidated statement of proﬁt or

loss was a proﬁt of €4.8 million (2021: €2.4 million).

26.4.2.3. Hedge of net investments in foreign operations

The Group uses foreign exchange forward contracts as a hedge of its ex-

posure 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 hedg-

ing instruments as the net investment creates a translation risk that will

match the foreign exchange risk on the hedging instruments. The hedge

ineffectiveness will arise when the amount of the investment in the foreign

subsidiaries becomes lower than the amount of the notional amount of the

hedging instruments.

The impact of the derivative 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 Category

amount

Assets

Liabilities

consolidated

for measuring

outstanding

ﬁnancial

ineffectiveness

statements

for the year

in € millions

As at

December 31, 2022

Foreign currency

forward contracts

GBP 1,965.0

4.6

13.3

Derivative

ﬁnancial

assets

122.7

As at

December 31,

2021

Foreign currency

forward contracts

GBP 1,999.6

101.1

Derivative

ﬁnancial

assets

(152.9)

The impact of the hedged item on the consolidated statement of ﬁnancial position is,

as follows:

The hedging gains and losses recognized in OCI before tax are equal to the change in

fair value used for measuring effectiveness. There is no ineffectiveness recognized in

proﬁt or loss.

Foreign currency

translation reserve

Change in fair value used for

measuring ineffectiveness

for the year

in € million

As at December 31, 2022

Net investment in foreign

subsidiaries

(288.3)

(122.7)

As at December 31, 2021

Net investment in foreign

subsidiaries

218.3

152.9

Non-derivative hedging ﬁnancial instruments

The Group has the following non-derivative hedging ﬁnancial instruments

used to hedge its exposure to foreign exchange risk on its investments in

foreign operations (NIFO):

Bond

Notional

currency

Notional amount as at December 31,

2022

2021

in notional currency millions

Series J

British Pound

500.0

Series Q

British Pound

81.1

The net change in the above non-derivative hedging ﬁnancial instruments

resulted in income of €30.4 million (2021: expense of €66.3 million) pre-

sented as an OCI impact on the NIFO. Consequently, together with desig-

nated derivative hedging instruments, the net result of the OCI item foreign

currency – translation difference and NIFO amounted to a positive effect of

€10.8 million (2021: gain of €1.3 million) and a post-tax loss effect of €33.4

million (2021: gain of €21.5 million).

26.4.2.4. Derivatives not designated as hedging instruments

The Group uses interest rate swaps, collars, caps and ﬂoors to manage its ex-

posure to interest rate movements on its bank borrowings. These derivative

ﬁnancial instruments are linked to the bank loans maturity (see note 22.1).

26.5 Capital management

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 an LTV to

remain at a target below 45%. As at December 31, 2022 the LTV ratio was at 40%

(2021: 39%), and the Group did not breach any of its loan covenants, nor did it default

on any other of its obligations under its loan agreements. LTV covenant ratio may vary

between the subsidiaries of the Group. The Company regularly reviews compliance with

Luxembourg and local regulations regarding restrictions on minimum capital. During

the years covered by these consolidated ﬁnancial statements, the Company complied

with all externally imposed capital requirements.

27.

LEASES

The Group has entered into long-term rent agreements as a lessor of its investment

property. The future minimum rental income under non-cancelable operating leases

is as follows:

As at December 31,

2022

2021

in € millions

Less than a year

849.6

911.8

Between one to two years

817.7

861.2

Between two to three years

746.4

789.4

Between three to four years

640.5

672.4

Between four to ﬁve years

525.7

558.1

More than ﬁve years

3,616.0

3,976.9

7,195.9

7,769.8

28.

COMMITMENTS

As at December 31, 2022, the Group had commitments for future capital expenditures

on the real estate properties and guarantees of approximately €0.4 billion. Furthermore,

the Group had signed deals to sell real estate in a volume of approximately €0.5 billion,

which were not yet completed and are subject to conditions precedent. The Company

estimates the completion of the transactions to take place within the next twelve months.

29.

CONTINGENT ASSETS AND LIABILITIES

The Group had no signiﬁcant contingent assets and liabilities as at December 31, 2022.

30.

SIGNIFICANT SUBSEQUENT EVENTS

a) In January 2023, the Company announced on tender offers (“the Tender Offers”) to

buy back some of its outstanding straight bonds series K (carrying 1.0% annual

coupon and contractually maturing in January 2025) and series 32 (carrying 0.625%

annual coupon and contractually maturing in July 2025). Consequently, the Tender

Offers completed later in January 2023 and resulted in acceptance by the Company

to buy back €82.7 million nominal value of straight bond series K and €27.8 million

nominal value of straight bond series 32.

b) In March 2023, the Company delivered 27,691,319 of its own shares to the Manda-

tory Convertible Notes (“MCN”) investor pursuant to the terms of the MCN issued in

March 2020, according to which it shall be mandatorily converted into shares of the

Company in the course of the following three years after issuance, using a preset

conversion price (dividend adjusted). The shares were delivered from the Company’s

treasury shares.

c) After the reporting period, the Group signed new bank loans of €160 million.

d) After the reporting period, the Group completed the sales of investment property

with value of above €330 million that were presented as assets held for sale.

e) On March 28, 2023, the Company’s Board of Directors has decided not to recommend

a dividend payment for 2022 at the Company’s Annual General Meeting scheduled

for June 28, 2023, following the increase in macro-economic uncertainty and volatil-

ity, with currently limited visibility on the full impact of the current market environ-

ment on valuations, increasing ﬁnancing costs and limited access to capital markets

31.

GROUP SIGNIFICANT HOLDINGS

The details of the signiﬁcant holdings under the Group are as follows:

Holding rate as at

December 31,

Name

Place

of incorporation

Principal activities

Main place of

principal activity

2022

2021

Subsidiaries held directly and indirectly by the Company

in %

ATF Netherlands B.V.

Netherlands

Financing

Netherlands

100

AT Securities B.V.

Netherlands

Financing

Netherlands

100

Aroundtown Limited

Cyprus

Holdings

Germany, Netherlands,

United Kingdom

100

Aroundtown Real Estate Limited

Cyprus

Holdings

Germany, Netherlands,

United Kingdom

100

Grand City Properties S.A.

Luxembourg

Holdings and real estate

Germany,

United Kingdom

60.11

48.80

Edolaxia Group Limited

Cyprus

Holdings

Cyprus

100

TLG Immobilien AG

Germany

Holdings and real estate

Germany

88.16

88.02

WCM Beteiligungs- und Grundbesitz- AG

Germany

Holdings and real estate

Germany

86.12

83.04

Primecity Investment PLC

Cyprus

Holdings and real estate

Germany

99.97

99.96

Aroundtown Holdings B.V.

Netherlands

Holdings and real estate

Germany,

United Kingdom

100

Aroundtown Holdings S.à r.l.

Luxembourg

Holdings and real estate

United Kingdom

100

BSC München Grundstücks GmbH & Co. KG

Germany

Real estate

Germany

49.09

Associates and joint arrangements held indirectly by the Company

Globalworth Real Estate Investment Limited

Guernsey

Real estate

Poland, Romania

30.31

Tevat Limited

Cyprus

Holdings

Cyprus

Capitals Property S.à r.l.

Luxembourg

Real estate

Germany

BERLIN

AROUNDTOWN

CONSOLIDATED FINANCIAL STATEMENTS

BONN