AroundTown SA

Consolidated

Annual Report

2023

For the year ended December 31,

Rome

Berlin

Content

BOARD OF DIRECTORS‘ REPORT

CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR’S REPORT

Report of the Réviseur d’Entreprises Agréé

240

LIMITED ASSURANCE REPORT

Independent Limited Assurance Report on the Non-Financial Report

(Independent Auditor)

152

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

NON-FINANCIAL REPORT

General Information

Environmental Information

EU Taxonomy

Social Information

Governance Information

101

EPRA sBPR Data Preparation

116

MANAGEMENT DISCUSSION AND ANALYSIS

Notes on Business Performance

122

EPRA Performance Measures

132

Alternative Performance Measures

142

Responsibility Statement & Disclaimer

151

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of profit or loss

158

Consolidated statement of other comprehensive income

159

Consolidated statement of financial position

160

Consolidated statement of changes in equity

162

Consolidated statement of cash flows

164

Notes to the consolidated financial statements

166

Drenthe (Netherlands, Center Parcs)

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Board Of

Directors‘ Report

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Board of Directors‘ Report

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Board of Directors‘ Report

Key Financials

in € millions unless otherwise indicated

1–12/2023

Change

1–12/2022

Revenue

1,602.8

(0%)

1,609.9

Net rental income

1,192.8

(2%)

1,222.1

Adjusted EBITDA

1,002.9

1,002.3

FFO I

332.0

(8%)

362.7

FFO I per share (in €)

0.30

(9%)

0.33

FFO II

449.1

(37%)

714.1

ICR

4.2x

(1.0x)

5.2x

Loss for the year

(2,426.4)

431%

(457.1)

Basic loss per share (in €)

(1.82)

214%

(0.58)

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

1) Reclassiﬁed in Dec 2023 to include owner-occupied property

in € millions unless otherwise indicated

Dec 2023

Dec 2022

Total Assets

33,559.3

37,347.1

Total Equity

15,149.7

17,823.4

Investment property

24,632.4

27,981.0

Investment property of assets held for sale

408.3

909.1

Cash and liquid assets

(including those under held for sale)

3,026.1

2,718.7

Total ﬁnancial debt

(including those under held for sale)

14,242.1

14,805.8

Unencumbered assets ratio

(by rent)

74%

82%

Equity Ratio

45%

48%

Loan-to-Value

43%

40%

Financial Position Highlights

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Board of Directors‘ Report

In € millions unless otherwise indicated

2023

Change

2022

EPRA NRV

9,920.8

(19%)

12,289.1

EPRA NRV per share (in €)

9.1

(19%)

11.2

EPRA NTA

8,058.7

(20%)

10,135.2

EPRA NTA per share (in €)

7.4

(20%)

9.3

EPRA NDV

7,592.1

(28%)

10,515.2

EPRA NDV per share (in €)

6.9

(28%)

9.6

EPRA Earnings

438.8

438.7

EPRA Earnings per share (in €)

0.40

EPRA LTV

60.8%

5.4%

55.4%

EPRA Net initial yield (NIY)

4.0%

0.5%

3.5%

EPRA 'Topped-up' NIY

4.1%

0.6%

3.5%

EPRA Vacancy

7.9%

0.3%

7.6%

EPRA Vacancy including JV

8.1%

0.3%

7.8%

EPRA Cost Ratio

(including direct vacancy costs)

23.0%

(4.8%)

27.8%

EPRA Cost Ratio

(excluding direct vacancy costs)

20.8%

(4.9%)

25.7%

EPRA Cost Ratio

(including direct vacancy costs,

excluding extraordinary expenses for uncollected hotel rents)

20.4%

(1.6%)

22.0%

EPRA Cost Ratio

(excluding direct vacancy costs,

excluding extraordinary expenses for uncollected hotel rents)

18.3%

(1.6%)

19.9%

EPRA Performance Measures

AROUNDTOWN

Board of Directors‘ Report

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,

2023. The ﬁgures presented are based on the consolidated

ﬁnancial statements as of December 31, 2023, 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 on the

German as well as London residential real

estate market. As of December 31, 2023, the

Group’s holding in GCP is 63% excluding shares GCP

holds in treasury (61% including these shares). GCP is

consolidated in AT’s ﬁnancials since 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.

Aroundtown

The Group

Quality assets with a focus on large EU cities

primarily in Germany, Netherlands, and in London

Capital recycling by selling non-core/mature

assets

Attractive acquisitions below market value and

below replacement costs

Income generating portfolio

with value-add potential

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

Frakfurt 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 Stra

ße

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

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Board of Directors‘ Report

EXECUTING ON STRATEGIC PILLARS

€0.9 billion disposals signed in 2023

►

Over €1.2 billion of disposals closed in 2023

►

€0.2 billion of disposals signed but not closed

►

Ability to dispose of during difficult market conditions

€1.0 billion new bank debt signed in 2023

►

of which ca. €900 million was drawn during 2023

►

Supported by €17.9 billion unencumbered assets and strong bank relationships

REINFORCING STRONG LIQUIDITY POSITION

€3.0 billion in cash & liquid assets

►

Representing 21% of debt

SUPPORTING LIABILITY MANAGEMENT

€1.3 billion

of bonds repurchased at a discount in 2023

►

Generating profit, reducing leverage and supporting cash preservation

►

16% of debt maturing in 2024-2026 has been repurchased

Liquidity covers upcoming debt maturities until mid-2026

►

Cash and liquid assets, expected proceeds of signed disposals (not closed) and vendor loans

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Progress on ESG: Green Certiﬁcations

First analysis

and planning

Pilot project

started successfully

in the Netherlands

Transferring the

knowledge from the pilot

project across the portfolio

Aiming at gradual progress

Ongoing certifications in German offices

Analyzing certification options in hotels

100% of Dutch ofﬁces

have been certiﬁed.

First German ofﬁces

have been certiﬁed.

Beyond

2020

2021

2023

36%

of Ofﬁces

Green Certiﬁed

2022

15%

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Board of Directors‘ Report

EV charging station

Combined Heat and Power

Solar Panels

Progress on ESG:

Green Installations & Refurbishments

Energy-improving

investments

Green installations

●

Buildings ﬁtted with solar panels and energy

efﬁcient heating (Combined Heat and Power)

with a maximum capacity of over 6m kWh pa,

translating to over 2,000 tons of avoided CO

●

ca. 400 EV charging sockets installed

across the portfolio

●

Regular refurbishments such as roof,

façade, window, and lighting upgrades

can save 60%-95% of the energy loss from

inefﬁcient insulation/lighting

●

Reduces energy consumption and CO

tax, beneﬁtting both landlord and tenants

●

Improving energy labels resulting in higher

tenant demand & value.

Green refurbishments

Potsdam/Berlin

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Board of Directors‘ Report

Social

Governance, Awards & Indices

Progress on ESG:

Social, Governance, Awards & Indices

SUPPORTING COMMUNITIES

Over 90 impactful

projects supported

●

Significant contributions to communities

across diverse portfolio locations

●

Focused on improving child and youth

education and healthcare, fostering

job readiness for disadvantaged young

individuals, supporting initiatives

for underprivileged youth, extending

solidarity to ethnic minorities, and more

EMPLOYEE SATISFACTION

Recognized as top employer

●

Awarded “Top Company

2024” by Kununu

placing among the top

5% of companies as

rated by employees

●

GCP awarded “Most Wanted Start 2024” by ZEIT

publishing group and Kununu for its in-house

apprenticeship program

●

Provided added training and development opportunities

to foster in-house talent and establish AT as a top

employe

(RE-)INCLUSION INTO INDICES

●

Reintroduced into the MDAX and added to MDAX ESG+

●

Included in the DJSI Europe and Bloomberg Gender Equality

Index displaying the Group’s visibility across key ESG indices

and commitment to diversity









2023

AWARDS & RATINGS

●

Received the 7

consecutive EPRA BPR Gold award &

consecutive EPRA sBPR Gold award

●

Strong Sustainalytics rating (6

percentile) and S&P Global

CSA rating (6

percentile)

HIGH QUALITY TENANT SERVICES

24/7 Support & TÜV Certified

●

Providing 24/7 support

to both commercial and

residential tenants.

●

Both service centers are

TÜV certified. Residential service center

was also awarded fairest customer service hotline by

Focus Money.

●

Further digitalization measures in

residential portfolio: improved tenant

app and implemented AI to minimize

call center waiting times

AROUNDTOWN

Board of Directors‘ Report

Letter From

The CEO

Dear Stakeholders,

2023 has been a challenging year for the real estate sector, marked by a rapid hike in interest

rates, increasing geopolitical tensions, and heightened economic uncertainty. Our pro-active

management, diverse portfolio, conservative capital structure, and flexible business model

enabled us to navigate these uncertain times and capitalize on some opportunities in this

heightened market volatility. We executed strategic measures to strengthen our liquidity, balance

sheet and operating platform and are ready to continue moving the company towards its long-

term objectives. In this letter, we are pleased to highlight our achievements on these fronts and

share our insights on the current market environment.

MARKET & PORTFOLIO PERFORMANCE

2023 was marked by the rapid increase in central bank policy rates aimed at tackling high inﬂation rates across the eurozone.

While these higher rates have successfully curbed inﬂation, uncertainty remains whether these measures will push EU countries

into a recession. This economic uncertainty impacted the entire real estate sector resulting in devaluation recorded across all asset

types. This year, the biggest impact was felt in the ofﬁce sector. In the ofﬁce sectore, we have seen impacts on tenant demand as

businesses exercise more caution, delaying letting space expansion and relocation decisions. Consequently, we observe a certain

decreased demand and a lower level of new lettings, with the leasing process taking longer. Conversely, we see an uptick in

lease extensions, as tenants defer decisions until risks subside. On the positive side, high inﬂation rates have resulted in large

increases in rents as our commercial leases are mostly CPI-indexed or have step-up rents, which more than compensated for the

negative trend in the market, enabling solid rent like-for-like growth. Furthermore, increasing construction costs have resulted

in signiﬁcant cancellations of projects, resulting in a reduction in new supply in the coming years, which we expect will provide

tailwinds in the mid-to long-term.

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Board of Directors‘ Report

Due to prevailing market conditions, our ofﬁce occupancy has seen a small decline

which was more than offset by increasing rents, resulting in a 3.3% like-for-like rental

income growth for the ofﬁce portfolio in 2023. Our lease expiry proﬁle remains well-

distributed, giving us a headroom to address challenges effectively. Approximately

75%

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

which provides stability of cash ﬂows. Furthermore, German and Dutch ofﬁce markets

remain better positioned than US and UK markets, maintaining a healthy vacancy rate

even amidst economic uncertainty. German and Dutch ofﬁce markets also showcase

more efﬁcient utilization of ofﬁce space with higher attendance, fostering a sustainable

hybrid model while US & UK ofﬁce markets were oversupplied even before this period

of economic uncertainty. Looking ahead, while we anticipate a further decrease in

occupancy, we expect that rent increases will continue to offset this decline. As has

always been the case, we will continue to proactively address challenges and capitalize

on opportunities.

Our residential portfolio, our second largest asset type accounting for 33% of our total

portfolio, held through our stake in GCP, continued to beneﬁt from the widening supply-

demand gap in Germany and London. From an operational perspective, 2023 was a very

strong year, with increasing rents and declining vacancies.

In both markets, the pace of

new supply continues to substantially fail to keep up with strong demand and government

targets, primarily due to higher material, labor, and ﬁnancing costs, coupled with regulatory

hurdles, making new construction economically less viable. Net migration remained high

in 2023, and the impact of higher mortgage rates on home affordability which drives

more people to rent collectively served as the primary catalysts for the heightened rental

demand. Consequently, the residential portfolio vacancy reached an all-time low of 3.6%.

Low vacancy and strong demand also pushed rents higher, particularly in London, where

rent adjustments are not regulated, enabling to capture inﬂation faster than in Germany.

As a result, our residential portfolio recorded a like-for-like rental growth of 3.4% in

2023. Throughout 2023 we slightly increased our holding rate in GCP to 63% currently

as compared to 60% as of December 2022, utilizing the opportunity to strengthen our

position in a stable and strong cash ﬂow generating portfolio at an attractive share price.

We expect the underlying market dynamics in our residential markets to persist in the

coming years, allowing us to beneﬁt from these stable operational tailwinds while limiting

the downside risk.

Our hotel portfolio accounts for 21% of our total portfolio. The hospitality industry, also

in 2023, continued its recovery after the pandemic effects, witnessing a steady increase

in both the occupancy and average daily room rate among operators throughout the

year. While leisure demand has recovered faster, business and international travel as well

as conferences took longer to recover. This slower recovery particularly affected certain

hotel markets in Germany which rely in part on business travelers. Despite this, corporate

travel started to pick up towards the later part of 2023, especially with the return of

trade fairs and conferences. International travel continued to recover as well. Leisure

travel has bounced back to pre-pandemic levels and growth has stabilized. However, in

2023 hotel tenants’ margins remained pressured due to cost inﬂation and widespread

stafﬁng shortages. However, we were able to increase our collection rate to 87%,

up from

69% in 2022 and 48% in 2021. We believe that we have successfully navigated through

the operational challenges we encountered during and after the pandemic, followed

by the rapid increase in operational costs and operational disruptions. We expect to be

back to pre-pandemic levels in 2024.

STRENGTHENED THE LIQUIDITY AND BALANCE SHEET THROUGH

DISPOSALS, LIABILITY MANAGEMENT EXERCISES AND CASH RETENTION

During 2023, we reinforced our high liquidity position with disposals and new bank debt

which supported our pro-active liability management activities. Our cash and liquid

assets increased to €3 billion mainly from disposals and new debt funding, allowing for

deleveraging activities. We closed over €1.2 billion of disposals during 2023 encompassing

a variety of asset types, locations and deal sizes, including development rights. Our

diversified portfolio and the extensive reach of our deal-sourcing network give us a

competitive edge, allowing us to re-focus on markets that are relatively more active than

others, while our strong liquidity position and clean debt maturity schedule provide us

the time and ﬂexibility to execute deals on terms we see as favorable. Signed disposals

amounted to €0.9 billion in 2023, of which €0.2 billion was not closed as of 2023.

We accessed additional liquidity through bank ﬁnancing where we utilized our strong

banking relationships and large amount of unencumbered assets to sign ca. €1 billion

in new bank debt, which has enabled us to increase our total liquidity and target bond

buybacks. Our diversified asset mix and locations again gave us a competitive edge,

especially in an environment with tightened lending standards. Our new bank debt, raised

at an average maturity of over 7 years and an average interest rate margin of 1.4% plus

Euribor, featured mostly capped rates, positioning us favorably for potential decreases in

base rates. As of the end of December 2023, we retain ca. €18 billion in unencumbered

assets, giving us to the ﬂexibility to raise signiﬁcant additional secured ﬁnancing if needed.

Additionally, we have utilized several measures to retain our cash liquidity which include a

more selective approach towards executing capex measures, suspending dividend payments

in 2023 and not calling the perpetual notes which do not have any repayment obligations.

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Board of Directors‘ Report

These measures substantially reinforced our liquidity position, enabling active liability

management measures to support deleveraging and extend the debt maturity proﬁle.

Throughout 2023, we repurchased approx.

€1.3 billion in primarily nearer term bonds

at a discount

thereby reducing leverage and strengthening the equity base. Buying

back short-term bonds supports our cash preservation strategy as upcoming maturities

are repurchased at a discount while also saving on coupon payments. As a result,

16%

of total debt maturing in 2024-2026 has been repurchased. Thanks to all these

strategic measures taken, we currently have a liquidity position of €3.0 billion, which

including expected proceeds from signed disposals and vendor loans covers debt

maturities until mid-2026.

VALUATIONS

In 2023, the fast increasing interest rates continued to negatively impact valuations

across all asset types and locations. These elevated rates concurrently resulted in

a muted transaction market marked by significantly lower volume than historical

levels. The absence of robust transactional evidence introduced an additional layer

of uncertainty, creating disparities among market participants’ expectations. However,

strong rental growth in the portfolio and market rents have partially counteracted the

effects of yield expansion on the valuations. In total, we registered a like-for-like value

decline of 11% as of December 2023. Accordingly, the average yield increased from 4.5%

in 2022 to 5.0% in 2023. Ofﬁce properties were signiﬁcantly impacted, experiencing

a value decline of 13%. Residential assets registered a smaller decline compared to

ofﬁces with 8%. Hotel assets have recorded the least devaluations at 6%, with the post-

pandemic recovery countering the impact of higher interest rates. Developments rights

remain the most impacted, with 21% value decline, as larger discount and cap rates for

future cash ﬂows and higher capex costs impact development project valuations the

most. Development rights constitute only a minimal portion of the overall portfolio.

While the future trajectory of property valuations remains uncertain, a stable labor

market and an economy that has deﬁed gloomy expectations remain positive catalysts

while any potential revival of the transaction markets due to lower rates would offer

greater clarity moving forward.

Our deleveraging activities helped partially offset the negative valuation impacts. From

June 2022 until year-end 2023, the property values declined by

% while our LTV

increased by 3 percentage points. As outlined above, deleveraging activities included

disposals, bond buybacks at discount, suspension of dividends, not exercising the option

to call perpetual notes, cash collection from ﬁnancial assets, and operational proﬁtability.

We retain a signiﬁcant headroom to our bond covenants

which is one of the highest

among listed European real estate sector

, and our strong liquidity covers the debt

maturities until mid-2026. Our high operational proﬁtability and ﬁnancial discipline

resulted in an ICR of 4.2 in 2023 with further ﬁnancial ﬂexibility provided by €17.9

billion in unencumbered assets.

ESG PROGRESS

We are pleased to highlight some of our notable accomplishments throughout the

year, signifying substantial strides across the three different ESG fronts. It is essential

to recognize that this achievement is a direct outcome of the diligent efforts and

commitment exhibited by our Sustainability team and various teams across the entire

organization. Our approach to sustainability extends beyond a standalone initiative, as

we have ingrained sustainability processes and accountability within every facet of our

business operations. The progress made signiﬁes our commitment to advancing ESG

targets, and we remain dedicated to further enhancements to ensure the realization

of these goals.

Environmental

In 2023, our commitment to sustainability was reinforced by ongoing efforts to secure green

certiﬁcations for our ofﬁce portfolio, complemented by targeted green investments and

refurbishments aimed at reducing emissions. Notably, we achieved signiﬁcant milestones in

BREEAM certiﬁcation, fully certifying our Dutch ofﬁce portfolio. The successful certiﬁcation

of the Dutch ofﬁce portfolio, initiated as a pilot project in 2021, served as a foundation for

knowledge transfer across the entire portfolio, leading to the certiﬁcation of our ﬁrst German

ofﬁces in 2023. Consequently,

% of our ofﬁce portfolio is now certiﬁed, a substantial

increase from the 15% recorded last year. Looking ahead, we plan to gradually certify our

German ofﬁces and are concurrently exploring certiﬁcation options for our hotel portfolio.

Furthermore, we continued our renewable and energy efﬁciency investments in 2023.

Leveraging green installations which target carbon reduction via installation of

renewable energy systems, we equipped buildings with solar panels and energy efﬁcient

heating units (Combined Heat and Power) with a maximum capacity of over 6 million

kWh pa, translating to over 2,000 tons of avoided CO

. In addition, we installed approx.

400 EV charging sockets across our portfolio. These initiatives contribute to

our society’s

shared CO

reduction path while also leading to improved green building certiﬁcations,

heightened demand, and increased overall value. Parallel efforts focused on enhancing

energy efﬁciency through regular refurbishments, including roof, facade, window, and

lighting replacements. These measures save on energy loss resulting from inefﬁcient

insulation/lighting and thus contribute to reduced energy consumption and CO

tax,

AROUNDTOWN

Board of Directors‘ Report

beneﬁting both us and our tenants. The resulting improvement in energy performance

not only aligns with our sustainability goals but also enhances tenant demand and

overall property value. Our dedication to these initiatives exempliﬁes our commitment

to a sustainable future.

Social

On the social side, we dedicated our efforts to actively engage with and contribute to

the well-being of our communities, enhance the quality of tenant services, and elevate

our standing as an employer of choice. Through the Aroundtown and GCP foundations,

we sustained meaningful partnerships with charities that delivered targeted assistance

across our diverse portfolio locations, collaborating with local associations. Our projects

were aimed at improving child and youth education and healthcare, fostering job readiness

for disadvantaged young individuals, supporting initiatives for underprivileged youth,

extending solidarity to ethnic minorities, and more. In 2023 alone, we made contributions

to local partners through both the Aroundtown and GCP foundations spanning

over 90

impactful projects.

Additionally, our focus on delivering high-quality tenant services persisted across both

commercial and residential sectors. Offering 24/7 tenant support company-wide, we

achieved TÜV re-certiﬁcation for both service centers in 2023. Notably, GCP’s residential

tenant service center received the “Fairest Customer Service” award, while the migration

of service requests to the GCP App enhanced efﬁciency and tenant satisfaction.

Moreover, our commitment to providing training and development opportunities and

establishing ourselves as a top employer continued to make strides. Aroundtown earned

the distinction of being awarded “Top Company 2024” by Kununu, a leading platform for

employer reviews and feedback on corporate culture, placing us among the top 5% of

companies on the platform as rated by employees. Furthermore, GCP received the “Most

Wanted Start 2024” award for its in-house apprenticeship program, granted by the ZEIT

publishing group and Kununu. Our focus on fostering in-house talent through workshops

and opportunities for developing both soft and hard skills ensures that we remain a high-

performing company poised for success in the future.

Governance, Indices and Awards

Throughout 2023, we remained dedicated to the enhancement of our processes, policies,

and reporting standards. Notably, our 2023 annual report marks a signiﬁcant milestone

as it embraces an integrated format, presenting the non-ﬁnancial reporting alongside our

comprehensive ﬁnancial report. Upholding rigorous standards for ﬁnancial transparency

and sustainability reporting, we are proud to have earned the EPRA BPR Gold award

for the 7

consecutive time and the EPRA sBPR Gold award for the 6

consecutive year.

Our steadfast commitment to diversity and anti-discrimination is acknowledged by our

inclusion in the Bloomberg Gender Equity Index. We also maintained our strong rating

with Sustainalytics in the low-risk category and are ranked among top 6

percentile

globally across all industries. Our prominence in other ESG indices, such as the Dow

Jones Sustainability Index and MDAX ESG + Index, further reinforces our commitment to

sustainable practices.

I would like to once again express my deepest gratitude to our

exceptional teams for their hands-on approach, unwavering

commitment and tireless efforts throughout the past year.

Looking into 2024, we are confident that our robust platform,

well-diversified portfolio and high liquidity equip us not only to

navigate current challenges but also to seize new opportunities

that may unfold in the year ahead.

Barak Bar-Hen

March 27, 2024

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Board of Directors‘ Report

The Strategy and

Business Model

Value creation

Acquisition and takeover

below market prices

Repositioning and

operational improvements

Robust cash

ﬂows

supported by strong tenant structure as well

as capital recycling by selling non-core and mature assets.

Disposals to be channeled into deleveraging

Additionally continuing to extract

value and rights from the properties

Sourcing and targeting acquisitions in central locations

in top tier cities with growth and upside potential

AT‘s value creation starts prior to acquisition

Berlin

AROUNDTOWN

Board of Directors‘ Report

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

acquiring value-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 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 altering

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.

ACQUISITION AND TAKEOVER BELOW MARKET PRICES

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

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. Because

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

weaknesses and strengths are identified pre-acquisition, the execution of the

repositioning 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 proﬁtability 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 community by collaborating

with local municipalities, supporting community initiatives and advertising on key

real estate platforms.

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

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

improvements the Group initiates improve the living quality or business environment

for existing and future tenants, resulting in increased demand for these repositioned

assets.

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Board of Directors‘ Report

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.

Key stakeholder relationship management considering sustainability

matters

Aroundtown’s strategy and business model takes into account the diverse interests

and perspectives of its stakeholders, including its valued employees, both residential

and commercial tenants, municipalities and local communities in which the Group

operates, suppliers and business partners, and investors, and forms an important part

of the approach to sustainable growth. AT understands that without the support of

its stakeholders that the Group would not be able to fully execute on its strategic

goals. Understanding and addressing the needs and concerns of these stakeholders

requires ongoing communication, active engagement, and a commitment to ethical

business practices. Regular feedback mechanisms, community involvement, and a

proactive approach to problem-solving contribute to building trust and long-lasting

relationships with all stakeholders and have been embedded across AT’s business

functions to ensure that their interests are represented and addressed. Aroundtown’s

upstream value chain consists of its investors, its construction and development

partners, and its suppliers. AT takes the next position in its value chain, with its

employees and tenants making up its downstream value chain. Aroundtown’s business

strategy takes into account the sustainability matters identiﬁed as material during

its Double Materiality Assessment. Whether these relate to its own workforce, its

supply chain or the energy efﬁciency of its assets and other environmental matters,

the Group adapts its strategy and underlying processes where necessary to reﬂect

the impacts and importance of its material sustainability topics.

Aroundtown puts great emphasis on establishing strong relationships with its

tenants 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

attention 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.

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 potential

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 properties. 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

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Board of Directors‘ Report

most of the potential has been achieved 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

internally 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 estimates that most

of the rights will be disposed.

Tuscany

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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 since inception into one of the largest real estate companies

in Europe 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 accompa

nied by a pipeline and acquisition of attractive properties and the successful tran-

sition 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 an LTV of 43% as of

December 31, 2023, below the

Board of Directors’ guidance of 45%. Aroundtown’s

management views the conservative debt metrics as vital to secure long-term

ﬁnancial strength. The Company continuously analyzes ﬁnancing opportunities 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

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Board of Directors‘ Report

FINANCIAL POLICY

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

•

LTV guidance below 45% on a sustainable basis

•

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 & bank loans

•

Dividend distribution of 75% of FFO I per share*

Aroundtown’s conservative capital structure, strong track record in accessing capital

markets and its strong relationships to mortgage banks enable the Group to ﬁnance

its funding needs. 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, 2023 amounted to €3.0 billion. Additionally, undrawn RCF’s of €1 billion

(no MAC) and a high ratio of unencumbered investment properties of 74% (by rent,

€17.9 billion in total value) as of December 31, 2023 provide for additional ﬁnancial

ﬂexibility.

*The decision is subject to market conditions and AGM approval

Frankfurt

Berlin

Maintaining high

interest cover ratio

(ICR)

4.4

YEARS

2.2%

Average

debt maturity

Average

cost of debt

4.2x

FY 2023

FY 2022

Financing sources mix

Loan-To-Value

Board of Directors’ guidance of 45%

Dec 2023

Dec 2022

40%

High unencumbered assets ratio

€17.9BN

Dec 2022

Dec 2023

82%

Straight bonds and schuldscheins

Loans & borrowings

Total Equity

of which Perpetual Notes

of which Mandatory Convertible Notes

Dec 2023

Dec 2022

41%

55%

52%

5.2x

INVESTMENT GRADE CREDIT RATING

AT has a BBB+ (outlook negative) 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.

OUTLOOK

NEGATIVE

BBB

DEC 2023

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Board of Directors‘ Report

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Board of Directors‘ Report

Frankfurt

Asset Type

Strongly diversiﬁed portfolio with a focus in ofﬁces,

residential and hotels.

Tenant

High tenant diversiﬁcation with no material tenant or

industry dependency.

Commercial portfolio with over 3,000 tenants and

residential portfolio with very granular tenant base.

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: 82% 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.

Well-Diversified Group Portfolio

with Focus on Strong Value Drivers

Aroundtown’s

Quality Portfolio

TOTAL

PORTFOLIO:

€25BN*

*including development rights & invest

and excluding properties held for sale

Residential 33%

Office 40

GROUP

ASSET TYPE

BREAKDOWN

December 2023

by value*

Retail

Logistics /

Other

Hotel 21

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Two of the strongest

economies in Europe with

AAA credit rating

Among the lowest

unemployment

levels in Europe

Low debt/GDP

levels compared to

European average

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:

82% of the portfolio

Rotterdam

Amsterdam

Utrecht

Frankfurt

Hannover

Wiesbaden

NRW

Mannheim

Mainz

Stuttgart

Dresden

Munich

Bremen

Hamburg

Berlin

Leipzig

Halle

Nuremberg-Fuerth

inhabitants per sqkm

(Destatis & CBS, 2021 & 2022)

POPULATION DENSITY

IN GERMANY AND

THE NETHERLANDS

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 2023

by value*

Others

20%

Dresden/Leipzig/

Halle

Munich

London

Frankfurt

Rotterdam

Utrecht

Nuremberg

Bremen

Hannover

Stuttgart/BB

Amsterdam

Hamburg/LH

Wiesbaden/Mainz/

Mannheim

Berlin 24%

NRW 14%

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Berlin

Leipzig

Meuse (Netherlands, Center Parcs)

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

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Board of Directors‘ Report

*Map representing approx. 95% of the portfolio

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

of the portfolio is located in top tier

neighborhoods including Charlotten-

burg, Wilmersdorf, Mitte, Kreuzberg,

Friedrichshain, Lichtenberg, Schöneberg,

Neukölln, Steglitz and Potsdam

of the portfolio is well located primarily in

Reinickendorf, Spandau, Treptow, Köpenick

and Marzahn-Hellersdorf

TOP 4

OFFICE

CITIES:

Berlin, Munich, Frankfurt

and Amsterdam make up

61%

of the office portfolio.

AT is the leading office landlord in

Berlin, Frankfurt and Munich among

publicly listed peers

OFFICE: High Quality

Ofﬁces in Top Tier Cities

Rotterdam

Dresden/Leipzig/Halle

Amsterdam 5%

OFFICE

December 2023

by value

Berlin 27%

Frankfurt 15%

Munich 14%

NRW 11%

Utrecht

Wiesbaden/Mainz/Mannheim

Nuremberg

Hamburg

Stuttgart

London

Others

Warsaw

Hannover

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Board of Directors‘ Report

Berlin

Dresden

Cologne

Utrecht

Amsterdam

Leipzig

Munich

Rotterdam

Berlin

Stuttgart

Frankfurt

HOTELS: Focus on Central Locations,

Quality and Operators with Brand Recognition

Over 150 hotels across top locations with fixed long-term leases with third party hotel operators

AT’s hotel portfolio, valued at €4.6 billion as of

December 2023, is well diversified and covers a

total of 1.6m 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. 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.

Meuse

(Netherlands, Center Parcs)

Rome

Athens

Limburg

(Belgium, Center Parcs)

Paris

Brussels

Dresden/Leipzig/Halle

Hamburg/

Lüneburger Heide (Center Parcs)

Drenthe

(Netherlands, Center Parcs)

Eindhoven/Brabant

(Center Parcs)

HOTELS

December 2023

by value

Berlin 19%

NRW 7%

London

Wiesbaden/Mainz/Mannheim

Hannover/ Braunschweig

Others

Munich/BR

tralsund/Rügen/Usedom

Frankfurt

Stuttgart/BB

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

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Board of Directors‘ Report

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Board of Directors‘ Report

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 and Brussels.

High Geographical

Diversiﬁcation

Berlin

Cologne

Berlin

Davos

Berlin

Hamburg/ Lüneburger Heide (Center Parcs)

Eindhoven/Brabant (Netherlands, Center Parcs)

Bad Saarow (Brandenburg/Berlin)

Brussels

Rome

AROUNDTOWN

Board of Directors‘ Report

Grand City

Properties

Residential portfolio

The residential portfolio is primarily held through a 63% stake in

Grand City Properties (“GCP”) excluding the shares GCP holds in

treasury (61% including these shares) as of December 31, 2023.

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 holds 63k 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 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

OUTLOOK

NEGATIVE

Berlin

GCP

REGIONAL

DISTRIBUTION

December 2023

by value

NRW 21%

London 19%

Berlin 23%

Dresden/

Leipzig/

Halle 14%

Hamburg/Bremen

Nuremberg/Fürth/Munich

Mannheim/KL/ Frankfurt/Mainz

Others

10%

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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

Dresden

Berlin

Hamburg

Dresden/Leipzig/Halle

NRW

Stuttgart

Hannover

Others

Munich

LOGISTICS/

OTHER

December 2023

by value

Berlin 42%

Kassel 29%

Amsterdam

Frankfurt/Mainz

Others

14%

Hamburg

Rostock

Dresden/Leipzig/Halle

Stuttgart/BB

RETAIL

December 2023

by value

Berlin 43%

NRW 25%

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Board of Directors‘ Report

December 2023

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

8,961

3,221

12.8%

451

12.9

2,782

5.0%

4.2

Residential

7,715

3,653

3.6%

370

8.6

2,112

4.8%

Hotel

4,584

1,567

3.2%

238

13.0

2,926

5.2%

14.5

Logistics/Other

399

434

9.2%

5.0

920

6.1%

5.1

Retail

1,081

516

12.3%

10.7

2,095

5.5%

4.3

Development rights & Invest

1,892

Total

24,632

9,391

7.9%

1,142

10.7

2,421

5.0%

7.4

Total (GCP at relative consolidation)

21,421

7,893

8.5%

991

11.1

2,481

5.1%

7.5

Asset type overview

Regional overview

December 2023

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

5,197

1,428

7.5%

208

12.7

3,638

4.0%

NRW

3,310

1,922

8.4%

186

8.4

1,722

5.6%

London

1,841

235

4.2%

35.6

7,852

5.0%

Dresden/Leipzig/Halle

1,625

1,071

4.2%

6.9

1,517

5.3%

Munich

1,573

524

9.9%

9.5

3,004

3.6%

Frankfurt

1,474

486

16.0%

14.4

3,036

4.8%

Wiesbaden/Mainz/Mannheim

650

264

7.4%

11.6

2,457

5.5%

Amsterdam

568

159

10.0%

15.4

3,575

4.9%

Hamburg/LH

451

180

4.7%

12.6

2,502

6.0%

Hannover

250

156

17.2%

9.1

1,603

5.5%

Stuttgart/BB

235

117

16.5%

11.1

2,014

5.4%

Rotterdam

211

1.7%

14.4

2,512

7.4%

Utrecht

185

7.7%

14.1

2,628

6.4%

Other

5,170

2,695

7.1%

296

9.7

1,918

5.7%

Development rights & Invest

1,892

Total

24,632

9,391

7.9%

1,142

10.7

2,421

5.0%

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Board of Directors‘ Report

Capital Markets

KEY INDEX INCLUSIONS

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

MDAX, MDAX ESG+,

FTSE EPRA/NAREIT Index Series, MSCI World Small Cap, DJSI Europe

as well as

GPR 100

& 250, GPR Global Top 100 ESG

and

DIMAX

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 19 different research analysts on an ongoing basis,

with reports updated and published regularly.

excluding suspended

voting rights

Placement

Frankfurt Stock Exchange

Market segment

Prime Standard

Trading ticker

AT1

Initial placement

of capital

13.07.2015

Key index

memberships

MDAX

MDAX ESG+

FTSE EPRA /

NAREIT:

– Global

– Developed Europe

– Eurozone

– Germany

– Green Indexes

DJSI Europe

MSCI World Small Cap

GPR 100 & 250

GPR Global Top 100 ESG

DIMAX

AS OF DECEMBER 31, 2023

Number of shares

1,537,025,609

Number of shares,

base for share KPI

calculations

1,093,138,396

AS AT MARCH 26, 2024:

Shareholder Structure

Freeﬂoat: 46%

Shares held in treasury

: 29%

Avisco Group/Vergepoint

ii)

: 15%

Stumpf Capital GmbH

iii)

: 10%

12% are held held through TLG Immobilien AG,

voting rights suspended

ii)

controlled by Yakir Gabay

iii)

controlled by Georg Stumpf

Market cap

€2.6 bn / €1.9 bn

(excl. treasury shares)

TRADING DATA

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Board of Directors‘ Report

Share price performance and total return since initial placement of capital (13.07.2015)

EPRA Germany (rebased) +16% total return

MDAX (rebased) +31% total return

Stoxx 600 (rebased) +71% total return

Aroundtown -32% total return

2015

2016

2017

2018

2019

2020

2021

2024

2022

2023

Frankfurt

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Berlin

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Board of Directors‘ Report

Non-ﬁnancial

report

Amsterdam

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Board of Directors‘ Report

PREPARATION OF THE NON-FINANCIAL REPORT

The content of this report and selected metrics (described as reviewed with relevant

data tables) have been reviewed with limited assurance in accordance with the

International Standard on Assurance Engagements (ISAE) 3000 (Revised). A statement

from the auditors can be found on page 152.

Aroundtown presents its performance measures in alignment with the European

Public Real Estate Association (EPRA) sustainability Best Practice Recommendations

(sBPR) standards throughout this report. Full estimation of value chain data, upstream

and downstream, has not been conducted. Value chain data is only included for

tenant-obtained energy consumption and water usage. Information regarding the

preparation of the data throughout the report can be found in the

EPRA sBPR Data

Preparation

section of this report.

As well as EPRA sBPR, Aroundtown also reports

in reference to the Global Reporting Initiative (GRI), and conducts Sustainability

Accounting Standards Board (SASB) mapping, which are published in separate

documents in our website.

In preparation for the ﬁrst compliance window of the EU’s Corporate Sustainability

Reporting Directive (CSRD) in 2025, Aroundtown structured and prepared this

report to be in alignment with the recommendations of the European Sustainability

Reporting Standards (ESRS). This report also includes information published in

compliance with the EU Taxonomy, Regulation (EU) 2020/852 of the European

Parliament.

The methodology used to prepare the Sustainability Statement is as below:

Identification of Stakeholders

The process began by identifying the stakeholders relevant to Aroundtown, which

involved deﬁning the purpose and scope of the Non-Financial Report and identifying

captured stakeholders. Subsequently, the identiﬁed stakeholders’ perspectives were

assessed, and relevant stakeholders were engaged further through a series of topical

interviews.

Internal stakeholders include, but are not limited to, Aroundtown employees from

the following departments: Human Resources, Occupational Health and Safety,

Sustainability, Insurance, Data Protection, Real Estate Management, Risk Management,

Energy, Water and Management, Rent Control and Increase, Finance, Advisory, and

Compliance. Other stakeholders include value chain workers, business partners,

investors and tenants.

Problem Mapping

Interviews with key stakeholders were conducted to identify and map ﬁnancial and non-

ﬁnancial topics impacting Aroundtown. These interviews were categorized according to

the ESRS standards and questions on these topics were addressed during the sessions.

Data Validation

The information obtained through the interviews was validated by cross-referencing

with other data sources, ensuring accuracy and reliability. This step helped in building

a comprehensive understanding of the materiality of issues. The outcome of the double

materiality assessment (DMA) was then used to prepare this report as much as possible

in accordance with the guidelines set out in the CSRD.

General Information

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DOUBLE MATERIALITY ASSESSMENT

Aroundtown applies the principle of materiality as a guide to help identify the

ESG risks, opportunities and signiﬁcant issues presented by the Group’s business

model. ESG risks are evaluated as part of regular risk assessments and risk planning.

Financial budgets are adjusted to account for material ESG risks. The DMA is a

strategic framework designed to evaluate and understand the dual impact of a

company. On one front, it assesses the impact on the company itself, delving into

ﬁnancial health, operational efﬁciency, and employee well-being. Simultaneously, the

assessment extends its gaze to the broader horizon, examining the company’s impact

on people and the planet. This dual focus enables a comprehensive understanding of

not only ﬁnancial implications but also social responsibility, environmental impact,

and the overall contribution to a sustainable and ethical future.

In 2023, Aroundtown undertook a review of its material topics as part of a

comprehensive sustainability risk assessment under the direction of the Sustainability

Department. As part of its ongoing commitment to sustainability and responsible

business practices, it is critical to emphasize the importance of the DMA assessment

for the development of the Group’s business. This assessment is not just a procedural

requirement, but a strategic imperative with far-reaching implications for the Group’s

success and relevance in an ever-evolving business landscape.

This DMA was performed in alignment with the GRI guidelines and best management

practices. As the assessment process was ﬁnalized by mid-June 2023, and the ofﬁcial

CSRD requirements were published at the end of August 2023, the methodology used

for this DMA was not fully aligned with the CSRD requirements and should therefore

be considered as a transitional assessment. Aroundtown thus plans to conduct

another DMA in 2024, aligned to CSRD guidance and requirements. Nevertheless,

the results of the assessment – a selection of material topics – serves the purpose

of this report and the disclosure of all the material topics will be made accordingly.

The DMA was performed in four stages:

Identiﬁcation

of ESG topics through the review of a list of GRI material topics, as

well as sector-speciﬁc material topics.

2. Prioritization

of the topics in order to select a short list of material topics that were

used for further investigation in the next steps of the process.

3. Engagement

with a total of 59 internal stakeholders through both a digital survey

(28 participants) as well as interview sessions (four interviews, 31 participants).

Further engagement with seven external stakeholders through a series of seven

interviews. External stakeholders extended to the upstream value chain with

investors, and the downstream value chain with tenants.

4. Scoring methodology

was developed and implemented in order to make a ﬁnal list

of material topics that would be used for the disclosure and reporting.

Interviews and a digital survey played a crucial role in the DMA process, providing

both a qualitative and quantitative dimension to the analysis. This approach

ensured a comprehensive exploration of relevant subjects, allowing for a more

in-depth understanding of the stakeholders’ perspectives and insights as well as

their perspectives on ESG priorities and future areas of risk and opportunity for

Aroundtown – all of which informs the Group’s strategy.

The result of the DMA is represented the materiality chart below. An analysis of

the focus areas for the organization and potential commitments/KPIs that can be

considered follows.

Energy and carbon emissions (2.54, 2.82)

are the highest priority for all stakeholders.

They believe this is where Aroundtown’s activities have the greatest impact on the

environment. They also believe that the transition to a low carbon economy is likely

to have a high impact on the business. Environmental Compliance (1.27, 2.08) is

the other issue that was considered to have a high impact on the business. General

stakeholder consensus is that the subsequent priorities are as follows: climate change

and resilience (1.20, 1.45), governance (1.25, 1.52) and people (i.e., diversity and

equality (1.32, 1.54), human rights and ethics (1.40, 1.50) and employment and skills

(1.50, 1.32).

Numeric results of the double materiality assessment: (2.54, 2.82) (Impact on people & planet, Impact on company)

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Environmental Compliance

(incl. supply chain)

Sustainable Procurement

Biodiversity

Water Use

Human Rights and Ethics

Diversity and Equality

Employment and Skills

Sustainability Governance

Climate Change and Resilience

Health and Safety

Impact on Company

Impact on People & Planet

Energy and Carbon

Emissions

Governance

Environment

Social

Low impact

Medium impact

High impact

DOUBLE MATERIALITY ASSESSMENT

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Board of Directors‘ Report

After the ofﬁcial publication of the ESRS requirements, the DMA’s material topics were assessed against the standards’ topics, sub-topics and sub-sub-topics. The following table

shows an overview of ESRS topics, sub-topics and sub-sub-topics, highlighting those that have been deemed material in the DMA. All the material topics will be addressed in

more detail and according to the ESRS requirements in the relevant chapters of this report.

Topical

ESRS

Sustainability matters covered in topical ESRS

Topic

Sub-topic

Sub-sub-topics

ESRS E1

Climate

Change

Integration of sustainability-related

performance in incentive schemes

Material impacts, risks and opportunities

and their interaction with strategy and

business model

Description of the process to identify

and assess material impacts, risks and

opportunities

Climate change adaptation

Climate change mitigation

Energy

ESRS E2

Pollution

Description of the processes to identify

and assess material impacts,

risks and opportunities

ESRS E3

Water and

Marine

Resources

Description of the processes to identify

and assess material impacts,

risks and opportunities

Water

consumption

ESRS E4

Biodiversity

and

Ecosystems

Description of the processes to identify

and assess material impacts,

risks and opportunities

Impacts on the state of species

Species

population size

ESRS E5

Circular

Economy

Description of the processes to identify

and assess material impacts,

risks and opportunities

Waste

Topical

ESRS

Sustainability matters covered in topical ESRS

Topic

Sub-topic

Sub-sub-topics

ESRS S1

Own

Workforce

Interests and views of stakeholders

Material impacts, risks and

opportunities and their interaction

with strategy and business model

Working conditions

Secure

employment

Working time

Adequate wages

Health and

safety

Equal treatment and opportunities

for all

Gender equality

and equal pay

for work of equal

value

Training

and skills

development

Employment and

inclusion

of persons with

disabilities

Measures

against violence

and harassment

in the workplace

Diversity

Other work-related rights

Child labour

Forced labour

Privacy

MATERIAL TOPICS

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YES

CSRD mandatory- mandatory for everyone

Aroundtown mandatory- material topics scoring 1.41+ in DMA

Not mandatory- topics less than 1.41 in DMA, but Aroundtown will report on this year

The above table shows the individual ESRS standards and whether they are

mandatory or subject to materiality

Topical

ESRS

Sustainability matters covered in topical ESRS

Topic

Sub-topic

Sub-sub-topics

ESRS S2

Workers in

the Value

Chain

Interests and views of stakeholders

Material impacts, risks and

opportunities and their interaction

with strategy and business model

ESRS S3

Affected

Communities

Interests and views of stakeholders

Material impacts, risks and

opportunities and their interaction

with strategy and business model

ESRS S4

Consumers

and

End-Users

Interests and views of stakeholders

Material impacts, risks and

opportunities and their interaction

with strategy and business model

Personal safety of consumers and/or

end-users

Health and

safety

ESRS G1

Business

Conduct

The role of the administrative,

management and supervisory bodies

Description of the processes to identify

and assess material impacts, risks and

opportunities

Corporate culture

Protection of whistle-blowers

Political engagement and lobbying

activities

Management of relationships with

suppliers including payment practices

Prevention

and detection

including

training

Corruption and bribery

Incidents

Standard

Topic

Mandatory

or subject to

materiality?

ESRS 1

General Requirements

Mandatory - sets out

the principles to be

applied, no reporting

requirements

ESRS 2

General Disclosures

Mandatory

ESRS E1

Climate Change

Subject to materiality -

detailed explanation to

be provided if this topic

is deemed to be not

material

ESRS E2

Pollution

Subject to materiality

ESRS E3

Water and Marine Resources

Subject to materiality

ESRS E4

Biodiversity and Ecosystems

Subject to materiality

ESRS E5

Resource Use and Circular Economy

Subject to materiality

ESRS S1

Own Workforce

Subject to materiality

ESRS S2

Workers in the Value Chain

Subject to materiality

ESRS S3

Affected Communities

Subject to materiality

ESRS S4

Consumers and End Users

Subject to materiality

ESRS G1

Business Conduct

Subject to materiality

OVERVIEW OF EUROPEAN SUSTAINABILITY REPORTING

STANDARDS (ESRS)

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AROUNDTOWN’S ESG STRATEGY

Established by the Board of Directors and monitored by the ESG Committee,

Aroundtown’s ESG Strategy is guided by dedication to operating responsibly,

creating value for the stakeholders, and improving the environmental and social

performance of the Group’s assets. The core of our business model – investing in

value-add opportunities instead of demolition and new asset development –

demonstrates our commitment to sustainable real estate. Overall, our approach and

success are underpinned by a set of comprehensive long-term targets which aim to

deliver tangible beneﬁts for our stakeholders; our investors, tenants, building users,

local communities, employees and the environment.

Our overarching ESG Strategy is detailed throughout this report and has been

designed to focus on the ESG topics which have been identiﬁed as relevant to our

business. As a result of our 2023 DMA, we have implemented several changes to

ensure material impacts, risks and opportunities are effectively addressed. Our

Strategy is constantly evolving to meet the needs of our stakeholders and to remain

aligned with legislation and regulation that apply to us.

As described in our Strategy and Business Model section, we source and acquire

assets that follow our selective acquisition criteria and beneﬁt from internal growth

potential, including assets that might be underperforming in terms of ESG aspects

and can be refurbished and repositioned into quality assets. Our refurbishment-ﬁrst

approach underpins our ESG Strategy as we recognize the beneﬁts of renovating

existing building stock rather than demolishing and developing new assets. By using

this approach, we minimize construction waste during the development process as

well as the energy consumption, biodiversity impacts and noise pollution which

would occur during a full construction project.

Raising assets’ environmental performance is one of our main sustainability

drivers, and we therefore invest also in buildings with development potential from

a sustainability perspective, even if this might require more signiﬁcant structural

interventions. Fundamentally, the ﬁndings of the environmental assessments

undertaken as part of our due diligence enable us to develop comprehensive asset

environmental improvement plans, including a deﬁned catalogue of measures

which are factored into the budget for asset repositioning.

Another

pillar of our ESG strategy is tenant satisfaction. Our tenants are pivotal to our

success, so we are committed to exceptional customer service, tailored management

approaches, and continuous improvement to foster long-term tenant relationships.

Our tenants have access to a 24/7 hotline for emergency support, and our residential

tenants also to a tenant app through which regular communication of events

and relevant information is available. Environmental initiatives, such as BREEAM

certiﬁcation and energy-saving measures also align with tenants‘ sustainability

preferences, as it has been reﬂected in previous tenant satisfaction surveys. Future

plans include further digitalization, service enhancements, and a focus on tenant

feedback to reﬁne offerings, demonstrating a proactive, tenant-ﬁrst approach that

drives both operational excellence and tenant loyalty. Our Tenant Satisfaction Policy

further details our commitments to our tenants and how we ensure high-quality

customer service.

With regard to the satisfaction of its employees, Aroundtown continues to engage

with them through various ways, providing training and professional development

opportunities, as well as channeling their feedback to further shape Aroundtown as

a welcoming and diverse company. We also closely monitor our gender pay gap in an

effort to increase transparency and conform to widely accepted standards.

Furthermore, our Business Partner Code of Conduct and our Human Rights Policy set

out our commitments to act in accordance with internationally recognized standards

of human rights and includes our expectations of our suppliers to ensure our

value chain workers are protected to the same standards we hold ourselves. Both

policies were updated in 2023. In general, Aroundtown’s corporate governance and

compliance with the ever evolving regulatory and legal frameworks in the European

Union have been of great importance to the Group and at the core of our business.

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Frankfurt

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Environmental Information

CLIMATE CHANGE

Long-Term Targets

●

Achieve a 40% reduction in CO

intensity by 2030 against the 2019 baseline,

measured in CO

-equivalent emissions intensity (CO

e/m

)

●

Achieve a 20% reduction in energy intensity by 2030 against the 2019 baseline,

measured in kWh/m

●

Switch electricity to Power Purchasing Agreements (PPAs) certified renewable

electricity from wind, hydro-electric and solar PV sources by 2027

●

Ensure our portfolio’s increasing resilience to climate-related risks through the

implementation of adaptation solutions and retroﬁtting of our assets

●

Continue building climate risk assessment capacities and data collection to allow

asset speciﬁc and forward-looking planning and actions

●

Follow technological developments in the real estate sector, as well as products

and services offered by prop-tech companies to adopt cutting-edge climate change

adaptation solutions

2024 Goals

●

Set up a new database for environmental data, allowing semi-automated data

collection through a mobile app for facility managers

●

Source 7% of our procured energy from PPA renewables

●

Conduct 500 energy assessments and energy efﬁcient retroﬁt plans

●

Continue to assess the Group’s portfolio stranding risk

●

Begin to expand our portfolio-level physical climate risk assessment to an

asset-level to further guide the implementation of asset-speciﬁc climate change

adaptation solutions

●

Continue to implement climate change adaptation plans determined in 2022 and 2023

Climate Change Mitigation

Over recent years, from a global community standpoint, we have truly recognized

the crucial role we play in mitigating the negative effects of climate change- the

Intergovernmental Panel on Climate Change (IPCC) has made it clear that the

international community must limit global warming to +1.5°C in comparison

to pre-industrial times. Without signiﬁcant reductions in greenhouse gas (GHG)

emissions worldwide, this will not be possible. We understand the gravity of the

situation as demonstrated in the results of our DMA which identiﬁed energy and

carbon emissions as the most material topic for our business. As emissions from

buildings and construction make up around 40% of annual global emissions, we are

undertaking signiﬁcant mitigation efforts to drive this transition.

There is increasing pressure from investors, governments and regulators, and

society for urgent action to reduce the adverse impact of the built environment on

climate change. A key development which continues to drive change is the phased

introduction of the EU Taxonomy. This legislation requires large, listed companies

like Aroundtown to align their approach with strict criteria across fundamental

environmental objectives on climate change, water, waste, pollution, and biodiversity.

Our second full assessment against the EU Taxonomy Key Performance Indicators for

the environmental objective Climate Change Mitigation can be found in the EU

Taxonomy section of this report.

Aroundtown Group Carbon Reduction Strategy

Our fundamental commitment to climate change mitigation is our target of a 40%

reduction in CO

emissions intensity by 2030, against our 2019 baseline. In order to

achieve this ambitious goal, we developed our Group-wide Environmental and Energy

Policy, to establish how efﬁciency and renewable energy projects will be targeted,

identiﬁed, implemented and monitored.

Guiding our actions on this target is the Group’s CO

Pathway, which monitors our

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progress towards achieving this 40% reduction target and forecasts the rate of

reductions which must be made to reach it. Data on current energy performance and

EPC ratings are combined with metrics on potential improvement measures to develop

a model of the entire portfolio. The suite of possible measures is determined from onsite

audits, desk-based energy simulations and EPC recommendations. Using this data,

possible combinations of energy efﬁciency measures and renewable energy systems

are considered, to assess how transition risks can be mitigated at each property. These

insights are considered alongside broader market and regulatory factors, to develop an

action plan for investments which aligns with the required carbon reduction.

The measures incorporated in the modeling of our CO

pathway include upgrades

to current building fabric and systems and more sophisticated renewable energy

measures such as air source heat pumps and CHP systems. Further advanced

technologies, such as micro wind turbines, geothermal heat pumps, and hydrogen-

based CHP systems will be investigated further in the future. The potential

efﬁciency improvement, carbon reductions and associated costs of these measures

are considered.

Rotterdam

Roof, façade,

and basement

insulation

Window

replacements

Improved energy efﬁciency

through better building envelopes.

Renewable energy systems and technological upgrading.

Air conditioning

and ventilation

Air source

heat pumps

Solar PV

EV charging

Combined heat

and power

generation

LED systems

Smart meters

Smart energy management systems and hydraulic

balancing improve operational efﬁciency through

integrating systems and optimizing energy ﬂows.

Sourcing local

renewable

energy through

Power Purchase

Agreements (PPA).

Aroundtown Group Carbon Reduction Strategy

2019

Baseline

66.98 kg C0

e/m²/year

Intensity

Annual reduction

Average of 4%

reduction/year

2030 Target

40% cumulative

reduction

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Our Energy Strategy focuses on:

●

Comprehensive due diligence at the acquisition stage including energy efﬁciency

aspects, enabling us to develop asset improvement and refurbishment plans to

achieve energy efﬁciency improvements

●

Implementation of environmental management policies and procedures, including

data collection, digitalization and reporting, preventative maintenance and ongoing

operational improvement

●

Sustainable energy measures encompassing investment in solar and wind power

systems, combined heat and power (CHP), electric vehicle (EV) charging stations,

smart meters and a total energy management system

●

Progressively switching all electricity from Renewable Energy Certiﬁcates (RECs) to

PPA certiﬁed renewable energy by 2027

●

Collaborating with tenants with whom we seek to implement green elements into

lease agreements

Monitoring and Management

At acquisition, our due diligence processes record the energy intensity and supply

systems of the property, so that planning for efﬁciency improvements can begin as

early in the asset lifecycle as possible. This includes examining the current structural

fabric, technical systems, and management practices of the building. We are working

to expand the energy auditing done alongside the formal due diligence process, so

that projects can be implemented immediately upon acquisition.

Among our existing properties, to maximize the improvement opportunities, we

aim to complete 500 energy audits each year. In 2023, we continued to conduct

holistic site audits which assess the condition of the envelope and supply systems

of the building from which we can identify appropriate energy efﬁciency actions

and renewable energy system opportunities. We initiated a pilot project aimed at

conducting energy audits, developing asset-speciﬁc retroﬁt/decarbonization plans,

and evaluate their compatibility and performance. Within the scope of this initiative,

we have executed pilot projects across 47 buildings in Germany and 25 buildings

in the Netherlands. The energy savings, carbon reductions and investment costs of

these projects are modelled and extrapolated to the full portfolio, to provide an

integrated picture of our progress towards our reduction targets. The outcome of

this project will guide our decision to proceed with a broader and more extensive

implementation. In the future, we will enhance these assessments with further

digital modelling to simulate the effect of efﬁciency interventions.

Whereas our initial energy management approach has been to invest in onsite

renewable energy and efﬁcient energy generating systems such as CHPs, we adjusted

our approach to align with the three-stage hierarchy in the World Green Building

Council’s Net Zero Carbon Buildings Commitment for operational carbon. This means

when identifying energy interventions, we ﬁrst focus on ways to reduce and optimize

the energy demand of our assets, then identify opportunities to generate the required

energy renewably and onsite, and ﬁnally source the remaining energy demand through

off-site renewable energy. Note that given the regulatory changes in the past year,

particularly regarding the usage of gas or fuel-based systems, such as CHPs, we will

likely phase out CHPs in the mid-term.

To ensure we prioritize these improvement plans correctly and monitor their effect

to further inform our modelling, good data coverage and reliability is essential.

We have a long-term goal of achieving full data coverage across our portfolio.

We achieved 68% energy data coverage for our like-for-like portfolio in 2023.

To maximize the utility of this data, we have initiated the development of a new

database for environmental data, enabling semi-automated data collection through

a mobile app for facility managers.

Investments into Renewable and Efﬁcient Energy Systems

The gradual global transition to a low-carbon economy has highlighted the

importance of investing in renewable and green energy infrastructure; in more

recent years, we have seen the real estate sector furthering efforts towards this

too during construction and use stages of buildings. Since 2019, Aroundtown has

been investing in renewable energy to ensure that its properties remain competitive

during the transition to electriﬁcation of properties and transport, and to a more

decentralized energy market focused on renewables. The signiﬁcant challenges to

the European energy market in 2022 and 2023 have further underlined the urgency

of this transition, and the foresight of our investments.

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Over the years, our investments have focused on the following measures:

●

The installation and operation of solar PV generation systems on rooftops and

parking areas

●

The installation of highly efﬁcient energy generating systems based on CHP

●

The installation of EVs, charging stations. This allows for conversion of both the

tenants’ vehicles and the Group’s ﬂeet to EVs, resulting in lower ﬂeet cost and more

reliable mobility as well as lower emissions

Together with a partner company, we implement efﬁcient and renewable-based

onsite energy systems at our properties. Our partner also undertakes site visits

to identify the number of EV charging points that can be installed at each of our

properties, for private or public use.

In terms of future additional activities, we are planning the installation of heat pumps,

as well as the implementation of electricity storage to support solar, EV chargers and

heat pumps. This will not only increase the energy efﬁciency of the asset but enable

optimal management of energy consumption and production. Also, this will provide

the necessary infrastructure for fast EV charging stations to serve Aroundtown and its

tenants. In 2024, we will focus more closely on the implementation of smart meters

combined with a total energy management system to optimize efﬁciencies in terms of

resource use and cost.

Renewable Power Purchasing Agreements

Beyond our investments in renewables and energy efﬁciency systems, we have set

a goal to switch all electricity from Renewable Energy Certiﬁcates (RECs) to PPA-

certiﬁed renewable electricity generated from wind, hydroelectric and solar PV

sources by 2027. This means that where it is not viable to generate energy onsite or

not sufﬁcient to meet building demand, additional renewable energy will be sourced

to minimize asset and portfolio carbon emissions. In 2023, our purchased like-for-

like electricity covered by RECs was 56% in comparison to 55% in 2022.

Green Leases

All aspects of our energy strategy ultimately impact the quality of our assets and

the property management services we offer to our tenants. Since 2021 our tenant

leases include green lease clauses which were introduced as an annex including

obligations for both parties to agree on the sharing of utilities’ consumption data

and information; observance of energy conservation practices; selection of low

energy-consuming equipment and preference to renewable-based energy.

Internal Carbon Pricing

We have applied an internal carbon price so we can identify the additional beneﬁts

of our actions towards energy consumption and emissions reductions. We have used

the German pricing based on the Fuel Emissions Trading Act

as opposed to the wider

market pricing. This pricing was €30/ton CO

through 2023, is set at €45/ton CO

for

2024, and will increase incrementally to a price corridor of €55-65/ton CO

by 2026.

From 2027 onward, it will transition to a market-based system for which the rules are

yet to be determined, for which the Group assumes a price cap of €120/ton CO

Climate Change Adaptation

It is clear that climate change poses major risks across all countries and sectors

arising

from both the physical impacts of climate change itself, and the potential impacts of

the social transition which will be required to mitigate it. This section of our report

is structured according to the recommendations of the Taskforce on Climate-related

Financial Disclosures (TCFD), the leading international standard for reporting on

management of climate-related risks. Aroundtown is aware that in October 2023, it

was announced that TCFD will be disbanded following the publication of the IFRS S1

and IFRS S2 standards, which include TCFD’s recommendations, and will therefore be

overseen by the IFRS Foundation from 2024. This will be considered in next year’s report.

Governance

As with corporate governance, Aroundtown’s Board of Directors and management team

share overall responsibility for climate-related risks. We have therefore introduced the

inclusion of our carbon emissions reduction target achievement into our executive

remuneration. In 2023, the Group has committed to aligning the remuneration of its

executive individuals with the requirements of the Remuneration Policy and the changes

will become effective as of 2023 and 2024. The Board of Directors and management team

are also responsible for regularly reviewing and updating our Environmental and Energy

Policy, which was most recently updated in 2023 and will come into effect in 2024.

The policy addresses and aims to manage the material impacts, risks and opportunities

related to climate change mitigation and adaptation. The key objectives captured

within the policy are around metering and monitoring systems, energy efﬁcient systems,

renewable energy systems, energy storage systems, and EV charging infrastructure.

Brennstoffemissionshandelgesetz (BEHG), https://www.gesetze-im-internet.de/behg/__10.html

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Board of Directors‘ Report

The Management of Aroundtown is co-responsible for assessing and managing climate-related risks.

A distinction is made between climate risks affecting the Group at the corporate level, for which

Management is the risk owner, and climate risks which impact our properties, which are owned by the

Operations Department. In addition, our Taskforce on Building Resilience works cross-departmentally to

address climate risks across relevant business units, developing action plans and adaptation solutions

as necessary.

Governance Structure

on Climate Risks

Building

Resilience Taskforce

Inter-departmental platform for the discussion

and collaboration on climate risks

Develop KPI’s for climate risk &

action plans and adaptation solutions

Risk Committee

Oversees risk management,

incl. climate risks

Management

Assessment and management

of climate-related risks at

corporate level

Sustainability

Department

& Risk Ofﬁcer

Assessment of physical and

transitional climate risks

Operations

Department

Assessment and management

of climate-related risks on a

property level

AROUNDTOWN

Board of Directors‘ Report

Strategy

In order to effectively manage climate-related risks, we ﬁrstly conduct risk assessments

to understand the impacts these risks could have. The Risk Committee oversees

risk management for the Group, and the potential impacts of climate change are

considered as part of this process. Assessment of physical and transitional climate

risks is conducted by the Chief Risk Ofﬁcer (CRO) in close collaboration with the

Sustainability Department, and such assessments are presented to the Committee

annually at a minimum, as well as upon urgency throughout the year. Following

these assessments, we determine relevant and practicable measures to help reduce

risks and maximize potential opportunities.

Transition Risk

In order to understand the exposure of the Group to transition risks, the Sustainability

Department and Risk Committee have undertaken a comprehensive assessment of

various transitional risk factors. A summary of the identiﬁed risks is provided in the

following table, which also sets out the mitigation strategies being used to control

these risks in our organization. In alignment with the recommendations of the TCFD,

we also describe the potential opportunities which the Group has identiﬁed in each

of these factors.

The timeframes short-, medium- and long-term in this table refer to expectations

in the next 1-3 years, 4-10 years, and 10+ years respectively. We have started the

process of ﬁnancially quantifying climate-related physical and transition risk and will

continue to bolster these processes and our sources of information through 2024.

Bonn

AROUNDTOWN

Board of Directors‘ Report

Risk Category

Description

Impacts and Timeframe

Mitigation Strategy

Opportunity

Policy

Climate-related regulations and laws are chan-

ging rapidly, placing stricter requirements and

expectations on the energy and emissions per

formance. Carbon pricing schemes and energy

ratings such as the EU‘s energy performance

certiﬁcates (EPCs) are increasingly being imple-

mented, and requirements for minimum ratings

that must be met to let units to tenants are co-

ming into force. Over time, existing regulations

may become more aggressive or new policy

tools may be implemented posing restrictions

on letting or preventing the sale of buildings

that do not comply with such minimum stan

dards, leaving them „stranded“.

Carbon pricing and enhanced emissions-repor-

ting obligations might result in higher opera-

ting and compliance costs. Stricter EPC requi

rements are already in place in Netherlands

and are set to be implemented throughout EU

member states with the recasting of the Energy

Performance of Buildings Directive (EPBD) in

2023 - a trend expected to continue over the

mid to long-term. These standards may requi-

re increased CapEx to bring properties up to

the required standard in order to prevent their

stranding. Market and investor pressure to disc

lose GHG emissions, as well as a carbon reduc-

tion pathway to net-zero has increased and will

stay high in the mid to long-term.

(S, M, L)

The Group‘s Carbon Reduction Pathway forms

the strategy for reducing the carbon intensity of

the portfolio. The Pathway explicitly considers

potential carbon taxes and energy efﬁciency

measures and will identify inefﬁcient assets

which are high priority for action to mitigate

stranding risk. The Group has piloted the use of

the science-based CRREM methodology across

the Dutch portfolio to assess the medium-/

long-term alignment of our assets to decarbo-

nization expectations. The Group has also laun

ched a broader CRREM analysis starting with

a set of assets in the German portfolio. These

results have been used to inform the overall

strategy, although at this time, the Group has

prioritized stranding deﬁnitions based on EPCs

and the EU’s climate commitments embodied

in the EPBD recast, which provides a more

straightforward guide for prioritizing inefﬁcient

assets for improvement and for the renovation

planning process itself, although some uncer

tainty remains regarding implementation at

the national level.

A move to more efﬁcient buildings may result

in lower operating costs, reduce stranding

risks and decrease exposure to variations in

the cost and availability of natural resources.

More efﬁcient buildings may also attract hig-

her valuations inﬂuenced by improved energy

performance and will be more attractive to in-

vestors, tenants and ﬁnancial institutions due

to compliance with their sustainable reporting

requirements.

Legal

Companies may also become subject to lawsu-

its alleging failure to take sufﬁcient actions to

reduce greenhouse gas emissions or to account

for or disclose known climate-related risks.

Climate-related litigation may also result from

erroneous non-ﬁnancial reporting or mislea-

ding sustainability claims, in cases of „green-

washing,“ while companies in the EU found to

have made misleading or false environmen

tal claims could face ﬁnes if the proposed EU

Green Claims Directive is approved.

With stricter EU regulation, including the EU

Taxonomy and SFDR, the real estate sector

has already felt the pressure of environmen

tal legislation. The signiﬁcant gaps between

current regulations and the carbon budgets of

the Paris Agreement make further regulatory

tightening over the mid- to long-term likely. It

is also possible that the scope of these regu-

lations expands to take in more segments of

the Group‘s value chain, increasing potential

exposure and compliance costs. While clima

te-related litigation has primarily targeted go-

vernments and fossil fuel companies to date,

it is possible that other sectors such as real

estate may be targeted over the medium-to-

long term.

(M, L)

Our dedicated Sustainability Department works

to ensure accurate and high-quality non-ﬁnan-

cial reporting, while constantly monitoring

changes in regulations to identify gaps and

facilitate compliance.

This involves not only

monitoring current legislative initiatives but

also assessing the gaps between current policy

and science-based climate targets to anticipate

future changes.

AROUNDTOWN

Board of Directors‘ Report

Risk Category

Description

Impacts and Timeframe

Mitigation Strategy

Opportunity

Market

Tenant preferences for low or zero-carbon

properties are likely to reduce demand for in

efﬁcient properties. Likewise, shifting investor

preferences for sustainable and resilient assets

could see valuations favor green buildings.

Market conditions may shift from “green premi

ums” for low- or zero-carbon assets to “brown

discounts” in rent or valuation for assets with

high energy or carbon intensities.

The age of German building stock, where the

Group primarily operates, combined with our

business model of acquiring and

managing ex-

isting buildings, poses signiﬁcant challenges in

offering low or zero-carbon properties through

the level of investment that is required. Inabili-

ty to meet tenant preferences may increase va

cancies and reduce revenues while inability to

meet market expectations may reduce access to

capital. Shifting market demand may put down

ward pressure on the value of “brown” assets

which are not in line with market expectations,

thereby reducing the availability of capital and

increasing the cost of debt. Increasing sus-

tainable ﬁnance regulation is forcing tenants

and investors to report on their sustainable

actions, which will increase these demands on

the Group. The existing market structure leaves

landlords responsible for capital expenditures

needed to improve energy efﬁciency of existing

assets with limited ability to recover reduced

utility expenses enjoyed by the tenant.

(M, L)

The Group is working with tenants to reduce

energy and utility consumption as part of speci

ﬁc green lease agreements and tenant awaren-

ess campaigns, as well as increasing engage

ment with our tenants on their green building

expectations and needs.

The Group is working on collaboration and

cost-sharing arrangements with tenants in

the area of energy-efﬁciency-improving reno-

vations to mitigate risks posed by the current

market structure.

The carbon reduction pathway prioritizes the

most inefﬁcient assets in the portfolio for as-

sessment of possible interventions to determi-

ne economic feasibility of investments that will

protect or improve their value. This pathway

will be subject to ongoing development to en-

sure alignment to market standards.

Aroundtown’s scale provides economic beneﬁts

which result in competitive advantages in re

positioning assets with development potential

in terms of energy efﬁciency or climate resi-

lience. This could result in growth opportuni

ties through the acquisition of such assets from

owners without such ability.

Low and zero-carbon buildings will be better

positioned to reﬂect shifting tenant preferen-

ces, as well as investor demands, positively

impacting rents and access to capital. Green

assets may strengthen business resilience by

increasing revenue through new products and

services that meet market demands and may

improve access to capital and debt. Green bond

issuance, sustainability-linked loans or energy

efﬁciency-related subsidies for buildings can

be used to improve the ﬁnancial feasibility of

making the needed investments.

Energy

Energy markets are more prone to price ﬂuc-

tuations driven by supply crunches or swings

in energy demand. This leads to risks asso

ciated with high energy and utility consump

tion and over-reliance on fossil-fuel derived

energy supplies.

Energy market risks associated with a depen

dence on fossil fuels were previously seen as

being relevant in the medium-to-long term,

but the Russian war in Ukraine and the ensu-

ing rise in energy prices have brought these

risks to the present day. This has caused many

sectors, including the real estate sector to call

for speeding up the transition to a low-carbon

economy. Nonetheless, the current energy mix

of most grids are still primarily reliant on fos

sil fuels, as renewable energy generation and

energy storage capacities have not reached the

required levels for decarbonization.

(S, M, L)

The Group aims to reduce reliance on fossil

fuels through its target to procure 100% of

landlord-obtained electricity through power

purchase agreements (PPAs), as well as through

installation of onsite renewable energy sys-

tems. Investments in energy efﬁciency will also

reduce energy costs, mitigating exposure to va

riations in price.

Increasing procurement of energy from re

newable sources and a shift to decentralized

energy generation can reduce operational

costs, compliance costs and exposure to vola

tile fossil fuel markets. Green bond issuance

or sustainability-linked loans can be used to

improve the ﬁnancial feasibility of making the

needed investments.

AROUNDTOWN

Board of Directors‘ Report

Physical Climate Risk

To assess the materiality of various physical risks to our assets, in 2022 we conducted a

city-level physical risk assessment through S&P Global Sustainable1 for each of our major

strategic locations. This was done across eight physical risks, with modelling conducted

under four warming scenarios (SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5 from the CMIP6

consolidated climate models). From this analysis, exposure scores were produced for each

decade from 2020 to 2100 in twenty cities of strategic focus to Aroundtown. These scores

were weighted against the GDP of the areas assessed, and the cities analyzed cover around

71% of the value of our portfolio. This analysis informs the assessment of risk levels in

various locations and scenarios provided below.

The following table presents the results of this risk analysis, describing the potential

impacts and severity of each risk across the locations analyzed and under two warming

scenarios.

Risk Category

Description

Impacts and Timeframe

Mitigation Strategy

Opportunity

Technology

Aroundtown recognizes that current technolo

gies are insufﬁcient to achieve the grid decar-

bonization needed to address climate change,

and this is expected to increase the pace of

technological development.

Insufﬁcient monitoring of technological de-

velopments or regulatory requirements may

lead to investment in technologies that beco-

me obsolete before the end of their use life.

Buildings with obsolete technology systems

may experience reduced demand and require

higher maintenance costs/CapEx requirements

to meet minimum efﬁciency standards and mo-

dern work, leisure and residential trends.

(M, L)

The Energy and Operations Departments moni

tor regulations and available technologies on

the market and their observed costs to main-

tain awareness of relevant and economical

technologies that can improve the energy or

carbon proﬁles of buildings. The energy-related

procedures underlying the new environmental

policy of the Group prescribe prioritization of

investment towards proven and cost-effective

technologies.

Opportunity to engage with and invest in prop-

tech companies to ensure modern, forward-

thinking and appropriate technological outﬁts

of the Group‘s properties.

Reputation

Companies seen as taking insufﬁcient clima-

te action or delaying climate action face in

creasing scrutiny and criticism from tenants,

investors, the media, and society at large.

Additionally, current and future generations

of employees hold greater expectations for

companies to act to address climate change.

Any deﬁciencies in the climate strategy of the

Group could expose the company to criticism

from societal actors, diminishing the company‘s

reputation. Errors in non-ﬁnancial reporting

may be seen as fraudulent or greenwashing.

Reputational damage from inaction on climate

change may also reduce the ability to recruit

and retain talent in the medium- to long-term.

(S, M, L)

The Sustainability Department monitors best

practices and societal trends to identify and

act on gaps in the Group‘s climate strategy and

bringing them to the attention of relevant in-

ternal stakeholders while working to ensure

high-quality sustainability disclosures. Clear

communication on the Group‘s sustainability,

climate risk actions and carbon reduction tar-

gets will reassure employees, potential candi

dates and investors of the Group‘s continued ef

forts with regard to climate change mitigation

and adaptation.

Through meeting or exceeding requirements,

expectations, or best practices, the Group may

be able to positively improve its reputation.

This can also improve the Group‘s ability to at-

tract and retain critical talent.

AROUNDTOWN

Board of Directors‘ Report

Risk

Potential Impacts

Potential Business Impacts

Variation under Climate Scenarios

Variation by Location

Extreme

Heat

Deadly heat stress is a prominent risk across

our countries of operation, particularly in urban

areas with heat island effects. Other potential

chronic impacts include worsening air quality

due to wildﬁres, and the spread of disease vec-

tors due to increased temperatures.

Under-adapted assets could become dangerous

or unlivable in situations of extreme heat, with

potential effects on occupancy or rent levels.

Household energy demand is likely to increa

se to manage extreme temperatures. Increased

CapEx demands will be incurred to adapt to

these risks with measures such as green roof

tops or use of water permeable material.

Divergence in degree of exposure between sce-

narios is only observed in the latter half of the

century. With actual extreme heat observations

outpacing modelled estimates of our current

warming path, our analysis indicates this risk

is highly likely to become material, regardless

of scenario.

Likely to be experienced at similar levels

throughout given urban geographies, indica-

ting the need for systemic adaptation plans in

high-risk locations. Munich has a high rate of

increase of exposure, as well as high absolute

risk, alongside other South German cities such

as Stuttgart.

Drought

Decreased precipitation and increased tem

peratures, particularly during extreme heat

events, could make water scarce across large

geographic areas. This may have wider infras

tructural effects, including to local agriculture.

Under-adapted assets could become dangerous

or unlivable in drought conditions, with poten-

tial effects on occupancy or rent levels. CapEx

requirements may be required to adapt high

risk assets.

Divergence of risk level between the scenarios

analyzed is comparatively lower than for other

risks, with the level of exposure of the Group's

regions of operation high across all warming

paths assessed.

Drought risks are observed to be correlated by

region, with the East German cities of Leipzig,

Halle, and Dresden among the most exposed.

Almost all cities have near-maximum exposu-

re scores by the end of the century, indicating

that the solutions adopted need to be systemic

across locations.

Wildﬁre

Wildﬁre events can cause substantial damage

to life and property in short periods of time,

displacing communities and rendering wider

areas dangerous or unlivable. The resulting

smoke also severely worsens air quality, leading

to potential chronic impacts.

Acute property damage could prove highly

costly to the business and dangerous to our

occupants. The potential chronic impacts on

air quality may also impact occupancy.

Height

ened physical risk is also likely to impact insu

rance premiums and vacancy rates.

Divergence of risk level between the scenarios

analyzed is comparatively lower than for other

risks, with the level of exposure of the Group's

regions of operation high across all warming

paths assessed.

Local geographical conditions drive wide varia

tions in exposure levels between cities. Despite

the connection to heat and precipitation levels,

the results differ from the scores for extreme

heat and drought, indicating a need to assess

local risk drivers at asset-level.

Fluvial

Flood

Spontaneous ﬂooding due to extreme precipi-

tation can cause substantial damage, with the

impacts depending strongly on location due to

ground conditions and structural stability. Such

ﬂooding can also have collateral impacts on in-

frastructure and transportation.

Acute property damage could prove highly

costly to the business and dangerous to our

occupants. Impacts are extremely dependent

on asset-level conditions, making it difﬁcult

to assess the value at risk with any accuracy.

Heightened physical risk is also likely to impact

insurance premiums and vacancy rates.

Some cities see considerable differences in risk

scores between the SSP2-4.5 and SSP3-7.0 sce-

narios, with greater magnitude of increase bet-

ween decades observed in the higher-warming

scenario. The rate of increase of risk rating is

most pronounced in the decades before 2050

in these more severe scenarios.

There are considerable differences in exposure

scores at city level, indicating the very locati

on-speciﬁc drivers of this risk. The cities with

greatest exposure include London, Hamburg

and Amsterdam.

London also ranks among

the cities with the greatest rate of increase in

exposure through 2050, along with the cities

of Frankfurt, Mannheim, Mainz, and Wiesbaden,

which are located near the conﬂuence of the

Rhein and Main rivers.

The highly location de

pendent ﬁndings demonstrate the need to con-

duct asset-level assessments of this risk.

Coastal

Flood

Rising sea levels may render coastal areas or

river ﬂood basins unlivable. Impacts will be

widespread in affected locations, potentially

leading to displacement of communities or

substantial adaptation costs.

Surface water or river ﬂooding could lead to

severe damage to real estate, potentially in

curring substantial costs for repair and main-

tenance, and losses from assets being removed

from operation. Heightened physical risk is also

likely to impact insurance premiums and va

cancy rates.

Differences between scenarios are signiﬁcant

by the end of the century, but are less pronoun-

ced through to 2050, suggesting this risk will

be material regardless of actual warming.

Naturally, this risk can only be assessed in co-

astal cities, with the highest scores found in

Bremen, Amsterdam and Hamburg. As the adap-

tation solutions required cannot be implemen-

ted at the scope of individual assets, in-depth

consideration of the adaptation plans of local

governments will be required to understand

the value at risk of assets.

AROUNDTOWN

Board of Directors‘ Report

Three risks are excluded from the table above, as they were deemed less relevant

to our portfolio following the analysis. Tropical cyclones are excluded, as our assets

have no potential exposure to such risks. Extreme cold is discounted as the scores

against this risk fall in all scenarios. This risk is part of the historical norm for the

European areas in which we operate, and so is not relevant as a climate risk. Finally,

water stress is excluded, as the analysis conducted indicated decreasing risk levels.

However, we consider that this does not incorporate the potential interrelations

with other risks and is not sufﬁciently clear as to the driving causes of the identiﬁed

stress. While we consider our analysis conducted in 2022 still valid in 2023, we

understand that this physical climate risk assessment was conducted on a portfolio-

level so does not provide insight into speciﬁc assets at potential risk. With the

ambition to expand this to the asset-level as much as possible, we have compared

several physical climate risk assessment tools in the market and have selected an

international service provider. In 2024, we will launch an asset-speciﬁc analysis of

physical climate risks to obtain a more in-depth overview and to plan for the most

relevant adaptation solutions.

Frankfurt

Medium scenario (SSP2-4.5)

Medium-high scenario (SSP3-7.0)

City-level Physical

Risks Analysis

Frankfurt,

Average Decadal Growth Rate (2020-2050)

Munich,

Average Decadal Growth Rate (2020-2050)

Cologne,

Average Decadal Growth Rate (2020-2050)

Berlin,

Average Decadal Growth Rate (2020-2050)

Extreme Heat Increase (2020-2050)

Lowest

Highest

AROUNDTOWN

Board of Directors‘ Report

AROUNDTOWN

Board of Directors‘ Report

The previous map shows the 16 cities from the German portfolio included in the physical

risk assessment conducted through S&P Global Sustainable1. The color scale ranks

the cities according to their increasing exposure to extreme heat risk up until 2050

providing an indication of which German cities should be prioritized when implementing

adaptation solutions.

The four bar charts demonstrate the growth rates in risk exposure through 2050,

comparing between the Medium (SSP2-4.5) and Medium-High (SSP3-7.0) scenarios,

for the strategically important cities of Berlin, Cologne, Frankfurt, and Munich.

The

differences between the scenarios, as well as the local risk variations indicate the need for

a carefully informed approach when developing adaptation plans at the city- and asset-

level.

Consideration of multiple scenarios is critical for ensuring any plans implemented

are robust and will enhance the resilience of our buildings.

Risk Management

A key priority in our current risk management efforts is the implementation of adaptation

solutions and action plans. The joint work of the CRO, the Sustainability Department

and the Building Resilience taskforce on this objective is presented to the Risk and

ESG Committees and reported to Management. These bodies are jointly responsible for

approving and overseeing the implementation of the risk management approach taken

forward.

With climate change being felt across our countries of operations, it is Aroundtown’s

goal to increase the long-term resilience of its portfolio against climate-related risks.

Following the common practice of distinguishing climate-related risks into physical and

transition risks, we further subdivide physical risks as being either chronic or acute, with

regards to the timescale of their impacts, and as being temperature-, wind-, water- or solid

mass-related, as laid out in the EU Taxonomy.

The Building Resilience Taskforce started the analysis on building resilience in 2022

and continued throughout 2023. With a number of physical climate risks identiﬁed for

the portfolio (see section on Physical Climate Risk Assessment), the taskforce developed

several adaptation solutions to counter these risks and to make AT’s assets more resilient

in the long run. In order to prioritize these measures, the Building Resilience Taskforce

held a working session to assess the materiality and feasibility to the stakeholder

departments within Aroundtown. The results of this exercise were collated to identify

those measures which could deliver the greatest value for the required investment.

The outcome of this assessment process was a set of four adaptation programs which

will be prioritized at our assets. The identiﬁed solutions are:

●

Refurbishments

– Review of materials chosen at sites which are at risk, and roof

maintenance works.

●

Tenant guidebook for extreme conditions

– Creation of a behavioral guide for tenants to

deal with extreme climatic conditions, including deﬁnition of the internal and external

notiﬁcation chain in such emergency circumstances.

●

Flood analysis and planning

– Asset-level analysis of ﬂooding and drought to determine

countermeasures. Development of ﬂood scenario plans and emergency plans.

●

Tree planting program

– Planting and maintenance of trees in public areas where this

leads to a positive effect, and unsealing spaces to create more green areas around

buildings.

In line with the EU Taxonomy’s prescribed climate risks and vulnerability assessment,

it is the Group’s goal to implement these adaptation solutions over the course of the

next four years. These solutions will therefore guide our investment program to increase

the resilience of our assets to physical climate risks. The Sustainability Department will

continue to analyze the vulnerabilities of our assets to identify further opportunities for

adaptation in the future.

With the selection of a climate risk assessment tool at the end of 2023, Aroundtown is

well-equipped to expand its portfolio-level risk assessment to an in-depth, asset-speciﬁc

analysis in 2024. This will allow the development of more tailored adaptation solutions

for our individual assets, which will be implemented in subsequent years.

Metrics: Climate Change

In order to assess and monitor the progress towards our climate change-related goals and

commitments, we regularly collect utility consumption data from our assets as shown in

tables 1 and 2. This also allows us to calculate the greenhouse gas emissions associated

with this activity as shown in tables 3 and 4. Due to restrictions around tenant data sharing,

we are unable to monitor tenant-obtained energy which is from renewable sources, as

well as that regarding fuels or district heating. The Group understands “energy generation

from non-renewable sources” to be electricity generated from its CHP systems, for which

no data was available for assets in the operational control portfolio. Additionally, energy

consumption from nuclear sources is not reported as the Group’s energy procurement is

linked to the energy mix in its countries of operation.

While nuclear-produced energy

could be present in electricity not covered by REC or PPA contracts, the Group is not

provided with the energy mix for procured energy in its invoices received for these

contracts, and as such ﬁgures could not be reported.

AROUNDTOWN

Board of Directors‘ Report

Absolute energy for managed assets

Energy reported in kWh

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Elec-Abs

Electricity consumed for landlord shared services

51,432,626

42,946,916

33,742,430

25,845,675

2,190,777

1,879,813

2,847,746

1,296,389

12,651,673

13,925,039

Total landlord-obtained electricity consumed

51,432,626

42,946,916

33,742,430

25,845,675

2,190,777

1,879,813

2,847,746

1,296,389

12,651,673

13,925,039

Total landlord-obtained electricity generated offsite from

renewable sources

61%

55%

52%

36%

70%

99%

84%

52%

79%

84%

Total landlord-obtained electricity generated and consumed onsite

from renewable sources

N/A

Total landlord-obtained electricity generated onsite from

renewable sources and exported

1,609,961

874,227

1,240,756

443,993

N/A

369,205

N/A

Total tenant-obtained electricity consumed

369,771,025

377,180,534

204,220,788

161,158,593

29,816,089

26,444,067

16,473,795

12,504,955

119,260,354

155,876,902

Total electricity consumed

421,203,651

420,127,450

237,963,217

187,004,267

32,006,765

28,323,880

19,321,541

13,801,344

131,912,027

169,801,942

Total electricity consumption data coverage, by area (sqm)

5,612,591

5,200,022

2,127,300

1,242,135

176,427

101,191

253,482

79,334

3,055,382

3,653,672

Proportion of landlord-obtained electricity consumption and

associated GHG emissions that is estimated

24%

17%

18%

65%

35%

Proportion of tenant-obtained electricity consumption and

associated GHG emissions that is estimated

100%

Proportion of total electricity consumption and associated GHG

emissions that is estimated

66%

90%

88%

86%

94%

93%

95%

91%

94%

91%

Fuels-Abs

Fuels (natural gas) consumed for landlord shared services

66,812,069

58,530,701

22,114,258

7,813,861

1,953,266

1,220,926

614,432

87,448

42,130,114

49,408,466

Fuels (oil) consumed for landlord shared services

3,690,886

6,087,432

786,107

3,156,073

117,578

2,787,201

2,931,359

Fuels (natural gas) allocated for tenant consumption

228,381,803

184,675,423

66,342,774

23,441,582

10,648,449

6,656,017

19,866,623

2,827,493

131,523,958

156,067,780

Fuels (oil) allocated for tenant consumption

14,844,393

18,776,082

2,358,320

9,468,219

3,801,700

8,684,373

9,307,863

Total landlord shared services fuels consumed

70,502,954

64,322,490

22,900,365

10,674,290

1,953,266

1,220,926

732,010

87,448

44,917,314

52,339,825

Total (landlord-obtained) fuels allocated for tenant consumption

243,226,196

206,882,025

68,701,094

32,022,871

10,648,449

6,656,017

23,668,322

2,827,493

140,208,331

165,375,643

Total (landlord-obtained) fuels consumed

313,729,150

271,204,515

91,601,458

42,697,161

12,601,715

7,876,943

24,400,332

2,914,942

185,125,645

217,715.468

Proportion of total (landlord-obtained) fuels from green sources

59%

63%

38%

36%

81%

85%

16%

73%

Total (landlord-obtained) fuels consumption data coverage, by area

(sqm)

2,680,520

2,245,508

1,007,358

598,881

127,215

76,309

236,700

62,899

1,309,246

1,431,792

Proportion of total (landlord-obtained) fuel consumption and

associated GHG emissions that is estimated

10%

DH&C-Abs

Total district heating/cooling consumed for landlord-shared services

85,900,960

81,155,956

24,410,417

17,512,218

1,312,965

463,215

1,139,391

20,260

59,038,188

63,160,262

Total (landlord-obtained) district heating/cooling allocated for

tenant consumption

298,887,582

255,812,971

73,231,251

52,536,655

7,157,775

2,525,271

36,840,296

655,077

181,658,260

200,095,968

Total (landlord-obtained) district heating/cooling consume

384,788,542

336,968,927

97,641,669

70,048,873

8,470,739

2,988,487

37,979,686

675,337

240,696,447

263,256,230

Proportion of total (landlord-obtained) district heating and cooling

from green sources

Total (landlord-obtained) district heating/cooling consumption

data coverage, by area (sqm)

3,643,448

2,892,806

1,260,622

581,545

89,094

24,883

287,299

16,435

2,006,433

2,221,880

Proportion of total (landlord-obtained) district heating/cooling

consumption and associated GHG emissions that is estimated

13%

12%

18%

TABLE 1

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Absolute energy for managed assets

Energy reported in kWh

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Absolute

Energy

Total landlord shared services energy consumed

207,836,540

188,425,362

81,053,212

54,032,183

5,457,007

3,563,955

4,719,147

1,404,097

71,689,861

129,425,127

Total tenant-obtained/tenant-allocated energy consumed

911,884,803

476,620,034

346,153,133

84,559,526

47,622,312

9,181,288

76,982,413

3,482,570

300,918,614

379,396,650

Total landlord-obtained energy consumed

749,950,318

651,120,357

222,985,557

138,591,709

23,263,231

12,745,243

65,227,765

4,886,667

438,473,766

494,896,738

Total energy consumption

1,119,721,343

1,007,104,875

427,206,344

299,750,302

53,079,319

39,189,310

81,701,560

17,391,623

557,734,120

650,773,640

Total energy consumption data coverage, by area (sqm)

6,337,823

5,598,246

2,533,326

1,654,624

216,309

151,390

532,806

138,561

3,055,382

3,653,672

Proportion of landlord-obtained energy consumption and

associated GHG emissions that is estimated

10%

12%

13%

Proportion of tenant-obtained energy consumption and associated

GHG emissions that is estimated

100%

Proportion of total energy consumption and associated GHG

emissions that is estimated

39%

43%

50%

54%

57%

67%

22%

72%

31%

34%

Proportion of total energy generated offsite from renewable/

green sources

28%

27%

24%

21%

51%

70%

10%

33%

27%

Proportion of total energy generated onsite from renewable/green

sources (consumed onsite or exported)

1,609,961

874,227

1,240,756

443,993

N/A

369,205

N/A

Total renewable/green energy consumption and generation

320,442,090

268,781,440

101,955,360

62,269,087

26,843,900

27,523,527

7,886,314

822,275

181,866,455

178,166,551

Total energy consumption from fossil sources

800,889,214

739,197,662

326,491,740

237,925,208

26,235,419

11,665,783

73,815,246

16,569,347

376,236,869

473,037,324

Absolute energy intensity (kWh/sqm*year)

Energy-Int

(Abs)

Building energy intensity for heating energy consumed

110.64

120.62

83.44

95.51

97.42

107.38

119.05

45.26

128.57

131.64

Building energy intensity for all energy consumed

185.50

203.04

195.30

246.06

278.84

387.28

195.27

219.22

171.60

178.11

Mandatory Certificates (Energy Performance Certificates)

Cert-Tot

% of portfolio certified by floor area

86%

57%

82%

30%

85%

19%

91%

13%

88%

91%

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Like-for-like energy for managed assets

Energy reported in kWh

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Elec-LfL

Electricity consumed for landlord shared services

37,233,811

39,170,211

23,993,398

24,257,171

1,425,200

1,355,775

740,363

889,153

11,074,850

12,668,112

Total landlord-obtained electricity consumed

37,233,811

39,170,211

23,993,398

24,257,171

1,425,200

1,355,775

740,363

889,153

11,074,850

12,668,112

Proportion of landlord-obtained electricity generated offsite from

renewable sources

56%

55%

39%

36%

88%

92%

62%

99%

90%

84%

Total landlord-obtained electricity generated and consumed onsite

from renewable sources

N/A

Total landlord-obtained electricity generated onsite from

renewable sources and exported

1,003,166

520,635

633,961

90,400

N/A

369,205

N/A

Total tenant-obtained electricity consumed

279,026,059

149,726,101

18,279,532

5,555,800

105,464,625

Total electricity consumed

316,259,870

318,196,270

173,719,499

173,983,273

19,704,732

19,635,306

6,296,163

6,444,953

116,539,475

118,132,738

Total electricity consumption data coverage, by area (sqm)

4,466,450

1,559,647

108,163

85,487

2,713,154

Proportion of landlord-obtained electricity consumption and

associated GHG emissions that is estimated

27%

22%

28%

38%

36%

Proportion of tenant-obtained electricity consumption and

associated GHG emissions that is estimated

100%

Proportion of total electricity consumption and associated GHG

emissions that is estimated

91%

88%

86%

95%

93%

86%

94%

89%

Fuels-LfL

Fuels (natural gas) consumed for landlord shared services

55,468,926

60,245,116

12,094,034

8,602,557

1,113,802

1,244,632

254,459

432,660

42,006,631

49,965,267

Fuels (oil) consumed for landlord shared services

3,249,848

2,966,671

409,139

361,513

53,508

4,025

2,787,201

2,601,134

Fuels (natural gas) allocated for tenant consumption

181,710,981

201,155,859

36,282,102

25,807,672

6,072,018

6,785,251

8,227,513

13,989,330

131,129,347

154,573,606

Fuels (oil) allocated for tenant consumption

11,641,897

9,252,056

1,227,418

1,084,538

1,730,106

130,134

8,684,373

8,037,384

Total landlord shared services fuels consumed

58,718,774

63,211,787

12,503,173

8,964,070

1,113,802

1,244,632

307,968

436,684

44,793,831

52,566,401

Total (landlord-obtained) fuels allocated for tenant consumption

193,352,878

210,407,916

37,509,520

26,892,210

6,072,018

6,785,251

9,957,619

14,119,464

139,813,720

162,610,990

Total (landlord-obtained) fuels consumed

252,071,652

273,619,703

50,012,694

35,856,281

7,185,820

8,029,883

10,265,587

14,556,148

184,607,551

215,177,391

Proportion of total (landlord-obtained) fuels from green sources

60%

63%

17%

36%

83%

85%

32%

73%

71%

Total (landlord-obtained) fuels consumption data coverage, by area

(sqm)

2,045,124

554,154

65,655

120,998

1,304,317

Proportion of total (landlord-obtained) fuel consumption and

associated GHG emissions that is estimated

10%

DH&C-LfL

Total district heating/cooling consumed for landlord-shared services

70,230,781

63,750,140

11,066,102

11,040,226

300,126

328,954

57,127

563,808

58,807,427

51,817,151

Total (landlord-obtained) district heating/cooling allocated for

tenant consumption

217,647,551

212,307,658

33,198,306

33,120,679

1,636,169

1,793,329

1,847,098

18,229,797

180,965,978

159,163,853

Total (landlord-obtained) district heating/cooling consumed

287,878,332

276,057,798

44,264,408

44,160,906

1,936,295

2,122,283

1,904,225

18,793,605

239,773,405

210,981,004

Proportion of total (landlord-obtained) district heating and cooling

from green sources

Total (landlord-obtained) district heating/cooling consumption

data coverage, by area (sqm)

2,587,720

540,616

28,133

19,082

1,999,890

Proportion of total (landlord-obtained) district heating/cooling

consumption and associated GHG emissions that is estimated

11%

10%

12%

13%

TABLE 2

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

●

In 2023, like-for-like landlord-obtained electricity consumption decreased by 5% compared to 2022.

●

Like-for-like landlord-obtained fuels decreased by 8%, compared to 2022.

●

Total absolute energy intensity for 2023 decreased by 1% compared to 2022.

Like-for-like energy for managed assets

Energy reported in kWh

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Like-

for-Like

Energy

Total landlord shared services energy consumed

166,183,367

166,132,138

47,562,673

44,261,468

2,839,128

2,929,360

1,105,457

1,889,645

69,882,277

64,485,264

Total tenant-obtained/tenant-allocated energy consumed

690,026,487

701,741,632

220,433,928

209,738,991

25,987,719

26,858,112

17,360,517

37,905,060

286,430,603

264,628,478

Total landlord-obtained energy consumed

577,183,796

588,847,712

118,270,500

104,274,358

10,547,315

11,507,941

12,910,174

34,238,906

435,455,806

438,826,508

Total energy consumption

856,209,854

867,873,771

267,996,601

254,000,459

28,826,847

29,787,473

18,465,974

39,794,706

540,920,432

544,291,133

Total energy consumption data coverage, by area (sqm)

4,940,898

1,628,800

108,163

154,852

3,049,084

Proportion of landlord-obtained energy consumption and

associated GHG emissions that is estimated

10%

12%

Proportion of tenant-obtained energy consumption and associated

GHG emissions that is estimated

100%

Proportion of total energy consumption and associated GHG

emissions that is estimated

40%

37%

59%

65%

61%

32%

14%

29%

27%

Proportion of total energy generated offsite from renewable/

green sources

30%

33%

15%

21%

69%

70%

29%

33%

37%

Proportion of total energy generated onsite from renewable/green

sources (consumed onsite or exported)

1,003,166

520,635

633,961

90,400

N/A

369,205

N/A

Total renewable/green energy consumption and generation

254,811,276

285,602,907

41,029,754

52,479,346

19,757,451

20,920,407

5,346,734

1,881,492

176,929,689

201,360,982

Total energy consumption from fossil sources

602,401,744

582,791,498

227,600,808

201,611,513

9,069,396

8,867,066

13,119,240

37,913,214

364,359,947

343,360,386

Like-for-like building energy intensity (kWh/sqm*year)

Energy-Int

(LfL)

Building energy intensity for heating energy consumed

116.75

118.82

86.12

73.09

97.26

108.25

86.88

238.08

128.58

129.09

Building energy intensity for all energy consumed

187.36

189.89

197.50

184.64

279.44

289.78

160.53

313.47

171.39

172.52

Mandatory Certificates (Energy Performance Certificates)

Cert-Tot

% of portfolio certified by floor area

95%

69%

99%

10%

77%

100%

94%

93%

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Absolute GHG emissions for managed assets

GHG emissions reported in tons CO

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

GHG-Dir-Abs

Direct GHG emissions (GHG Protocol Scope 1)

14,456

13,534

4,671

2,484

395

246

155

9,235

10,787

GHG-Indir-

Abs

Indirect GHG emissions (GHG Protocol Scope 2; Location-based)

42,134

28,525

18,448

5,350

1,164

131

1,361

21,161

23,039

Indirect GHG emissions (GHG Protocol Scope 2; Market-based)

5,689

N/A

4,341

N/A

211

N/A

165

N/A

972

N/A

Indirect GHG emissions (GHG Protocol Scope 3

from tenant-controlled energy; Location-based)

267,719

261,927

106,501

88,835

15,014

11,777

21,346

5,353

124,858

148,167

Indirect GHG emissions (GHG Protocol Scope 3

from tenant-controlled energy; Market-based)

247,871

N/A

100,755

N/A

14,478

N/A

20,599

N/A

112,038

N/A

Absolute

GHG

Emissions

Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Location-based)

324,309

303,987

129,620

96,668

16,573

12,153

22,862

5,376

155,254

181,994

Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Market-based)

268,015

N/A

109,767

N/A

15,084

N/A

20,919

N/A

122,245

N/A

Total GHG emissions data coverage, by area (sqm)

6,337,823

5,138,314

2,533,326

1,180,427

216,309

101,191

532,806

79,334

3,055,382

3,653,672

Absolute building GHG intensity (kgCO

e/sqm*year)

GhG-Int

(Abs)

Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and

3; Location-based) (kgCO

e/sqm*year)

51.28

59.16

57.15

81.89

76.62

120.10

43.63

67.76

46.82

49.81

Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and

3; Market-based) (kgCO

e/sqm*year)

42.38

N/A

48.40

N/A

69.73

N/A

39.92

N/A

36.87

N/A

TABLE 3

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Like-for-like

GHG emissions for managed assets

GHG emissions reported in tons CO

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

GHG-Dir-LfL

Direct GHG emissions (GHG Protocol Scope 1)

12,050

12,941

2,549

1,832

225

251

9,210

10,769

GHG-Indir-

LfL

Indirect GHG emissions (GHG Protocol Scope 2; Location-based)

32,970

31,809

11,564

11,597

600

584

287

483

20,519

19,145

Indirect GHG emissions (GHG Protocol Scope 2; Market-based)

4,358

4,461

3,807

3,699

102

411

739

Indirect GHG emissions (GHG Protocol Scope 3

from tenant-controlled energy; Location-based)

202,762

204,549

70,242

68,068

8,321

8,509

4,662

9,997

119,535

117,975

Indirect GHG emissions (GHG Protocol Scope 3

from tenant-controlled energy; Market-based)

185,725

183,638

66,682

63,989

7,924

8,027

4,285

4,950

106,833

106,672

Like-for-

Like GHG

Emissions

Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Location-based)

247,782

249,299

84,356

81,496

9,147

9,345

5,015

10,569

149,265

147,889

Total GHG emissions (GHG Protocol Scopes 1, 2 and 3; Market-based)

202,133

200,234

73,039

69,519

8,187

8,298

4,453

5,043

116,454

117,374

Total GHG emissions data coverage, by area (sqm)

4,940,898

1,628,800

108,163

154,852

3,049,084

Building GHG intensity (kgCO

e/sqm*year)

GhG-Int

(LfL)

Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and 3;

Location-based) (kgCO

e/sqm*year)

53.48

53.81

77.05

74.44

97.52

99.64

35.80

75.45

45.17

44.76

Building GHG emissions intensity (GHG Protocol Scopes 1, 2 and 3;

Market-based) (kgCO

e/sqm*year)

43.63

43.22

66.72

63.50

87.30

88.48

31.79

36.00

35.24

35.52

●

Our like-for-like Scope 1 emissions associated with building energy consumption decreased by 7% in 2023 compared to 2022.

●

Our like-for-like location-based Scope 2 emissions increased by 4%, and our like-for-like location-based Scope 3 emissions decreased by 1%.

●

Our like-for-like market-based Scope 2 emissions decreased by 2%, and our like-for-like market-based Scope 3 emissions increased by 1%.

●

Total like-for-like location-based Scope 1, 2 and 3 emissions decreased by 1% % from 2022 to 2023.

●

Total like-for-like market-based Scope 1, 2 and 3 emissions increased by 1% from 2022 to 2023.

●

Total like-for-like location-based GHG intensity decreased by 1% compared to that of 2022.

●

Total like-for-like market-based GHG intensity increased by 1% compared to that of 2022.

TABLE 4

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

ENVIRONMENTAL PROTECTION

Within Aroundtown’s overarching goal of environmental protection, we include other

closely associated topics that were raised in our 2023 DMA but were not deemed

material: resource use and circular economy, water management, biodiversity and

ecosystems, and pollution. All these matters align with our long-term commitment to

tenants and society by ensuring that the resources we need to maintain a high quality

of life are preserved and that we regard environmental impacts in providing them.

We take our responsibility to safeguard the natural environment and reduce the

adverse impacts of our business activities very seriously.

Long-term Targets

●

Focus on refurbishment over demolition and new construction

●

Waste minimization and separation by professional and environmentally friendly

waste disposal

●

Stronger consideration of biodiversity topics in refurbishment projects and

upgrading of assets

●

Continue efforts towards sustainable water consumption, maintain a high level of

water quality, and lower water- and wastewater-related operating costs

●

Continue increasing green building certiﬁcations for the commercial portfolio

2024 Goals

●

Engage more closely with our contractors regarding the recycling of demolition waste

●

Improve data gathering on waste disposal and recycling rates by further rolling

out our framework agreement with an established waste management company

for most of our portfolio

●

Conduct biodiversity projects across our assets to help understand improvement

opportunities

●

Expand smart water metering initiative into German assets

Circular Economy

While the circular economy topic was not deemed material during our DMA, we do

address the transition to a circular economy in our EU Taxonomy analysis. In order

to establish quantitative targets for waste reduction and improved recycling rates,

we must ﬁrst gather an accurate baseline of data across our assets. This will be a key

focus for 2024 so we can then establish feasible and calculated targets. To achieve

this, we have entered into an agreement for waste disposal with an established

provider, streamlining our reporting capabilities and control over the process.

We have not yet established a speciﬁc circular economy policy aimed to reduce

impacts, risks and opportunities, however, our goal is to reduce the total amount

of waste produced at our properties, and to increase the proportion of this waste

which is recycled or reused back into the circular economy. The above-mentioned

agreement will also help increase recycling rates. As with other sustainability

measures, reductions in waste output and landﬁll volume correspond to reductions

in operating costs, alongside reducing our environmental impact.

At Aroundtown,

there are two key ways in which waste is generated – waste linked

to construction and renovation projects and waste linked to the operation of the

asset and the tenants themselves.

Tenant Waste Management

To increase recycling rates, we are providing waste separation facilities on our sites,

and engaging with our tenants on their waste management practices. As with other

sustainable measures, reductions in waste output and landﬁll volume correspond to

reductions in operating costs, alongside reducing our environmental impact.

Whereas some portfolio sectors have traditionally posed a greater challenge to

inﬂuencing waste management practices, such as residential or hotels, others have been

easier to inﬂuence, such as ofﬁces. However, as sustainability issues rise on everyone’s

agenda, we are beginning to see engagement on environmental issues from most of our

tenants.

Our local technical teams are always available to support tenants who seek our

advice on these issues. This coordination and engagement between stakeholders will be

a crucial part of building a more circular, resource-efﬁcient economy.

AROUNDTOWN

Board of Directors‘ Report

We also try to use the indirect inﬂuence that our properties can have on their

tenants to produce more sustainable outcomes. This is often done through

awareness raising activities; for example, our subsidiary GCP publishes leaﬂets and

has produced information videos for tenants with advice on more environmentally

friendly behavior such as recycling. In 2023, GCP also continued the previously

rolled-out pilots for pay-by-volume waste systems at the speciﬁc locations, which

monitored the volume of waste disposed by tenants and billed them accordingly.

These systems are yet to prove effective in inciting meaningful behavioral changes,

for example by drawing tenants’ attention to the cost-saving beneﬁts of waste

reduction. The pilot did not yield signiﬁcant evidence of the system’s impact on

the actual volume of waste disposed, so extending this initiative to further assets

is not to be expected.

Our green lease clauses for tenants also cover waste management and other

environmental management aspects, as well as engagement obligations between

tenant and landlord to ensure cooperation on sustainable practices with respect to

maintenance, construction and modernization works.

As another key example of our waste reduction projects, in early 2023, Aroundtown

started digitalizing its postal correspondence with tenants through the GOGREEN

Plus service from Deutsche Post DHL. This means that now postal correspondence

with residential tenants is digitally transmitted to Deutsche Post, who offer a

climate-neutral hybrid mail dispatch, by email, SMS, fax or post. Communications

with commercial tenants has been partially digitalized, and we aim to continue

expanding this effort further, as it substantially reduces the waste generated in

the production and delivery of the leaﬂets while also supporting our tenants in

reducing their carbon footprint. We will continue to look for innovative partnerships

and strategies to improve our resource efﬁciency in future.

Recycling of Construction Waste

When it comes to waste production and disposal from construction work, we are

more in control of waste management and recycling. Whenever we undertake

larger construction and refurbishment projects, we conduct reviews of the type

and quantity of waste produced, to ensure lawful disposal of hazardous and non-

recyclable waste streams and to recycle as much as possible. The topic of circular

economy is becoming more important for the real estate and construction sector,

not least due to the European Union’s EU Taxonomy regulation, which has

stipulated the goal of a 70% recycling rate for the sector. We therefore aim

to engage even more closely with our contractors regarding the recycling of

demolition waste and to improve data gathering on waste disposal and recycling

rates. In general, our goal is to preserve existing structures and materials and

not to demolish and build new. This is advantageous from an economic and

ecological perspective.

In order to track the progress of our approach, we collect waste generation data

from our assets and monitor this year on year, as will be presented in April. Due to

restrictions around tenant data sharing, we include tenant waste generation within

our landlord-managed ﬁgures. It is only possible, based on our waste collectors, to

report recycled and non-recycled waste.

Water Management

Water and marine resources was not deemed to be a material topic during our DMA,

however we recognize the importance of our water consumption and the negative

environmental impacts associated with poor water management. We therefore aim

to promote sustainable water use across our portfolio, and to comply with the high

standards for water quality and wastewater disposal set at EU and national level.

The importance of sustainable water usage has been highlighted by its inclusion as

a core environmental objective in the EU Taxonomy.

We seek to positively inﬂuence tenants’ water consumption, through engagement

programs and advanced measurement technologies. We are prioritizing

investment in smart water meters to provide tenants with accurate information

about their water usage. This data is also used to identify inefﬁciencies and

potential interventions from both a structural and management perspective.

Based on these insights, we seek to implement technical improvements to reduce

water consumption in our properties wherever feasible. So far, this initiative

has been implemented in the Netherlands, and pilot projects in Germany are

planned for 2024.

In 2023, we welcomed a Water Resource Specialist to our team, acknowledging that

this topic is of increasing importance and needs to be addressed separately from

the Energy Department who have previously managed water resources. A Water

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Board of Directors‘ Report

Management Policy and Procedure were established to unite and improve water

management efforts at operationally controlled and owned assets, outlining our

current water strategy, water management, and water-related procedure principles.

The Water Management Procedure also provides further information to Asset and

Property Managers on improving sustainable water usage at assets in our portfolio.

Metrics: Water Management

Our water management strategy is described in the section above. In order to track

the progress of our approach, we collect water consumption data from our assets

and monitor this year on year as shown in tables 5 and 6. Due to restrictions on

tenant data sharing, we include tenant submeters in our landlord-obtained water

consumption ﬁgures.

Absolute water consumption for managed assets

Water reported in m

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Water-Abs

Total landlord-obtained water consumed (including tenant submeters)

3,203,245

3,125,639

343,800

362,113

26,272

42,501

43,704

26,212

2,789,468

2,694,813

Proportion of landlord-obtained water consumption data that is

estimated (including tenant submeters)

29%

14%

26%

100%

20%

100%

29%

Total water consumption data coverage, by area (sqm)

3,670,113

2,548,011

1,502,344

999,057

56,449

163,776

158,541

108,068

1,952,779

1,277,110

Absolute building water intensity (m

*year)

Water-Int

(Abs)

Building water intensity for all water consumed

0.87

1.23

0.23

0.36

0.47

0.26

0.28

0.24

1.43

2.11

Like-for-like water consumption for managed assets

Water reported in m

TOTAL

OFFICE

RETAIL

OTHERS INCL. LOGISTICS

GCP

EPRA Code

Metric

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

Water-LfL

Total landlord-obtained water consumed (including tenant submeters)

2,979,843

2,658,191

194,035

191,142

15,039

11,565

35,439

35,982

2,735,329

2,419,501

Proportion of landlord-obtained water consumption data that is

estimated (including tenant submeters)

30%

15%

37%

80%

24%

80%

30%

Total water consumption data coverage, by area (sqm)

2,919,577

2,915,869

871,423

25,094

116,953

1,906,107

1,902,399

Like-for-like building water intensity (m

*year)

Water-Int

(LfL)

Building water intensity for all water consumed

1.02

0.91

0.22

0.60

0.46

0.30

0.31

1.44

1.27

TABLE 5

TABLE 6

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Board of Directors‘ Report

Biodiversity and Ecosystems

While biodiversity and ecosystems was not identiﬁed as a material topic in our

DMA, we remain cognizant of the need to and beneﬁts of contributing positively to

biodiversity at our sites. We have therefore established a clear, public Biodiversity

Commitment which details our approach to biodiversity protection and enhancement,

which is planned to be updated in 2024 to include a more speciﬁc strategy and

related goals considering EU Taxonomy aspects.

In 2023, we continued to conduct biodiversity studies at our sites to assess the types

and extent of species we have onsite and to identify opportunities for biodiversity

enhancement on and around our assets. In Germany, as part of our employee

engagement program, ‘Activate the Base’, some colleagues formed a biodiversity

taskforce aiming to kick-off the biodiversity studies in Germany after they were

piloted in the Netherlands in 2022. Four assets were assessed in Berlin in 2023,

for which implementation projects of the identiﬁed improvement measures will be

rolled out in 2024.

Meanwhile, our Dutch operations conducted 17 biodiversity studies across eight

cities, compared to seven studies conducted in 2022. Following the results, and

carefully considering both the urban landscape of the corresponding assets and

the practical feasibility of the identiﬁed possible measures, three biodiversity

enhancement projects took place in the Netherlands in 2023. These included the

installation of bat, hedgehog, squirrel and bird houses, insect hotels, green roofs,

and the planting of local ﬂora and fauna. For 2024, further biodiversity studies have

already been planned for the Netherlands.

Finally, we continued to expand our ‘Aroundtown buzzes’ program to protect urban

bee populations in and around our assets. The program was initiated in 2020 with

15 rooftop beehives across our commercial properties. By 2023, we had 43 bee

colonies across 11 roofs in our portfolio. These also include four roofs in our hotel

portfolio which we added to this program, in collaboration with the hotel tenants.

The bees are looked after by our very own registered beekeeper.

In addition, to further engage our staff with these biodiversity programs, our

employees receive gifts produced by our bee colonies, including beeswax candles,

and honey.

Pollution

While pollution was not deemed to be a material topic during our DMA conducted

earlier this year, it is nevertheless a topic that we consider in our construction and

refurbishment projects, as well as in the operation of our assets.

As described in

more detail in our EU Taxonomy section of this report, we for instance require our

suppliers and contractors of Taxonomy-relevant projects to sign a questionnaire

that conﬁrms their non-usage of pollutants and prohibited chemical substances by

the European Union.

Aroundtown‘s beekeeper at work

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Board of Directors‘ Report

EU TAXONOMY

Introduction

The EU Taxonomy is a classiﬁcation system for the identiﬁcation of sustainable

economic activities established by the European Commission. Its purpose is to

offer companies, investors and policymakers a standard set of deﬁnitions for which

economic activities can be considered environmentally sustainable in order to create

security for investors, protect against greenwashing and encourage investment

into more sustainable activities. The EU Taxonomy is currently comprised of six

environmental objectives: Climate Change Mitigation; Climate Change Adaptation;

Sustainable Use and Protection of Water and Marine Resources; Transition to Circular

Economy; Pollution Prevention and Control; and the Protection and Restoration of

Biodiversity and Ecosystems. The technical screening criteria for the six EU Taxonomy

environmental objectives were scheduled for release over a multiyear timeframe.

The Climate Delegated Act covering the technical screening criteria for a substantial

contribution to Climate Change Mitigation and Climate Change Adaptation and the

Do No Signiﬁcant Harm (DNSH) criteria for the remaining environmental objectives

was approved in 2021 and applied as of January 2022. The ﬁnal Environmental

Delegate Act adding the substantial contribution criteria for the remaining four

environmental objectives was approved in 2023 and will apply as of January 2024.

In 2022, Aroundtown undertook for the ﬁrst time an assessment of the Group’s EU

Taxonomy-aligned turnover (see Turnover KPI further below), capital expenditure

(CapEx) and operating expenses (OpEx) relating to the EU Taxonomy environmental

objectives Climate Change Mitigation and Climate Change Adaptation for the

ﬁnancial year ending 31st December 2022. Since then, Aroundtown has made

further progress in implementing and adapting processes to gather critical data for

EU Taxonomy reporting. For instance, in 2023, a mid-year EU Taxonomy alignment

exercise was performed, covering eligible CapEx under the environmental objective

Climate Change Mitigation. This allowed an earlier assessment of the status quo

and provided an opportunity to enhance process-optimization for the ﬁnal EU

Taxonomy alignment assessment. This exercise was performed by the Sustainability

Department, together with the Construction and Operation Departments, as well as

the Business and Group Controlling teams.

Furthermore, to deepen the knowledge and understanding of the EU Taxonomy

and its reporting requirements, several training sessions were conducted with the

Construction and Operation Departments in Germany, as well as the Netherlands,

Greece and Cyprus throughout 2023. At Aroundtown, the standard construction

contract was also recently revised to ensure the accessibility of information necessary

for EU Taxonomy compliance, incorporating provisions for contractors to deliver data

pertinent to EU Taxonomy reporting. The updated contract includes the EU Taxonomy

pollution prevention questionnaire (to be signed by contractors) which covers the

DNSH criteria on Pollution Prevention and Control, and integrates explicit provisions

for waste disposal and recycling data, covering the Circular Economy requirements

under the DNSH criteria for Climate Change Mitigation. It also covers the DNSH

technical speciﬁcations for water appliances so that in the future all refurbishment

activities that affect water appliances must align – if economically possible – to the

speciﬁcations of the EU Taxonomy. The new contract has taken effect from January

2024 for Aroundtown, while GCP is currently undertaking the contract update check,

which is also expected to be rolled out during 2024.

As a long-term target, Aroundtown aims to optimize its Enterprise Resource

Planning (ERP) system for the comprehensive collection of EU Taxonomy data. In

2024, ongoing training sessions will continue in conjunction with EU Taxonomy

updates for the Construction and Operation Departments and the Business and

Group Controlling teams.

Following strategies are in place to continuously improve the eligibility and/or

alignment with the EU Taxonomy:

●

Take substantial contribution and DNSH criteria of the EU Taxonomy into consideration

when making decisions regarding renovations and new development projects.

●

The emphasis is on Taxonomy-alignment of larger CapEx projects under 7.1

‘Construction of New Buildings’ and 7.2. ‘Renovation of Existing Buildings’ due to

their materiality over smaller projects.

●

Data collection improvements through better utilization of our ERP System and

closer collaboration with our suppliers.

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Board of Directors‘ Report

Methodology

Approach Taken to Determine Taxonomy-Eligible Activities

In order to determine EU Taxonomy eligibility,

Aroundtown ﬁrst identiﬁed all activities

undertaken by the Group during an initial assessment conducted in 2021 involving

multiple departments. Subsequently, the Sustainability Department has reviewed

the activities to determine whether the list was still up to date. In 2022, we changed

our reporting of photovoltaic systems, which were previously reported under activity

4.1 (electricity generation using solar photovoltaic technology) to reporting under

activity 7.6 (installation, maintenance and repair of renewable energy systems)

following further clariﬁcation published by the European Commission in December

2022. In 2023, Aroundtown continued to follow the established methodology.

Hence, the following seven EU Taxonomy-eligible activities were determined as

relevant for Climate Change Mitigation and Climate Change Adaptation:

●

Construction of new buildings (7.1)

●

Renovation of existing buildings (7.2)

●

Installation, maintenance and repair of energy efﬁcient equipment (7.3)

●

Installation, maintenance and repair of charging stations for electric vehicles in

buildings (and parking spaces attached to buildings) (7.4)

●

Installation, maintenance and repair of instruments and devices for measuring,

regulation and controlling energy performance of buildings (7.5)

●

Installation, maintenance and repair of renewable energy systems (7.6)

●

Acquisition and ownership of buildings (7.7).

Despite the activities’ contribution to both objectives, Aroundtown considers itself

as contributing more to Climate Change Mitigation than Climate Change Adaptation

through the energy efﬁciency improving renovations of its assets. As a consequence,

the EU Taxonomy Key Performance Indicators (KPIs) are reported with regard to

Climate Change Mitigation only. Nevertheless, with the refurbishment of our

properties, they also become more climate resilient. Aroundtown has also adopted

several speciﬁc adaptation solutions which will increase the contribution to the

second environmental objective in the upcoming years.

Furthermore, with the publication of the substantial contribution criteria for the four

remaining environmental objectives - Sustainable Use and Protection of Water and

Marine Resources; Transition to Circular Economy; Pollution Prevention and Control;

and the Protection and Restoration of Biodiversity and Ecosystems – in June 2023,

clariﬁed that only Circular Economy provided additional economic activities for the

real estate and construction sector. These new activities are:

●

Construction of new buildings (3.1)

●

Renovation of existing buildings (3.2)

●

Demolition and wrecking of buildings and other structures (3.3)

●

Maintenance of roads and motorways (3.4)

●

Use of concrete in civil engineering (3.5)

Of these activities, only 3.1, 3.2 and 3.5 apply to Aroundtown and are considered as

eligible in 2023. However, data availability of recycling data from waste disposal and

management sites is still a challenge for reporting with regards to DNSH Circular

Economy under Climate Change Mitigation. Aroundtown therefore chose to continue

improving fulﬁlment of the DNSH criteria for Circular Economy under Climate

Change Mitigation ﬁrst before potentially reporting on the substantial contribution

under Circular Economy in the future. In 2024, Aroundtown will continue to work

with suppliers to provide better recycling data, which has already been added as a

data delivery requirement to Aroundtown’s construction contract template in 2023.

Attributing Data to Economic Activities

Although our Construction and Operations Departments started to put into place

processes in 2022 that allow for the allocation of projects or activities to the relevant

economic activities, the majority of invoices had to be analyzed and evaluated

manually for eligibility and alignment.

Using determined commodity codes relevant

to each identiﬁed economic activity based on information provided in guidelines

and resources by the European Commission, the invoices could be allocated to the

correct eligible economic activity. This attribution process was necessary for CapEx

mostly.

The majority of turnover is generated in relation to the activity ‘Acquisition and

Ownership of Buildings (7.7)’, in the form of rental income. The Group also derives a

comparatively small amount of other income that is not related to eligible economic

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Board of Directors‘ Report

activities. Additionally, OpEx is reported as relating to activity 7.7, since it corresponds

to the maintenance measures at Aroundtown’s properties.

Assessment of Aligned Activities

For an economic activity to be aligned with the EU Taxonomy, three requirements

need to be fulﬁlled:

it must make a substantial contribution to the achievement of one or more EU

environmental objectives (“substantial contribution”)

it does not signiﬁcantly harm any other EU environmental objective (“do no

signiﬁcant harm / DNSH”)

it is in compliance with minimum social standards on topics such as Human

Rights, Labor Standards and Anti-Corruption (“minimum social safeguards”)

Based on these requirements, checks for EU Taxonomy alignment relate to different

business levels at Aroundtown. Whereas substantial contribution to Climate Change

Mitigation is assessed at the individual asset or project level, the DNSH criteria

apply rather to the economic activity itself. The DNSH criteria for Climate Change

Adaptation and Circular Economy was conducted for Aroundtown as a whole.

Compliance with minimum social safeguards was also evaluated for Aroundtown Group.

Substantial Contribution Assessments

This section outlines the checks conducted for substantial contribution to Climate

Change Mitigation relevant to Aroundtown’s eligible economic activities.

Starting with ‘Acquisition and ownership of buildings’ (7.7), this is the only activity for

which Aroundtown reports turnover and OpEx. Turnover is only considered as making

a substantial contribution to activity 7.7 if the relevant buildings – provided they

were constructed before 31 December 2020 – have been assigned energy efﬁciency

class A (or better) or are among the top 15% of regional or national housing stock in

terms of primary energy demand. For buildings constructed after 31 December 2020,

the same criteria for signiﬁcant contribution to Climate Change Mitigation apply as

for ‘Construction of new buildings’ (7.1).

As Aroundtown Group acquires existing buildings, they are mostly built before 31

December 2020. With regard to the energy class and building stock it has been

recognized by the European Commission and several real estate associations, that

the lack of an energy class labelling based on letters (A-G) for commercial assets in

Germany has created an issue for reporting. Aroundtown closely follows the sector’s

debate on the topic and has reviewed and assessed several methodologies presented

by industry organizations and an external service provider to the real estate sector.

After thorough review of the available methodologies, Aroundtown has adopted the

15% benchmark approach based on data published by a publicly available index,

that has been endorsed by the German Sustainable Building Council (DGNB), a

non-proﬁt focused on making buildings more sustainable. The index uses average

yearly primary energy consumption data per asset type from its vast database of

European clients’ consumption data to establish top 15% and top 30% benchmarks

for Germany, the UK, Benelux and other countries. We note that this approach was

adopted for the German portfolio only, whereas for the Dutch and London portfolios

for which EPC ratings were readily available, the EPC rating approach was followed.

Hence, aligned turnover and OpEx was only calculated in relation to the properties

that fall within the top 15% of building stock (German portfolio) or have an EPC

rating A and above (Dutch and UK portfolio). However, due to issues with data

availability on energy performance for our hotel portfolio, these are not fully

captured in the turnover and OpEx calculations and it is therefore likely that our

aligned percentages are actually higher than presented.

As for the substantial contribution criteria for the activity ‘Construction of new

buildings’ (7.1), the relevant building has to show a primary energy demand

that is at least ten percent below the national standard for nearly zero-energy

buildings. In addition, for buildings larger than 5,000m² further criteria have to

be fulﬁlled upon completion in order to be aligned: tests for airtightness and

thermal integrity, as well as a life-cycle Global Warming Potential of the building.

At Aroundtown Group, new constructions constitute a very small percentage of its

business activities. The few development projects in 2023 are currently mostly in

the planning phase and therefore not able to produce all necessary documentation

for the fulﬁllment of substantial contribution criteria (Climate Change Mitigation)

for ‘Construction of new buildings’ (7.1) or the various DNSH criteria. They are

therefore reported as eligible only in this year’s report.

The substantial contribution criteria to Climate Change Mitigation for ‘Renovation

AROUNDTOWN

Board of Directors‘ Report

of existing buildings’ (7.2) dictate that refurbishment results in at least a 30%

reduction in primary energy demand within three years or qualiﬁes as a major

renovation. Aroundtown checked compliance with these criteria by assessing

whether the renovation project touches 25% of the building envelope or more and

meets the cost-optimal minimum energy performance requirements as laid out in

the German buildings energy act, Gebäudeenergiegesetz (GEG) or other national

legislation, implementing the EU Directive 2010/31/EU

. If this was the case, the

CapEx

was considered as meeting the substantial contribution criteria. If this was

not the case, the CapEx was assessed under for the business activity for individual

energy efﬁciency measures as described in 7.3 (Installation, maintenance and repair

of energy efﬁcient equipment). Depending on the individual measure that was

conducted, compliance with the relevant technical criteria laid out in the GEG or

other national legislation is evaluated. Only if these were met, CapEx allocated to 7.3

(Installation, maintenance and repair of energy efﬁcient equipment) is considered as

meeting the substantial contribution criteria.

There are no additional technical screening criteria for activities 7.4 (Installation,

maintenance and repair of charging stations for electric vehicles in buildings (and

parking spaces attached to buildings)), 7.5 (Installation, maintenance and repair

of instruments and devices for measuring, regulation and controlling energy

performance of buildings) and 7.6 (Installation, maintenance and repair of renewable

energy systems) beyond the list of individual measures described for each activity.

Do No Signiﬁcant Harm Assessments

As mentioned above, in order for an economic activity to be aligned, the EU Taxonomy

employs the principle of ‘do no signiﬁcant harm’. As such, in addition to making a

substantial contribution to one of the environmental objectives, it must be shown that

each activity does not signiﬁcantly harm any of the other objectives, as deﬁned by the

Technical Screening Criteria in the First Delegated Act to the EU Taxonomy.

Since all eligible activities were assessed for making a substantial contribution to

Climate Change Mitigation, the DNSH assessments were performed only for those

that met the technical criteria for substantial contribution. As data with regard to

the fulﬁllment of substantial contribution criteria was not readily available for

our 7.1 (Construction of new buildings) projects, most of which are currently in the

planning phase, no further DNSH checks were conducted for this activity and is

therefore reported as eligible only in this year’s report.

Regarding activity 7.2 (Renovation of existing buildings), substantial contribution

criteria to Climate Change Mitigation were met, however, not all DNSH could be

fulﬁlled, in particular the criteria for Protection of Water and Marine Resources. This

stems to a great degree from a lack of relevant data available for both areas –

areas in which Aroundtown Group is highly dependent on information provided by

contractors and suppliers. The Group mainly faced challenges regarding the lack of

readily available technical information of bathroom and kitchen appliances, which

is oftentimes not indicated in contracts or invoices by contractors.

Despite these challenges, Aroundtown has worked consistently on setting up

processes and gathering the necessary data for relevant DNSH criteria, in particular

those for the environmental objectives of Protection of Water and Marine Resources.

Aroundtown is committed to improving access to data relevant for EU Taxonomy

reporting through continued engagement with contractors and suppliers. We note

that this DNSH criteria does not apply to residential properties and can therefore be

omitted in alignment checks of our residential portfolio held by our subsidiary GCP.

The other DNSH criteria related to the environmental objectives of Climate Change

Adaptation, Circular Economy, and Pollution Prevention were met for 7.2 (Renovation

of existing buildings), the assessments of which are described further below. We

note that the activity 7.2 (Renovation of existing buildings) can only be reported as

aligned in 2023 for our residential properties held by GCP.

For activity 7.3 (Installation, maintenance and repair of energy efﬁcient equipment),

DNSH criteria exist for the environmental objectives of Climate Change Adaptation

and Pollution Prevention, whereas for the activities 7.4 (Installation, maintenance

and repair of charging stations for electric vehicles in buildings (and parking spaces

attached to buildings)), 7.5 (Installation, maintenance and repair of instruments and

devices for measuring, regulation and controlling energy performance of buildings)

and 7.6 (Installation, maintenance and repair of renewable energy systems) only

Climate Change Adaptation applies.

The assessments performed against these different DNSH criteria are discussed in

turn below.

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010L0031

AROUNDTOWN

Board of Directors‘ Report

●

Climate Change Adaptation:

All economic activities in category 7 (construction

and real estate), require that a robust climate risk and vulnerability assessment

is conducted following the steps laid out in Appendix A of the Delegated Act.

Please refer to the section on Climate Change Adaptation in this report for further

information on this assessment and the adoption of relevant adaptation solutions.

●

Protection of Water and Marine Resources:

Water appliances for bathrooms and

kitchens need to follow speciﬁcations on maximum water ﬂow and ﬂush volume

outlined in Appendix E of the EU Taxonomy Regulation

. As this DNSH is not fulﬁlled

for 7.2 (Renovation of existing buildings) for AT in 2023 due to lack of data on

installed appliances, the activity is only reported as aligned for our residential

portfolio GCP, for which this DNSH does not apply.

●

Transition to a Circular Economy:

At least 70% by weight of non-hazardous

construction and demolition waste generated on the construction site are prepared

for reuse, recycling and other material recovery. Aroundtown complies with national

legislation on recycling requirements, and so do its renovation projects in Germany.

The German Circular Economy Act

Kreislaufwirtschaftsgesetz (KrWG)

, which implements

EU Directive 2008/98/EC on waste, as well as its amending Directive 2018/851/EU

stipulates a recycling rate of 70% by weight for construction and demolition waste.

●

Pollution Prevention and Control:

In order to prevent pollution through toxic and

environmentally harming chemicals, non-ﬁnancial undertakings are required to

conﬁrm that a number of chemical substances mentioned in Appendix C of the EU

Taxonomy Regulation

are not manufactured, placed on the market or being used

in any economic activity. As this DNSH criteria is relevant for three of our economic

activities – 7.1 (Construction of new buildings), 7.2 (Renovation of existing buildings)

and 7.3 (Installation, maintenance and repair of energy efﬁcient equipment) – the

Group has created a questionnaire outlining the speciﬁcations of Appendix C which

has been sent to our largest contractors to conﬁrm non-usage of these chemicals

in our building materials and at our construction sites. It has been made clear in

the European Commission’s FAQ document from December 2022

that such proof

must come from the supplier itself.

Minimum Social Safeguards

The EU Taxonomy states that activities may not qualify as environmentally sustainable

unless they comply with minimum social safeguards. This requires alignment with

the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles

on Business and Human Rights, as well as the fundamental conventions of the

International Labor Organization (ILO) and the International Bill of Human Rights.

Aroundtown has several corporate policies in place that refer to these international

standards and frameworks to ensure alignment with these social minimum safeguards.

These policies include our Human Rights Policy, the Business Partner Code of Conduct

and Employee Code of Conduct, as well as the Anti-Corruption Policy. Further, the Group’s

compliance trainings for employees include topics of corruption and fair business.

To assess the alignment of this framework to the required minimum safeguards, in

particular on the topic of human rights, the Group has made reference to the report

of the Platform on Sustainable Finance

of October 2022, in which two criteria to

determine compliance with the safeguards were established. These are:

That the company has established adequate human rights due diligence (HRDD)

processes, as outlined in the UNGPs and OECD Guidelines for Multi-national

Enterprises (MNE).

That there are no indications that the company does not adequately implement

HRDD, resulting in human rights abuses.

Demonstrating adequate HRDD for the purposes of the ﬁrst criterion requires that

the following six key steps have been implemented:

Six-Steps of Human Rights Due Diligence

Adopting and embedding a commitment to Human Rights Due Diligence into

policies and procedures

Identiﬁcation and assessment of adverse impacts, including through stakeholder

engagement

Taking actions to cease, prevent, mitigate and remediate adverse impacts

Tracking the implementation of these actions and its results

Communicating publicly on the approach of HRDD and actions taken to avoid and

address adverse impacts

Providing or cooperating in remediation, incl. establishing or participating in

grievance mechanisms where individuals and groups

can raise concerns about adverse impacts

https://ec.europa.eu/sustainable-ﬁnance-taxonomy/assets/documents/CCM%20Appendix%20A.pdf

https://ec.europa.eu/sustainable-ﬁnance-taxonomy/assets/documents/CCM%20Appendix%20E.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0851

https://ec.europa.eu/sustainable-ﬁnance-taxonomy/assets/documents/CCM%20Appendix%20C.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C_202300267

https://ﬁnance.ec.europa.eu/system/ﬁles/2022-10/221011-sustainable-ﬁnance-platform-ﬁnance-report-minimum-safeguards_en.pdf

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Board of Directors‘ Report

Aroundtown has addressed and implemented these six steps through embedding

the topic of Human Rights in its policies, including the Human Rights Policy, as

well as Employee and Business Partner Codes of Conduct and by conducting annual

human rights online trainings with its employees.

Taking into account adverse impacts on human rights in the Group’s materiality

assessments and risk management, Aroundtown has identiﬁed and addressed

potential risks in the areas of construction and refurbishment/maintenance of the

business through a number of measures and processes. For instance, based on their

contract volume with Aroundtown, their region of business operation and other

criteria, suppliers are categorized as low, medium or high-risk. Depending on their

risk level, an adequate due diligence process is conducted utilizing different sources

of information. Besides our desk-based due diligence checks, our construction and

operation managers are fulﬁlling their legal monitoring obligation during the

execution of the project according to the national law of the project location. Finally,

through Aroundtown’s whistle-blowing system that is accessible to employees and

externals, potential human rights violations may be reported.

Any reports are tracked and investigated by our Compliance Department. Following

an internal investigation procedure as documented in our Investigation Policy for

handling potential violations, employees or business partners receive a warning,

are ﬁned, or banned from doing further business with the Group, should the claim

be conﬁrmed. Aroundtown may also decide to consult with authorities if necessary.

Please also see the section ‘Fair Business and Compliance’ and the subsection

‘Management of Supplier Relationships’ in the Governance part of this report, which

provide further information on compliance with social minimum safeguards on

corruption and fair business.

None of the negative indicators described by the Platform on Sustainable Finance

report with regard to human rights, corruption, fair business and taxation for

the second criterion are applicable to AT. We therefore assess that this criterion

is also met for Aroundtown, and thus that the required minimum safeguards are

implemented as required by Article 18 of the EU Taxonomy.

Calculation of Key Performance Indicators

Based on the determination above of EU Taxonomy-eligible activities, Aroundtown

calculated the proportions of eligible and non-eligible activities, and the proportion

of these eligible activities which is aligned, in accordance with the calculation

methodologies deﬁned in the Commission Delegated Regulation 2021/2178

published on 6 July 2021 and updated by Commission Delegated Regulation

2023/2486 of 27 June 2023. In general, all three Key Performance Indicators (KPIs)

are calculated in accordance with IFRS in line with our consolidated annual report.

Double accounting is avoided by direct allocation of eligible and aligned KPIs to

a speciﬁc economic activity, as well as a clear separation in our accounting system

of CapEx and OpEx accounts. This division is further aggravated through separate

bookkeeping systems at Aroundtown’s various business entities.

The Turnover, OpEx and CapEx KPIs for aligned activities are determined according

to the following calculations:

Turnover KPI

The deﬁnition of the Turnover KPI pursuant to the EU Taxonomy Regulation:

The only activity from which revenue is derived that is deemed to be EU Taxonomy-

eligible is activity 7.7 (Acquisition and ownership of buildings). Aroundtown’s

turnover consists to a great degree of revenue generated from rental income and

operating income. The Group also derives a comparatively small amount of other

income that is not related to eligible economic activities, which is not counted in

the numerator but is included in the denominator. Other revenue includes mainly

management fee, consulting fees as well as income from loans in connection with

real estate transactions.

Aroundtown’s denominator is taken from “revenue” from the Consolidated Statement

of Proﬁt or Loss.

Aligned turnover is calculated as the sum of turnover generated ﬁrstly, from

Aroundtown Group’s properties that fall within the 15% top building stock in

Germany based on the previously described method and index and secondly, from

Dutch and UK assets that have an EPC label A or higher.

Numerator

Share of turnover derived from products and services associated

with EU Taxonomy-aligned activities.

Denominator

Total net turnover, calculated in accordance with “IAS 1.82 a)

Revenue” and consistent with the accounting principles applied

to the preparation of the Group’s ﬁnancial statement.

Please see the consolidated ﬁnancial statements starting page

158 of this report.

AROUNDTOWN

Board of Directors‘ Report

OpEx KPI

The deﬁnition of the OpEx KPI pursuant to the EU Taxonomy Regulation:

As such the denominator of the OpEx KPI is deﬁned differently and is comprised

of speciﬁc expenses summarized in “property operating expenses” disclosed in

the Consolidated Statement of Proﬁt or Loss of this report. The OpEx denominator

amount is therefore not mentioned as such in the ﬁnancial statement.

OpEx is considered as overall operating expenses that is linked to activitiy 7.7

(Acquisition and ownership of buildings) and therefore to the overall maintenance

and day-to-day servicing of properties.

Hence, the calculation of the aligned OpEx is linked, to the extent possible, to the

Numerator

Share of operating expenditure that is:

Related to assets or processes associated with EU

Taxonomy-aligned economic activities, including:

•

training and other human resources adaptation needs

•

direct non-capitalized costs that represent research and

development

Part of the CapEx plan (expand / upgrade of activities)

Related to the purchase of output from EU Taxonomy-

aligned economic activities

Related to measures allowing activities to be carried out

in a low-carbon manner or with reduced greenhouse gas

emissions and individual building renovation measures

Part of OpEx for the adaptation of economic activities to

climate change

Denominator

Total operating expenditure, as the sum of direct non-

capitalized costs, including:

1. Research and development

2. Building renovation measures

Short-term lease

4. Maintenance and repair

Any other direct expenditures relating to the day-to-day

servicing of assets of property, plant and equipment by the

undertaking or third party.

Please see the consolidated ﬁnancial statements starting page

158 of this report.

properties that fall within the 15% top building stock in Germany or are labeled with

an EPC A or higher in the Netherlands and the UK.

OpEx linked to research and development cannot be allocated to individual

properties as would be required for alignment.

CapEx KPI

The deﬁnition of the CapEx KPI pursuant to the EU Taxonomy Regulation:

Numerator

Share of capital expenditure that is:

Related to assets or processes that are associated with EU

Taxonomy-aligned economic activities

Part of a CapEx plan (expand / upgrade of activities)

Related to the purchase of output from EU Taxonomy-

aligned economic activities

Related to measures allowing activities to be carried out

in a low-carbon manner or with reduced greenhouse gas

emissions

Part of the CapEx for adaptation of economic activities to

climate change

Denominator

Total capital expenditure, as the sum of:

Additions to tangible and intangible assets during the

ﬁnancial year considered before depreciation, amortization

and any re-measurements, including:

•

IAS 16.73 e) i) and iii) Property, Plant and Equipment

•

IAS 38.118 e) i) Intangible Assets

•

IAS 40.76 a) and b) Investment Property (for the fair

value model)

•

IAS 40.79 d) i) and ii) Investment Property (for the cost

model)

•

IAS 41.50 b) and e) Agriculture

•

IFRS 16.53 h) Leases (leases that do not lead to the

recognition of a right-of-use over the asset shall not be

counted as CapEx)

Revaluations and impairments, additions resulting from

business combinations and excluding fair value change

Please see the consolidated ﬁnancial statements starting page

158 of this report.

AROUNDTOWN

Board of Directors‘ Report

The CapEx denominator is composed of “net additions”

from note 15 (property and

equipment) as well as capital expenditure on investment property and acquisition

on investment property both from note 13 (investment property).

The EU Taxonomy-aligned CapEx comprises costs incurred from economic

activities 7.2, 7.3, 7.4, 7.5 and 7.6. Where refurbishment, energy efﬁciency projects

or renewable energy projects last for several years, only those expenses that were

capitalized in the relevant reporting year are calculated as EU Taxonomy-eligible

or aligned CapEx.

CapEx linked to activities 7.4 and 7.6 mostly relates to infrastructure costs of

necessary modernization, upgrades or technical equipment of the properties prior

to the installation of EV charging stations or PV systems respectively. The majority

of CapEx is currently invested by our partner company. CapEx linked to activity 7.7

represents acquisitions of new assets in 2023. The CapEx numerator did not include

CapEx as part of a CapEx plan.

Presentation of the Performance Indicators Relating to EU Taxonomy-Aligned

and EU Taxonomy-Eligible Economic Activities

In line with the regulatory requirements for EU Taxonomy reporting in 2023,

Aroundtown is disclosing the performance indicators in the table template provided

by the European Commission.

Taxonomy-aligned, eligible and non-eligible percentages of Aroundtown‘s KPIs

Reviewed by auditor

72.7%

85.2%

2.8%

Eligible

Aligned

Non-eligible

4.9%

Capex

Opex

71.9%

28.1%

24.5%

9.9%

Turnover

AROUNDTOWN

Board of Directors‘ Report

Proportion of

Turnover

from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023

Financial year 2023

Year

Substantial contribution criteria

DNSH criteria (“Does Not Signiﬁcantly Harm”)

Economic activities

Code(s)

Absolute turnover

Proportion of

turnover 2023

Climate change mitigation

Climate change adaptation

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Climate change migration

Climate change adaption

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Minimum safeguards

Proportion of

Taxonomy-

aligned (A.1)

or -eligible

(A.2) turnover,

2022

Category

enabling

activity

Category

transi-

tional

activity

€

millions

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Acquisition and ownership of buildings

CCM 7.7

392.6

24.5%

N/EL

16.7%

Turnover of environmentally sustainable activities

(Taxonomy-aligned) (A.1)

392.6

24.5%

0.0%

16.7%

Of which enabling

0.0%

Of which transitional

0.0%

A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

EL; N/EL

Acquisition and ownership of buildings

CCM 7.7

1,164.8

72.7%

N/EL

80.6%

Turnover of Taxonomy- eligible but not

environmentally sustainable activities

(not Taxonomy-aligned activities) (A.2)

1,164.8

72.7%

0.0%

80.6%

A. Turnover of Taxonomy-eligible activities (A.1 +

A.2)16.7

1,557.4

97.2%

0.0%

97.3%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Turnover of Taxonomy- non-eligible activities

45.3

2.8%

TOTAL (A + B)

1,602.8

100.0%

Metrics: EU Taxonomy

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Proportion of

OpEx

from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023

Financial year 2023

Year

Substantial contribution criteria

DNSH criteria (“Does Not Signiﬁcantly Harm”)

(h)

Economic activities

Code(s)

Absolute OpEx

Proportion of

OpEx 2023

Climate change mitigation

Climate change adaptation

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Climate change migration

Climate change adaption

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Minimum safeguards

Proportion

Taxonomy-

aligned

(A.1) or

-eligible

(A.2) OpEx,

2022

Category

enabling

activity

Category

transi-

tional

activity

€

millions

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Acquisition and ownership of buildings

CCM 7.7

144.1

28.1%

N/EL

19.0%

OpEx of environmentally sustainable activities

(Taxonomy-aligned) (A.1)

144.1

28.1%

0.0%

19.0%

Of which enabling

0.0%

Of which transitional

0.0%

A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

EL; N/EL

Acquisition and ownership of buildings

CCM 7.7

369.4

71.9%

N/EL

81.0%

OpEx of Taxonomy- eligible but not environmentally

sustainable activities (not Taxonomy-aligned activities) (A.2)

369.4

71.9%

0.0%

81.0%

OpEx of Taxonomy-eligible activities (A.1+A.2)

513.5

100.0%

0.0%

100.0%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

OpEx of Taxonomy- non-eligible activities

0.0%

TOTAL(A + B)

513.5

100.0%

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Proportion of

CapEx

from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023

Financial year 2023

Year

Substantial contribution criteria

DNSH criteria (“Does Not Signiﬁcantly Harm”)

Economic activities

Code(s)

Absolute CapEx

Proportion of CapEx 2023

Climate change mitigation

Climate change adaptation

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Climate change migration

Climate change adaption

Water and marine resources

Circular economy

Pollution

Biodiversity and ecosystems

Minimum safeguards

Proportion

Taxonomy-

aligned

(A.1)

or eligible

(A.2) CapEx,

2022

Category

enabling

activity

Category

transi-

tional

activity

€

millions

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y; N;

N/EL

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Renovation of existing buildings

CCM 7.2

2.7

0.48%

N/EL

1.3%

Installation, maintenance and repair of energy efﬁciency equipment

CCM 7.3

3.0

0.52%

N/EL

0.5%

Installation, maintenance and repair of charging stations for electric

vehicles in buildings (and parking spaces attached to buildings)

CCM 7.4

0.4

0.07%

N/EL

0.0%

Installation, maintenance and repair of instruments and devices for

measuring, regulation and controlling energy performance of buildings

CCM 7.5

1.4

0.24%

N/EL

0.1%

Installation, maintenance and repair of renewable energy technologies

CCM 7.6

1.3

0.23%

N/EL

0.2%

Acquisition and ownership of buildings

CCM 7.7

48.1

8.38%

N/EL

8.7%

CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)

56.9

9.92%

0.0%

10.8%

Of which enabling

5.7

0.99%

0.0%

N/EL

0.8%

Of which transitional

2.7

0.48%

N/EL

1.3%

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)

EL; N/EL

Construction of new buildings

CCM 7.1

11.8

2.06%

N/EL

0.25%

Renovation of existing buildings

CCM 7.2

12.4

2.16%

N/EL

0.89%

Installation, maintenance and repair of energy efﬁciency equipment

CCM 7.3

9.4

1.63%

N/EL

2.35%

Installation, maintenance and repair of instruments and devices for

measuring, regulation and controlling energy performance of buildings

CCM 7.5

0.0

0.00%

N/EL

0.00%

Installation, maintenance and repair of renewable energy technologies

CCM 7.6

0.0

0.00%

N/EL

0.00%

Acquisition and ownership of buildings

CCM 7.7

455.6

79.35%

N/EL

82.89%

CapEx of Taxonomy- eligible but not environmentally sustainable activities (not

Taxonomy-aligned activities) (A.2)

489.2

85.21%

85.2%

86.37%

CapEx of Taxonomy-eligible activities (A.1+A.2)

546.1

95.12%

0.0%

97.18%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

CapEx of Taxonomy- non-eligible activities

28.0

4.88%

TOTAL(A + B)

574

100.0%

2023 ﬁgures reviewed by auditor

AROUNDTOWN

Board of Directors‘ Report

Frankfurt

AROUNDTOWN

Board of Directors‘ Report

Social Information

OUR WORKFORCE:

LABOR STANDARDS AND EMPLOYEE TOPICS

Long-term Targets

●

Be among the top ten most attractive employers in the commercial real estate

sector by 2030

●

Maintain zero incidents of discrimination

●

Offer a minimum of 12hrs of training and development opportunities per FTE

per year

2024 Goals

●

Continue to offer volunteering

program organized as a company-wide Social Day

for employees

●

Implement a second round of our ‘Activate the Base’ program, encouraging

employees to implement their own sustainability projects while receiving

guidance from an external coach

●

Introduce and conduct 180-degree surveys to encourage self-development among

employees

●

Implement our newly developed staff career path to create more transparency on

development opportunities

It is fundamental for a responsible business that everyone should feel safe and

protected, and we take signiﬁcant steps to ensure that our work environment

has a positive impact on the health and well-being of our people. Beyond this

foundation, we seek to excel in factors such as career development, education,

work-life balance, well-being, and diversity and inclusion, which are required to

attract and retain today’s top talent. The interests, views and rights of our own

employees primarily relate to human rights and health and safety. Our approach

to the protection of our workforce is explained in the following section.

Our suite of social policies including our Employee Code of Conduct, Diversity

Policy, Anti-Discrimination Policy, Human Rights Policy, Anti-Corruption Policy and

Whistleblowing Policy – all allow us to manage impacts, risks and opportunities

relating to our workforce. These policies cover all of our own employees and were

developed with the interests of our employees in mind. Our social policies detail

our commitments to the protection of our employees’ human rights, health and

safety, and protection against discrimination and harassment. They also detail

how our employees should keep us safe in relation to corruption and bribery

prevention. The centralization of our HR Department ensures that processes and

policies are standardized across the Group, meaning that knowledge and talents

are effectively used across the board.

Following the request from our employees, in 2023, we developed staff career

paths, including speciﬁc KPIs, which intend to create a clear structure and more

transparency regarding career and development opportunities at Aroundtown.

These career paths are expected to be communicated and applied from spring

2024. We also ensure all our employees are paid adequate wages in line with

applicable benchmarks.

Employee Satisfaction

We engage with our employees in a number of ways, primarily through our annual

employee engagement survey which allows us to obtain direct feedback from all

employees. We also conduct regular HR Roundtables during which our employees

and managers have the opportunity to ask questions and engage directly with our

HR Department. Our Group Head of HR is responsible for overseeing our annual

employee satisfaction survey, as well as our HR Roundtables and we use the

results of both to inform decisions or activities that will help manage actual and

potential impacts.

AROUNDTOWN

Board of Directors‘ Report

To ensure straightforward communication with staff across the Group, we have

implemented an HR software as an employee engagement tool. Through this platform,

employees can manage personal data, holiday and home ofﬁce requests, sick leave,

and book training and participation at other company events. We are continuing to roll

out new features to make the system more user-friendly. Our goal is for this software

to serve as a centralized HR system across all our locations of operation, so that all our

employees have easy and consistent access to the information they need, and to make

the employees and the HR Department more agile.

In 2023, we conducted a survey with our employees, the results of which will guide

our strategy to improve workplace satisfaction. The results were a clear indication

of the engagement of our employees, with a 63% response rate across the Group.

From this, we have identiﬁed priority areas for improvement in our HR policies,

and we formulated an action plan for 2023 and 2024 to act on this feedback. This

included further employee surveys to provide more opportunities for feedback and

communication, furthering information about career progression, and increased

communication about Aroundtown’s overall strategy and vision, and the promotion

path opportunities which employees can pursue within our organization.

This year, our commitment to a positive work environment was reﬂected by two

key milestones. Aroundtown was awarded ‘Top Company 2024’ by Kununu, a leading

platform for employer reviews and feedback on corporate culture, compensation

schemes, and overall employee satisfaction. This placed us among the top 5%

of all employer proﬁles in the platform in 2023 – a conﬁrmation of our strong

engagement for a great working environment and the satisfaction of our employees.

Our subsidiary, GCP, was chosen as ‘Most Wanted Start 2024’ by the newspaper, Die

Zeit, and Kununu, demonstrating GCP’s position as a leading apprenticeship company

in Germany, highlighting our commitment to employee development.

As part of our ongoing efforts to enhance workforce satisfaction and well-being,

our collaboration with a work-life platform in Germany continued throughout 2023.

The platform extends comprehensive support to our employees, which includes

family-oriented services like childcare for holidays, emergencies, daily needs, and

elderly care. The platform further enriches the employee experience by offering

programs for expecting parents, promoting a healthy work-life balance through

virtual sports courses and mental health prevention programs, and providing access

to diverse consultations and talks on leading a healthy life, diversity and inclusion,

and addressing discrimination concerns. These offerings align with our commitment

to fostering a positive and supportive work culture.

Training and Development

We place great importance on delivering a broad learning and development program

to our staff to provide them with the skills required to prosper in today’s business

environment and further their careers. Our training is targeted to individual needs

and delivered ﬂexibly to meet the needs of all our employees. We utilize our in-

house expertise, as well as external specialists, to deliver training ranging from

construction and property management to business skills and leadership training.

Training is delivered in person, through online webinars, or via our self-directed

learning portal, the Contemporary Real Estate Academy (CREA). This platform

enables a uniﬁed presentation of our mandatory training content and learning and

development material, which is accessible to all staff across our business. In 2023,

additional features were added that allow for better communication with employees

on training opportunities and advanced tracking of training data and the creation of

reports for content owners and admin users from our HR Department.

We have also continued to implement performance reviews digitally through our

HR software. Managers receive training on using the tool to provide performance

feedback and can then provide ratings and reviews digitally. In 2024, we plan

to relaunch the performance review tool across the Aroundtown departments

in Germany, with a new career development plan, aiming to deliver 60% of

performance reviews using this method. Streamlining this review process will

allow our employees to receive personal feedback more simply and regularly,

helping them to improve and progress towards their own goals.

In 2023, we also continued to expand our leadership training program, delivering

2,430 hours of training for upcoming leaders within our organization. In addition,

we maintained our mentoring scheme, enabling our employees to receive

professional coaching support from more senior team members. These programs

sought to boost individual employee performance while securing our long-term

viability. The leadership program is designed to equip the company’s current and

potential leaders with the fundamental critical thinking and problem-solving skills

essential for making sound decisions. It aims to improve communication and team

management skills, conﬂict resolution, as well as innovativeness and productivity.

Employees who participate in this program are provided with the skills necessary to

effectively manage change, ensuring the company remains resilient and adaptable.

AROUNDTOWN

Board of Directors‘ Report

In 2023, we also saw through the ﬁrst round of our ‘Activate the Base’ program, which

offered employees the opportunity to develop a project idea related to several topics

ranging from resource reduction and biodiversity to neighborhood engagement.

Together with an external consultancy, which guided the participants throughout the

project period, the employees also reﬂected on their values and personal development.

As an international company representing more than 60 nationalities, headquartered

in Germany, we also support our employees with language classes in English and

German. In 2023, we continued to pursue our intensive focus on language learning,

partnering with a well-known language school to offer advanced German courses for

non-native speakers and English for German speakers, with 3,557 hours of training

provided. The language program is targeted at promoting effective communication

and collaboration amongst employees and other stakeholders. It enhances operational

efﬁciency, tears down cultural barriers, reduces misunderstandings, builds trust, and

fosters a more inclusive workplace environment.

Occupational Health and Safety

We take our responsibility to provide a safe work environment seriously and ensure

that tasks do not pose undue health risks. Our Occupational Health and Safety

Policy ensures strict compliance with all workplace health and safety regulations

at national and EU level. We are jointly responsible for occupational health and

safety through the avoidance of risks to ourselves and our employees by identifying

and reporting any unsafe working conditions, violations of safety requirements, and

accidents in the workplace. The implementation of this policy is overseen by our

dedicated internal Ofﬁce Health and Safety Manager and by the internal inspections

of the occupational safety standards in our workplaces. We also undergo ad hoc

external audits by state ofﬁcers, but none have taken place in 2023.

In order to manage material risks, impacts and opportunities to our workforce, we

set targets to help mitigate these risks and maximize opportunities. In 2023, we

increased our internal budget for employee training, including for occupational

health and safety, with some employees being identiﬁed as knowledge owners

who then delivered training sessions themselves. The 169 certiﬁed ﬁrst-aiders in

the Group have been trained, within the scope of ﬁrst aid assistance, to respond

effectively to emergency occupational health and safety situations. Work-related

injuries, ill-health and incidents are investigated according to our Occupational

Health and Safety policy. Furthermore, we are in the process of expanding our

mentoring and coaching program in collaboration with one employee who will

transition to the roll of our full-time internal Business Coach starting in 2024. This

employee has received training in the matter and began offering coaching in the

last quarter of 2023 already.

To contribute further to the well-being of our employees, we offer a ﬂexible

package of beneﬁts and working provisions, such as hybrid working arrangements

to support working from home, and ﬂexible working hours. Part-time working

options also grant greater ﬂexibility for our employees to balance their work

around their lives and families. Such part-time arrangements are speciﬁc to the

employee’s needs.

The wider health and well-being beneﬁts provided include eye examinations and

health checks carried by our company physician, access to our company gym for

employees at our Berlin headquarters with courses and personalized training,

and mental health appointments available for all employees with our in-house

consultant.

Furthermore, our collaboration with a work-life platform mentioned under the

Employee Satisfaction section also contributes to fostering a secure and supportive

workplace environment. Offerings underpinning our commitment to occupational

health and safety include hundreds of virtual sports and mental health prevention

courses covering topics from mindfulness to resilience, and numerous talks

and consultation offers promoting a healthy lifestyle. Additionally, the platform

provides access to a 24/7 emergency hotline staffed by qualiﬁed psychologists

and coaches, ensuring prompt psychological support during critical situations. To

help manage stress, speciﬁc trainings, coaching and other methods such as Open

Space are also available.

Equal Treatment and Opportunities for All

We are committed to promoting equal treatment and opportunities for all

within our workforce. Our Anti-Discrimination Policy speciﬁcally addresses the

following grounds for discrimination: race or ethnic origin, gender, religion or

ideology, disability, age, sexual identity. Discrimination on the basis of any of

these characteristics constitutes an infringement of basic human rights and is

explicitly prohibited by us. The Anti-discrimination Policy explains our employees’

AROUNDTOWN

Board of Directors‘ Report

obligation and right to lodge a complaint should they believe they have been

subject to any kind of discrimination. These complaints are taken seriously and are

duly investigated. Further, our Diversity Policy details the diversity initiatives that

we implement, including the promotion of talent development, the recognition of

life experience, and the offering of cultural support.

In 2023, as a result of the ‘Activate the Base’ initiative, a Diversity Committee

comprising employee representatives from different organizational levels was

established with the aim of overseeing our commitments to diversity, inclusion and

anti-discrimination. A dedicated site is now available in our intranet containing up-

to-date topics and information, and comprehensive diversity training is now provided

to all employees upon joining the organization. To strengthen our commitment, the

position of Chief Diversity Ofﬁcer was also established during 2023, and is currently

held by the Group Head of HR.

Work-Related Rights

We respect and promote human rights throughout our organization with the help of

stringent policies and procedures. Should we operate in areas at risk of human rights

violations, we have committed to undertake human rights due diligence and risk

assessments. We regard every person as unique, and recognize people‘s individual

differences such as ethnic origin, gender, religion or belief, experience, physical

and mental abilities, age, and sexual identity. In this way, we ensure our employees,

tenants, and business partners, including our suppliers, respect the shared human

rights of all people, in line with international regulations such as the International

Labor Organization‘s Core Labor Standards, and the UN Guiding Principles on

Business and Human Rights. Our policies concerning our employee’s work-related

rights refer to forced or compulsory labor, and child labor. However, they currently do

not explicitly refer to trafﬁcking in human beings. We commit to duly consider this

aspect during our policy reviews.

Metrics: Our Workforce

As part of our commitment to improving employee satisfaction, maintaining high

standards of health and safety, and ensuring all employees receive equal treatment

and opportunities, we monitor and measure a series of metrics to help understand

our progress in areas relating to our workforce. Employee data disclosed below is

representative of the ﬁgures at the end of the reporting period and are reported in

full-time equivalent.









2023

We monitor our employee numbers by both geographical area and contract type as

seen in tables 7 and 8 below which allows us to monitor further information and

understand trends in employee-related data. These ﬁgures include employees who

are subject to the material impacts identiﬁed during our DMA.

AROUNDTOWN

Board of Directors‘ Report

Employee head count by contract type

EPRA

Code

Units of

Measure

Metric

2023

2022

Number

Percentage

Number

Percentage

N/A

Total

numbers

and

percentages

Permanent

employees

who identify as

female

677

50%

656

49%

Permanent

employees who

identify as male

670

50%

670

51%

Permanent

employees who

identify as 'other'

N/A

Temporary

employees

who identify as

female

156

43%

148

39%

Temporary

employees who

identify as male

203

57%

231

61%

Temporary

employees

which identify as

'other'

N/A

Non-guaranteed

hours employees

who identify as

female

53%

N/A

Non-guaranteed

hours employees

who identify as

male

47%

N/A

Non-guaranteed

hours employees

who identify as

'other'

N/A

TABLE 8

Employee headcount by geographical area

EPRA

Code

Units of

Measure

Metric

2023

2022

Number

Percentage

Number

Percentage

N/A

Total

numbers and

percentages

Total

1706

100%

1705

100%

Germany

1356

79.5%

1414

82.9%

Cyprus

149

8.7%

147

8.6%

Netherlands

4.1%

4.6%

United

Kingdom

3.8%

2.4%

Other

3.9%

1.5%

Employee breakdown by nationality

N/A

Percentages

in total

workforce

(as %

of total

workforce)

Share in all

managerial

positions (as

% of total

managerial

workforce)

in total

workforce

(as %

of total

workforce)

Share in all

managerial

positions (as

% of total

managerial

workforce)

Germany

61.9%

54.2%

64.2%

56.9%

Cyprus

8.2%

13.9%

8.0%

14.1%

Netherlands

3.7%

5.9%

3.8%

4.6%

Romania

3.7%

0.4%

4.8%

0.7%

United

Kingdom

3.4%

5.1%

1.7%

2.8%

Israel

3.2%

9.2%

3.6%

9.9%

Others

15.9%

11.3%

13.9%

11%

No. of nationalities

(incl. Germany)

TABLE 7

AROUNDTOWN

Board of Directors‘ Report

Due to our efforts to enhance and maintain employee satisfaction, we monitor

turnover and retention rates of our employees as well as track key hiring KPIs as

shown in table 9.

Hiring and Turnover

EPRA

Code

Units of

Measure

Metric

2023

2022

Number

Rate

Number

Rate

Emp-

Turn

over

Total

number

and rate

of new

employee

hires

New employee hires

397

23.3%

486

29%

Female

194

48.9%

196

40%

Male

203

51.1%

290

60%

Age group <30

154

38.8%

155

31.9%

Age group

≥ 30 - < 50

189

47.6%

264

54.3%

Age group >50

13.6%

13.8%

Open positions

ﬁlled by internal

candidates (internal

hires)

165

29.4%

189

28.0%

Average

amount (€)

Average hiring cost/

FTE

536.9

N/A

1068.7

N/A

Total

number

and rate of

employee

turnover

Employee turnover

380

18.3%

422

19.9%

Female

161

42.4%

190

45.0%

Male

219

57.6%

232

55.0%

Age group <30

23.4%

23.2%

Age group

≥ 30 - < 50

212

55.8%

233

55.2%

Age group ≥ 50

20.8%

21.6%

Employee initiated

turnover

264

12.7%

288

13.6%

Female

115

43.6%

135

46.9%

Male

149

56.4%

153

53.1%

Age group <30

22.7%

25.0%

Age group

≥ 30 - < 50

158

59.8%

165

57.3%

Age group ≥ 50

17.4%

17.7%

Training metrics are monitored as shown in table 10, including the percentage of our

employees who receive performance and career development reviews.

Training and Development

EPRA

Code

Units of

Measure

Metric

2023

2022

Emp-Dev

% of total

workforce

% of total employees who received regular

performance and career development reviews

during the reporting period

26.6

28.5

Emp-

Training

Average

number of

training

hours

All employees

16.0

12.5

Female

18.7

13.2

Male

13.6

11.9

Management

26.6

19.8

Female

38.3

25.2

Male

20.3

17.2

Non-management

18.1

14.7

Female

20.2

15.3

Male

15.9

14.2

Part-time employees

19.3

N/A

FTE employees

20.6

17.0

N/A

Average

amount

(€)

Average investment in training per FTE

696.3

539.7

Percentage

(%)

Percentage of FTEs that participated in

leadership development program

1.9%

N/A

Percentage of FTEs that participated in

language program

18.1%

N/A

TABLE 9

TABLE 10

2023 ﬁgures reviewed by auditor

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Board of Directors‘ Report

We monitor and measure the diversity of our employees in table

12, where we

collect data regarding the representation of male/female/other employees, and

employee with disabilities.

Diversity

EPRA

Code

Units of

Measure

Metric

2023

2022

Diversity-

Emp

Number

% of total

employees

who

identify

Female

49%

50%

Male

51%

50%

Other

% of

employees

who

identify

Female (Board of Directors)

29%

33%

Male (Board of Directors)

71%

67%

Female (top management)

22%

12%

Male (top management)

78%

88%

Female (senior management)

34%

25%

Male (senior management)

66%

75%

Female (junior management)

39%

41%

Male (junior management)

61%

59%

N/A

Female (all management)

35%

32%

Male (all management)

65%

68%

Female (revenue generating

management functions)

32%

29%

Male (revenue generating

management functions)

68%

71%

Female (STEM-related positions)

23%

18%

Male (STEM-related positions)

77%

82%

Number

Employees with disabilities

TABLE 12

2023 ﬁgures reviewed by auditor

Our commitment to the health, safety and well-being of our employees is measured

using health and safety metrics, shown in table 11.

Employee Health and Safety

EPRA

Code

Units of Measure

Metric

2023

2022

H&S-

Emp

Number of injuries/

accidents per total time

worked

Injury / accident rate

0.000004

0.000005

Number of injuries per

million hours worked

Lost-Time Injury

Frequency Rate (LTIFR)

4.0

4.6

Number of days lost per

total time worked

Lost day rate

0.0006

0.0003

Number of days lost per

total days scheduled to

be worked by employees

Absentee rate

7.4

8.0

Number of fatalities

Work-related fatalities

N/A

Number of injuries/

accidents

Recordable work-

related injuries/

accidents for own

workforce

10.

2022 ﬁgure for Injury Rate has been restated due to an error in last year’s reporting, where an internal metric using

number of Full-Time Employees (FTEs) as the denominator was reported. In 2023, we updated the methodology as

prescribed by the EPRA sBPR guidelines, which uses total number of working hours as the denominator.

11.

Accidents and injuries are tracked as the same metric internally, therefore accident rate is considered as the same

metric as injury rate.

TABLE 11

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Board of Directors‘ Report

Table 13 presents the gender pay gap within our employees. This indicator measures

the disparity in earnings between women and men, calculated as the average gross

hourly earnings of female employees divided in the average gross hourly earnings

of male employees. We closely monitor and report this difference based on various

levels of aggregation in an effort to increase transparency and conform to widely

accepted standards. The data is split based on employee remuneration (salary and

bonus) and basic salary in relation to employee level.

Gender Pay Gap

EPRA

Code

Units of Measure

Metric

2023

2022

Diversity-

Pay

Executive

Ratio of remuneration

(salary and bonus) of women to

men

0.46

0.41

Management

0.69

0.80

Non-management

0.82

0.86

All employees

0.67

0.68

Executive

Ratio of salary of women to men

0.47

Management

0.71

0.78

Non-management

0.83

0.85

All employees

0.70

0.71

N/A

Total

compensation

ratio

Ratio of the highest paid individual

to the median annual total

compensation for all employees

(excluding the highest paid

individual)

33.27

N/A

The Work-Related Rights section of this report describes our approach to our

employees’ human rights. Part of this approach entails the monitoring of issues and

incidents relating to these rights, as shown in table 14.

Issues and Incidents

EPRA

Code

Units of Measure

Metric

2023

2022

N/A

Total number

Incidents of discrimination (including

harassment)

Complaints ﬁled through channels

for people in own workforce to raise

concerns

N/A

Complaints ﬁled to National Contact

Points for OECD Multinational

Enterprises

N/A

Severe human rights issues and

incidents connected to own workforce

Severe human rights issues and

incidents connected to own

workforce that are cases of non

respect of UN Guiding Principles and

OECD Guidelines for Multinational

Enterprises

Amount (€)

Material ﬁnes, penalties, and

compensation for damages as result

of violations regarding social and

human rights factors

Material ﬁnes, penalties, and

compensation for severe human rights

issues and incidents connected to own

workforce

12.

The Management remuneration ratio for 2022 has been restated, as the ratio disclosed in 2022 was calculated based

on employees in Germany only. The updated ﬁgure reﬂects all locations.

13.

Only those discrimination cases that resulted in sanctions or actions towards the accused person are reported.

14.

Only if a complaint led to a conﬁrmed compliance case, it is reported here.

TABLE 13

TABLE 14

2023 ﬁgures reviewed by auditor

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Board of Directors‘ Report

WORKERS IN THE VALUE CHAIN

Long-term Targets

●

Maintain zero human rights violations in the supply chain

●

Maintain our high standard of business partner scrutiny

2024 Goals

●

Continuing the distribution of our new Business Partner Questionnaire relating

to our Business Partner Code of Conduct

●

Ensure the voluntary alignment of our Group policies to the new Supply Chain Act

in Germany (LkSG) and initiate possible changes accordingly

While the topic of workers in the value chain was not identiﬁed as material

during our DMA, AT believes that respect for human rights is a non-negotiable

foundation for any business. As such, AT’s commitment to maintaining stringent

standards of ethical behavior extends throughout our value chain as well as to

our own operations, and we operate in accordance with the UN Guiding Principles

on Business and Human Rights. We do this through the expectations and

requirements outlined in our Business Partners Code of Conduct which includes

expectations and requirements around human rights protection. This document

contains matters such as respecting and recognizing employees’ rights pertaining

to freedom of association and the exercise of collective bargaining, providing

fair remuneration, refraining from child, forced and compulsory labor, respecting

minimum age requirements and providing a workplace free of harassment and

discrimination of any kind. We identiﬁed the need to engage with the workers

in our value chain and will do so by using the Business Partner Questionnaire

developed in 2023 which assesses compliance with our Code of Conduct.

The principal interests, views and rights of our value chain workers relate to human

rights protection and fair labor standards. We believe respect for, and protection

of human rights is a non-negotiable for any business, so our commitment to

maintaining effective, diligent standards of ethical behavior extend from not only

our own operations, but across our value chain. We have ensured the interests,

views and rights of our value chain workers are taken into account in our updated

Business Partner Code of Conduct which reduces risk to ourselves as well as

our value chain workers. Furthermore, our Human Rights Policy sets out our

commitments to act in accordance with internationally recognized standards of

human rights and includes our expectations of our suppliers to ensure our value

chain workers are protected to the same standards we hold ourselves. Any and

all reported violations of human rights are reported directly to our CEO and a

member of the Board of Directors. These are also recorded by our Compliance

Department. We are committed to reporting human rights violations and include

this risk within our risk management process.

In our regions of operation, human rights are protected by the strict legal framework

of the European Union and the United Kingdom, meaning that concrete human

rights violations are not a substantial risk. This means that the most material

business impact of this topic is as a compliance issue, so our comprehensive

controls on human rights throughout our value chain are managed through our

compliance framework.

Since our business model includes the refurbishment of properties, much of our

supply chain consists of building work carried out by construction companies and

their subcontractors. Since these sub-contractors do not operate under our direct

oversight, this introduces a risk area for human rights violations, for which speciﬁc

controls are in place. Prior to contracting our business partners, we conduct checks

regarding their reputation, ability to provide the proposed work and their compliance

with the respective local laws. The signing of Aroundtown’s Code of Conduct for

Business Partners is a binding requirement for our business partners with an annual

contractual volume above €5,000 with the exception of large corporations which

have their own code of conduct – provided it is in line with our standards – and with

the exception of organizations that operate in heavily-regulated sectors. To ensure

that our requirements are both practical and thorough, we worked closely with

leading experts to develop a robust system for reporting and monitoring which can

also be integrated into their operations smoothly. The code requires a commitment

to the core principles of the agreement of the governing body of the ILO, the Ten

Principles of the UN Global Compact, and the OECD Guidelines for Multi-national

Enterprises on Responsible Business Conduct.

Each construction undertaking is managed by a dedicated AT project manager, who

engages directly with the onsite contractors and sub-contractors. These project

AROUNDTOWN

Board of Directors‘ Report

managers evaluate compliance with the Code of Conduct during their site visits,

such as inspections and acceptance of partial deliveries. We also conduct spot

checks of business partners’ compliance through our operational departments.

This supplements our standard systems for auditing the activities of our business

partners to control for the different risk potential.

Our property management business also outsources facilities management

services. These companies are required to have their own human rights guidelines

in place and are also subject to the Code of Conduct for Business Partners. Our

facilities managers are required to complete questionnaires regarding their

compliance practices, in which they must conﬁrm that they have conducted their

own human rights checks on any sub-contractors and that they comply with all

relevant human rights laws.

Urban gardening project Cologne

AROUNDTOWN

Board of Directors‘ Report

CONSUMERS AND END-USERS

Long-term Targets

●

Retain strong performance in tenant orientated customer service

●

Continually increase tenant satisfaction

●

Guarantee relevant health and safety standards and ensure compliance with all

statutory norms and safety requirements in Aroundtown’s countries of operation

●

Ensure the highest health and safety standards following national laws

●

Improve the monitoring of compliance with safety measures through the ongoing

centralization and standardization of management processes

2024 Goals

●

Conduct our annual tenant satisfaction survey

●

Continue the installation of renewable energy projects and electric vehicle charging

facilities

●

Further rollout the Tenant Retention project that started in 2023 aimed at expanding

the services at our properties e.g., through the creation of coworking spaces

●

Create opportunity for our tenants to source green electricity produced onsite

●

Further implementation of framework agreements across the portfolio to create

uniformly high standards

●

Digitalize the template for our mandatory property inspections, which starting in

2024 will be conducted twice a year per property

●

Centralization of internal processes and structures in our Quality and Projects team

to ensure compliance with the necessary safety standards at all levels

Tenant Satisfaction

Our business has been built on the premise of exceptional customer service,

emphasizing responsiveness, diligence, and reliability. We aim to build long-

term tenant relationships by striving for high standards in our properties and

customizing our management approach to cater for each tenant’s needs. When

considering our consumers and end-users, we include all tenants who can be

materially impacted by our activities.

Long-term tenant relationships are the cornerstone of our business model. In order to

deliver long-term cash ﬂows, which are central to our business model, it is crucial that

we build positive, long-term tenant relationships. This drives our objectives for this

area: to continually increase the satisfaction of our tenants with their experience of

our properties; and to offer industry-leading, tenant-oriented customer service.

Our tenant base is very diverse, comprising mainly governments, multi-national

and large domestic corporations, granular residential tenants and strong third-

party hotel operators. Additionally, Aroundtown has a small share of small to

medium enterprises as tenants. This diverse range of tenants brings a different

set of needs, which we aim to identify and support from the ﬁrst site visit.

Our tenants are supported by a three-tier management approach. At the regional

level, our asset managers work to enhance asset value by delivering excellent

customer service and targeted asset re-positioning. They serve as the ﬁrst point of

contact for our prospective tenants and engage with them on longer-term aspects

of the assets, the lease agreements, and tenant satisfaction. Our property managers

are responsible for ongoing customer care. They make regular site visits, prepare

budgets, plan technical improvements and maintenance works, and ensure that

refurbishment and management activities are aligned to tenants’ needs. At site

level, facility managers provide day-to-day technical support and maintenance,

accommodating the needs of our tenants with an accessible, ﬂexible approach.

Whenever facility managers are unavailable, tenants can also report issues directly

to property managers, who can then raise them with facility managers for action.

The process of establishing a professional customer relationship management

(CRM) system was initiated in 2021. The CRM system assists the efﬁciency of our

customer engagement process including letting, tracking leads, response times, and

the status of customer requests. Digitizing these internal workﬂows improves the

pace of our communications with tenants, providing vital and accessible customer

care in a competitive and continuously changing market. Both our commercial and

residential tenant service centers were also certiﬁed with TÜV and ISO 9001:2015

in 2022, which put us in a unique position compared to our peers.

Our focus in 2024 will be on continue to harness opportunities for further digitalization

through our SAP management system, for example by integrating the CRM solution

and a letting support tool to improve accessibility for tenants, potential tenants and

service providers. We have trialed solutions to provide tailored experiences for our

AROUNDTOWN

Board of Directors‘ Report

tenants, including booking systems, services and amenities, and to track satisfaction

and support resolution time. The ability to customize these systems will allow us to

respond more efﬁciently to our tenants‘ needs. Additionally, by examining the facility

management costs and concepts of our properties, we aim to identify optimization

potential to buffer the current price increases of operational costs.

In 2023, we launched several projects to improve tenant satisfaction, including a

ﬁtness studio installed at a discounted price for tenants, which is an offer we plan to

continue expanding in 2024. A tenant lounge at one of our properties, a discounted

co-working space, and discounts on hotel accommodation for tenants are other

examples of projects aimed to improve the overall tenant satisfaction that we plan

to continue implementing in the coming years.

In order to align our investments with our tenants’ needs, we tailor ongoing analysis

into each tenant’s industry segment and individual success factors. Investments

in environmental efﬁciency measures are an integral part of this strategy. Larger

corporate tenants often have sustainability policies which give preference to

buildings with higher environmental standards, as well as buildings which offer

additional beneﬁts to employee health and well-being. To evidence the green

credentials of our assets, we continue to pursue BREEAM certiﬁcation across our

commercial portfolio as shown in table 15. During 2023, we successfully certiﬁed

100% of our Dutch ofﬁce portfolio. In addition, we certiﬁed the ﬁrst German ofﬁces

during 2023, utilizing the knowledge transferred from our Dutch ofﬁce certiﬁcations.

Further certiﬁcations in German ofﬁces are ongoing and we are analyzing certiﬁcation

options in the hotel portfolio.

Environmental measures also beneﬁt tenants through reduced service charge

costs, through energy and water efﬁciency improvements. This trend was reﬂected

in the results of our 2022 commercial tenant survey which showed a clear desire

for improvement in the environmentally friendly services available and the energy

efﬁciency of our buildings. Consequently, our plans for 2024 include the development

of scooter and bicycle rental programs for our tenants as well as an improved

parking scheme, and the installation of solar panels onsite. The renewable electricity

generated with these panels will be made available for sale to our tenants, aiding

them in reducing their individual carbon impact. Within our residential portfolio,

awareness raising initiatives such as information videos or leaﬂets advice tenants

on sustainable practices including efﬁcient heating and ventilation.

Tenant Survey

At the end of 2022, we carried out a tenant satisfaction survey for the commercial

portfolio in which we asked tenants to rate their satisfaction across several areas

such as rental property features including parking and safety, sustainability-

related features including green space and energy efﬁciency, ﬁt-outs, cost, property

management, and onsite service. The survey showed high overall satisfaction, with

64% of those who consented and took part answering that they were partially or

completely satisﬁed with Aroundtown’s service. This rate was even higher among

our larger tenants (those with over 400m² rented) and tenants with longer-term

contracts (those with 7+ years’ contract duration). The results also demonstrated

good satisfaction with our external service providers, with the average ratings

for friendliness, accessibility, competence, responsiveness and service orientation

all indicating positive satisfaction. However, in our pursuit of conducting a tenant

survey in compliance with GDPR regulations, the scope of participation was limited,

as we needed to acquire signed consent from each tenant to use their data.

To address this challenge and enhance participation, we took proactive measures

in 2023, for which we paused the survey and focused on establishing a streamlined

process for including consent forms in new lease contracts and amendments of

existing ones. Simultaneously, we initiated the integration of consent data into

our SAP System for a more efﬁcient and secure approach. In parallel to this, as

the survey highlighted some areas for improvement, we rolled-out action plans

informed by the results, which will also guide much of our work in 2024. For

TABLE 15

15. Group portfolio, excluding GCP.

Type and number of ESG-certified owned assets

EPRA

Code

Units of Measure

Metric

2023

2022

Cert-Tot

Percentage of certiﬁed

assets with BREEAM-

In-Use

Ofﬁce Portfolio

36%

15%

Commercial Portfolio

21%

AROUNDTOWN

Board of Directors‘ Report

example, there was higher dissatisfaction with the accessibility, response time

and service orientation of our property management teams. To act on this,

Aroundtown now offers a 24/7 hotline for our commercial tenants through the

Service Center to provide a point of contact outside normal service hours. We

also started the process of developing an online service portal, in which tenants

will be able to send requests directly into our CRM system, which speeds up the

service process. This will be implemented in 2024 alongside a website for tenant

services containing relevant information and features. Furthermore, we have been

developing a Tenant Retention program in the form of a modular set of measures

for expanding the service offerings in our properties, for example by creating

coworking spaces, conference areas or gym facilities. Our efforts align with our

dedication to providing a more dynamic tenant-centric experience, which we hope

will be reﬂected in the results of future surveys.

For our properties in the Netherlands, we sent out the annual satisfaction survey

by email in August, in cooperation with an external agency. The survey covered

various aspects, including the service provided by the Service Desk, the condition

of the building and its surroundings, general sustainability matters, and overall

satisfaction. In 2023, the sustainability satisfaction score showed a signiﬁcant

improvement of 9.5% compared to 2022, while tenant involvement in sustainability

continued to increase, evidenced through and facilitated by discussions during

tenant meetings.

The overall service satisfaction has also seen a positive increase of 7.1%. To enhance

performance further, KPIs for this department have been adjusted for the upcoming

year, with the aim of achieving a yearly improvement of at least 3%. Across all

measured areas, scores have surpassed those of 2022 and it is our overall goal to

continue to improve performance.

Tenant Health and Safety

Guaranteeing high standards of health and safety within our buildings is a

fundamental obligation to our tenants, and a prerequisite to ensuring their

satisfaction with our service. Through the dedication of our property management

teams, we work continually to instill a positive health and safety culture across our

operations. Our ultimate goal is to protect tenants and third parties from health and

safety risks, and to deliver an environment which is healthy, safe and motivating,

with which our tenants are satisﬁed. When considering our consumers and end-

users, we include all tenants who can be materially impacted by our activities.

Health and safety are central to our asset management approach at every stage of

a property’s life cycle. At acquisition, we conduct a comprehensive due diligence

risk assessment which enables us to identify risks and implement preventative

maintenance solutions. We assess the building’s structural characteristics and

establish which refurbishment activities should be targeted, looking for opportunities

to improve the quality and accessibility of the property. Various measures are then

implemented to support tenants’ well-being, easier movement around the building,

and additional communal space and services.

The Aroundtown Tenant Health and Safety Policy sets out our commitment to

protecting the well-being of our tenants and the processes we apply through the

asset lifecycle, including hazard assessment, training, ﬁre safety, and reporting.

The policy details a three-tier management approach, with distinct roles and

responsibilities assigned to our facility, property and asset management teams, and

is in compliance with all statutory norms and safety requirements in the countries

where we are operational.

During the operational phase, we conduct technical reviews of our properties on an

ongoing basis, to ensure alignment with regulations and to guide future investment

planning. Our external facility managers are tasked with operational responsibility

for providing the information and carrying out the necessary tasks to maintain

the technical condition of our assets. This encompasses documenting all checks

performed on technical installations and building structures. Reports are forwarded

to Aroundtown, and any identiﬁed remedial works are incorporated into our annual

budget planning for each property or addressed promptly if required. In 2023, we

advanced in this domain by strategically aligning with two contractors that are

required to adhere to stringent health and safety reporting standards.

Our standard operating procedures for all assets guarantee complete compliance

with ﬁre and safety regulations. This involves investigating and documenting

safety incidents. We regularly commission the legally required assessments from

external ﬁre safety specialists as well as conduct statutory checks with the regional

ﬁre brigade. If deﬁcits are identiﬁed, these are documented and reported to the

Head of Technical Property Management, who is then responsible for seeing that

AROUNDTOWN

Board of Directors‘ Report

the required work is carried out. The proper implementation of these corrections is

conﬁrmed by appropriate follow-up processes, which include an onsite inspection

and subsequent clearance report to the authorities after the deﬁcits have been

processed. Our objective is to safeguard tenants and third parties from health and

safety hazards while providing a healthy, secure, and inspiring work environment

that satisﬁes our tenants.

Besides the Tenant Health and Safety Policy, our Human Rights Policy also details

our commitment to protecting the human rights of our tenants. Although this policy

is currently conﬁdential, it has been written in accordance with the UN Guiding

Principles on Business and Human Rights and in particular respects the privacy of

our tenants through data protection measures. Any and all reported violations of

human rights are recorded by our Compliance Department and reported directly to

our CEO and a member of the board of Directors. We are committed to reporting

human rights violations and include this risk within our risk management process.

Metrics: Consumers and End-Users

Our diligent approach to maintaining the highest standard of tenant health and

safety is described above, and the metrics we use to monitor the success of our

approach are shown below in table 16.

Asset Health and Safety

EPRA

Code

Units of Measure

Metric

2023

2022

H&S-Asset

Percentage of assets for which

health and safety impacts

are assessed or reviewed for

compliance/improvement

Percentage

of assets

95%

100%

H&S-Comp

Number of incidents of non-

compliance with regulations and/or

voluntary standards

Number of

incidents

TABLE 16

16. This metric is reported regarding the German portfolio only.

SOS-Kinderdorf e.V. - Program ‘Education for All in Germany’

AROUNDTOWN

Board of Directors‘ Report

AFFECTED COMMUNITIES AND

NEIGHBORHOOD DEVELOPMENT

Investors in the built environment are expected to think beyond their commercial

interest, to create long-term socio-economic beneﬁt in the communities they

operate in. By building productive relationships with the local community, we can

contribute to the development of prosperous neighborhoods, which in turn will

beneﬁt our properties and their tenants. The principal interests, views and rights

of our local communities relate to affordability, engagement and human rights. We

actively engage with the wider communities surrounding and within our properties

to promote neighborliness and connection. Our approach to meeting the needs of our

communities is underpinned by our Community Involvement and Development Policy.

Long-Term Targets

●

Invest up to €1 million p.a. in community projects via the Aroundtown and GCP

Foundations

●

Build partnerships with local stakeholders to achieve targeted impact with

communities around Group assets

●

Support measures that aim to achieve several of the United Nations Sustainable

Development Goals (UN SDGs)

2024 Goals

●

Achieve a level of community investment through the Aroundtown and GCP

Foundations of at least €500 thousand p.a.

●

Continue supporting employee volunteering through the company-wide ‘Social

Day’, extending this to further regions to engage more employees

●

Organization of our annual blood drive and donation day at the Berlin ofﬁce

While affected communities was not identiﬁed as a material topic in our DMA,

we are aware of the important role we play in our local communities and take

this responsibility very seriously. Our approach is underpinned by our Community

Involvement and Development Policy, which sets out our commitment to positively

impact the local communities where we operate and to improve the well-

being of our tenants and local stakeholders. In addition to outlining reporting,

responsibility, and planning requirements for active community relationship

management, the policy highlights the importance of key activities for addressing

local communities’ needs. This includes the projects sponsored by the Aroundtown

and GCP Foundations, and open and meaningful engagement and consultation

opportunities with external stakeholders. Thus, active community contributions

are one of our key priorities moving into 2024.

Our investment approach of targeting properties with value-add potential sees

us invest in properties in need of retroﬁtting with broader opportunities for

ESG improvements. These types of assets provide signiﬁcant potential to deliver

improvements for the properties’ tenants and nearby residents through investment

in building systems and facilities, shared services, aesthetics of external facades

and improved maintenance. We strive to create spaces for dialogue with existing

tenants and local authorities as soon as an asset is acquired, to determine how

the needs and concerns of the community can be addressed through the long-term

asset strategy. These community consultations are usually in the form of meetings

and workshops.

Neighborhood Development and Community Engagement

The opportunities for community engagement programs differ greatly across the

sectors represented by our assets. Shopping centers, which represents a small part

of the portfolio, for instance, hold regular community events, host liaison activities

with schools, and provide support to local charities, for example by providing spaces

free of charge to promote and raise funds for their cause. Our subsidiary, GCP, takes a

proactive approach to engagement in the communities surrounding the residential

properties they invest in. This year their activities/events have included:

●

Neighborhood gardening: Kick-off of two urban gardening projects in a high-rise

quartier in Cologne and a property in Braunschweig

●

Easter Week: Digital Easter week campaign with daily interactive activities (1,972

participants)

●

Cinema Summer: Live open-air cinema at 8 locations, plus additional 700 cinema

boxes for a home movie night (2,052 participants)

●

Halloween World: Digital Halloween craft activity with daily interactive tasks on

the GCP website and app (1,321 participants)

AROUNDTOWN

Board of Directors‘ Report

●

Advent Calendar: Interactive calendar from December 1

to 24

with games,

quizzes and surprises (16,

583 participants).

Some of these events have been a tradition for many years and always include a

call for participation through multiple channels to foster engagement. The high

participation numbers and the high tenant satisfaction rate on the initiatives of 97%

reﬂect the great reception from the tenants, and we are proud to continue building up

our efforts for community engagement in 2024.

Charitable Contributions

The Aroundtown Foundation exists to channel funding into projects which enrich

the communities in which the Group operates. This includes charitable organizations

and initiatives which support youth and elderly welfare, education, poverty relief,

national and vocational training including student aid, development coordination,

sports, art and culture. In autumn 2023, the purpose of the foundation was expanded

to include welfare and the assistance of people in special need linked to disasters,

war, and prosecution on the grounds of discrimination related to political, racial,

religious and gender reasons. The Foundation is run by a Committee of Aroundtown

managers and overseen by the Foundation Board, and all employees are encouraged

to propose projects for consideration.

In 2023, the Aroundtown and Grand City Properties Foundations supported a total

of 93 projects and donated approx. €1 million to charitable organizations. One such

donation went to the non-proﬁt association SOS-Kinderdorf e.V., which works to

provide children and young people a safe home. With our donation, we supported

the program ‘Education for All in Germany’, which rolled-out various educational

measures aimed at building equitable opportunities for disadvantaged young people

in different phases of life, reducing discrimination and strengthening social inclusion.

Also, with our donation to ShelterBox e.V., an organization helping and supporting

the world‘s most vulnerable people to regain their strength and rebuild their homes

after a disaster, we contributed to providing humanitarian aid to affected countries

after disasters, or in complex emergencies such as wars and conﬂicts. Further, with the

support of the Aroundtown Foundation, 20 young people (15 to 16 years old) were

able to attend a summer camp from the apropolis e.V., an association with the aim to

encourage young people to form their own political values and opinions.

The projects funded by the Grand City Properties Foundation included the support

of a women‘s advice center in the city of Kiel offering counseling options for women

in vulnerable situations such as in cases of domestic violence or for migrant women.

Our donation funded an artistic redesign of the passageway leading to the counseling

center with the aim of creating a space that feels safe and friendly for the women

visiting the center, but that also enhances the neighborhood aesthetics and helps break

spatial barriers. The foundation also supported lebensnah e.V., an association providing

support for people with disabilities, in developing a new individualized German sign

language course and an urban gardening project by the Caritas Association of Cologne.

Social Day

In 2023, we continued to deliver our Social Days to our employees. We delivered three

in total which involve volunteering for an organization during a paid working day.

These were a combination of self-organized, and organized through Lebenshilfe e.V.,

which sees itself as a self-help and support association for people with intellectual

disabilities and their families, helping people with disabilities to participate in

society on an equal footing.

We hope to continue these successful Social Days into 2024 and aim to expand this

engagement opportunity to employees in other regions. In addition to organizing

the Social Day, our annual employee blood drive and donation day took place in

October 2023 in Berlin.

Affordable Housing

Much of our community impact comes from our residential properties, owned

through our subsidiary, GCP. GCP’s tenants represent a wide range of social,

economic and cultural backgrounds. To provide properties which serve these

communities, we are committed to providing affordable housing, so to monitor our

performance in this regard, the Group has developed a “rental cost portion” metric

modeled on Eurostat’s housing cost overburden rate. This metric compares GCP’s

median rent for residential units against the net minimum wage, reﬂecting salary

after taxes and social security contributions, which we believe is a conservative

benchmark focusing on those most sensitive to rent affordability.

The housing cost portion based on the median warm rent of GCP’s residential properties

in Germany in 2023 was 39% of this benchmark, up from 38% in 2022. The warm rent

AROUNDTOWN

Board of Directors‘ Report

100

incorporates various costs of living including energy costs, and housing services, which

GCP has no control over. The rental cost portion based on median cold rent in 2023

for our German residential properties, excluding these factors, remained at 24% of the

net minimum wage salary in 2023. These ﬁgures show that increased housing costs

in 2023 were driven by utility and service cost inﬂation rather than increasing rental

costs, along with observations that wage growth lagged in the current inﬂationary

environment. Germany has already acted to increase the minimum wage as of January

1st, 2024, along with another increase set for 2025, which should improve housing

affordability if the trend of a decreasing rate of inﬂation continues. These results are

testament to the Group’s commitment to ensuring that our high-quality residential

properties are priced affordably for all our tenants.

Modernization Rent Increases

Our subsidiary GCP launched its modernization program for its residential properties

and is carrying a relatively small program, targeted to where it can make a signiﬁcant

impact. As part of our commitment to providing affordable housing, GCP works to

ensure that modernization cost allocation to tenants is done in a way that keeps

housing affordable. To determine these cost allocations, the Rent Control and Increase

Department analyses the current market situation and relevant regulations on cost

allocations, to decide whether to enact rental increase waivers on the modernization

costs. The average modernization cost allocation for our German residential properties

in 2023 was €0.53/sqm, which is 16% lower than the legally possible cost allocation

set out in German law.

In cases of signiﬁcant rent increases, tenants can object to the cost allocation in what

is known as a ﬁnancial hardship case. These can be resolved through a complete

or partial waiver of the entitled rent increase for a given number of years. In 2023,

however, zero hardship cases were received out of the 1,349 units modernized. We

believe this low number of hardship case applications reﬂects the targeted approach

to conducting modernization projects, and the careful consideration that is put into

rent increases which in many cases is partially waived based on the company’s

understanding of the local market situation. Recognizing the importance of not

placing pressure on our tenants in cases of ﬁnancial hardship, we ensure that any and

all changes are discussed with our tenants beforehand. This transparent and open

approach allows security and trusted relationships with our tenants.

Metrics: Affected Communities

Our dedication to maintaining strong community connections and developing

longstanding relationships is demonstrated by our Community Involvement

and Development Policy, which guides our efforts towards tenant engagement.

Particularly for our residential portfolio, a range of community events are organized

such as seasonal tenant festivals and campaigns throughout the year, on site and/or

digitally. By organizing various tenant events also digitally, our residential tenants at

all locations have the opportunity to participate. This is enhanced by complementary

tenant beneﬁts, such as an additional incentive for the residential tenants loyalty

program or embedding the digital campaigns in the GCP app. These initiatives

impact the wider community and are considered stakeholder engagement programs.

For 2024, we strive to set up an effective tracking system that allows us to better

measure the reach of the initiatives in terms of actual impact generated in the

communities - such as actual participation rates and satisfaction levels with the

various programs.

Community Engagement

EPRA

Code

Units of Measure

Metric

2023

2022

Comty-Eng

% of assets under operational

control that have implemented

local community engagement,

impact assessments,

and/or development programs

Percentage

of assets

75%

N/A

17.

This metric is reported regarding the GCP portfolio only.

TABLE 17

101

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Board of Directors‘ Report

Governance Information

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 our shareholders and bondholders

are large international leading institutional investors and major global investment

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-

Discrimination, 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 listed companies incorporated in Germany, apart for recommendations C.10

(with sole reference to its applicability to the Chair of the Audit Committee), D.8 and

D.9 of the German Corporate Governance Code (Deutscher Corporate Governance

Kodex). Aroundtown has therefore issued a declaration that it does not deviate

from the aforementioned recommendations of the German Corporate Governance

Code. In general, Aroundtown already complies with most of the principles and

continues to take steps to implement ESG best practices throughout the business.

The Group’s efforts support the United Nations Sustainable Development Goals

(UN SDGs), particularly those relating to Peace, Justice and Strong Institutions

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

The Group is a founding member of the United Nations Global Compact (UNGC)

Network Germany, one of the largest corporate sustainability initiatives, signaling the

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

Ten Principles. In 2023 we submitted our ﬁrst disclosure to the UN Global Compact.

Board of Directors

The Board of Directors makes decisions solely in the Group’s best interest,

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

Directors vested with the broadest powers to perform in the Group’s interests. All

powers not expressly reserved by the Luxembourg Companies Act or by the articles

of association to the general meeting of the shareholders fall within the competence

of the Board of Directors.

On a regular basis, the Board of Directors evaluates the effective fulﬁlment of their

remit and compliance with corporate governance procedures implemented by the

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

Board of Directors currently consists of a total of seven members, of which four are

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

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

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

and the principles of 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, however directors may be re-appointed after such term.

The Board of Directors is supported by ﬁve committees of the Board, these being

the ESG, Audit, Risk, Remuneration and Nomination Committees. Additional support

is provided by the Advisory Board. The Board of Directors is also 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 (AGM) of the shareholders is intended to take

place on June 26th, 2024, in Luxembourg.

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Board of Directors‘ Report

102

Members of the Board of Directors

The Annual General Meeting in 2023 approved the renewal of the mandates of all

the directors until the Annual General Meeting 2027 and newly appointed Daniel

Malkin to the Board of Directors until the Annual General Meeting 2027.

In 2023, the Board of Directors conducted 31 meetings. The below table shows the

attendance of board members, as well as the average attendance rate:

The composition of our highest governance body is summarized in table 18.

Senior and Key Management

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

Mr Daniel Malkin

Independent Director

Name

Position

Mr Barak Bar-Hen

Co-CEO and COO

My Eyal Ben David

CFO

Mr Oschrie Massatschi

CCMO (Chief Capital Markets Ofﬁcer)

Name

Meetings attended

Percentage attended

Mr Frank Roseen

30/31

97%

Ms Jelena Afxentiou

29/31

94%

Mr Ran Laufer

30/31

97%

Mr Markus Leininger

28/31

90%

Ms Simone Runge-Brandner

28/31

90%

Mr Markus Kreuter

30/31

97%

Mr Daniel Malkin

(elected June 28th, 2023)

12 (/12)

100%

Board average

29/31

95%

Composition of the Highest Governance Body

EPRA

Code

Units of

Measure

Metric

2023

2022

Number

Percentage

Number

Percentage

Gov-Board

Total

numbers

and

percentages

Executive

board members

29%

33%

Independent

board members

57%

50%

Non-executive

board members

14%

17%

Independent /

non-executive

board members

with competen

cies relating to

environmental

and social

topics

100%

Average tenure

(years) on

the Board of

Directors

6.2

N/A

5.2

N/A

TABLE 18

18.

Since Mr. Daniel Malkin was elected in June, his attendance is assessed solely based on the meetings held after his

appointment to the Board by the Annual General Meeting. In calculating averages, his attendance is recorded as 100%,

reﬂecting his full participation in all meetings following his appointment.

103

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Board of Directors‘ Report

Advisory Board

The Board of Directors established an Advisory Board to provide expert advice

and assistance to the Board of Directors. The Board of Directors decides on the

composition, tasks and term of the Advisory Board as well as the appointment

and dismissal of its members. The Advisory Board has no statutory powers under

the Luxembourg law or the articles of association with 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 has established an Audit Committee and decides on the

composition, tasks and term of the Audit Committee as well as the appointment and

dismissal of its members. The 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 services rendered by such auditor, the issuing of the audit mandate to the

auditor, the determination of auditing focal points and the fee agreement with the

auditor. The Audit Committee consists of the independent directors: Mr. Markus Kreuter

(Chairperson), Mr. Markus Leininger, Ms. Simone Runge-Brandner, and Mr. Daniel Malkin.

ESG Committee and ESG Management

The Group’s governance incorporates consideration of sustainability issues

at both the Board of Directors and management levels. The operational ESG

strategy has been established and is managed by the Board of Directors, which

has ultimate oversight of the overall ESG performance. The Board of Directors

established an ESG Committee to supervise the company´s ESG processes and to

review and assess the Group’s contribution to sustainable development.

The ESG Committee is chaired by Mr. Markus Leininger, an independent member

of the Board of Directors, and includes as voting members independent director

Mr. Markus Kreuter and executive director Mr. Frank Roseen, as well as advisory

members including the Group’s Head of the Sustainability Department, Head of

the Energy Department and Head of Human Resources Department as well as

the Chief Operating Ofﬁcer of a key Group company. The ESG Committee oversees

strategic guidance on ESG topics and is responsible for reviewing and assessing

Aroundtown’s responsible business strategy, policies and practices with respect

to ESG. The Committee meets at least quarterly, with additional meetings called

as required, and sets the direction for the work of the Sustainability Department.

The Sustainability Department acts as a cross-departmental interface, working

across the Group to implement and monitor sustainability programs and initiatives

at an operational level. It is led by the Head of Sustainability and reports directly

to the CEO and to the Chairperson of the Board of Directors. The Department also

prepares the Group’s materiality analysis and ESG reporting, as well as responds to

enquiries by investors and rating agencies on ESG topics. It collaborates closely with

the Energy Department, which applies its engineering expertise to implement the

technical elements of our sustainability strategy. There are constant exchanges of

information between departments around ESG-related aspects.

Risk Committee and Chief Risk Ofﬁcer

The Board of Directors has established a Risk Committee tasked with assisting

and providing expert advice to the Board of Directors in fulﬁlling its oversight

responsibilities, relating to the different types of risks, recommending on a risk

management structure and its processes, as well as assessing and monitoring the

effectiveness of the risk management system. The Risk Committee is supported

by the Chief Risk Ofﬁcer (CRO) who brings a systematic and disciplined approach

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

AROUNDTOWN

Board of Directors‘ Report

104

to evaluate and improve the risk management culture, capabilities and practices

integrated within the strategy-setting and execution. The CRO’s responsibilities are

determined and monitored by the Risk Committee, whose oversight is established

pursuant to the Rules of Procedure of the Risk Committee. The Risk Committee

provides advice on actions of risk management, in particular by reviewing the

Group’s risk management procedures established by the management and

their effectiveness for risk detection, assessment, prioritization, mitigation and

monitoring, as well as its internal control system. The Board of Directors decides

on the composition, tasks and terms of the Risk Committee members and the

appointment and dismissal of its members, and of the CRO. Members of the Risk

Committee are Mr. Markus Kreuter (Chairperson), Mr. Markus Leininger, Ms. Simone

Runge Brandner, Mr. Daniel Malkin, Mr. Frank Roseen and Mr. Ran Laufer.

Internal Controls and Risk Management Systems

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

measures to mitigate the occurrence and/or impact of any possible failure to an

acceptable level.The risk management supervision is led by the Risk Committee, which

reviews the risk management structure, organization, processes and coordinates risk-

related training. The Group categorizes the risk management systems into two main

categories: internal risk mitigation and external risk mitigation. The internal controls

system and compliance of the Group is monitored by the Compliance Department.

Internal Risk Mitigation

Internal controls are constructed from ﬁve main elements:

●

Risk management – set by the Risk Committee and guided by an ongoing analysis

of the organizational structure and by identifying potential weaknesses. Further,

the committee assesses control deficiencies impacting the risk management

framework in the organization, supported by CCO and CRO.

●

Control discipline – based on the organizational structure and supported by

employee and management commitments. The discipline is erected on the

foundations of integrity and ethical values.

●

Control features – the 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 payment are completed by at least two

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

and contract. A payment exceeding a certain set threshold amount requires an

additional approval as a condition for payment.

●

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

through a detailed monthly Actual vs. Budget analysis and additional checks.

Strong and sustainable internal control system signiﬁcantly reduces the probability

and materiality of errors. The management sees high importance in constantly

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

●

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

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

enterprise risk management. Potential future expenditures on ESG matters and

opportunities are included in the ﬁnancial budget.

The Group has established procedures to protect the conﬁdentiality and integrity

of management information and data across all business processes. Furthermore,

we implemented a wide range of guidelines and provisions, with the ratiﬁcation

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

mandatory awareness training on GDPR. The Group has implemented Standard

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

in the course of the Group’s operations is 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 level of zero compliance-related tolerance. Both our Business Partners

Code of Conduct and Employee Code of Conduct can be found on our

website

External Risk Mitigation

Through its ordinary course of business, the Group is exposed to various external

risks. The Risk Committee is therefore constantly determining whether the

appropriate infrastructure, resources and systems are in place and are adequate to

maintain an acceptable level of risk. The potential risks and exposure are related,

inter alia, to volatility of interest rate risk, inﬂation risk, liquidity risk, credit risk,

regulatory and legal risk, collection and tenant deﬁciencies, the need to unexpected

capital investments, property damage risk, physical climate risks, market downturn

risk and geopolitical risk. The Group sets direct, speciﬁc guidelines and boundaries

to mitigate and address each risk of failure or potential default, by hedging and/or

reducing it to an acceptable level of impact and/or occurrence.

105

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Board of Directors‘ Report

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

see pages

224-231 (Note 25.3 Risk management objectives and policies).

ESG Risk Management

The assessment of physical and transitional risks linked to climate change are

primarily external. The Risk Committee commissions the CRO and the Sustainability

Department to conduct physical risk assessments of Aroundtown’s portfolio in

Germany, the Netherlands and the UK. Other departments, including insurance,

energy and technical due diligence provide additional support and expertise where

necessary. Under current procedures, the Group assesses climate-related risk at the

portfolio level; however, it is the Group’s long-term ambition to conduct an asset-

level analysis. The Group’s focus is to prioritize information which provides the

most accurate image of regional and local climate risks, as well as opportunities

arising from the necessary transition.

Climate-related risks are taken into account throughout the process described

above. A comprehensive risk matrix catalogue for each risk group has been

compiled for the Group, including physical and transitional climate-related risks.

Each risk is rated based on a combination of impact and likelihood resulting in

four rating deﬁnitions: Inherent Risk, Target Residual Risk, Target Risk Reduction

and Actual Residual Risk.

The ability to quantify climate related risks depends, inter alia, on the availability

of data and methodologies. The Carbon Risk Real Estate Monitor (CRREM) tool is

an emerging best practice for stranding risk assessment in the real estate sector

and is a methodology taken into consideration by the Group. While CRREM was

found to be the most advanced tool for assessing alignment with Paris Agreement

targets, its current methodology poses challenges limiting its practical usability

for landlords to focus on renovation planning to address energy and carbon

intensity under their own sphere of inﬂuence. The Group has thus prioritized

applying stranding deﬁnitions based on EPCs and the EU’s climate commitments

embodied in the EPBD recast, which grants a better understanding of investment

actions needed and the expected results of those actions speciﬁc to each asset

class, both in terms of their sustainability and ﬁnancial impacts.

In order to further engage stakeholders, including the value chain and workers

in our value chain, the Group intends to develop a methodology in 2024 which

assesses potential risks allowing the Group to develop even further its mitigation

strategy. This process will include department heads and team leaders. This new

approach will promote an enhanced risk management structure, ensuring ampliﬁed

understanding and cooperation across our stakeholders.

Nomination Committee

The Board of Directors established a Nomination Committee to identify suitable

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

The Nomination Committee consists of the Independent Directors Mr. Markus

Leininger, Mr. Markus Kreuter, Ms. Simone Runge-Brandner, and Mr. Daniel Malkin.

Remuneration Committee

The Board of Directors established a Remuneration Committee to determine

and recommend to the Board the Company’s Remuneration Policy and prepares

and recommends to the Board remuneration proposals for members of the

Board, the Executive Directors and Senior Management including evaluation of

short- and long-term performance-related remuneration to senior executives.

The Remuneration Committee consists of the Independent Directors Mr. Markus

Leininger, Mr. Markus Kreuter, Ms. Simone Runge-Brandner, and Mr. Daniel Malkin.

ESG-Linked Remuneration

The Remuneration Policy is recommended to the Board by the Remuneration

Committee. It applies to the Company’s executive individuals and independent and

non-executive directors, and ties Short-Term and Long-Term Incentive Programs

to speciﬁc ESG targets, such as the annual progress towards Scope 1 and 2

emissions reductions, the annual increase of the proportion of buildings with

green certiﬁcations, the Group’s ESG rating, and gender equality. In 2023, the Group

has committed to aligning the remuneration of its executive individuals with the

requirements of the Remuneration Policy and the changes will become effective as

of 2023 and 2024.

106

ESG

Governance Structure

Sustainability

Department

Cross-departmental interface

Implements and monitors

sustainability programs

Energy Department

Develops energy and

carbon reduction strategy

Implements and tracks energy

projects and progress

HR Department

Compliance Department

Operations & Construction Departments

Responsible for deﬁning,

implementing and tracking

departments‘ ESG targets

Markus Leininger

Independent Director

Chairman of the ESG Committee

Markus Kreuter

Independent Director

Frank Roseen

Executive Director

ESG Sponsors at Board level

BOARD OF DIRECTORS

ESG Committee

Markus Leininger, Frank Roseen, Markus Kreuter,

Head of Sustainability, Head of Energy,

Chief Operating Ofﬁcer, Head of HR

Meets at least quarterly

Strategic guidance on ESG

Responsible for reviewing ESG strategy

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Board of Directors‘ Report

107

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Board of Directors‘ Report

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 the AGM, 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 previously announced 2021/2022 buy-back program. The AGM of

shareholders takes place at such place and time as speciﬁed in the notice of the

meeting. At the AGM, the Board of Directors presents, among others, the directors‘

report as well as consolidated ﬁnancial statements to the shareholders. The AGM

resolves, among others, on the ﬁnancial statements of the Group, 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 to expire.

Compliance with the Transparency Law

Aroundtown is committed to adhere to best practices in terms of corporate

governance by applying, among others, rules arising from the Luxembourg law

of 11 January 2008 on transparency requirements for issuers, as amended (the

‘Transparency Law’).

In particular, Aroundtown 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

publishes, stores with the Luxembourg Stock Exchange as the ofﬁcially appointed

mechanism (OAM) and ﬁles with the Commission de Suerveillance 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 our website.

In addition, Aroundtown provides on its website information about the organization,

its management and upcoming and past shareholder meetings such as its AGMs. The

Company‘s website further provides a ﬁnancial calendar announcing the ﬁnancial

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

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

The individual Aroundtown SA ﬁnancial statements are published annually on the

same day as the 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”):

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

the relevant information is available on page 207 (Note 19. Total equity) of this

Consolidated Annual Report. In addition, Aroundtown’s shareholding structure

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

is available on page 37 of this Consolidated Annual Report and on the Company’s

website, where the shareholding structure is updated as per shareholder

notiﬁcations on a regular basis.

b) With regard to article 11 (1) (b) of the Takeover Law, the ordinary shares

issued by Aroundtown are admitted to trading on the regulated market of the

Frankfurt Stock Exchange (Prime Standard) and are freely transferable according

to Aroundtown’s articles of association (the “Articles of Association”).

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

following signiﬁcant shareholdings were reported to Aroundtown until December

31, 2023:

Shareholder name

Amount of Shares

Percentage of voting

rights

Aroundtown SA and its

wholly owned afﬁliate

259,951,076

16.91%

Avisco Group PLC /

Vergepoint Limited

230,660,516

15.01%

TLG Immobilien AG

183,936,137

11.97%

Stumpf Capital GmbH

154,351,365

10.04%

Total number of Aroundtown SA shares as of December 31, 2023: 1,537,025,609

Voting rights are suspended

Controlled by Yakir Gabay

Controlled by Georg Stumpf

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Board of Directors‘ Report

108

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

Aroundtown 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 Aroundtown

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

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

previously announced 2021/2022 buy-back programme.

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

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

conditions in relation to Aroundtown’s incentive share plan are described on page

213 (Note 20. 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 Aroundtown accordingly. In this case, the

exercise of voting rights relating to the shares exceeding the fraction that should

have been notiﬁed is suspended. The suspension of the exercise of voting rights is

lifted the moment the shareholder makes the notiﬁcation.

g) With regard to article 11 (1) (g) of the Takeover Law, as of December 31, 2023,

Aroundtown was not aware of any agreements between shareholders that would

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

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

the Articles of Association, the members of the board of directors of Aroundtown

(the

“Board”

) shall be elected by the shareholders at their annual general meeting

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 shareholders, by

observing the applicable legal prescriptions. Further details on the rules governing

the appointment and replacement of a member of the Board are set out in page

101 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 deliberate 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.

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

endowed with wide-ranging powers to exercise all administrative tasks in the

interest of Aroundtown 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

101-106 and 242 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 207 (Note

19.1.1. Share capital) and page 213 (Note 20. Share-based payment agreements)

of this Consolidated Annual Report. According to article 8.7 of the Articles of

Association, Aroundtown may redeem its own shares to the extent and under the

terms permitted by law. The shareholders’ meeting held on 6 May 2020 authorised

the Board, with the option to delegate, to buy-back, either directly or through a

subsidiary of Aroundtown, shares of Aroundtown for a period of ﬁve (5) years not

exceeding 20% of the aggregate nominal amount of Aroundtown’s issued share

capital. The annual general meeting of the shareholders of Aroundtown

held on 30

June 2021 approved to increase the maximum aggregate nominal amount of the

shares of Aroundtown which may be acquired under the buy-back programme by

10% of the aggregate nominal amount of the issued share capital of Aroundtown

from time to time and an ordinary general meeting of the shareholders of

Aroundtown held on 11 January 2022 further increased the maximum aggregate

nominal amount of the shares of Aroundtown which may be acquired under

Aroundtown’s buy-back programme from 30% to 50% of the aggregate nominal

amount of the issued share capital of Aroundtown from time to time. Aroundtown

concluded its previously announced share buyback program at the end of 2022.

Further details on Aroundtown’s concluded share buyback program are described

on page 208 (Note 19.1.2. Treasury shares) of this consolidated annual report.

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

bonds, perpetual notes and security issuances (listed on pages 207-210 and 214-

218; and Note 19.1.1., Note 19.2. and Note 21.2.) under the EMTN programme

contain change of control provisions that provide noteholders with the right to

require Aroundtown to repurchase their notes upon a change of control of the

issuer. Aroundtown’s ISDA master agreement securing derivate transactions with

regard to its listed debts contains a termination right if Aroundtown is ﬁnancially

weaker after a takeover.

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

between Aroundtown and members of the Board or employees according to which,

in the event of a take-over bid, Aroundtown may be held liable for compensation

arrangements if the employment relationship is terminated without good reason

or due to a takeover bid.

apropolis SommerCamp

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Board of Directors‘ Report

110

FAIR BUSINESS AND COMPLIANCE

Our business strategy is underpinned by our fundamental commitment to

ethical conduct, robust corporate governance, and high levels of transparency.

Safeguarding the 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 review 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-Corruption, Diversity and Anti-Discrimination, Anti-Bribery,

measures to prevent human right violations, Data Protection Declaration and User

Policy, as well as a Whistleblowing Policy.

This framework seeks to embed our principles of integrity, respect, performance,

accountability, and sustainability into all of our business activities. We ensure our

Board of Directors and senior executives hold vast experience and skillsets in

relevant business areas in order to help maintain our high governance standards.

Long-term Targets

●

Keep our level of fair business relationships with our customers and suppliers

●

Maintain zero tolerance towards compliance violations

2024 Goals

●

Maintain high-level awareness and engagement with our Group policies

●

Review and implement actions to comply with new European regulations (e.g.,

CSRD) during 2024

●

Adherence to the Group risk management strategy by performing compliance risk

assessment

●

Ensure the voluntary alignment of our Group policies to the new Supply Chain

Act in Germany (LkSG)

To ensure our high ethical standards are embedded in our business, we have

developed a comprehensive compliance framework. This system is designed to

adapt to increasingly complex legal frameworks, and to protect our business from

the risks associated with unethical conduct. The expectations and requirements of

this framework are clearly set out through our Group-level policies and standards.

Alignment with these standards is monitored by internal control mechanisms, and

in case of deviations we have a clear reporting and response process.

All Group-

wide policies mentioned in this section are aligned with and approved by the Board

of Directors. This ensures and justiﬁes the clear statement of Aroundtown’s top

management that these policies are a crucial part of the Group and binding for each

and every one working for and with Aroundtown.

Our compliance and risk management teams are structured accordingly to ensure

responsible behavior guides us, and they are supplemented by internal monitoring

procedures, covering all steps of real estate investment and management.

Employee Code of Conduct

At the heart of the internal policies for compliance is our Employee Code of Conduct.

This sets out the principles of our commitment to ethical behaviour and is a contractual

requirement for our staff at every level. The Employee Code of Conduct covers our

standards on topics including bribery, corruption, fair competition and anti-trust,

conﬂict of interest, and discrimination. It is supplemented by topical guidelines and

speciﬁc policies, such as the Anti-Corruption Policy, the Global Information Security

Policy, the Diversity Policy, and the Anti-Discrimination Policy. Aroundtown is also a

signatory of the Charta der Vielfalt (German Diversity Charter). For more information

on our anti-discrimination efforts, please refer to the subsection Equal Treatment

and Opportunities for All. Another crucial subject in our compliance program is the

management of ethical standards in our supply chain as described in the section

Workers in the Value Chain.

In its Employee Code of Conduct, the Group has also 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

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AROUNDTOWN

Board of Directors‘ Report

law. Reported issues are investigated by the Compliance Department. Besides

the reporting channels, there is also a Whistleblowing Platform conducted by an

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

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

Please refer to the subsection Our Intranet Compliance Site below.

Aroundtown‘s Code of Conduct includes the prohibition of insider dealing.

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

(Market Abuse Regulation (MAR)), as amended. Aroundtown notiﬁes (including by

way of training sessions) pursuant to applicable provisions under MAR, all persons

discharging managerial responsibilities of their obligations in the context of

managers’ transactions. Memorandums, notiﬁcations, training and information are

distributed regularly.

Outstanding leadership is crucial in this regard. Our managers are expected to

be examples of our core values of mutual respect and clear communication. This

standard of behavior usually shows positive effects on our commercial success, as

well as on staff performance. We maintain a horizontal organizational structure, with

a widespread culture of transparent and regular feedback between employees and

managers. Furthermore, our Employee Code of Conduct establishes expectations

for all staff to abide by the values of openness, trust, teamwork, and acceptance

of diversity in all their dealings with one another and with our tenants and other

stakeholders. Adherence to the Code of Conduct is a mandatory requirement of all

employee contracts.

Our Intranet Compliance Site

Since 2022, we have a compliance site on our Group intranet, where the above

policies are available to all our employees. This is a major step towards our

overarching goal of unifying our internal policies across all our operating regions.

Through the intranet platform, we can now also ensure that policies are available

in a standard form to the whole organization, and that updates to these policies

are rolled out immediately.

Our intranet page and our publicly available website also support the measures

that ensure ongoing alignment with our compliance standards. Firstly, it contains

a dedicated page on our breach reporting and whistleblowing processes and

provides access to our whistleblowing platform. We are aware that ensuring

continued alignment to our high ethical standards requires a frictionless

method for employees’ concerns to be registered, and this is the spirit of our

“Speak Up” approach. Through it, employees and external service providers are

encouraged to voice any concerns they may have about breaches of the law or

contradiction of our Code of Conduct without any fear of repercussions, as dictated

by the Whistleblower Protection Act. Issues can also be reported in person, but

to guarantee total anonymity when preferred, we work with a third-party web

application to allow stakeholders to register any suspected misconduct in good

faith to ensure whistleblowing protection in line with our Whistleblowing Policy.

Our intranet page ensures availability and awareness of this platform for our

employees and the whistleblowing system can also be accessed via our website by

external stakeholders. This whistleblowing process is key to the effectiveness of the

compliance framework. Should a report be submitted through our whistleblowing

platform, an investigation is launched by a responsible user of the system, or a

member of Group Compliance to ensure objectivity of the investigation.

Additionally, the intranet platform provides links to our Contemporary Real Estate

Academy (CREA), our e-learning tool providing training on anti-corruption, bribery,

and data protection topics. This continual training and communication ensure that

understanding of our standards is always being reinforced. Compliance trainings

through CREA are included in our Welcome Days for new employees, as well as

training on the use of our whistleblowing platform. Furthermore, employees are

required to undergo annual refresher training on these policies, to reafﬁrm their

commitment to these standards.

Compliance Monitoring

In addition to unifying our compliance approach across our operating locations, we

want awareness and consideration of compliance issues to be straightforward and

commonplace for our employees. To this end, in 2022 we introduced compliance

ambassadors in our regional ofﬁces, to serve as ﬁrst contact points for staff on

compliance subjects. These have currently been embedded in our UK and Cyprus

ofﬁces, as well as some regional ofﬁces in Germany. In order to enable an open

culture around compliance, these ambassadors are not ofﬁcers of the Compliance

Department, but are empowered to serve as sources of information and guidance

for staff across the organization. In 2023, we intensiﬁed our collaboration with our

AROUNDTOWN

Board of Directors‘ Report

112

local compliance ambassadors, which we aim to continue also in 2024.

We monitor the effectiveness of our compliance framework by tracking the number

of compliance violations. We continue to carefully analyze the evolving market and

regulatory environment in conjunction with further appropriate development of

internal structures. This process considers a range of compliance issues including

but not limited to corruption or bribery, conﬂicts of interest, insider trading, and

money laundering. In 2023, zero relevant compliance cases were reported within

the Group.

For the purpose of this report, Aroundtown considers a compliance case to be

relevant either when it has the potential to materially harm the reputation of

Aroundtown, will have a signiﬁcant impact on an investor’s decision to invest in AT

or if it may lead to a signiﬁcant ﬁnancial damage (of > €500 thousand). Any cases

reported to the Compliance Department in 2023 were treated with the highest

attention and considered carefully based on the provided deﬁnition of relevance.

It was determined that none of the cases could be considered relevant.

Transparency and Reporting

We are committed to transparently reporting on our ESG progress, as such this is

the 7

year in a row for which we have been awarded the Gold Award for EPRA BPR

and the 6

year in a row for EPRA sBPR, showcasing our continual commitment to

the highest standards of transparency and reporting. We also received recognition

by Sustainalytics, a sustainability rating agency, which ranked the Group as “Low

Risk,” placed in the top 6

percentile of the global universe of rated companies.

Our S&P Global Corporate Sustainability Assessment (CSA) was ranked in the top

6th percentile of real estate companies globally, leading the Group to be placed in

the Dow Jones Sustainability Index (DJSI) Europe for the second consecutive year.

Corporate Culture

In 2023, we asked some of our employees who sit within key ESG-related roles to

tell us how they felt about our corporate culture, as we wanted to understand how

our employees view our company, and if, and how, we need to make improvements.

The feedback we received during this exercise is reﬂective of our employee

engagement programs and demonstrates the values we uphold at the Aroundtown

Group. In the upcoming year, we aim to maintain this positive corporate culture.

Here’s what they had to say:

Political Engagement and Lobbying

Aroundtown does not engage in direct lobbying activities or make donations to

political parties. However, as a member of bodies such as the German Sustainable

Building Council (DGNB), the German Property Federation (ZIA) and the European

Public Real Estate Association (EPRA), we participate in consultations on public

policy. For example, we have been involved through EPRA in consultation with

the EU on the real estate applications of their Sustainable Finance and Taxonomy

Regulations. However, we do not make any political contributions and have

measures in place when working with former politicians to check that there are no

connections remaining with their previous political activities.

supportive

flexible

innovative

fair

everchanging

family-like

creative

empowering

hands-on

communicative

improvement-oriented

helpful

open

adaptive

encouraging

dynamic

19.

Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third party

suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an endorsement

of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable

for a particular purpose. Their use is subject to conditions available at

https://www.sustainalytics.com/legal-disclaimers

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Management of Supplier Relationships

Prior to contracting our Business Partners, we conduct checks regarding their

reputation, ability to provide the proposed work and their compliance with

the respective local laws. We recognize the signiﬁcance of our suppliers and

the importance of the type of relationships we build with them, as well as the

inﬂuence we can have on them in terms of ESG performance. We therefore have

developed a Business Partner Code of Conduct, which details our expectations

and requirements from our suppliers in order to extend our reach of responsible

and sustainable practices. The signing of Aroundtown’s Business Partner Code

of Conduct is a binding requirement for our business partners with an annual

contractual volume above €5,000, with the exception of large corporations which

have their own code of conduct – provided it is in line with our standards – and

with the exception of organizations that operate in heavily-regulated sectors.

With the signing of our Business Partner Code of Conduct, these business partners

demonstrate their commitment to adhering to the Code of Conduct.

Furthermore,

in 2023 we enhanced this process by developing a Business Partner Questionnaire

which assesses compliance with our Code of Conduct.

To fulﬁll our commitment and effectively manage the risks associated with our

business partners, we conduct regular onsite checks, particularly focusing on

health and safety. Regarding payment terms, although we do not have a speciﬁc

policy in place that addresses cases of late payments to our suppliers, we do deﬁne

the payment terms at the beginning of our contracts to ensure we are on the same

page with suppliers, and we do adhere to this agreement.

Taking into account adverse impacts on human rights identiﬁed in the Group’s

materiality assessment and risk management process, which involves consideration

of the risks associated with our suppliers according to their economic sectors and

countries of operation, Aroundtown has identiﬁed and addressed potential risks in

the areas of construction and refurbishment/maintenance of the business through

a number of measures and processes. For instance, Aroundtown’s critical suppliers

(those with a contract volume of > €250 thousand per annum) are required to sign

the Group’s HR questionnaire and during project implementation, site visits are

conducted by the Construction or Operation Departments on a quarterly basis to

ensure compliance with our ESG Strategy.

Corruption and Bribery

Our Anti-Corruption Policy details the procedures and processes in place to prevent,

detect and address allegations or incidents of corruption or bribery, including

varying levels of contracts for different supplier types involving checks of company

structure and ﬁnance functions. The Policy, alongside our Code of Conduct, is

available to all employees to ensure they understand their responsibilities in

preventing and reporting incidents of corruption or bribery. While the policy is not

yet explicitly aligned with the United Nations Convention on Corruption, we will

be updating it in 2024, and will consider this convention.

During 2023, we were not subject to any convictions or ﬁnes resulting from the

violation of anti-corruption or anti-bribery laws. We also did not experience any

incidents of corruption or bribery, or any public legal cases in this regard.

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Board of Directors‘ Report

114

DATA PROTECTION

We have a deep commitment to protecting the privacy of our stakeholders’

data, which goes beyond what is required of us by regulation. We believe data

protection is a key aspect sitting within our governance responsibilities, and every

organization should have strong data protection governance in place. The volume

of data handled in our business relationships increases every year, and we take the

trust placed in us to protect the conﬁdentiality of this data seriously.

Long-term Targets

●

Identify risks proactively, to detect and eliminate weaknesses before they can

become threats

●

Embed a culture of awareness and vigilance throughout our staff, through

consistent and regular training

●

Pursue continual improvement of the security of our digital systems

2024 Goals

●

Pass our recertiﬁcation audits for ISO 27001

●

Introduce a new “on the job” learning format aimed at making information security

more accessible by e.g., rolling out awareness campaigns across our ofﬁces

The development of our Information Security and Privacy Strategy is continual, and

is spearheaded by our in-house cybersecurity leads, who sit in on the board’s Risk

Committee meetings to reﬂect data security considerations in our top-level risk

management processes. Our ISO 27001 certiﬁcation for our Information Security

Management System (ISMS) at our headquarters in Berlin was maintained for a

third consecutive year in 2023. The scope of the certiﬁcation applies to our head

ofﬁce, while the scope of the implementation applies to all local and international

ofﬁces where all relevant policies and procedures apply in the same way. For

operational reasons, all digital information ﬂows through Berlin, making this the

most material location to focus our certiﬁcation effects.

The core principles of our Information Security Management System are:

●

Conﬁdentiality: encryption wherever data is stored or accessed

●

Integrity: establishing procedures to prohibit unauthorized personnel to alter

information

●

Availability: designing systems to minimize downtime

●

Security: securing business information pertaining to Group operations

●

PII: enforcing the security and conﬁdentiality of processed personal information

●

Regulations: satisfying regulatory (such as GDPR) and other information security

requirements

●

Awareness: training employees on how to identify threats and act according to

Group guidelines

●

Resilience: protecting our systems and networks as well as the data contained

therein from malicious activities

●

Information Assets: ensuring that all networks, systems and applications comply

with conﬁdentiality, integrity and availability

As part of our proactive approach to risk management, we have conducted 28

internal reviews at our ofﬁce branches (local and international) over 2022 and

2023, and further reviews are already planned for 2024. These were designed to

compare the effectiveness of measures at these ofﬁces to the implementation at

our operational HQ, to ensure that the application of our procedures is uniﬁed

across our business locations. The results demonstrated good levels of compliance

across the organization, and opportunities to further improve practice at these

sites were identiﬁed. Our goal is to continue to conduct more audits, so we can

pinpoint potential weaknesses before they become threats.

In 2023, as planned, we restarted our in-person welcome days, including data

protection as a key part of the agenda. We also conducted extensive technical crisis

penetration tests alongside risk assessments. To further strengthen our security

posture, an extensive Data Loss Prevention Strategy was kicked-off in 2023, which

will continuously roll out over the course of 2024.

Also, this year, a core member of our data protection team was invited to speak at

a Federal Ofﬁce for Information Security (BSI) event, explaining our approach to

cybersecurity and its successes. BSI is a German government agency addressing

cybersecurity, so this invitation demonstrated the success and strength of our approach.

One key channel of risk to our systems and networks identiﬁed is mobile devices.

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In light of the shift in recent years to remote working spurred by the COVID-19

pandemic, we have introduced new controls to ensure that all external connections

are secure. Through a Privileged Access Management (PAM) System, we have added

a supplementary security layer for external IT service providers which enforces

MFA (multi-factor-authentication), session recording, least privileges and requires

approval before each session. For our external business service providers, we have

implemented a tool which checks the compliance of the operating systems that

connect to ensure that they are well protected with a recent operating system, a

malware solution and encryption capabilities. External service providers can only

connect if all these standards are fulﬁlled.

To ensure adequate security in our processes for saving and sharing information, all

documents are labelled with an information security classiﬁcation, from Public to

Restricted, which requires password protection for the document, where applicable.

To embed our data protection system across the Group, we place great importance

on training and awareness for our staff, with all personnel being required to sign

a company statement of their commitment to data protection. Furthermore, all

our employees are required to complete video-based training modules on data

protection, which are regularly developed to keep the training provided up to date.

In 2022, we developed and ﬁlmed new awareness videos starring our employees

to make the training more relatable and understandable, and we implemented

a photo-based project portraying colleagues in fun poses edited to be used as

“landing pages” for phishing campaigns. In 2024, we intend to continue creating

highly personalized awareness campaigns covering further topics.

Beyond initial training on our data protection procedures, we emphasize continued

learning and awareness efforts. Furthermore, Aroundtown’s Standard Operating

Procedures (SOPs) set out expected courses of action for day-to-day activities, such as

saving and storing information or handling requests for data. Permanent employees

must complete mandatory refresher training every 18 months to reinforce their

knowledge of these procedures and awareness of data protection risks.

Furthermore, we monitor potential security incidents and data protection breaches

as an indicator of the effectiveness of our operational procedures. In 2023, no

such conﬁrmed breaches or incidents were reported. In the event of any conﬁrmed

incident, a response team is formed to immediately investigate the matter and

recommend remedial actions to prevent a similar occurrence.

Grafﬁti artistic intervention in shopping center. Source: Frameless-studio UG – Artist Tape_Fabifa.

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116

EPRA sBPR Data Preparation

As members of the European Public Real Estate Association (EPRA), we choose to

report on our ESG impacts in accordance with the 3rd edition (2017) of the EPRA

Sustainability Best Practice Recommendations (sBPR). In 2023, we received the EPRA

sBPR Gold award for our disclosure for the seventh time consecutively. This year,

in preparation for the ﬁrst compliance window of the CSRD, we have reported in

alignment where possible with ESRS disclosure requirements according to our DMA.

Organizational Boundaries

The information and data in this report covers the operations of Aroundtown

SA, spanning our direct employees and commercial portfolio. As of 31 December

2023, our Group portfolio (including Grand City Properties S.A.) held €25 billion

of investment property comprising ofﬁces (40%); residential (33%); hotels (21%);

logistics/other and retail (6%).

Information on our residential portfolio, which is owned by Grand City Properties S.A.

(“GCP”) in which we hold a 63% stake (excluding the shares GCP holds in treasury),

has been consolidated and the data is included in the scope of this report. However,

GCP’s’ performance is also reported separately, and this information is published on

the sustainability section of GCP’s website

Landlord and Tenant Boundaries

We have followed the methodology followed in last year’s report for allocating

energy consumption between landlord-controlled areas and tenant-controlled

areas. In our 2019 baseline, we use a common area/total area ratio to apportion

shared-service heating consumption between landlord and tenant spaces,

based on the ﬂoor area distribution found with the property types classiﬁcation

appendix (3a) of the GRESB Real Estate Assessment reference guide

. Thus,

the whole building consumption is attributed to landlord or tenant control in

proportion to the ratio of shared spaces to tenant areas expected for the property.

Correspondingly, emissions from this heating are attributed to Scope 1 and 2 or

to Scope 3 in the same proportion. For electricity, the consumption for tenant-

controlled areas is estimated based on industry standard energy benchmarks,

namely those of CIBSE. At present, we collect and/or estimate Scope 3 emissions

data relating to tenant energy consumption. We look to expand this emissions

data boundary in future years.

Therefore, the energy consumption and the corresponding CO

emissions will now

represent the entire building area i.e., of both landlord and tenant-controlled

area. We recognize that under an operational control approach, the allocation of

emissions between Scope 1 or 2 and Scope 3 is dependent on the metering

and sub-metering arrangement in place between tenants and landlords. However,

to create an accurate representation of the entire building, we have classiﬁed

indirect emissions by area apportioned between landlord and tenant spaces, as

described in the methods above.

Coverage

Absolute and like-for-like portfolio environmental data relates to the assets in the

operational control portfolio, which is a subset of the Organizational Boundaries

discussed above, deﬁned as assets the company directly manages building operations

such as choice of energy provider. The like-for-like subset contains all the properties

for which we received environmental reporting data for the full two-year period

from January 1

, 2022 to December 31

, 2023.

Actual environmental performance data is only reported on assets for which we have

operational control and for which we can collect utilities data. On an absolute basis,

this included a net lettable area of 6,337,823 m² out of a total operational control

portfolio covering a net lettable area of 7,265,365 m² (excluding assets held for sale

and properties under development) at the end of December 31

, 2023. A breakdown of

the portfolio net lettable area based on asset types are as follows: ofﬁce – 2,770,258

m², retail – 183,760 m², others including logistics – 686,791 m². During 2023, we

continued to improve the quality of our environmental data collection and are now

able to report like-for-like data from approximately 68% of our total managed assets

portfolio.

Further information relating to maximum coverage on an absolute and like-for-like

basis per utility type is provided within our data tables.

12.

2023 Real Estate Standard and Reference Guide, https://documents.gresb.com/generated_ﬁles/real_estate/2023/real_estate/reference_guide/complete.html#property_types_classiﬁcation

117

AROUNDTOWN

Board of Directors‘ Report

Data relating to our employees covers all direct employees employed by Aroundtown

in Germany (who represent 80% of our European workforce), including part time

and temporary workers, as well as our international employees. Following the

consolidation with GCP in 2021, our employee data also includes GCP data, but

excludes contractors and those not directly employed by us.

Voluntary green building certiﬁcations (Cert-Tot) are discussed in absolute terms.

100% of the Dutch ofﬁce portfolio is certiﬁed, 36% of the total ofﬁce portfolio is

certiﬁed and 21% of the commercial portfolio is certiﬁed with BREEAM. In our

German portfolio, with the ﬁrst ofﬁce assets certiﬁed, we expect gradual progress in

the coming periods. We are also analyzing certiﬁcation options in our hotel portfolio.

Reporting Period

All data relates to our ﬁnancial year, which coincides with the calendar year, and

consequently runs from January 1

to December 31

of the year under review.

Estimation of Landlord-Obtained Utility Consumption

Measured data for the reporting year were not fully available in time for

publication. In instances where the available heating data is not representative,

estimations were calculated based on known consumption from other periods,

following the ratio-based heating-degree-days normalization method. In the

case of electricity, the consumption was extrapolated based on the weighted

arithmetic mean of other known periods. In some instances, this was not possible

for heating. Here we calculated an estimation by extrapolating expected

heating consumption according to the EPC rating of the building and weather

normalization was not performed.

Data is only available for a proportion of units under our management control,

for example regarding recycled waste. In this instance we have extrapolated data

for the units where we are able to collect complete data given the similarities

between our units and those which are tenanted.

We have reported the percentage of estimation that this represents per utility type

in our data tables.

Furthermore, we have disclosed the proportion of overall consumption that our

estimation of tenant consumption represents, according to our methodology

described in the section ‘Landlord and Tenant Boundaries’.

Regarding only landlord-obtained utility consumption, as per the EPRA sBPR

requirements, we have detailed the extent of estimations below:

●

Electricity: 76% of landlord-obtained consumption is based on available utility

consumption data, with 24% estimated.

●

Heating: 92% of landlord-obtained consumption is based on available utility

consumption data, with the remaining 8% estimated.

The total volume of waste is based on the contracted waste volumes at properties

where this information was available. No additional estimation occurred. The total

proportion of recycled waste is based on household averages published by the

German environmental protection authority which represents the highest authority

in the country.

Our own ofﬁce utilities consumption is estimated based on the proportion of the

total rental ﬂoor area occupied by Aroundtown as we do not occupy the whole

building and no sub-meters exist.

Units of Measurement and Normalization

Utilities data are reported based on absolute consumption measured in kWh

(energy), t CO

e (GHG emissions), m

(water) and m

and tons (waste).

GHG emissions are reported using location-based conversion factors published by

the German Environmental Protection Association.

Where consumption is normalized, we calculate intensity indicators using ﬂoor area

) for whole buildings, including tenant areas. Since we are now estimating the

tenant consumption, we believe that our numerator and denominator provide a

representative intensity ﬁgure.

Employee coverage rates are expressed as a percentage of AT’s total direct employees

at year end.

●

Accident/Injury Rate = Number of reportable injuries / Total hours worked

●

Lost-Time Injury Frequency Rate (LTIFR) = Number of injuries / Million hours worked

●

Lost Day Rate = Number of days lost due to workplace injuries / Number of

working hours

●

Absentee Rate = Number of days absent due to illness / Total number of working days

●

Work-related Fatalities = Total number of work-related fatalities

●

Number of Accidents = Number of Injuries

●

Rate of Accidents = Injury rate

AROUNDTOWN

Board of Directors‘ Report

118

Accidents and injuries are tracked as the same metric, and therefore accident rate is

classiﬁed as the same metric as injury rate.

Segmental Analysis (By Property Type, Geography)

Segmental analysis by geography is not relevant for our portfolio. Our assets are

primarily located within Germany, the Netherlands and London, and therefore in

the same climatic zone. Segmental analysis is instead provided by asset type and is

consistent with our ﬁnancial reporting.

Disclosure on Own Ofﬁces

Our own occupied ofﬁce consumption is excluded from our portfolio data as we are

a tenant in the building.

Restatements of Information

●

In 2023, the Group updated its deﬁnition of the Operational Control portfolio to

include all assets it directly manages in its German and Dutch portfolios, and to

exclude hotels. This has resulted in a restatement of the EPC coverage ﬁgures

with the denominator now being calculated according to the new operational

control portfolio deﬁnition.

●

Renewable share of energy: a technical error was identiﬁed for 2022 ﬁgures, where

an existing contract for renewable energy for one energy type was incorrectly

applied to all energy contracts for that asset. This has now been corrected to tagging

renewable contracts more granularly to contracts for each speciﬁc energy type.

●

Injury rate: 2022 ﬁgures for Injury Rate have been restated due to an error in last

year’s reporting, where an internal metric using number of Full-Time Employees

(FTEs) as the denominator was reported. In 2023, we updated the methodology

as prescribed by the EPRA sBPR guidelines, which uses total number of working

hours as the denominator.

●

Gender Pay Gap: The Management remuneration ratio for 2022 has been restated,

as the ratio disclosed in 2022 was calculated based on employees in Germany

only. The updated ﬁgure reﬂects all locations.

Narrative on Performance

Explanation and analysis of our performance in relation to the Performance Measures

reported on are found with the respective data tables throughout this report.

Berlin

119

AROUNDTOWN

Board of Directors‘ Report

Key Factors

EPRA Code

Indicator

Units of Measure

Location in Report

Environmental

Energy

Consumption

Elec-Abs

Total electricity consumption

kWh

Table 1, Page 62

Elec-LfL

Like-for-like total electricity consumption

kWh

Table 2, Page 64

DH&C-Abs

Total district heating and cooling consumption

kWh

Table 1, Page 62

DH&C-LfL

Like-for-like total district heating and cooling consumption

kWh

Table 2, Page 64

Fuels-Abs

Total fuel consumption

kWh

Table 1, Page 62

Fuels-LfL

Like-for-like total fuel consumption

kWh

Table 2, Page 64

Energy-Int

Building energy intensity

kWh/m

/year

Table 1, Page 63

Table 2, Page 65

GHG Emissions

GHG-Dir-Abs

Total direct greenhouse gas (GHG) emissions

tons CO

Table 3, Page 66

GHG-Indir-Abs

Total indirect greenhouse gas (GHG) emissions

tons CO

Table 3, Page 66

GHG-Int

Greenhouse gas (GHG) emissions intensity from building energy consumption

kgCO

e/m

/year

Table 3, Page 66

Table 4, Page 67

Water Consumption

Water-Abs

Total water consumption

Table 5, Page 70

Water-LfL

Like-for-like total water consumption

Table 6, Page 70

Water-Int

Building water intensity

/year

Table 5, Page 70

Table 6, Page 70

Waste Management

Waste-Abs

Total weight of waste by disposal and diversion routes

tons by disposal/diversion route

To be published in April

Waste-LfL

Like-for-like total weight of waste by disposal and diversion routes

tons by disposal/diversion route

GBCs

Cert-Tot

Type and number of sustainably certiﬁed assets

Total number by certiﬁcation/rating/labelling scheme

Table 1, Page 63

Table 2, Page 65

Table 15, Page 95

Social

DE&I

Diversity-Emp

Employee gender diversity

Percentage of male and female employees

Table 12, Page 90

Diversity-Pay

Gender pay ratio

Pay ratio

Table 13, Page 91

Health, Safety and

Wellbeing

H&S-Emp

Employee health and safety

Injury rate

Table 11, Page 90

Lost day rate

Table 11, Page 90

Absentee rate

Table 11, Page 90

Work-related fatalities

Table 11, Page 90

H&S-Asset

Asset health and safety assessments

Percentage of assets

Table 16, Page 97

H&S-Comp

Asset health and safety compliance

Number of incidents

Table 16, Page 97

Employee Development

Emp-Training

Training and development

Average number of hours

Table 10, Page 89

Emp-Dev

Employee performance appraisals

Percentage of total workforce

Table 10, Page 89

Emp-Turnover

Employee turnover and retention

Total number and rate of new employee hires and turnover

Table 9, Page 89

Community Engagement

Comty-Eng

Community engagement, impact assessments and development programs

Percentage of assets

Table 17, Page 100

Governance

Governance Body

Gov-Board

Composition of the highest governance body

Total number of executive board members

Table 18, Page 102

Total number of independent board members

Table 18, Page 102

Total number of non-executive board members

Table 18, Page 102

Average tenure on the governance body

Table 18, Page 102

Number of independent/non-executive board members with

competencies relating to environmental and social topics

Table 18, Page 102

Gov-Select

Nominating and selecting the highest governance body

Narrative description

Page 101

Gov-Col

Process for managing conﬂicts of interest

Narrative description

Page 101

EPRA sBPR Index

AROUNDTOWN

Board of Directors‘ Report

120

London

121

AROUNDTOWN

Board of Directors‘ Report

AROUNDTOWN

Board of Directors‘ Report

122

Notes on

Business

Performance

Berlin

123

AROUNDTOWN

Board of Directors‘ Report

Year ended December 31,

2023

2022

in € millions

Revenue

1,602.8

1,609.9

Net rental income

1,192.8

1,222.1

Property revaluations and capital (losses) / gains

(3,217.5)

(497.3)

Share of (loss) / proﬁt from investment in equity accounted investees

(149.8)

5.9

Property operating expenses

(638.4)

(694.9)

of which Extraordinary expenses for uncollected hotel rents

(33.0)

(75.0)

Administrative and other expenses

(64.7)

(62.5)

Operating (loss) / proﬁt

(2,467.6)

361.1

Adjusted EBITDA

1) 2)

1,002.9

1,002.3

Finance expenses

(230.1)

(184.8)

Current tax expenses

(120.4)

(117.4)

FFO I

332.0

362.7

FFO I per share (in €)

0.30

0.33

FFO II

449.1

714.1

Impairment of goodwill

(137.0)

(404.3)

Other ﬁnancial results

(14.4)

(194.1)

Deferred tax income

543.1

82.4

Loss for the year

(2,426.4)

(457.1)

SELECTED CONSOLIDATED INCOME STATEMENTS DATA

excluding extraordinary expenses for uncollected hotel rents

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 142-150

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 142-150

AROUNDTOWN

Board of Directors‘ Report

124

REVENUE

AT recorded revenues of €1,603 million in 2023 (“FY 2023”), ﬂat compared to €1,610

million generated in 2022 (“FY 2022”). Net rental income represents the largest

portion of revenues and totaled €1,193 million in 2023, 2% lower compared to €1,222

million in 2022. The decline in net rental income due to €2.1

billion of net disposals

closed since the start of 2022 was partially offset by the like-for-like rental growth of

3.2% in 2023, of which 3.6

% is from in-place rent like-for-like and more than offset

the negative 0.4

% from occupancy like-for-like.

The commercial portfolio continued

to beneﬁt from signiﬁcant CPI adjustments and step-up rents and recorded like-

for-like rental growth of 3.0%. The residential portfolio continued to beneﬁt from a

signiﬁcant supply and demand imbalance resulting in a further reduction of vacancy

to a historic new low level and a like-for-like net rental income growth of 3.4%.

AT generated operating and other income of €410 million in 2023, higher by 6%

compared to €388 million in 2022. Operating income is mostly related 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 increase in operating and other income was mainly due to cost inﬂation which

accordingly also resulted in an increase of recoverable property operating expenses.

Other income also includes €39 million income from vendor loans and loans-to-

own investments. Reimbursable utility costs including heating, energy and water and

external service expenses were the largest drivers of growth. However, in line with

the slowdown in inﬂation, the increase in these expenses slowed down throughout

2023. The increase was partially offset by the smaller portfolio size due to disposals.

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. As AT

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

recurring and therefore presents their contributions in a separate line item. The net

rental income from held-for-sale and disposed properties amounted to €13 million

in 2023, decreasing compared to €18 million in 2022 mostly due to the smaller

disposals volume and held-for-sale balance. As a result, the recurring net rental

income in 2023 totaled €1,180 million, compared to €1,204 million in 2022. Recurring

net rental income also includes immaterial rental income from properties classiﬁed

as development rights & invest which is excluded in the run rate.

Year ended December 31,

2023

2022

in € millions

Recurring long-term net rental income

1,179.7

1,204.1

Net rental income related to properties marked for disposal

13.1

18.0

Net rental income

1,192.8

1,222.1

Operating and other income

410.0

387.8

Revenue

1,602.8

1,609.9

Dresden

125

AROUNDTOWN

Board of Directors‘ Report

PROPERTY REVALUATIONS AND CAPITAL (LOSSES) / GAINS

Property revaluations and capital (losses) / gains amounted to a loss of €3,218

million in 2023, compared to a loss of €497 million in 2022. Property revaluations

amounted to a loss of €3,175 million in 2023, compared to a loss of €540 million

in 2022. The full portfolio was revalued by independent and certiﬁed third-party

appraisers for the 2023 annual report. In 2023, AT recorded a like-for-like value

decline of

%, of which 5% were recorded in H2 of 2023. This decline was primarily

due to the large increase in interest rates in the period which resulted in increased

discount rates, cap rates and yield expansion. More information on the increase in

discount and cap rates can be found in note

Measurement of fair value

of the audited

consolidated ﬁnancial statements.

Capital gains or losses represent the sale of properties disposed compared to their

book values. AT completed over €1.2 billion of disposals in 2023 at an average

discount of 3% to book values and resulting in a capital loss of €43 million. AT

beneﬁtted from its diverse asset mix and closed disposals across all asset types,

including 65% in ofﬁces, residential and hotels, 21% in retail and logistics/other and

14% in development & invest properties. Disposals consisted of 39% in non-core

locations, 18% in London, 15% in Dresden and Leipzig, 12% in Berlin, 11% in Hamburg,

and 5% in Frankfurt and NRW.

As of December 2023, the portfolio had an average value of €

2,421 per sqm and

net rental yield of

5.0

%, compared to €2,635 per sqm and 4.5% respectively as of

December 2022.

SHARE OF (LOSS) / PROFIT FROM INVESTMENT

IN EQUITY-ACCOUNTED INVESTEES

The share of (loss) / proﬁt from investment in equity accounted investees amounted

to a loss of €150 million in 2023, compared to a proﬁt of €6 million in 2022. This item

represents AT’s share of proﬁts (loss) from investments which are not consolidated

in AT’s ﬁnancial statements, but over which AT has signiﬁcant inﬂuence. The loss

was mostly due to valuation losses in investees’ assets. As of December 2023, the

largest equity-accounted investee remains the investment in Globalworth Real Estate

Investments Limited (“Globalworth” or “GWI”) which is a leading publicly listed ofﬁce

landlord in Central and Eastern European markets, mainly focused on Warsaw and

Bucharest. The equity-accounted investee balance also includes stakes in assets where

AT does not have control.

The recurring operational contribution of investees to adjusted EBITDA and FFO I were

€57 million and €47 million in 2023, compared to €59 million and €46 million in 2022.

Year ended December 31,

2023

2022

in € millions

Share of (loss) / proﬁt from investment

in equity accounted investees

(149.8)

5.9

Year ended December 31,

2023

2022

in € millions

Property revaluations

(3,174.8)

(539.9)

Capital (losses) / gains

(42.7)

42.6

Property revaluations and capital (losses) / gains

(3,217.5)

(497.3)

AROUNDTOWN

Board of Directors‘ Report

126

PROPERTY OPERATING EXPENSES

Property operating expenses amounted to €638 million in 2023, lower by 8% compared

to €695 million in 2022. The decline in property operating expenses was mainly due to

the lower extraordinary expenses for uncollected hotel rents and the overall smaller

portfolio size, partially offset by cost inﬂation in ancillary expenses and purchased

services that correlated with the increase in operating income. However, the cost

inﬂation has softened in H2 2023. Excluding the impact from lower extraordinary

expenses for uncollected hotel rents, property operating expenses were €605 million in

2023 and decreased by 2% year-over-year. The largest component of property operating

expenses are ancillary expenses and purchased services which are mainly recoverable

from tenants and include utility costs (heating, energy, water, insurance, etc.), charges

for services provided to tenants (cleaning, security, etc.) and other services contracted

in relation to operations of properties. Operating personnel expenses amounted to

€63 million in 2023, higher compared to €59 million in 2022 as headcount remained

stable, but wage inﬂation resulted in an overall increase. Other operating costs include

various expenses such as marketing, letting and legal fees, transportation, travel,

communications, insurance, IT and VAT. These costs have decreased

mainly as a result of

lower provisions for uncollected hotel rents, the smaller portfolio and greater efﬁciency

in these items, offsetting the impacts of cost inﬂation.

Property operating expenses also include non-recurring extraordinary expenses for

uncollected hotel rents totaling €33 million in 2023, lower than the €75 million in

2022. These extraordinary expenses reduced during 2023 as the hospitality industry

continued its recovery, witnessing a steady increase in the occupancy and average daily

room rate throughout the year.

Year ended December 31,

2023

2022

in € millions

Ancillary expenses and purchased services

(409.8)

(390.8)

Maintenance and refurbishment

(49.3)

(51.1)

Personnel expenses

(62.7)

(58.6)

Depreciation and amortization

(17.9)

(21.1)

Other operating costs

(98.7)

(173.3)

of which Extraordinary expenses for uncollected hotel rents

(33.0)

(75.0)

Property operating expenses

(638.4)

(694.9)

Mainz

127

AROUNDTOWN

Board of Directors‘ Report

MAINTENANCE AND CAPEX

AT recorded maintenance and refurbishment expenses in the amount of €49

million in 2023, lower by 4% compared to €51 million in 2022. The decline was

mostly a result of the smaller portfolio size due to disposals, partially offset by cost

inﬂation. The maintenance expense ratio over the average investment property value

(including the properties held for sale) remained relatively stable at 0.18% in 2023.

AT continuously reviews its portfolio to assess its capex needs to maintain the high

quality of its assets, increase the attractiveness of its portfolio to support the letting

process and address the requirements of both existing and prospective tenants. In

2023, AT invested €335 million in capex, reﬂecting a ratio of 1.2% over average

investment property value (including properties held for sale), compared to €408

million and 1.4% in 2022. Due to the prevailing market conditions, strengthening

the liquidity and balance sheet has been an important objective for AT and thus, AT

carried out projects more selectively, resulting in the lower capex spent in 2023. A

lower volume of projects was partially offset by an increase in construction costs.

AT divides its capex into three different main categories. These include Expansion

capex, Tenant improvements and Other capex. Expansion capex includes activities

that are targeted at creating additional income drivers or signiﬁcant value creation

potential which may result in additional lettable space or signiﬁcant enhancement

of the existing space. These selective projects are mostly major refurbishments but

also conversions and new-builds and they are mainly done at low risk with high pre-

let ratios. Expansion capex additionally includes GCP’s pre-letting modiﬁcations and

development capex. Expansion capex projects represented €122 million or 36% of

total capex in 2023, compared to €197 million or 48% in 2022, reducing in absolute

and percentage terms mainly because of greater selectiveness in undertaking large

projects with substantial investment requirements. Tenant improvements include

capex for fit-out works that are targeted at retaining existing tenants and/or

attracting new tenants, supporting the quality of the tenant structure and extending

the average lease term. This category represented €96 million or 29% of capex in

2023, compared to €96 million or 24% in 2022, stable in absolute terms but higher in

percentage terms due to lower capex in 2023. Other capex includes ongoing capital

expenditures that are targeted at sustaining the high quality of assets as well as

improving sustainability standards to reduce the energy and CO

consumption and

tax, beneﬁtting AT and its tenants. These can be green installations such as solar

panels, combined heat and power engines and electric vehicle charging stations as

well as green refurbishments such as roof and lighting replacements. This item also

includes GCP’s repositioning capex. Other capex accounted for €117 million or 35%

of total capex in 2023, compared to €114 million or 28% in 2022, increasing mostly

due to GCP’s higher repositioning capex. The absolute amount remained stable year-

over-year excluding GCP’s repositioning capex, at €41 million in 2023 compared to

€40 million in 2022 as cost inﬂation offset the smaller portfolio size.

CAPEX

Other capex

28%

Expansion capex

48%

Tenant

improvements

24%

2022

€408m

RATIO OVER

INVESTMENT

PROPERTY*

1.2%

RATIO OVER

INVESTMENT

PROPERTY*

1.4%

Other capex

35%

Tenant

improvements

29%

Expansion capex

36%

€235m

excl. GCP

€265m

excl. GCP

* including properties held for sale. Portfolio value is average of the beginning and end of the period

2023

€335m

AROUNDTOWN

Board of Directors‘ Report

128

ADMINISTRATIVE AND OTHER EXPENSES

AT recorded administrative and other expenses in the amount of €65 million in 2023,

higher compared to €63 million in 2022 mainly due to cost inﬂation partially offset

by higher efﬁciency across the period. Administrative personnel expenses were the

largest component and totaled €31 million in 2023, higher compared to €29 million in

2022. Administrative 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 were ﬂat as cost inﬂation was

offset by higher efﬁciencies.

FINANCE EXPENSES

AT recorded net ﬁnance expenses totaling €230 million in 2023, increasing by 25%

compared to €185 million in 2022. Finance expenses are mainly composed of net

interest on bonds and bank debt. The increase was due to new debt being raised,

the expiry of certain hedging instruments which resulted in 13% amount of debt to

become variable at current rates, and the higher rates within the capped portion of

the debt. These factors were partially offset by a lower total debt balance due to bond

buybacks at discount and a small amount of loan repayments and higher interest

income received from cash deposits. In 2023, AT repaid

approx. €1.5 billion

in shorter

term debt from bond buybacks at discount and scheduled redemptions while raising

approx. €0.9 billion in new longer-term bank debt, resulting in a net nominal debt

reduction of around €0.6 billion. Since the beginning of 2022, the Group has repaid

approx. €2.5 billion in debt and raised €1.4 billion of bank debt

. As a result, AT has a

cost of debt of 2.2% with an average debt maturity of 4.4 years as of December 2023

compared to a cost of debt of 1.4% and 5-year debt maturity as of December 2022. AT

maintains a hedging ratio of 83% as of December 2023 with no material upcoming

hedging expiries.

Finance expenses also include ﬁnance expenses on lease liabilities

which increased to €17 million in 2023 from €11 million in 2022, mainly due to new

ground leases and a commencement of a ﬁnance lease agreement.

OTHER FINANCIAL RESULTS

AT recorded other ﬁnancial results amounting to an expense of €14 million in 2023,

compared to €194 million in 2022. 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. The lower expense in 2023 was primarily due

to the positive impact from the bond buybacks at discount. This gain was offset by

negative adjustments in the net fair value of both ﬁnancial assets and liabilities, which

were impacted by volatility in ﬁnancial markets, changes in yields and movements

in foreign exchange rates. Other ﬁnancial results was also impacted by changes in

investments in ﬁnancial assets mainly related to real estate funds which were also

impacted by negative valuation adjustments. The net fair value of hedging instruments

was negatively impacted by the higher interest rates and derivatives were impacted by

inﬂation indexation hedging instruments on two of AT’s bonds. Since inﬂation remained

elevated in 2023 above the pre-determined hedged level, an expense was recorded

in other ﬁnancial results line albeit at a lower amount than in 2022. This expense is

economically partially offset by an increase on the revenues line coming from inﬂation-

indexed leases. Other ﬁnancial results also include negative changes in the value of

contingent liabilities relating to the takeover of TLG, ﬁnance related costs incurred to

Year ended December 31,

2023

2022

in € millions

Personnel expenses

(30.9)

(28.8)

Legal and professional fees

(13.4)

(12.1)

Audit and accounting expenses

(7.1)

(7.2)

Marketing and other administrative expenses

(13.3)

(14.4)

Administrative and other expenses

(64.7)

(62.5)

Year ended December 31,

2023

2022

in € millions

Finance expenses

(230.1)

(184.8)

Year ended December 31,

2023

2022

in € millions

Other ﬁnancial results

(14.4)

(194.1)

129

AROUNDTOWN

Board of Directors‘ Report

optimize the debt proﬁle like those associated with debt repayments and expenses

related to new ﬁnancing, currency hedging and others.

IMPAIRMENT OF GOODWILL

Aroundtown conducts an impairment test once a year or when there is an indication

of impairment of an asset. The impairment amount reﬂects the amount by which the

carrying amount of an asset or cash generating unit exceeds its recoverable amount.

In 2023, AT recorded impairment of goodwill in the amount of €137 million, compared

to €404 million in 2022. €604 million is attributed to the goodwill on TLG and

€540 million is attributed to the goodwill on GCP. The goodwill is mainly attributed

to deferred taxes and the balance was reduced due to revaluation losses and the

reduced portfolio size following disposal activity. All EPRA NAV KPI’s exclude the

goodwill so any change in the goodwill balance has no impact on these KPI’s.

Year ended December 31,

2023

2022

in € millions

Impairment of goodwill

(137.0)

(404.3)

Leipzig

AROUNDTOWN

Board of Directors‘ Report

122

TAXATION

AT recorded in 2023 current tax expenses in the amount of €120 million, higher

compared to €117 million in 2022. Current tax expenses are comprised of corporate

income taxes and property taxes. Deferred tax expenses amounted to an income of

€543 million in 2023, higher than an income of €82 million in 2022 mainly due the

greater negative property revaluations in 2023 which had a positive deferred tax

impact.

LOSS FOR THE YEAR & LOSS PER SHARE

AT recorded a net loss of €2,426 million in 2023, compared to a net loss of €457

million in 2022. The larger loss was primarily due to higher non-cash negative

property revaluations, net of the resulting deferred tax income, and the higher

ﬁnance expenses, offsetting the operational results and the lower other ﬁnancial

expenses. Correspondingly, a net loss of €1,988 million was attributed to

shareholders in 2023, compared to a net loss of €645 million in 2022. The loss

attributable to non-controlling interests totaled €592 million in 2023, compared

to a proﬁt of €70 million in 2022, mainly due to negative property revaluations in

companies with a minority stake, mostly GCP. The proﬁt attributable to perpetual

notes investors amounted to €153 million in 2023, higher compared to €118

million in 2022. The increase was due to the coupon rate resetting for the four

perpetual notes which had a ﬁrst call date in 2023. Due to the non-call decisions,

coupon payments increased to 7.08% for AT’s January perpetual note, 6.33% for

GCP’s January perpetual note, 7.75% for AT’s July USD perpetual note, and 5.90%

for GCP’s October perpetual note. The higher coupon payments did not have any

impact on cashﬂow as the reset coupons will only apply to the 2024 payments. The

higher coupon payments also only had a partial impact on proﬁt attributable to

perpetual notes investors as the call dates took place after the start of the period,

but will have a full impact in 2024. Under IFRS accounting standards and AT’s

bond covenants, perpetual notes are fully classiﬁed as 100% equity whether they

are called or not called.

The basic and diluted loss per share amounted to of €1.82 in 2023, lower compared

to a basic and diluted loss per share of €0.58 in 2022.

AT recorded a total comprehensive loss of €2,451 million in 2023, compared to a

loss of €441 million in 2022, mainly due to the larger net loss for the year. It was

also impacted by a total other comprehensive loss of €24 million in 2023, compared

to an income of €16 million in 2022 due to the impact from cash ﬂow hedges and

cost of hedging and the negative revaluation of property, plant and equipment.

Year ended December 31,

2023

2022

in € millions

Current tax expenses

(120.4)

(117.4)

Deferred tax income

543.1

82.4

Current and deferred tax income / (expenses)

422.7

(35.0)

Year ended December 31,

2023

2022

in € millions

Loss for the year

(2,426.4)

(457.1)

(Loss) / proﬁt attributable to:

Owners of the Company

(1,987.6)

(645.1)

Perpetual notes investors

153.4

118.1

Non-controlling interests

(592.2)

69.9

Basic loss per share (in €)

(1.82)

(0.58)

Diluted loss per share (in €)

(1.82)

(0.58)

Weighted average basic shares (in millions)

1,093.0

1,109.9

Weighted average diluted shares (in millions)

1,094.5

1,111.3

Loss for the year

(2,426.4)

(457.1)

Other comprehensive (loss) / income

(24.4)

15.8

Total comprehensive loss for the year

(2,450.8)

(441.3)

123

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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 and/or

non-recurring items such as revaluation and capital gains, extraordinary expenses,

and other adjustments. Additionally, in order to mirror the recurring operational

results of the Group, the results from investments in equity-accounted investees

is subtracted as this also include 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.

In 2023, AT generated an adjusted EBITDA before JV contribution of €946 million,

slightly higher compared to €944 million. The like-for-like rental growth of 3.2%

and lower operating expenses were partially offset by the impact of disposals.

Including joint venture positions’ adjusted EBITDA contribution, AT recorded an

adjusted EBITDA of €1,003 million in 2023, ﬂat compared to €1,002 million in 2022.

Adjusted EBITDA excludes the impact from extraordinary expenses for uncollected

hotel rents. Including these expenses, adjusted EBITDA would have amounted to

€970 million in 2023, increasing by 5% compared to €927 million in 2022 due to

the higher collection rate in hotels.

AT’s adjusted EBITDA accounts for other adjustments in the amount of €5.3 million

in 2023 compared to €7.4 million in 2022 related mainly to non-cash expenses

for employees’ share incentive plans. AT conservatively does not include the

contributions from commercial properties marked for disposal as they are intended

to be sold and therefore, their contributions are non-recurring. This adjustment

amounted to €10.0 million in 2023, lower compared to €12.4 million in 2022.

Year ended December 31,

2023

2022

in € millions

Operating (loss) / proﬁt

(2,467.6)

361.1

Total depreciation and amortization

17.9

21.1

EBITDA

(2,449.7)

382.2

Property revaluations and capital (losses) / gains

3,217.5

497.3

Share of (loss) / proﬁt from investment in equity

accounted investees

149.8

(5.9)

Other adjustments

5.3

7.4

Contribution of assets held for sale

(10.0)

(12.4)

Add back: Extraordinary expenses for uncollected hotel rents

33.0

75.0

Adjusted EBITDA before JV contribution

945.9

943.6

Contribution of joint ventures' adjusted EBITDA

57.0

58.7

Adjusted EBITDA

1,002.9

1,002.3

including expenses related to employees’ share incentive plans

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

AROUNDTOWN

Board of Directors‘ Report

124

FUNDS FROM OPERATIONS (FFO I, FFO II)

Funds from Operations I (FFO I) is an industry standard performance indicator,

reﬂecting the recurring operational proﬁtability. FFO I starts by deducting the

ﬁnance expenses, current tax expenses and perpetual notes attribution 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.

Furthermore, AT includes the extraordinary expenses for uncollected hotel rents

and makes an adjustment related to assets held for sale.

In addition, AT provides the FFO II, which is an additional key performance indicator

used in the real estate industry to evaluate the recurring operational profits

including the disposal gains during the relevant period.

AT generated an FFO I amounting to €332 million in 2023, lower by 8% compared

to €363 million in 2022. The decline was mostly due to the impact from disposals

and cost inﬂation, higher perpetual notes attribution due to the partial impact

from the coupon step-ups for notes with a first call date in 2023, and higher

ﬁnance expenses from new debt and the impact of the higher interest rates. These

factors were partially offset by the lower provision for uncollected hotel rents,

like-for-like rental growth of 3.2% and a reduction in contribution to minorities

mainly due to the higher holding rate in GCP. As of December 2023, AT’s stake in

GCP was 63%, excluding the treasury shares, from 60% as of December 2022. The

contribution from commercial properties held for sale, which is excluded from the

FFO, amounted to €7.1 million in 2023 compared to €7.8 million in 2022. FFO I per

share amounted to €0.30 in 2023, 9% lower compared to €0.33 in 2022.

AT recorded an FFO II of €449 million in 2023, declining by 37% compared to €714

million in 2022 mainly due to the lower volume of disposals at a lower margin in

the period. In 2023, AT closed over €1.2 billion of disposals at an 11% margin over

cost compared to €1.6 billion at a 29% margin over cost values in 2022.

Year ended December 31,

2023

2022

in € millions

Adjusted EBITDA before JV contribution

945.9

943.6

Finance expenses

(230.1)

(184.8)

Current tax expenses

(120.4)

(117.4)

Contribution to minorities

(127.0)

(136.3)

Adjustments related to assets held for sale

2.9

4.6

Perpetual notes attribution

(153.4)

(118.1)

FFO I before JV contribution

317.9

391.6

Contribution of joint ventures' FFO I

47.1

46.1

Extraordinary expenses for uncollected hotel rents

(33.0)

(75.0)

FFO I

332.0

362.7

FFO I per share (in €)

0.30

0.33

Weighted average basic shares (in millions)

1,093.0

1,109.9

FFO I

332.0

362.7

Result from the disposal of properties

117.1

351.4

FFO II

449.1

714.1

including the minority share in TLG‘s and GCP‘s FFO

the net contribution which is excluded from the FFO amounts to €7.1 million in 2023 and €7.8 million in 2022

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

weighted average number of shares excludes shares held in treasury; 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)

125

AROUNDTOWN

Board of Directors‘ Report

Year ended December 31,

2023

2022

in € millions

Net cash from operating activities

772.1

788.0

Net cash from investing activities

608.2

408.5

Net cash used in ﬁnancing activities

(1,051.6)

(1,763.5)

Net changes in cash and cash equivalents

328.7

(567.0)

Cash and cash equivalents as at the beginning of the year

2,305.4

2,873.0

Other changes

7.1

(0.6)

Cash and cash equivalents as at the end of the year

2,641.2

2,305.4

including change in balance of assets held for sale and movements in exchange rates on cash held

€772 million of net cash was provided from operating activities in 2023, lower by 2%

compared to €788 million. The like-for-like rental growth and higher rent collection

was offset by the impact of disposals and cost inﬂation, as well as a lower amount of

cash dividends received from joint venture positions and a higher working capital as a

result of timing differences between the consumption and settlement of recoverable

costs.

€608 million of net cash was received from investing activities in 2023, higher

compared to €409 million in 2022, as a lower volume of disposals was offset by

a lower volume of acquisitions and capex and repayment from loans-to-own and

vendor loans. €970 million of cash was received from disposals and repayment of

vendor loans – net of new vendor loans granted, transaction costs, and tax – partially

offset by ca. €360 million of net cash used mainly for capex and investment in

associates and others, net of repayment from loans-to-own.

€1,052 million of net cash was used in ﬁnancing activities in 2023, lower compared

to €1,764 million that was used in 2022. The main uses of cash in 2023 were the

€1.3 billion in bond buybacks at discount which helped reduce leverage, redemption

of the €100 million Series S schuldschein and repayment of approx. €85 million in

bank debt mainly tied to assets that were disposed. Further uses of cash included the

CASH FLOW

coupon payments to perpetual notes holders, higher net ﬁnance expenses due to the

higher level of interest rates but partially offset by higher interest income and the

acquisition of some GCP shares. The higher reset coupons of the non-called perpetual

notes did not have an impact on the cash ﬂow as the coupons were paid according

to the coupon rates at issuance but will have an impact in the 2024 payments. €214

million was paid as net cash interest and other ﬁnancial expenses and €126 million

was paid to perpetual notes holders. The main cash source in 2023 was ca. €900

million of new bank debt raised in 2023.

All combined, €329 million of net cash was generated during 2023. Including other

liquid assets, AT’s liquidity position reached €3.0 billion at the end of December 2023,

representing 21% of the total debt position.

AROUNDTOWN

Board of Directors‘ Report

126

ASSETS

(a) Total assets

Total assets amounted to €33.6 billion at year-end 2023, lower by 10% compared to

€37.3 billion at year-end 2022. The decline was mainly due to the negative property

revaluations, impairment of goodwill and utilization of the large cash balance for

deleveraging activities, partially offset by new bank debt raised and operational

proﬁts. Non-current assets totaled €28.9 billion as of December 2023, down by 11%

compared to €32.5 billion as of December 2022.

(b) Investment property

Investment property represents the largest item under non-current assets and

amounted to €24.6 billion at year-end 2023, 12% lower as compared to €28.0 billion

at year-end 2022. The decline was mainly due to negative property revaluations,

movement of investment property into assets held for sale, and disposals of

investment property. As of December 2023, AT got its full portfolio revalued by

independent and qualiﬁed third-party appraisers in order to reﬂect the most updated

market environment. This resulted in a like-for-like value decline for the full year

of 11%, or 10% after adding back capex, due to higher cap rates and discount rates

which were impacted by the higher interest rates, partially offset by the like-for-like

rent growth supported by the indexation-driven increases on commercial leases and

strong demand in the residential sector. Since the end of June 2022, AT recorded a

total valuation decline of 14%.

Throughout 2023, AT closed over €1.2

billion in disposals, of which

€0.7

billion

was signed in 2023 and €0.5

billion was signed in 2022. AT signed disposals in the

amount of €0.9

billion in 2023 including the signed disposals that are not closed yet

at year-end 2023. The disposals were across all asset types and multiple locations,

highlighting AT’s ability to sell despite the difﬁcult market conditions. Signed and

not closed disposals will further improve the strong liquidity position. In addition,

over €200 million of new investment properties were added during the year. These

were previously held through a joint venture structure and loans-to-own and during

the year AT increased its stake and obtained control. These investment properties

are composed mainly of attractive leisure hotels with additional upside potential.

Goodwill and intangible assets amounted to €1.2 billion at year-end 2023, lower

compared to €1.3 billion at year-end 2022, due to an impairment as explained under

Impairment of goodwill

above. As of December 2023, goodwill in the amount of €604

million is related to the TLG takeover and €540 million is related to the consolidation

of GCP. All EPRA NAV KPI’s exclude the goodwill so any change in the goodwill

balance has no impact on these KPI’s.

(d) Investment in equity-accounted investees

Investment in equity-accounted investees amounted to €1.1 billion at year-end 2023,

lower compared to €1.3 billion at year-end 2022. This line item represents the Group’s

long-term investment in joint ventures in which the Group has a signiﬁcant inﬂuence,

but which are not consolidated. The largest investment in this item as at year-end

2023, which represents approx. 45% 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% as of December 2023, indirectly held through a joint venture with CPI

Property Group S.A. 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 decline

was mainly due the negative valuation results of these investees and consolidation of

some previously held investment property through joint venture structures.

Dec 2023

Dec 2022

Note

in € millions

Total Assets

(a)

33,559.3

37,347.1

Non-current assets

(a)

28,867.5

32,491.5

Investment property

(b)

24,632.4

27,981.0

Goodwill and intangible assets

(c)

1,165.7

1,308.1

Investment in equity-accounted investees

(d)

1,086.5

1,291.9

Other non-current assets

(e)

1,458.1

1,303.8

127

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.

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 2024-2026. The loans are

secured against the property sold at an initial LTV in the range of 40%-70% at the

time of disposal and in case of default gives AT the ability to get the asset back with

a penalty to the defaulted buyer (through a process involving a receiver). The balance

as of December 2023 is €0.65 billion, compared to €0.5 billion at year-end 2022. The

increase is due to granting new vendor loans in connection with disposals closed

in 2023, net of repayments during 2023. As of December 2023, the average interest

rate of the vendor loans is ca. 5%. The interest rate increased from 3.4% at year-end

2022 due to scheduled step-ups, variable components as well as due to contractual

extensions at higher rates. The future liquidity coming from the repayments of the

vendor loans will reduce the Group’s leverage as they are conservatively not included

in the leverage calculation.

Loans-to-own assets are asset-backed and yielding loans where, under certain

conditions, the default of the loan will enable the Group to take over the underlying

asset at a material discount. Loans-to-own assets were provided to a diverse number

of property owners and sourced through the Group’s wide deal sourcing network

established over the years. As of December 2023, the loans-to-own balance amounted

to €0.4 billion. This item comprises of around 15 loans, with maturities primarily by

2027,

and were given at an average LTV of 65%, bearing interest rates of 3%-10%

and secured by the underlying asset.

The loans-to-own assets are expected to be repaid or converted into properties and

will reduce the Group’s leverage. 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.

Financial investments amounted to ca. €0.35 billion which comprise

over 20

investments

mainly in real estate funds and potentially co-investments in their

attractive deals and ﬁnancial assets with the expectation for long-term yield.

The other non-current assets also include ca. €65 million of tenant deposits which

are used as a security for rent payments, ca. €50 million of receivables due to revenue

straight-lining effect arising from rent-free periods granted to tenants, long-term

minority positions in real estate properties and other receivables.

Furthermore, non-current assets include long-term derivative financial assets,

deferred 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 totaled €4.7 billion at year-end 2023, lower compared to €4.9 billion

at year-end 2022 mainly due to disposals of assets held for sale and utilizing part of

the cash proceeds for debt repayment, partially offset by cash inﬂow from new bank

debt and operational proﬁts.

The cash and liquid assets balance amounted to €3.0 billion at year-end 2023,

higher by 11% compared to €2.7 billion at year-end 2022. Cash was generated

mainly from disposals, new bank debt drawn and FFO generation which all together

offset cash usage from the liability management exercises. AT’s strong liquidity

position represents 21% of total debt.

The assets held for sale balance amounted to €409 million at year-end 2023, lower

than €922 million at year-end 2022. The decline was mostly due to net disposals

from the held for sale balance. The assets in the held for sale balance are marked to

be sold within the next 12 months. Over 40% have already been signed for disposal

as of the publication date of this report.

Current assets also include trade and other receivables totaling €1.0 billion at

Dec 2023

Dec 2022

in € millions

Current assets

4,691.8

4,855.6

Cash and liquid assets

3,026.1

2,718.7

Assets held for sale

409.4

922.0

Trade and other receivables

1,008.3

1,168.1

including cash in assets held for sale, short term deposits and ﬁnancial assets at fair value through

proﬁt or loss

excluding cash in assets held for sale

AROUNDTOWN

Board of Directors‘ Report

128

AVERAGE VALUATION PARAMETERS

2023

2022

Rental multiple

19.9

22.3

Value per sqm

€2,421

€ 2,635

VALUATION ASSUMPTIONS SET BY

INDEPENDENT VALUERS

2023

2022

DCF method

Market rental growth p.a.

2.0%

2.1%

Average discount rate

6.1%

5.6%

Average cap rate

5.1%

4.7%

DECEMBER 2023

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

8,961

3,221

12.8%

451

12.9

2,782

5.0%

4.2

Residential

7,715

3,653

3.6%

370

8.6

2,112

4.8%

Hotel

4,584

1,567

3.2%

238

13.0

2,926

5.2%

14.5

Logistics/Other

399

434

9.2%

5.0

920

6.1%

5.1

Retail

1,081

516

12.3%

10.7

2,095

5.5%

4.3

Development rights & Invest

1,892

Total

24,632

9,391

7.9%

1,142

10.7

2,421

5.0%

7.4

Total (GCP at relative consolidation)

21,421

7,893

8.5%

991

11.1

2,481

5.1%

7.5

year-end 2023, lower compared to €1.2 billion at year-end 2022. This item includes

approx. €775 million of operating costs and operational rent receivables, pre-paid

expenses, and tax assets and was higher compared to approx. €660 million in 2022

mainly due to cost inﬂation and tax receivables. Operating cost receivables relate

to ancillary services and other charges billed to tenants. These services include

utility and service costs which include heating, water, insurance, cleaning, waste,

etc. These operating cost receivables are mainly settled once per year against

the advance payments received from tenants and are therefore correlated to pre-

payments for ancillary services received from tenants presented under short-term

liabilities. Current assets also include 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 of approx. €230 million at year-end 2023, lower compared to year-end

2022, and explained above as part of the non-current assets.

129

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LIABILITIES

Total liabilities amounted to €18.4 billion at year-end 2023, lower by 6% compared

to €19.5 billion at year-end 2022. The reduction was mainly due to debt repayments,

mostly from bond buybacks at discount, and lower deferred tax liabilities due to the

property devaluations, partially offset by new bank debt raised. Total debt from bank

loans and bonds amounted to €14.2 billion at year-end 2023, 4% lower compared

to €14.8 billion at year-end 2022. The decline was mainly due to the repurchase of

€1.3 billion in nominal value, mostly near-term bonds at an average discount of 20%,

reducing leverage and reﬁnancing risk. AT also redeemed the €100 million Series S

schuldschein and repaid approx. €85 million in bank debt mainly tied to assets that

were disposed. These measures were partially offset by ca. €900 million in new bank

debt drawn at an average margin of 1.4% and an average maturity of over 7 years.

As a result of these pro-active liability management exercises and large liquidity

position, debt maturities until mid-2026 are covered, up from end-of-2025 in Dec

2022, by the current liquidity and expected proceeds from signed disposals that are

not closed and vendor loans. AT has additional liquidity sources from undrawn credit

facilities that mature mostly in 2025 and unencumbered investment properties of

€17.9 billion which allow it to raise further secured ﬁnancing.

Deferred tax liabilities amounted to €2.1 billion at year-end 2023, lower by 21%

compared to €2.7 billion at year-end 2022. The decrease was mainly due to negative

revaluations and disposals. Deferred tax liabilities are non-cash items that are

Dec 2023

Dec 2022

in € millions

Short- and long-term loans and borrowings

2,204.1

1,398.4

Short- and long-term straight bonds and schuldscheins

12,038.0

13,407.4

Deferred tax liabilities (including those under held for sale)

2,125.1

2,693.7

Short- and long-term derivative ﬁnancial instruments

and other long-term liabilities

1,076.1

1,011.8

Other current liabilities

966.3

1,012.4

Total Liabilities

18,409.6

19,523.7

including loans and borrowings under held for sale

excluding current liability items that are included in the lines above

predominantly tied to revaluation gains, calculated conservatively by assuming

theoretical future property disposals in the form of asset deals and as such the full

corporate tax rate is applied in the relevant jurisdictions. Deferred tax liabilities

represented 12% of total liabilities as of December 2023.

Short- and long-term derivative ﬁnancial instruments and other long-term liabilities

were higher at year-end 2023 compared to year-end 2022 mainly due to the

commencement of a ﬁnance lease agreement on a residential property in London

which increased the ﬁnancial lease liabilities and the cash balance by approx. €50

million. Other long-term liabilities also include tenancy deposits 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 were €1.0 billion at year-end 2023, lower compared to over

€1.0 billion at year-end 2022, mainly due to disposals. The largest item in other

current liabilities is trade and other payables, which mainly comprise of pre-payments

for ancillary services received from tenants that are correlated with the operating

costs receivables under current assets. Other current liabilities also include tax

payables, provisions for other liabilities and accrued expenses and other liabilities

in properties held for sale which are not included above. Current assets cover current

liabilities by 3 times.

AROUNDTOWN

Board of Directors‘ Report

130

DEBT METRICS

AT’s disciplined debt management approach, strong credit proﬁle and high ﬁnancial

strength are reﬂected in the solid debt metrics. AT had an LTV of 43% at year-end

2023, higher compared to 40% at year-end 2022. The increase was mainly due to

the property devaluations, partially mitigated by pro-active deleveraging activities.

Since the end of June 2022, property valuations fell by

% while LTV only increased

by 3% as deleveraging measures partially offset the impact of negative revaluations.

These measures mainly included disposals, bond buybacks at discount, suspension of

dividends and operational proﬁtability. Aroundtown’s leverage and ﬁnancial metrics

retain a very signiﬁcant headroom to bond covenants.

The Group’s high operational proﬁtability and ﬁnancial discipline resulted in a high

ICR of 4.2x in 2023, lower compared to 5.2x in 2022, mainly due to higher ﬁnance

expenses. An unencumbered investment property ratio of

74%

(by rent) with a total

value of €17.9

billion (excluding held for sale assets) as of year-end 2023 highlights

the Group’s ﬁnancial ﬂexibility and provides additional liquidity potential, along with

undrawn revolving credit facilities.

LOAN-TO-VALUE (LTV)

Dec 2023

Dec 2022

in € millions

Investment property (incl. advance payments and deposits and

owner-occupied property and excl. right-of-use assets)

24,580.1

28,014.6

Investment property of assets held for sale

408.3

909.1

Investment in equity-accounted investees

857.1

1,053.8

Total value (a)

25,845.5

29,977.5

Total ﬁnancial debt

14,242.1

14,805.8

Less: Cash and liquid assets

(3,026.1)

(2,718.7)

Net ﬁnancial debt (b)

11,216.0

12,087.1

LTV (b/a)

43%

40%

UNENCUMBERED ASSETS

Dec 2023

Dec

2022

in € millions

Rent generated by unencumbered assets

855.8

959.0

Rent generated by the total Group

1,158.7

1,166.9

Unencumbered assets ratio

74%

82%

Year ended December 31,

INTEREST COVER RATIO (ICR)

2023

2022

in € millions

Finance expenses

230.1

184.8

Adjusted EBITDA

955.9

956.0

ICR

4.2x

5.2x

Reclassiﬁed in Dec 2023 to include owner-occupied property

including property related JV‘s

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 hotel

rents

including the extraordinary expenses for uncollected hotel rents, the ICR, including extraordinary expenses

for uncollected hotel rents would have amounted to 4.0x in 2023 and 4.8x in 2022

CONSERVATIVE LEVERAGE

(LTV)

Board of Directors’ guidance of 45%

Dec 2023

Dec 2022

40%

43%

Dec 2023

OUTLOOK

NEGATIVE

131

AROUNDTOWN

Board of Directors‘ Report

EQUITY

Total equity amounted to €15.1 billion at year-end 2023, lower by 15% compared to

€17.8 billion at year-end 2022. The decline was mainly due to the negative property

revaluations, net of the resulting deferred tax income, and impairment of goodwill,

partially offset by the operational proﬁts and lower other ﬁnancial expenses mainly

due to the bond buybacks at discount. Correspondingly, shareholders’ equity declined

by 20% to €7.6 billion at year-end 2023 from €9.6 billion at year-end 2022. In March

2023, the USD mandatory convertible notes were fully converted into 27.7 million

shares but did not impact the share count used in the KPI’s as the notes were already

considered as shareholders’ equity under IFRS accounting rules and had already been

included in the share count upon issuance. Given the macro-economic uncertainty

and volatility in the ﬁrst half of 2023, the Board of Directors of both Aroundtown and

GCP decided not to recommend a dividend payment for 2022 to be distributed in

2023 at the respective annual general meetings of both companies. Non-controlling

interests declined to €2.7 billion at year-end 2023 from €3.5 billion at year-end 2023

mostly due to the loss attributable to non-controlling interests mainly from property

devaluations and the increased stake in GCP to 63% (excluding treasury shares) at

year-end 2023 from 60% as at year-end 2022 via acquisition of shares.

The perpetual notes balance amounted to €4.8 billion at year-end 2023, stable

compared to €4.7 billion at year-end 2022. Following IFRS accounting treatment,

perpetual notes are classiﬁed as equity as they do not have a repayment date, are

subordinated to debt, do not have default rights nor covenants and coupon payments

are deferrable at the Company’s discretion. The perpetual notes are 100% equity

under IFRS regardless of whether they are called or not and therefore have no impact

on the bond covenants. The Board of Directors of both Aroundtown and GCP decided

not to exercise the voluntary option to call the perpetual notes with ﬁrst call dates

in 2023 given the elevated volatility in ﬁnancial markets and economic uncertainty.

Furthermore, after the reporting period, the Board of Directors of Aroundtown decided

not to call the AT perpetual note with a ﬁrst call date in January 2024. All these

decisions were taken after having considered all available options and were mainly

made because the rates of a potential new issuance were signiﬁcantly above the reset

rates of the notes. The reset coupons were adjusted at the respective call dates to

7.08% for AT’s January 2023 perpetual note, 6.33% for GCP’s January 2023 perpetual

note, 7.75% for AT’s July 2023 USD perpetual note, and 5.90% for GCP’s October 2023

perpetual note. After the reporting period, the coupon rate for AT’s January 2024

perpetual note was reset to 4.54%. The higher reset coupon rates on all the non-

called perpetual notes will result in approx. €75 million higher coupon payments on

an annualized basis. Non-called perpetuals can be called at every interest payment

date and the Company will continue to assess all options regarding its perpetual

notes. Perpetual notes remain an important part of the Company’s capital structure

as they provide a security cushion during volatile times by allowing issuers to manage

the timing of any reﬁnancing and conserve cash despite the higher coupon payments.

Dec 2023

Dec

2022

in € millions

Total equity

15,149.7

17,823.4

of which equity attributable to the owners of the Company

7,643.3

9,585.3

of which equity attributable to perpetual notes investors

4,756.9

4,747.7

of which non-controlling interests

2,749.5

3,490.4

Equity ratio

45%

48%

AROUNDTOWN

Board of Directors‘ Report

132

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

2023

Change

2022

EPRA NRV

9,920.8

(19%)

12,289.1

EPRA NRV per share (in €)

9.1

(19%)

11.2

EPRA NTA

8,058.7

(20%)

10,135.2

EPRA NTA per share (in €)

7.4

(20%)

9.3

EPRA NDV

7,592.1

(28%)

10,515.2

EPRA NDV per share (in €)

6.9

(28%)

9.6

EPRA Earnings

438.8

438.7

EPRA Earnings per share (in €)

0.40

EPRA LTV

60.8%

5.4%

55.4%

EPRA Net initial yield (NIY)

4.0%

0.5%

3.5%

EPRA 'Topped-up' NIY

4.1%

0.6%

3.5%

EPRA Vacancy

7.9%

0.3%

7.6%

EPRA Vacancy including JV

8.1%

0.3%

7.8%

EPRA Cost Ratio (including direct vacancy costs)

23.0%

(4.8%)

27.8%

EPRA Cost Ratio (excluding direct vacancy costs)

20.8%

(4.9%)

25.7%

EPRA Cost Ratio (including direct vacancy costs, excluding extraordinary expenses for uncollected hotel rents)

20.4%

(1.6%)

22.0%

EPRA Cost Ratio (excluding direct vacancy costs, excluding extraordinary expenses for uncollected hotel rents)

18.3%

(1.6%)

19.9%

133

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-property 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. Additionally, 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.

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

excluding shares in treasury, base for share KPI calculations

Dec 2023

Dec 2022

in € millions

EPRA NRV

EPRA NTA

EPRA NDV

EPRA NRV

EPRA NTA

EPRA NDV

Equity attributable to the owners of the Company

7,643.3

9,585.3

Deferred tax liabilities

1,841.2

1,564.8

2,281.2

1,882.6

Fair value measurement of derivative ﬁnancial instruments

14.2

(29.0)

Goodwill in relation to TLG

(604.0)

(680.6)

Goodwill in relation to GCP

(539.8)

(600.0)

Intangibles as per the IFRS balance sheet

(19.8)

(23.1)

Net fair value of debt

1,092.6

2,210.5

Real estate transfer tax

1,565.9

1,732.2

NAV

9,920.8

8,058.7

7,592.1

12,289.1

10,135.2

10,515.2

Number of shares (in millions)

1,094.4

1,094.2

NAV per share (in €)

9.1

7.4

6.9

11.2

9.3

9.6

AROUNDTOWN

Board of Directors‘ Report

134

The EPRA NAV KPI’s were negatively impacted by the negative property devaluations,

net of the associated deferred tax income, partially offset by the positive operational

result, the lower other ﬁnancial expenses mainly due to bond buybacks at discount,

and the reduction of minorities in GCP. The reduction in goodwill had no impact on

these KPI’s as goodwill is excluded from the equity, thus any change is neutral.

EPRA NRV

The EPRA NRV amounted to €9.9 billion or €9.1 per share as of year-end 2023, both

declining by 19% compared to €12.3 billion or €11.2 per share as of year-end 2022.

EPRA NTA

The EPRA NTA amounted to €8.1 billion or €7.4 per share at year-end 2023, decreasing

both by 20%, compared to €10.1 billion or €9.3 per share at year-end 2022.

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. As a result, AT only adds back 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 on these properties 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 the share of retail assets in its 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 low risks with high pre-let ratios.

Since the decision is based on an opportunistic basis, Aroundtown conservatively

does not add back deferred tax liabilities related to these assets.

EPRA NDV

The EPRA NDV amounted to €7.6 billion or €6.9 per share as of year-end 2023, both

lower by 28% compared to €10.5 or €9.6 per share at year-end 2022. The decline was

further impacted by a lower difference between the higher net fair value of debt and

the book value of debt amount as a result of net debt repayments and lower market

volatility in 2023.

PORTFOLIO ITEMS

Dec 2023

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

21,440.1

86%

77%

Investment property of assets held for sale

408.3

Retail portfolio

772.3

GCP's Portfolio cities classiﬁed as "Others"

880.7

Development rights & Invest portfolio

1,539.3

Total

25,040.7

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

135

AROUNDTOWN

Board of Directors‘ Report

EPRA EARNINGS

EPRA Earnings is intended to serve as a key indicator of the Group’s underlying

operational 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. As 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 above.

EPRA Earnings amounted to €439 million in 2023, ﬂat compared to €439 million in

2022. Higher ﬁnance expenses and ﬁnance-related costs

, the impact from disposals

and cost inﬂation were offset by the like-for-like rental growth, lower extraordinary

expenses for uncollected hotel rents, lower operating costs and reduced minorities.

EPRA Earnings per share totaled €0.40 in 2023, also ﬂat compared to €0.40 per share

in 2022.

Year ended December 31,

2023

2022

in € millions

Earnings per IFRS income statement

(2,426.4)

(457.1)

Property revaluations and capital (losses) / gains

3,217.5

497.3

Impairment of goodwill

137.0

404.3

Changes in fair value of ﬁnancial assets and liabilities, buy-

backs and early repayment costs, net

(14.8)

168.6

Deferred tax income

(543.1)

(82.4)

Share of (loss) / proﬁt from investment in equity accounted

investees

149.8

(5.9)

Adjustment for investment in equity-accounted investees

47.1

46.1

EPRA Earnings contribution to minorities

(128.3)

(132.2)

EPRA Earnings

438.8

438.7

Weighted average basic shares (in millions)

1,093.0

1,109.9

EPRA Earnings per share (in €)

0.40

Bridge to FFO I

Add back: Total depreciation and amortization

17.9

21.1

Add back: Finance-related costs

29.2

25.5

Add back: Other adjustments

5.3

7.4

Less: FFO items related to minorities

1.3

(4.1)

Less: FFO contribution from asset held for sale

(7.1)

(7.8)

Less: Perpetual notes attribution

(153.4)

(118.1)

FFO I

332.0

362.7

FFO I per share (in €)

0.30

0.33

including AT‘s share in joint venture positions.

adjusting for the minority share in GCP‘s FFO adjustments

weighted average number of shares excludes shares held in treasury; base for share KPI calculations

AROUNDTOWN

Board of Directors‘ Report

136

EPRA LTV

Dec 2023

in € millions

Consolidated

(as reported)

Share of joint

ventures

Share of material

associates

Material non-

controlling interests

Proportionate

consolidation

Total ﬁnancial debt

14,242.1

686.9

(1,801.4)

13,127.6

Foreign currency derivatives

(84.2)

18.7

(65.5)

Equity attributable to perpetual notes investors

4,756.9

(461.6)

4,295.3

EPRA Gross debt

18,914.8

686.9

(2,244.3)

17,357.4

Less:

Cash and liquid assets

(3,026.1)

(129.7)

512.3

(2,643.5)

EPRA Net debt

15,888.7

557.2

(1,732.0)

14,713.9

Investment property (incl. advance payments and excl. right-

of-use assets)

24,506.1

1,161.5

(3,499.7)

22,167.9

Investment property of assets held for sale

408.3

15.3

(78.2)

345.4

Owner-occupied property

74.0

(17.8)

56.2

Intangibles as per the IFRS balance sheet

21.9

(2.1)

19.8

Net receivables

155.6

75.1

(63.0)

167.7

Financial assets

1,027.2

444.8

(48.2)

1,423.8

EPRA Total property value

26,193.1

1,696.7

(3,709.0)

24,180.8

EPRA LTV

60.7%

60.8%

EPRA LTV

including balances under held for sale

137

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

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

(incl. advance payments and excl.

right-of-use assets)

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%

including balances under held for sale

AROUNDTOWN

Board of Directors‘ Report

138

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 net assets 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.

EPRA LTV was 60.8% at year-end 2023, higher compared to 55.4% at year-end 2022.

The increase was primarily due to the negative property revaluations, partially

offset by the operational proﬁts and deleveraging activities such as disposals, bond

buybacks at discount, suspension of dividends and repayments from loans-to-own

and vendor loans.

Berlin

139

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

operating 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 was 4.0% at year-end 2023, higher compared to 3.5% at year-end 2022,

mainly due to lower portfolio values driven by negative revaluations, partially offset

by disposal of assets with higher-than-average yields. The increase in in-place and

market rents and a lower cost margin, reﬂected in a lower EPRA cost ratio, supported

the increase in the EPRA NIY. Accordingly, the EPRA ‘Topped-up’ NIY increased to 4.1%

at year-end 2023, compared to 3.5% at year-end 2022.

Dec 2023

Dec 2022

in € millions

Investment property

24,632.4

27,981.0

Investment property of assets held for sale

408.3

909.1

Share of JV investment property

1,103.3

1,195.3

Less: Classiﬁed as Development rights & Invest

(1,891.8)

(2,271.3)

Complete property portfolio

24,252.2

27,814.1

Allowance for estimated purchasers' costs

1,784.5

1,959.3

Grossed up complete property portfolio value

26,036.7

29,773.4

End of period annualized net rental income

1,233.9

1,255.7

Operating costs

(189.9)

(216.6)

Annualized net rent, after non-recoverable costs

1,044.0

1,039.1

Notional rent expiration of rent-free periods or

other lease incentives

12.6

15.1

Topped-up net annualized rent

1,056.6

1,054.2

EPRA NIY

4.0%

3.5%

EPRA 'TOPPED-UP' NIY

4.1%

3.5%

including AT‘s share in joint venture positions

to reach annualized operating costs, cost margins were used for each respective period

Frankfurt

AROUNDTOWN

Board of Directors‘ Report

140

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 calculated

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 in Globalworth, the leading publicly listed ofﬁce landlord in

Central and Eastern European markets, mainly in Warsaw and Bucharest.

EPRA Vacancy was 7.9% at year-end 2023, higher compared to 7.6% at year-end

2022. The small increase was mainly due to negative like-for-like occupancy, partially

offset by disposal of assets with higher-than-average vacancy. Correspondingly, EPRA

Vacancy including JV increased to 8.1% at year-end 2023, up from 7.8% at year-end

2022. Aroundtown has observed an increase in market ERV’s due to inﬂation driven

indexations.

EPRA VACANCY INCLUDING JV

Dec 2023

Dec 2022

in € millions

Estimated Rental Value (ERV) of the vacant space including JV

106.9

103.6

Dec annualized net rent including vacancy rented at ERV

including JV

1,322.7

1,324.4

EPRA VACANCY INCLUDING JV

8.1%

7.8%

EPRA VACANCY

Dec 2023

Dec 2022

in € millions

Estimated Rental Value (ERV) of the vacant space

98.4

95.2

Dec annualized net rent including vacancy rented at ERV

1,240.7

1,246.1

EPRA VACANCY

7.9%

7.6%

including AT‘s share in joint venture positions

Amsterdam

141

AROUNDTOWN

Board of Directors‘ Report

The EPRA Cost Ratios provide an overview of a company’s

operating cost structure and provide for increased comparability

across companies. The cost ratios are derived by dividing the

administrative expenses and property operating expenses

(including non-recoverable service charges) by the net rental

income. 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.

The EPRA cost ratios amounted to 23.0% including direct

vacancy costs and 20.8% excluding direct vacancy costs in 2023,

lower compared to 27.8% and 25.7% in 2022 respectively. The

lower cost ratio is the result of efﬁciency gains, like-for-like

net rental growth, lower extraordinary expenses for uncollected

hotel rents, and disposal of assets with a higher-than-average

cost structure. Correspondingly, cost ratios excluding the

extraordinary expenses for uncollected hotel rents amounted

to 20.4% including direct vacancy costs and 18.3% excluding

direct vacancy costs in 2023, both lower compared to 22.0% and

19.9% in 2022, respectively.

including AT‘s share in joint venture positions

Year ended December 31,

2023

2022

in € millions

Administrative and other expenses

64.7

62.5

Maintenance and refurbishment

49.3

51.1

Ancillary expenses and purchased services, net

(0.2)

3.0

Personnel expenses

62.7

58.6

Other operating costs

98.7

173.3

Depreciation and amortization

17.9

21.1

Share of equity-accounted investees

19.5

13.4

Exclude:

Depreciation and amortization

(17.9)

(21.1)

EPRA Costs (including direct vacancy costs)

294.7

361.9

Direct vacancy costs

(27.9)

(27.6)

EPRA Costs (excluding direct vacancy costs)

266.8

334.3

Extraordinary expenses for uncollected hotel rents

(33.0)

(75.0)

EPRA Costs (including direct vacancy costs, excluding extraordinary expenses

for uncollected hotel rents)

261.7

286.9

EPRA Costs (excluding direct vacancy costs, excluding extraordinary expenses

for uncollected hotel rents)

233.8

259.3

Revenue

1,602.8

1,609.9

Less: Operating and other income

(410.0)

(387.8)

Add: Share of net rental income from equity-accounted investees

87.0

79.1

Net rental income

1,279.8

1,301.2

EPRA Cost Ratio (including direct vacancy costs)

23.0%

27.8%

EPRA Cost Ratio (excluding direct vacancy costs)

20.8%

25.7%

EPRA Cost Ratio (including direct vacancy costs, excluding extraordinary

expenses for uncollected hotel rents)

20.4%

22.0%

EPRA Cost Ratio (excluding direct vacancy costs, excluding extraordinary

expenses for uncollected hotel rents)

18.3%

19.9%

EPRA COST RATIOS

AROUNDTOWN

Board of Directors‘ Report

142

ADJUSTED EBITDA

The adjusted EBITDA is a performance measure used to evaluate

the operational results of the Group by deducting from the

EBITDA

, which includes the

Total depreciation and amortization

on top of the

Operating (loss) / proﬁt

, non-operational items such

as the

Property revaluations and capital (losses) / gains

and

of (loss) / 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

which is mainly the expenses for

employees’ share incentive plans. In order to reﬂect only the

recurring operational proﬁts, Aroundtown deducts the

Share of

(loss) / proﬁt from investment in equity accounted investees

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 holding rate over the

period. This line item is labelled as

Contribution 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

hotel rents. Adjusted EBITDA excludes (adds back) these

expenses which are called

Extraordinary expenses for

uncollected hotel rents.

Adjusted EBITDA Calculation

Operating (loss) / proﬁt

(+) Total depreciation and amortization

(=) EBITDA

(-) Property revaluations and capital (losses) / gains

(-) Share of (loss) / proﬁt from investment in equity accounted

investees

(+) Other adjustments

(-) Contribution of assets held for sale

(+) Add back: Extraordinary expenses for uncollected hotel rents

(=) Adjusted EBITDA before JV contribution

(+) Contribution of joint ventures‘ adjusted EBITDA

(=) Adjusted EBITDA

Named as „Operating proﬁt“ in FY 2017, 2018, 2019, 2020, 2021 and 2022

Named as „Fair value adjustments, capital gains and other income“ in FY 2017, and

„Property revaluations and capital gains“ in FY 2018, 2019, 2020, 2021 and 2022

Named as „Share in proﬁt from investment in equity-accounted investees“ in

FY 2017, 2018, 2019 and 2020, and „Share of proﬁt from investment in equity-

accounted investees“ in FY 2021 and 2022.

Including expenses related to employees‘ share incentives plans. Named as

„Other adjustments“ in FY 2023 as no one-off expenses related to TLG merger

were recorded in FY 2023. Named as „Other adjustments incl. one-off expenses

related to TLG merger“ after the takeover of TLG in FY 2020, 2021 and 2022. Prior

to the takeover 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

Named as “Extraordinary expenses for uncollected hotel rents“ in FY 2023. Named

as „Extraordinary expenses for uncollected rent“ in FY 2020, 2021 and 2022. 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

contributed 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

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.

143

AROUNDTOWN

Board of Directors‘ Report

FUNDS FROM OPERATIONS I (FFO I)

Funds from Operations I (FFO I) is an industry standard

performance indicator for evaluating operational recurring

proﬁts of a real estate ﬁrm. Aroundtown calculates

FFO I

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 expenses 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 excluding

the contribution from assets held for sale. Aroundtown

additionally deducts the

Perpetual notes attribution

to reach

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 (loss) / 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 hotel rents

Therefore, Aroundtown’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.

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

Extraordinary 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 measurement

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

transactions 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 hotel rents

(=) 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 consolidated.

Named as „Adjustment for GCP FFO I contribution“ in FY 2017, „Adjustment

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

Named as „Extraordinary expenses for uncollected rent“ in FY 2020, 2021 and 2022

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, base for

share KPI calculations. Prior to their conversion, it included the conversion

impact of mandatory convertible notes.

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

attribution, 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

144

LOAN-TO-VALUE (LTV)

The Loan-to-Value (LTV) is a measurement aimed at reﬂecting

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

internal LTV guidance 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

is calculated by adding together the

Investment

property

which includes

Advance payments and deposits

and

starting from FY 2023

Owner-occupied 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

and

Short- and long-term straight bonds

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

RENTAL YIELD AND RENT MULTIPLE

The rental yield and rent multiple are industry standard

indicators to measure the rent generation of a property

portfolio relative to its value and are generally used as key

valuation indicators.

The

Rental yield

is derived by dividing the

End of period

annualized net rental income

, by the

Investment property

. The

End of period annualized net rental income

is the annualized

monthly in-place rent of the related

Investment property

at the end of the period. The

Rent multiple

is the inverse of

Rental yield

and is derived by dividing the

Investment property

by the

End of period annualized

net rental income

. As the

assets that classiﬁed as

Development rights & invest

do not

generate material rental income, these are excluded from the

calculation.

AT additionally reports rental yield and/or rent multiple on

a more granular basis, such as in its portfolio breakdown

or in relation to speciﬁc transactions, to provide enhanced

transparency and comparability on its property portfolio in

speciﬁc locations and/or in relation to transaction activity.

LTV Calculation

(+) Investment property

(incl. advance payments and deposits and owner-occupied property

and excl. right-of-use assets)

(+) 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

It included inventories - trading property before the item was disposed and

starting in Dec 2023 includes Owner-occupied property

Named as „Assets held for sale“ in FY 2019 and FY 2018 and „Investment

properties classiﬁed as held for sale“ in FY 2017

Including property related JV‘s starting from Dec 2022

Total of bank loans, straight bonds, schuldscheins and exluding lease liabilities.

It included convertible bonds prior to their repayment.

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

Excluding properties classiﬁed as Development rights & Invest

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

assets 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 generated 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 investors

primarily to indicate the long-term solvency position of

Aroundtown.

Equity Ratio Calculation

(a) Total Equity

(b) Total Assets

(=) (a/b) Equity Ratio

Rental Yield and Rent Multiple Calculation

(a) End of period annualized net rental income

(b) Investment property

(=) (a/b) Rental yield

(=) (b/a) Rent multiple

Unencumbered Assets Ratio Calculation

(a) Rent generated by unencumbered assets

(b) Rent generated by the total Group

(=) (a/b) Unencumbered Assets Ratio

145

AROUNDTOWN

Board of Directors‘ Report

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 costs.

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, including extraordinary expenses

for uncollected hotel rents

and which was previously reported

ICR, Covid adjusted

and

which is calculated by dividing

the

Adjusted EBITDA

including extraordinary expenses for

uncollected hotel rents 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

contributions from joint venture positions

ICR Calculation

(a) Finance expenses

(b) Adjusted EBITDA

(=) (b/a) ICR

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

contributions from joint venture positions

Named as ICR, Covid adjusted in FY 2022

Including extraordinary expenses for uncollected hotel rents

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, Including Extraordinary Expenses for Uncollected Hotel Rents Calculation

(a) Finance expenses

2) 4)

(=) (c/a) ICR, including extraordinary expenses for uncollected hotel rents

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 Company’s

recurring operational proﬁts and thereby indicates how

much of the recurring operational proﬁts are available

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

butions from assets held for sale and joint venture

positions and excludes extraordinary expenses for

uncollected hotel rents. The

adjusted EBITDA (annualized)

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 attributable 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 perpetual notes to the net debt as

relevant. For enhanced transparency, AT additionally

provides this KPI including the full balance sheet amount

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 hotel rents.

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

AROUNDTOWN

Board of Directors‘ Report

146

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. 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

is calculated by dividing the

EPRA NTA

by the

Number

of shares

which excludes the treasury shares. 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

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, base for share KPI calculations. Prior to their

conversion, it included the conversion impact of mandatory convertible notes.

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

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

deferred 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 liabilities 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 liabilities, as well as excluding deferred

tax assets on certain ﬁnancial instruments in line with EPRA

recommendations. Aroundtown also adds/deducts

Fair

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 recommendations. 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

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 relation 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.

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.

147

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

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

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 signiﬁcant minority share in intangibles

Changed in Dec 2022 to exclude RETT

Including only the gross purchasers‘ costs of properties where RETT

optimization 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, base for share KPI calculations. Prior to their

conversion, it included the conversion impact of mandatory convertible notes.

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 shareholders’ 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 deducting from the

Equity attributa

ble to the owners

of the Company

, 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 share

is calculated by dividing the

EPRA NDV

by the

Number of shares

which excludes the treasury shares.

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

related to GCP surplus prior to the consolidation of GCP as

of July 1, 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, base for share KPI calculations. Prior to their

conversion, it included the conversion impact of mandatory convertible notes.

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

The components are described under the LTV section

Starting in Dec 2023, Investment property under the LTV section was changed to

include Owner-occupied property which is added separately below in EPRA LTV

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

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

is calculated by dividing the

EPRA Net debt

EPRA Total

property 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

the sum of

Total ﬁnancial debt

described under LTV section

above, an adjustment related to

Foreign currency derivatives

Equity attributable to perpetual notes investors

and

Net

payables

EPRA Total property value

is the sum of

Investment

property

which includes

Advance payments and deposits

but excludes the right-of-use assets,

Investment property

of assets 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 other 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

(excluding 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

in absolute values, the netted sum is shown in

EPRA Total

property value

, otherwise in

EPRA Net debt

Financial assets

are the sum of loans-to-own assets and vendor loans. The

calculation 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 relevant 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

AROUNDTOWN

Board of Directors‘ Report

148

EPRA EARNINGS

The EPRA Earnings is deﬁned by the European Public Real

Estate Association (EPRA) as the earnings from operational

activities and serves as an indicator of a company’s

underlying 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

income statement

, the

Property revaluations and capital

(losses) / 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, taking out

Deferred tax income

deducting the

Share of (loss) / 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

Adjustment for investment 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. 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.

EPRA Earnings per share

is calculated by dividing the

EPRA

Earnings

by the

Weighted average basic shares

which

excludes the shares held in treasury.

As FFO I is the widely-recognized indicator for a company’s

operational performance, an additional reconciliation is

provided from the

EPRA Earnings

to the

FFO I

. In this regard,

on top of

EPRA Earnings, Total depreciation and amortization,

Finance-related costs

and

Other adjustments

are added back.

Other adjustments

are made up of share-based payments and

previously included one-off expenses related to TLG merger.

Furthermore,

FFO items mainly related to investments in

equity-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.

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 operating 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

Notional rent expiration of rent-

free periods or other lease incentives

by the

Grossed up complete

property portfolio value

EPRA Earnings and EPRA Earnings Per Share Calculation

Earnings per IFRS income statement

(-) Property revaluations and capital (losses) / gains

(-) Impairment of goodwill

(-) Changes in fair value of ﬁnancial assets and liabilities, buy-backs

and early repayment costs, net

(-) Deferred tax income

(-) Share of (loss) / proﬁt from investment in equity accounted investees

(+) Adjustment for investment in equity-accounted investees

5) 6)

(-) 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,

and „Property revaluations and capital gains“ in FY 2018, 2019, 2020, 2021

and 2022

Named as „Changes in fair value of ﬁnancial assets and liabilities, net“ in FY

2017, 2018, 2019, 2020 and 2021

Named as „Deferred tax expense“ in FY 2017, 2018, 2019, 2020 and 2021.

Named as „Deferred tax income (expenses)“ in FY 2022

Named as „Share in proﬁt from investment in equity-accounted investees“ in

FY 2017, 2018, 2019 and 2020, and „Share of proﬁt from investment in equity

accounted investees“ in FY 2021 and 2022

In FY 2017, 2018 and 2019, share of proﬁt from investment in equity-accounted

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, base for

share KPI calculations. Prior to their conversion, it included the conversion

impact of mandatory convertible notes

149

AROUNDTOWN

Board of Directors‘ Report

EPRA VACANCY

The EPRA Vacancy is a key benchmark for providing

comparable

vacancy

reporting

across

real

estate

companies. Around

town provides

EPRA Vacancy

and

EPRA

Vacancy including JV

EPRA

Vacancy

is calculated by dividing

the

Estimated Rental Value (ERV) of the vacant space

the

Dec annualized net rent including vacancy rented at

ERV

. This ﬁgure was previously 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 contribution 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.

EPRA COST RATIOS

The EPRA Cost Ratios are key benchmarks provided

by Aroundtown in line with EPRA guidelines in order

to enable meaningful measurement of changes in

its operating costs, as well as to provide for

increased

comparability 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 equity-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 amortization

if includ

ed above and include

Extraordinary expenses for uncollected hotel rents

. 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

positions’ 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 ﬁnancial accounts. The

EPRA Cost Ratio

(excluding direct vacancy 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 vacancy costs)

, by the

Net rental

income

Aroundtown additionally provides EPRA Costs Ratios

excluding Extraordinary expenses for uncollected hotel

rents adjustments. The

EPRA Cost Ratio (including

direct

vacancy costs, excluding extraordinary expenses for uncollected

hotel rents)

is derived by dividing the

EPRA Costs (including

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 respective

periods

EPRA NIY and ´TOPPED-UP´ NIY Calculation

(+) Investment property

(+) Investment property 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

150

direct vacancy costs, excluding extraordinary expenses for

uncollected hotel rents)

, which adds back the

Extraordinary

expenses for uncollected hotel rents

to the

EPRA Costs

(

including direct vacancy costs)

, by

Net rental income

. The

EPRA

Cost Ratio (excluding direct vacancy costs, excluding

extraordinary expenses for uncollected hotel rents)

is derived

by dividing the

EPRA Costs (excluding direct vacancy costs,

excluding extraordinary expenses for uncollected hotel rents)

which adds back the

Extraordinary expenses for uncollected

hotel rents

to the

EPRA Costs (excluding direct vacancy costs)

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 hotel rents

(=) (e=a-d) EPRA Costs (including direct vacancy costs, excluding

extraordinary expenses for uncollected hotel rents)

(=) (f=c-d) EPRA Costs (excluding direct vacancy costs, excluding

extraordinary expenses for uncollected hotel rents)

(+) 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

extraordinary expenses for uncollected hotel rents)

(=) (k=a/g) EPRA Cost Ratio (excluding direct vacancy costs,

excluding extraordinary expenses for uncollected hotel rents)

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

Named as “Extraordinary expenses for uncollected hotel rents“ in FY 2023.

Named as „Extraordinary expenses for uncollected rent“ in FY 2020, 2021 and

2022. The adjustment started in 2020 after the Covid pandemic in order to

reﬂect the recurring costs excluding these extraordinary expenses

Changed to „excluding extraordinary expenses for uncollected hotel rents“

from

„excluding Covid-19 adjustment“ in FY 2023

151

AROUNDTOWN

Board of Directors‘ Report

Frank Roseen

Executive Director

Jelena Afxentiou

Executive Director

By order of the Board of Directors, March 27, 2024

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

management 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

presented 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

essential to this report.

AROUNDTOWN

Board of Directors‘ Report

152

To the Board of Directors of

Aroundtown SA

37, boulevard Joseph II

L-1840 Luxembourg

Grand Duchy of Luxembourg

Independent Limited Assurance Report

on the Non-Financial Report (Independent Auditor)

Independent Limited Assurance Report

We were engaged by the Board of Directors (the “Management”) of Aroundtown

SA (“the Company”) to report on the Company’s statements and indicators (the

“sustainability disclosures information”) that are disclosed in the Company’s Non-

Financial Report 2023 (the “Report”), for the selected ESG topics and KPIs related to

the year 2023, as listed in Appendix I:

●

Energy and Carbon Emissions

●

Environmental Compliance

●

Diversity and Equality

●

Employment and Skills

in the form of an independent limited assurance conclusion as to whether the

sustainability disclosures information is prepared and presented in all material

respects in accordance with EPRA Sustainability Best Practices Recommendations

(“EPRA SBPR”) Guidelines dated September 2017, and the EU Regulation 2020/852

on EU Taxonomy for Sustainable activities (Article 8) (the “Criteria”).

Responsibilities of the Management of the Company

Management of the Company is responsible for the preparation and presentation

of the sustainability disclosures information as reported in the Report in

accordance with the Criteria. This responsibility includes designing, implementing

and maintaining internal control relevant to the preparation of the sustainability

disclosures information.

Management is responsible for preventing and detecting fraud and for identifying and

ensuring that the Company complies with laws and regulations applicable to its activities.

Management is also responsible for ensuring that staff involved with the preparation

and presentation of the sustainability disclosures information as reported in the

Report are properly trained, information systems are properly updated and that any

changes in reporting encompass all signiﬁcant business units.

Our Responsibilities

Our responsibility is to examine the sustainability disclosures information as

described in the Report and to report thereon in the form of an independent limited

assurance conclusion based on the evidence obtained. We conducted our engagement

in accordance with International Standard on Assurance Engagements (ISAE) 3000,

Assurance Engagements other than Audits or Reviews of Historical Financial

Information, issued by the International Auditing and Assurance Standards Boards as

adopted for Luxembourg by the Institut des Réviseurs d’Entreprises (hereafter “IRE”).

That Standard requires that we plan and perform the engagement to obtain limited

assurance about whether the sustainability disclosures information as reported in

the Report is properly prepared and presented in all material respects in accordance

with the Criteria and is free from material misstatement.

Our firm applies International Standard on Quality Management 1, “Quality

Management for Firms that Perform Audits or Reviews of Financial Statements,

or Other Assurance and Related Services Engagements” (“ISQM 1”), as adopted for

153

AROUNDTOWN

Board of Directors‘ Report

Luxembourg by the Commission de Surveillance du Secteur Financier (CSSF) and

accordingly, maintains a comprehensive system of quality control including the

design, implementation and operation of a system of quality management of audits or

reviews of ﬁnancial statements, or other assurance and related services engagements.

We have complied with the independence and other ethical requirements of the

International Ethics Standards Board for Accountants’ International Code of Ethics

for Professional Accountants (including International Independence Standards)

(IESBA Code) as adopted for Luxembourg by the CSSF, which is founded on

fundamental principles of integrity, objectivity, professional competence and due

care, conﬁdentiality, and professional behaviour.

Summary of work performed

A limited assurance engagement on the sustainability disclosures information as

described in the Report consists of making inquiries, primarily of persons responsible

for the preparation of information presented in the Report, and applying analytical

and other evidence gathering procedures, as appropriate, with relation to the

sustainability disclosures information as described in the Report.

Conducting media search for references to the Company during the reporting period;

Obtaining and reading the Company’s policies and processes to address

sustainability matters and reporting;

Inquiries and inspection of the processes for determining the Report content and

related controls implemented;

Interviews with relevant staff responsible for providing and preparing the

information in the Report, inquiries and inspection of the related controls

implemented and methodologies used;

Conﬁrmation of alignment of the content and structure of the sustainability

statement with the Criteria.

The assurance procedures performed in a limited assurance engagement vary in

nature and timing from, and are less in extent than for, a reasonable assurance

engagement. Consequently, the level of assurance obtained in a limited assurance

engagement is substantially lower than the assurance that would have been obtained

had a reasonable assurance engagement been performed. A limited assurance

engagement involves performing procedures to obtain sufﬁcient appropriate evidence

to give assurance over the matters identiﬁed for our report. The assurance procedures

selected depend on our judgment, the suitable criteria including our assessment of

the risk of material misstatement in the sustainability disclosures information as

reported in the Report, whether due to fraud or error.

As part of this engagement, we have not performed any procedures by way of

audit, review or veriﬁcation of the sustainability disclosures information nor of the

underlying records or other sources from which the information was extracted.

The limited assurance opinion expressed in this report has been formed on the

above basis.

AROUNDTOWN

Board of Directors‘ Report

154

Inherent limitations

Our assurance work was limited to examining the relevant documents that were

made available by Management. Other than as described in the assurance procedures

above, we were not required to, nor have we, veriﬁed the accuracy or completeness of

the underlying data from which the Report, provided by the client, has been prepared.

Due to the inherent limitations of any internal control structure, it is possible that

errors or irregularities in the information presented in the Report may occur and not

be detected. Our engagement is not designed to detect all weaknesses in the internal

controls over the preparation and presentation of the Report, as the engagement

has not been performed continuously throughout the period and the procedures

performed were undertaken on a sample basis.

Our assurance work did not include:

Procedures to verify the sustainability disclosures information related to another

period than for the year ended 31 December 2023.

Conclusion

Our conclusion has been formed on the basis of, and is subject to, the matters

outlined in this report.

We believe that the evidence we have obtained is sufficient and appropriate to

provide a basis for our conclusion.

Based on the assurance procedures performed and evidence obtained, as described

above, nothing has come to our attention that causes us to believe that the

sustainability disclosures information as reported in the Report are not prepared

and presented in all material respects, in accordance with the Criteria.

Restriction of Use of Our Report

Our report is solely for the purpose set forth in the above objective and is not to

be used for any other purpose. Our report is solely for the use of the Management

and, through the Company’s website, the investors of the Company (“the Investors”).

The Investors can rely upon the Report at their own risks. We do not owe any duty to

the Investors, whether in contract or in tort or under statute or otherwise (including

in negligence) with respect to or in relation to the Report. Investors will not bring

any actions, proceedings or claims against KPMG Audit S.à r.l. where the action,

proceeding or claim in any way relates to or concerns the use of or reliance on

the Report. We cannot be held liable to Investors for any direct nor indirect loss or

damage suffered or costs incurred by them, arising out of or in connection with the

use or the Report, however such loss or damage is caused.

It might not be translated, summarised, disclosed, published or transmitted

electronically for any other purposes, without our prior consent.

We will agree with you the basis and timing of communications in order to

communicate any matters raised during our assignment that we believe to be both

important and relevant.

Luxembourg, 27 March 2024

KPMG Audit S.à r.l.

Cabinet de révision agréé

Muhammad Azeem

Réviseur d’entreprises agréé

155

AROUNDTOWN

Board of Directors‘ Report

Berlin

156

AROUNDTOWN

Consolidated Financial Statements

Berlin

Consolidated

Financial Statements

157

AROUNDTOWN

Consolidated Financial Statements

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

158

Consolidated statement of proﬁt or loss

Year ended December 31,

2023

2022

Note

in € millions

Revenue

1,602.8

1,609.9

Property revaluations and capital (losses) / gains

(3,217.5)

(497.3)

Share of (loss) / proﬁt from investment in equity-accounted investees

(149.8)

5.9

Property operating expenses

(638.4)

(694.9)

Administrative and other expenses

(64.7)

(62.5)

Operating (loss) / proﬁt

(2,467.6)

361.1

Impairment of goodwill

(137.0)

(404.3)

Finance expenses

(230.1)

(184.8)

Other ﬁnancial results

(14.4)

(194.1)

Loss before tax

(2,849.1)

(422.1)

Current tax expenses

11.2

(120.4)

(117.4)

Deferred tax income

11.4

543.1

82.4

Loss for the year

(2,426.4)

(457.1)

(Loss) / proﬁt attributable to:

Owners of the Company

(1,987.6)

(645.1)

Perpetual notes investors

153.4

118.1

Non-controlling interests

(592.2)

69.9

Loss for the year

(2,426.4)

(457.1)

Net loss per share attributable to the owners of the Company (in €)

Basic loss per share

12.1

(1.82)

(0.58)

Diluted loss per share

12.2

(1.82)

(0.58)

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

159

Consolidated statement of other comprehensive income

Year ended December 31,

2023

2022

Note

in € millions

Loss for the year

(2,426.4)

(457.1)

Other comprehensive (loss) / income:

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

12.1

(33.3)

Cash ﬂow hedges and cost of hedging

(33.6)

33.8

Items that will not be reclassiﬁed to proﬁt or loss, net of tax:

Revaluation of property and equipment

(2.9)

15.3

Total comprehensive loss for the year

(2,450.8)

(441.3)

Total comprehensive (loss) / income attributable to:

Owners of the Company

(2,013.2)

(626.1)

Perpetual notes investors

153.4

118.1

Non-controlling interests

(591.0)

66.7

Total comprehensive loss for the year

(2,450.8)

(441.3)

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

160

Consolidated statement of ﬁnancial position

As at December 31,

2023

2022

Note

in € millions

ASSETS

Investment property

24,632.4

27,981.0

Goodwill and intangible assets

1,165.7

1,308.1

Property and equipment

213.5

199.7

Investment in equity-accounted investees

1,086.5

1,291.9

Advance payments and deposits

107.4

136.1

Derivative ﬁnancial assets

25.4.1

138.1

205.8

Other non-current assets

1,458.1

1,303.8

Deferred tax assets

11.4

65.8

65.1

Non-current assets

28,867.5

32,491.5

Cash and cash equivalents

25.3.2

2,641.2

2,305.4

Short-term deposits

127.1

137.5

Financial assets at fair value through proﬁt or loss

25.1

257.7

266.5

Trade and other receivables

1,008.3

1,168.1

Derivative ﬁnancial assets

25.4.1

248.0

46.8

Assets held for sale

13.2.2

409.5

931.3

Current assets

4,691.8

4,855.6

Total assets

33,559.3

37,347.1

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Consolidated Financial Statements

161

Consolidated statement of ﬁnancial position (continued)

As at December 31,

2023

2022

Note

in € millions

EQUITY

Share capital

19.1.1

15.4

Treasury shares

19.1.2

(2,893.3)

(3,033.7)

Retained earnings and other reserves

10,521.2

12,603.6

Equity attributable to the owners of the Company

7,643.3

9,585.3

Equity attributable to perpetual notes investors

19.2

4,756.9

4,747.7

Equity attributable to the owners of the Company and perpetual notes investors

12,400.2

14,333.0

Non-controlling interests

19.3

2,749.5

3,490.4

Total equity

15,149.7

17,823.4

LIABILITIES

Loans and borrowings

21.1

2,124.2

1,266.0

Straight bonds

21.2

11,698.0

13,307.4

Derivative ﬁnancial liabilities

25.4.1

306.4

431.7

Other non-current liabilities

635.1

567.2

Deferred tax liabilities

11.4

2,106.5

2,662.3

Non-current liabilities

16,870.2

18,234.6

Current portion of long-term loans and loan redemptions

21.1

79.9

22.9

Bonds and schuldscheins

21.2

340.0

100.0

Trade and other payables

671.5

666.0

Tax payable

72.5

93.6

Provisions for other liabilities and accrued expenses

215.3

201.0

Derivative ﬁnancial liabilities

25.4.1

134.6

12.9

Liabilities associated with assets classiﬁed as held for sale

13.2.2

25.6

192.7

Current liabilities

1,539.4

1,289.1

Total liabilities

18,409.6

19,523.7

Total equity and liabilities

33,559.3

37,347.1

The Board of Directors of Aroundtown SA authorized these consolidated ﬁnancial statements for issuance on March 27, 2024

Frank Roseen

Jelena Afxentiou

Executive Director

The accompanying notes form an integral part of these consolidated ﬁnancial statements

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

162

Consolidated statement of changes in equity

Attributable to the owners of the Company

Equity

attributable to

Cash ﬂow

Equity

attributable

the owners of

premium

hedge and

attributable to

to perpetual

the Company

Non-

and capital

cost of hedge

Treasury

Retained

the owners of

notes

and perpetual

controlling

Total

capital

reserves

earnings

the Company

investors

notes investors

interests

equity

Note

in € millions

Balance as at January 1, 2023

15.4

5,186.0

59.6

(3,033.7)

7,358.0

9,585.3

4,747.7

14,333.0

3,490.4

17,823.4

(Loss) / proﬁt for the year

(1,987.6)

153.4

(1,834.2)

(592.2)

(2,426.4)

Other comprehensive (loss) / income for the year,

net of tax

13.8

(39.4)

(25.6)

1.2

(24.4)

Total comprehensive (loss) / income for the year

13.8

(39.4)

(1,987.6)

(2,013.2)

153.4

(1,859.8)

(591.0)

(2,450.8)

Transactions with owners of the Company

Contributions and distributions

Settlement of mandatory convertible notes

19.1.5

(138.5)

138.5

Equity settled share-based payment

19.1.2

(1.7)

1.9

0.2

Total contributions and distributions

(140.2)

140.4

0.2

Changes in ownership interests

Initial consolidations and deconsolidations

19.3.1

0.2

Transactions with non-controlling interests

(NCI), dividends distributed to NCI

19.3.1

56.9

(150.1)

(93.2)

Total changes in ownership interests

56.9

(149.9)

(93.0)

Transactions with perpetual notes investors

Payment to perpetual notes investors

(118.2)

Buy-back of perpetual notes

14.1

(26.0)

(11.9)

Total transactions with perpetual notes investors

14.1

(144.2)

(130.1)

Balance as at December 31, 2023

15.4

5,073.7

20.2

(2,893.3)

5,427.3

7,643.3

4,756.9

12,400.2

2,749.5

15,149.7

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

163

Consolidated statement of changes in equity (continued)

Attributable to the owners of the Company

Equity

attributable to

Cash ﬂow

Equity

attributable

the owners of

premium

hedge and

attributable to

to perpetual

the Company

Non-

and capital

cost of hedge

Treasury

Retained

the owners of

notes

and perpetual

controlling

Total

capital

reserves

earnings

the Company

investors

notes investors

interests

equity

Note

in € millions

Balance as at January 1, 2022

15.4

5,529.8

24.2

(2,937.3)

7,901.5

10,533.6

4,747.7

15,281.3

3,875.1

19,156.4

(Loss) / proﬁt for the year

(645.1)

118.1

(527.0)

69.9

(457.1)

Other comprehensive (loss) / income for the

year, net of tax

(16.4)

35.4

19.0

(3.2)

15.8

Total comprehensive (loss) / income for the year

(16.4)

35.4

(645.1)

(626.1)

118.1

(508.0)

66.7

(441.3)

Transactions with owners of the Company

Contributions and distributions

Share buy-back program

19.1.2

(254.6)

Equity settled share-based payment

(2.2)

2.3

0.1

Dividend distributions to the owners of the Company

19.1.3

(325.2)

155.9

(169.3)

Total contributions and distributions

(327.4)

(96.4)

(423.8)

Changes in ownership interests

Initial consolidations and deconsolidations

19.3.1

26.3

Transactions with non-controlling interests (NCI),

dividends distributed to NCI and others

19.3.1

101.6

(477.7)

(376.1)

Total changes in ownership interests

101.6

(451.4)

(349.8)

Transactions with perpetual notes investors

Payment to perpetual notes investors

(118.1)

Total transactions with perpetual notes investors

(118.1)

Balance as at December 31, 2022

15.4

5,186.0

59.6

(3,033.7)

7,358.0

9,585.3

4,747.7

14,333.0

3,490.4

17,823.4

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

164

Consolidated statement of cash ﬂows

Year ended December 31,

2023

2022

Note

in € millions

CASH FLOWS FROM OPERATING ACTIVITIES

Loss for the year

(2,426.4)

(457.1)

Adjustments for the loss:

Depreciation and amortization

14, 15

17.9

21.1

Property revaluations and capital gains

3,217.5

497.3

Share of loss / (proﬁt) from investment in equity-accounted investees

16.4

149.8

(5.9)

Impairment of goodwill

137.0

404.3

Finance expenses and other ﬁnancial results

244.5

378.9

Current and deferred tax (income) / expenses

(422.7)

35.0

Share-based payment

20.2

5.3

5.4

Change in working capital

(58.5)

(29.1)

Dividend received

19.1

34.8

Tax paid

(111.4)

(96.7)

Net cash from operating activities

772.1

788.0

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for acquisitions of property, equipment and intangible assets

(16.2)

(26.4)

Proceeds from disposals of investment property and proceeds from investees

970.4

1,286.5

Acquisitions of investment property and associates, investment in capex and advances paid

(395.6)

(730.3)

Proceeds from / (investments in) traded securities and other ﬁnancial assets, net

49.6

(121.3)

Net cash from investing activities

608.2

408.5

The accompanying notes form an integral part of these consolidated ﬁnancial statements

AROUNDTOWN

Consolidated Financial Statements

165

Consolidated statement of cash ﬂows (continued)

Year ended December 31,

2023

2022

Note

in € millions

CASH FLOWS FROM FINANCING ACTIVITIES

Share buy-back program

19.1.2

(254.6)

Payments to mandatory convertible notes investors

(5.9)

(11.9)

Payments to perpetual notes investors, net of buy-back

(126.2)

(118.1)

Buy-back and redemption of bonds

21.3

(1,128.6)

(829.2)

Proceeds of loans from ﬁnancial institutions and others, net of repayments made

21.3

812.9

225.0

Amortization of loans from ﬁnancial institutions and others

21.3

(16.6)

(13.3)

Transactions with non-controlling interests

19.3.1

(84.4)

(*)

(427.4)

Dividend paid to the owners of the Company

(169.3)

(Payments to) / proceeds from hedge relations, derivatives and others

(288.6)

39.2

Interest and other ﬁnancial expenses paid, net

21.3

(214.2)

(203.9)

Net cash used in ﬁnancing activities

(1,051.6)

(1,763.5)

Net changes in cash and cash equivalents

328.7

(567.0)

Cash and cash equivalents as at January 1

2,305.4

2,873.0

Assets held for sale – change in cash

13.2.2

9.1

(5.5)

Effect of movements in exchange rates on cash held

(2.0)

4.9

Cash and cash equivalents as at December 31

2,641.2

2,305.4

(*) reclassiﬁed

166

Consolidated Financial Statements

AROUNDTOWN

Notes to the consolidated

ﬁnancial statements

For the year ended December 31, 2023

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 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

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.

These consolidated ﬁnancial statements for the year ended December 31, 2023, 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 negative outlook given by Standard and

Poor’s (S&P). The rating of ‘BBB+’ also applies to the Company’s senior unsecured debt.

The Group`s subordinated perpetual notes’ rating is ‘BBB-’ with a negative outlook.

Grand City Properties S.A.’s (a subsidiary of the Company, “GCP”) corporate credit rating

is ‘BBB+’ with a negative outlook given by S&P, and ‘Baa1’ with a negative outlook given

by Moody’s Investors Service (Moody’s), who maintains its public rating on GCP on an

unsolicited basis since 2021. The ‘BBB+’ and ‘Baa1’ ratings also apply to the GCP’s senior

unsecured debt. GCP`s subordinated perpetual notes are rated ‘BBB-’ with a negative

outlook and ‘Baa3’ with a negative outlook, by S&P and Moody’s, respectively.

Aroundtown’s and GCP’s credit ratings were reafﬁrmed by S&P in December 2023.

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
	Companies over which the Company has signiﬁcant inﬂuence (as deﬁned
	in the IAS 28) and that are not subsidiaries. The Company’s investment
Associates
	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 23
The reporting period	The ﬁnancial year ended on December 31, 2023

167

AROUNDTOWN

Consolidated Financial Statements

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, 2022 have been reclassiﬁed to enhance comparability with 2023

ﬁgures and are marked as “reclassiﬁed”.

The consolidated ﬁnancial statements were authorized for issuance by the Company’s

Board of Directors on March 27, 2024.

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,

when applicable;

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 adopted

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

revised, if the estimate affects only that period, or in the period of the revision and

future periods, if the revision affects the present as well as future periods.

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 economic

life of the properties and the present value of the minimum lease payments not

amounting to substantially all of the fair value of the properties, that it retains

substantially all the risks and rewards incidental to ownership of these properties

and accounts for the contracts as operating leases.

●

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 simultaneously

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.

168

Consolidated Financial Statements

AROUNDTOWN

Principal versus agent considerations (services to tenants)

The Group arranges for certain services provided to tenants of investment property

included in the contract the Group enters into as a lessor, to be provided by third

parties. The Group has determined that it controls the services before they are

transferred to tenants, because it has the ability to direct the use of these services

and obtain the beneﬁts from them. In making this determination, the Group has

considered that it is primarily responsible for fulfilling the promise to provide

these speciﬁed services because it directly deals with tenants’ complaints and it

is primarily responsible for the quality or suitability of the services. Therefore, the

Group has concluded that it is the principal in these contracts. In addition, the Group

has concluded that it transfers control of these services over time, as services are

rendered by the third-party service providers, because this is when tenants receive

and, at the same time, consume the beneﬁts from these services.

Determining the timing of revenue recognition on the sale of property

The Group has evaluated the timing of revenue recognition on the sale of property

based on a careful analysis of the rights and obligations under the terms of the

contract and legal advice from the Group’s external counsels in various jurisdictions.

The Group has generally concluded that contracts relating to the sale of completed

property are 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

combination, it is accounted for as an acquisition of a group of assets and liabilities.

The cost of the acquisition is allocated to the assets and liabilities acquired based

upon their relative fair values, and no goodwill or deferred tax is recognized.

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 development purposes in order to assess the future expected cash ﬂows

from the assets. Any change in the assumptions used to measure the investment

property could affect its fair value.

Valuation of financial assets and liabilities -

Some of the Group’s assets and

liabilities are measured at fair value for ﬁnancial reporting purposes. In estimating

the fair value of an asset or a liability, the Group uses market-observable data

to the extent it is 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

determination is uncertain during the ordinary course of business. The Group

recognizes liabilities for anticipated tax audit issues based on estimates of whether

additional taxes will be due. Where the final tax outcome of these matters is

different from the amounts that were initially recorded, such differences will impact

the income tax in the period in which such determination is made.

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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.

Deferred tax liabilities related to the investment property. Deferred tax liabilities

consider the theoretical disposal of investment properties in the form of asset deals

with a tax rate applied based on the nominal rate in the jurisdiction of the property.

Impairment of financial assets measured at amortized cost

When measuring

expected credit loss (ECL) the Group uses reasonable and supportable forward-looking

information, which is based on assumptions for the future movement of different

economic drivers and how these drivers will affect each other. Loss given default is

an estimate of the loss arising on default. It is based on the difference between the

contractual cash ﬂows due and those that the lender would expect to receive, taking

into account cash ﬂows from collateral and integral credit enhancements.

Impairment of investments in associates -

The Group periodically evaluates the

recoverability 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 particular 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

impairment testing for an asset is required, the Group estimates the asset’s

recoverable 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 current 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 synergies 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

precedents 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

readily determine the interest rate implicit in leases where it is the lessee,

therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities.

The IBR is the rate of interest that the Group would have to pay to borrow over

a similar term, and with a similar security, the funds necessary to obtain an asset

of a similar value to the right-of-use asset in a similar economic environment.

The IBR therefore reﬂects what the Group ‘would have to pay’, which requires

estimation when no observable rates are available.

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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. For each investee, the Group determines the functional

currency and items included in the ﬁnancial statements of each entity are measured

using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group’s entities at their

respective functional currency spot rates at the date of the transaction. Monetary

assets and liabilities denominated in foreign currencies are translated at the functional

currency spot rates of exchange at the reporting date. Differences arising on settlement

or translation of monetary items are 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 currency

are translated using the exchange rates at the dates of the initial transactions. Non-

monetary items measured at fair value in a foreign currency are translated using the

exchange rates at the date when the fair value is determined. The gain or loss arising

on translation of non-monetary items measured at fair value is treated in line with

the recognition of gain or loss on change in fair value of the item (i.e. translation

differences on items whose fair value gain or loss is 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-monetary

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

adjustments to the carrying amounts of assets and liabilities arising on the acquisition

are treated as assets and liabilities of the foreign operation and translated at the spot

rate of exchange at the reporting date.

As at December 31, 2023, the Group’s main foreign exchange rates versus the euro

were as follows:


	EUR/GBP	EUR/USD
	(“British Pound”)	(“US Dollar”)
December 31, 2023	0.869	1.105
December 31, 2022	0.887	1.067
Average rate during the year 2023	0.870	1.081
Average rate during the year 2022	0.853	1.053
Changes (in %):
Year ended December 31, 2023	(2.0%)	3.6%
Year ended December 31, 2022	5.6%	(5.8%)

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3. MATERIAL ACCOUNTING POLICIES

3.1 Changes in accounting policies and disclosures

In the current year, the Group has applied a number of new and amended IFRS

Accounting Standards issued by the International Accounting Standards Board (IASB)

and adopted by the EU that are mandatorily effective in the EU for an accounting period

that begins on or after January 1, 2023. Their adoption has not had any material impact

on the disclosures or on the amounts reports in these ﬁnancial statements.

●

IFRS 17

Insurance Contracts

(including the June 2020 Amendments to IFRS 17)

IFRS 17 establishes the principals for the recognition, measurement, presentation and

disclosure of insurance contacts and supersedes IFRS 4

Insurance Contacts.

IFRS 17 outlines a general model, which is modiﬁed for insurance contracts with direct

participation features, described as the variable fee approach. The general model is

simpliﬁed if certain criteria are met by measuring the liability for remaining coverage

using the premium allocation approach. The general model uses current assumptions

to estimate the amount, timing and uncertainty of future cash ﬂows and it explicitly

measures the cost of that uncertainty. It takes into account market interest rates and

the impact of policyholders’ options and guarantees.

●

Amendments to IAS 1

Presentation of Financial Statements

and IFRS Practice Statement

Disclosure of Accounting policies

The amendments change the requirements in IAS 1 with regard to disclosure of

accounting policies. The amendments replace all instances of the term ‘signiﬁcant

accounting policies’ with ‘material accounting policy information’. Accounting policy

information is material if, when considered together with other information included

in an entity’s ﬁnancial statements, it can reasonably be expected to inﬂuence decisions

that the primary users of general purpose ﬁnancial statements make on the basis of

those ﬁnancial statements.

The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy

information that relates to immaterial transactions, other events or conditions is

immaterial and need not be disclosed. Accounting policy information may be material

because of the nature of the related transactions, other events or conditions, even if

the amounts are immaterial. However, not all accounting policy information relating to

material transactions, other events or conditions is itself material.

The IASB has also developed guidance and examples to explain and demonstrate the

application of the ‘four-step materiality process’ described in IFRS Practice Statement 2.

●

Amendments to IAS 8

Accounting policies, Changes in Accounting Estimates and Errors:

Deﬁnition of Accounting Estimates

The amendments replace the deﬁnition of a change in accounting estimates with a

deﬁnition of accounting estimates. Under the new deﬁnition, accounting estimates are

“monetary amounts in ﬁnancial statements that are subject to measurement uncertainty”.

The deﬁnition of a change in accounting estimates was deleted. However, the IASB

retained the concept of changes in accounting estimates in the Standard with the

following clariﬁcations:

A change in accounting estimate that results from new information or new

developments is not the correction of an error

The effects of a change in an input or a measurement technique used to develop

an accounting estimate are changes in accounting estimates if they do not result

from the correction of prior period errors

The IASB added two examples (Examples 4-5) to the Guidance on implementing IAS

8, which accompanies the Standard. The IASB has deleted one example (Example 3)

as it could cause confusion in light of the amendments.

●

Amendments to IAS 12

Income Taxes

: Deferred Tax related to Assets and Liabilities

arising from a Single Transaction

The amendments introduce a further exception from the initial recognition exemption.

Under the amendments, an entity does not apply the initial recognition exemption

for transactions that give rise to equal taxable and deductible temporary differences.

Depending on the applicable tax law, equal taxable and deductible temporary

differences may arise on initial recognition of an asset and liability in a transaction

that is not a business combination and affects neither accounting 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.

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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 amendments

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 12 Income Taxes: International Tax Reform - Pillar Two Model Rules

The Group has adopted the amendments to IAS 12 upon their release in May 2023.

The amendments introduce a temporary mandatory exception from deferred tax

accounting for the top-up tax, which is effective immediately and require new

disclosures about the Pillar Two exposure.

The mandatory exception applies retrospectively. However, because no new legislation

to implement the top-up tax was enacted or substantively enacted in any jurisdiction

in which the Group operates and no related deferred tax was recognized at that date,

the retrospective application has no impact on the Group’s consolidated statement

of ﬁnancial position.

3.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the

Company and its subsidiaries as at December 31, 2023. Control is achieved when

the Group is exposed, or has rights, to variable returns from its involvement with the

investee and has the ability to affect those returns through its power over the investee.

Speciﬁcally, the Group controls an investee if, and only if, the Group has:

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.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary

and ceases when the Group loses control of the subsidiary. Assets, liabilities, income

and expenses of a subsidiary acquired or disposed of during the year are included in

the consolidated ﬁnancial statements from the date the Group gains control until the

date it ceases to control the subsidiary.

Proﬁt or loss and each component of other comprehensive income (OCI) are attributed

to the equity holders of the parent of the Group and to the non-controlling interests,

even if this results in the non-controlling interests having a deﬁcit balance. When

necessary, adjustments are made to the ﬁnancial statements of subsidiaries to bring

their accounting policies in line with the Group’s accounting policies. All intra-group

assets and liabilities, equity, income, expenses and cash ﬂows relating to transactions

between members of the Group are eliminated in full on consolidation.

Unrealized gains arising from transactions with equity-accounted investees are

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eliminated 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 accounted

for as an equity transaction. The carrying amounts of the Group’s interests and the non-

controlling interests are adjusted to reﬂect the changes in their relative interests in the

subsidiaries. Any difference between the amount by which the non-controlling interests

are adjusted and the fair value of the consideration paid or received is recognized

directly in equity attributed to owners of the Company.

When the Group loses control over a subsidiary, proﬁt or loss on disposal is calculated

as the difference between (i) the aggregate of the fair value of the consideration

received and the fair value of any retained interest and (ii) the previous carrying

amount of the assets (including goodwill), and liabilities of the subsidiary and any

non-controlling interests and other components of equity, and is 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

considers the substance of the assets and activities of the acquired entity in

determining whether the acquisition represents the acquisition of a business. Where

such acquisitions are not determined to be an acquisition of a business, they are not

treated as business combinations. Rather, the cost to acquire the corporate entity or

assets and liabilities is allocated between the identiﬁable assets and liabilities of the

entity based on their relative 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

contribute to the ability to create outputs. The acquired process is considered substantive

if it is critical to the ability to continue producing outputs, and the inputs acquired include

an 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

measured at acquisition date fair value, and the amount of any non-controlling interests

in the acquiree. For each business combination, the Group elects whether to measure

non-controlling interests in the acquiree that are present ownership interests and entitle

their holders to a proportionate share of the entity’s net assets in the event of liquidation,

at fair value or at the proportionate share of the acquiree’s identiﬁable net assets. Other

types of non-controlling interests are measured at fair value or, when applicable, on the

basis speciﬁed in another IFRS.

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

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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

information obtained during the ‘measurement period’ (which cannot exceed one year from

the acquisition date) about facts and circumstances that existed at the acquisition date.

When the Group acquires a business, it assesses the identiﬁable assets acquired and

liabilities assumed for appropriate classiﬁcation and designation in accordance with the

contractual terms, economic circumstances and pertinent conditions as at the acquisition

date. This includes the separation of embedded derivatives in host contracts by the

acquiree.

At the acquisition date, the identiﬁable assets acquired and the liabilities assumed are

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

consideration 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

reporting period in which the combination occurs, the Group reports provisional

amounts for the items for which the accounting is incomplete. Those provisional

amounts are adjusted during the measurement period, 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

classiﬁcation 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 recoverable 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

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operation 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 participate 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

incorporated 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

recognize 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

income 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.

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Lease incentives that are paid or payable to the lessee are deducted from lease

payments. 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 controls

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.

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Consolidated Financial Statements

●

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

carryforward 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 business

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

subsidiaries, 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

information about changes in facts and circumstances. The adjustment is either treated

as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred

during the measurement period or 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.

The Group has applied a temporary mandatory relief from deferred tax accounting for

the impacts of the top-up tax and accounts for it as a current tax when it is incurred.

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

performed with sufﬁcient frequency to ensure that the carrying amount of a revalued

asset does not differ materially from its fair value.

A revaluation surplus is recorded in other comprehensive income and credited

to the asset revaluation surplus in equity. However, to the extent that it reverses a

revaluation deﬁcit of the same asset previously 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 of property and equipment items are measured at cost less accumulated

depreciation 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.

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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. Development

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 development 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 economic

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 charges

(heating, water, insurance, cleaning etc.) on a monthly basis. These prepayments

received from tenants are mainly settled once a year against the operating cost

receivables. 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.

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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

expenditure such as transfer taxes, professional fees for legal services and other

transaction costs.

Subsequent to initial recognition, investment property is stated at fair value, which

reﬂects market conditions at the reporting date. Gains or losses arising from changes

in the fair values of investment property are included in proﬁt or loss in the period in

which they arise, including the corresponding tax effect.

Transfers are made to (or from) investment property only when there is evidence of a

change in use (such as commencement of development or inception of an operating

lease to another party). For a transfer from investment property to inventories, the

deemed cost for subsequent accounting is the fair value at the date of change in use.

If an inventory property becomes an investment property, the difference between the

fair value of the property at the date of transfer and its previous carrying amount is

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 accounting 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

requirements for determining when a performance obligation is satisﬁed in IFRS 15)

or when it is permanently withdrawn from use and no future economic benefit is

expected from its disposal. The difference between the net disposal proceeds and

the carrying amount of the asset is 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 investment 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

investment 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

services, property transfer taxes, development overheads and other related costs

NRV is the estimated selling price in the ordinary course of the business, based on

market prices at the reporting date, less estimated costs of completion and the

estimated costs necessary to make the sale.

When a 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

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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

amortized 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.

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(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

method 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

investments as equity instruments designated at fair value through OCI when

they meet the deﬁnition of equity under IAS 32 and are not held for trading. The

classiﬁcation is determined on an instrument-by-instrument basis.

Gains and losses on these ﬁnancial assets are never recycled to proﬁt or loss.

Dividends are 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 purpose of selling or repurchasing in the near term. Derivatives, including

separated embedded derivatives, are also classiﬁed as held for trading unless

they are designated as effective hedging instruments. Financial assets with cash

ﬂows that are not solely payments of principal and interest are classiﬁed and

measured at fair value through proﬁt or loss, irrespective of the business model.

Notwithstanding the criteria for debt instruments to be classiﬁed at 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

recognized in the consolidate statement of proﬁt or loss

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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-

ﬁnancial host, is separated from the host and accounted for as a separate derivative

if: the economic characteristics and risks are not closely related to the host; a

separate instrument with the same terms as the embedded derivative would meet

the definition of a derivative; and the hybrid contract is not measured at fair

value through proﬁt or loss. Embedded derivatives are measured at fair value with

changes in fair value 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 embedded

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,

irrespective of the timing of the default (a lifetime ECL). The Group presumes

that the credit risk on a ﬁnancial asset has increased signiﬁcantly since initial

recognition when contractual payments are more than 30 days past due, unless the

Group has reasonable and supportable information that demonstrates otherwise.

Lifetime ECL represents the expected credit losses that will result from all possible

default events over the expected life of a ﬁnancial instrument. In contrast, 12-month

ECL represents the portion of lifetime ECL that is expected to result from default

events on a financial instrument that are possible within 12 months 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

established a provision that is based on its historical credit loss experience,

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Consolidated Financial Statements

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

information indicates that the Group is unlikely to receive the outstanding

contractual amounts in full before taking into account any credit enhancements

held by the Group or when there is a breach of ﬁnancial covenants by the debtor.

Irrespective of the above analysis, the Group considers that default has occurred

when a financial asset is more than 90 days past due unless the Group has

reasonable and supportable information to demonstrate that a more lagging

default criterion is more appropriate. A ﬁnancial asset is written off when 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

described below:

Financial liabilities at fair value through proﬁt or loss

Financial liabilities at fair value through proﬁt or loss include ﬁnancial liabilities

held for trading and ﬁnancial liabilities designated upon initial recognition as at

fair value through proﬁt or loss.

Financial liabilities are classiﬁed as held for trading if they are incurred for the

purpose of repurchasing in the near term. This category also includes derivative

ﬁnancial instruments entered into by the Group that are not designated as hedging

instruments in hedge relationships as deﬁned by IFRS 9. Separated embedded

derivatives are also classiﬁed as held for trading unless they are designated as

effective hedging instruments.

Gains or losses on liabilities held for trading are 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, interest-

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

determining contractual cash ﬂows that are necessary as a direct consequence of IBOR

reform to be treated as a change to a ﬂoating rate of interest, provided the transition

from IBOR to a risk-free rate (RFR) takes place on a basis that is ‘economically equivalent’.

To qualify as ‘economically equivalent’, the terms of the ﬁnancial instrument must be the

same before and 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 applied judgement to assess

whether the transition had taken place on an economically equivalent basis. In making

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this assessment, the Group considered the extent of any changes to the contractual cash

ﬂows as a result of the transition and the factors that had 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. The

transition has been completed as of December 31, 2023.

(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

noteholders 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

determined 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

subsequent years.

Transaction costs are apportioned between the liability and equity components of the

convertible bonds, based on the allocation of the proceeds to the liability and equity

components when the instruments are initially 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

attributable to its holders, which forms part of the total equity of the Group. The

Company may, at its sole discretion, elect to defer the payment of interest on the notes

(referred to as Arrears of Interest). Arrears of Interest must be paid by the Company upon

the occurrence of certain events, including but not limited to, dividends, distributions or

other payments made to instruments such as the Company’s ordinary shares, which rank

junior to the perpetual notes. Upon occurrence of such an event, any Arrears of Interest

would be re-classiﬁed as a liability in the Group’s consolidated ﬁnancial statements.

The deferred amounts shall not bear interest.

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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

unrecognized 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

management objective and strategy for undertaking the hedge.

The documentation includes identiﬁcation of the hedging instrument, the hedged item,

the nature of the risk being hedged and how the Group will assess whether the hedging

relationship meets the hedge effectiveness requirements (including the analysis of

sources of hedge ineffectiveness and how the hedge ration is determined). A hedging

relationship qualiﬁes for hedge accounting if it meets all 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.

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In cases that the Group designates only the spot element of swap contracts as a

hedging instrument, the forward element is recognized in OCI and accumulated in

a component 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

immediately 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

amendments, which enable its hedge accounting to continue during the period of

uncertainty, before the replacement of an existing interest rate benchmark with an

risk-free rate (RFR). For the purpose of determining whether a forecast transaction is

highly probable, the reliefs require it to be assumed that the IBOR on which the hedged

cash ﬂows are based is not altered as a result of IBOR reform. The reliefs end when the

Group judges that the uncertainty arising from IBOR reform is no longer present for

the hedging relationships that are referenced to IBORs. This applies when 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

Decision 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

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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

recognized 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 constructive,

vis-à-vis third parties as a result of a past event, if it is probable that a claim will be

asserted, and the probable amount of the required provision can be reliably estimated.

Provisions are reviewed regularly and adjusted to reﬂect new information or changed

circumstances. Provisions include provisions for operating and administrative liabilities,

as well as accruals of interest on straight and convertible bonds which have not become

payable as at the 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,

except 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

commencement 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 payments)

less any lease incentives receivable, variable lease payments that depend on an

index or a rate, and amounts expected to be paid under residual value guarantees.

The lease payments also include the exercise price of a purchase option reasonably

certain to be exercised by the Group and payments of penalties for terminating the

lease, if the lease term reﬂects the Group exercising the option to terminate. Variable

lease payments that do not depend on an index or a rate are 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

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is remeasured if there is a modiﬁcation, a change in the lease term, a change in

the lease payments (e.g., changes to future payments resulting from a change

in an index or rate used to determine such lease payments) or a change in the

assessment of an option to purchase the underlying asset. IFRS 16 requires certain

adjustments to be expensed, while others are added to the cost of the related

right-of-use asset.

The Group presents 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.

(c)

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to short-term leases

of equipment (i.e., those leases that have a lease term of 12 months or less from the

commencement date and do not contain a purchase option). It also applies the lease

of low-value assets recognition exemption to leases of ofﬁce equipment that are

considered to be low value. Lease payments on short-term leases and leases of low-

value assets are 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

effective, up to the date of issuance of the Group’s ﬁnancial statements are disclosed

below, if they are expected to have an impact on the Group’s ﬁnancial statements.

The Group intends to adopt these new and amended standards and interpretations, if

applicable, when they become effective.

With effective date of January 1, 2024:

●

Amendments to IFRS 16

Leases

– Lease Liability in a Sale and Leaseback

The amendments to IFRS 16 add subsequent measurement requirements for sale

and leaseback transactions that satisfy the requirements in IFRS 15

Revenue from

Contracts with Customers

to be accounted for as a sale. The amendments require the

seller-lessee to determine ‘lease payments’ or ‘revised lease payments’ such that the

seller-lessee does not recognize a gain or loss that relates to the right of use retained

by the seller-lessee, after the commencement date.

The amendments do not affect the gain or loss recognized by the seller-lessee relating

to the partial or full termination of a lease. Without these new requirements, a seller-

lessee may have recognized a gain on the right of use it retains solely because of a

remeasurement of the lease liability (for example, following a lease modiﬁcation or

change in the lease term) applying the general requirements in IFRS 16. This could

have been particularly the case in a leaseback that includes variable lease payments

that do not depend on an index or rate.

As part of the amendments, the IASB amended an Illustrative Example in IFRS 16

and added a new example to illustrate the subsequent measurement of a right-of-

use asset and lease liability in a sale and leaseback transaction with variable lease

payments that do not depend on an index or rate. The illustrative examples also clarify

that the liability that arises from a sale and leaseback transaction that qualiﬁes as a

sale applying IFRS 15 is a lease liability.

The amendments are effective for annual reporting periods beginning on or after

January 1, 2024. Earlier application is permitted. If a seller-lessee applies the

amendments for an earlier period, it is required to disclose that fact.

A seller-lessee applies the amendments retrospectively in accordance with IAS 8

to sale and leaseback transactions entered into after the date of initial application,

which is deﬁned as the beginning of the annual reporting period in which the entity

ﬁrst applied IFRS 16.

●

Amendments to IAS 1

Presentation of Financial Statements

– Classification of

Liabilities as Current or Non-Current

The amendments to IAS 1 published in January 2020 affect only the presentation of

liabilities as current or non-current in the statement of ﬁnancial position and not

the amount or timing of recognition of any asset, liability, income or expenses, or the

information disclosed about those items.

The amendments clarify that the classiﬁcation of liabilities as current or non-current

is based on rights that are in existence at the end of the reporting period, specify that

classiﬁcation is unaffected by expectations about whether an entity will exercise its

right to defer settlement of a liability, explain that rights are in existence if covenants

are complied with at the end of the reporting period, and introduce a deﬁnition of

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Consolidated Financial Statements

‘settlement’ to make clear that settlement refers to the transfer to the counterparty

of cash, equity instruments, other assets or services.

The amendments are applied retrospectively for annual periods beginning on or after

January 1, 2024, with early application permitted.

●

Amendments to IAS 1

Presentation of Financial Statements

– Non-current Liabilities

with Covenants

The amendments to IAS 1 issued in August 2022 specify that only covenants that an

entity is required to comply with on or before the end of the reporting period affect

the entity’s right to defer settlement of a liability for at least twelve months after the

reporting date (and therefore must be considered in assessing the classiﬁcation of

the liability as current or non-current). Such covenants affect whether the right exists

at the end of the reporting period, even if compliance with the covenant is assessed

only after the reporting date (e.g. a covenant based on the entity’s ﬁnancial position

at the reporting date that is assessed for compliance only after the reporting date).

The IASB also speciﬁes that the right to defer settlement of a liability for at least

twelve months after the reporting date is not affected if an entity only has to comply

with a covenant after the reporting period. However, if the entity’s right to defer

settlement of a liability is subject to the entity complying with covenants within

twelve months after the reporting period, an entity discloses information that enables

users of financial statements to understand the risk of the liabilities becoming

repayable within twelve months after the reporting period. This would include

information about the covenants (including the nature of the covenants and when

the entity is required to comply with them), the carrying amount of related liabilities

and facts and circumstances, if any, that indicate that the entity may have difﬁculties

complying with the covenants.

The amendments are applied retrospectively for annual reporting periods beginning

on or after January 1, 2024. Earlier application of the amendments is permitted.

The Group has not early adopted any standard, interpretation or amendment that has

been issued but is not yet effective.

London

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4. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

4.1 Fair value hierarchy

The following table presents the Group’s ﬁnancial assets and liabilities measured and

presented at fair value as at December 31, 2023, and as at December 31, 2022, on a

recurring basis under the relevant fair value hierarchy. Also presented are the Group’s

financial assets and liabilities measured at amortized cost for which the carrying

amount materially differs from the fair value.


	As at December 31, 2023						As at December 31, 2022
	Fair value measurement using						Fair value measurement using
	Carrying	Total fair	Quoted prices	Signiﬁcant	Signiﬁcant	Carrying	Total fair	Quoted prices	Signiﬁcant	Signiﬁcant
	amount	value	in active	observable	unobservable	amount	value	in active	observable	unobservable
			market	inputs	inputs			market	inputs	inputs
			(Level 1)	(Level 2)	(Level 3)			(Level 1)	(Level 2)	(Level 3)
			in € millions					in € millions
FINANCIAL ASSETS

Financial assets at fair value through proﬁt or loss (1)	418.7	418.7	240.6	135.2	42.9	466.4	466.4	196.7	231.7	38.0
Derivative ﬁnancial assets	386.1	386.1	-	386.1	-	252.6	252.6	-	252.6	-
Total ﬁnancial assets	804.8	804.8	240.6	521.3	42.9	719.0	719.0	196.7	484.3	38.0
FINANCIAL LIABILITIES
Loans and borrowings	2,204.1	2,221.3	-	2,221.3	-	1,288.9	1,242.6	-	1,242.6	-

Bonds and schuldscheins (2)	12,038.0	10,373.8	10,157.2	216.6	-	13,407.4	10,110.6	9,820.1	290.5	-
Derivative ﬁnancial liabilities	441.0	441.0	-	441.0	-	444.6	444.6	-	444.6	-
Total ﬁnancial liabilities	14,683.1	13,036.1	10,157.2	2,878.9	-	15,140.9	11,797.8	9,820.1	1,977.7	-

(1)

including non-current ﬁnancial assets at fair value through proﬁt or loss

(2)

the carrying amount excludes accrued interest

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Level 1:

he 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

instrument are observable, the instrument is included in level 2.

Level 3:

if one or more of the signiﬁcant inputs is not based on observable market data,

the instrument is included in level 3.

The Group’s policy is to recognize transfers into and transfers out of fair value hierarchy

levels as at the end of the reporting period.

When the fair value of financial assets and financial liabilities recorded in the

consolidated statement of ﬁnancial position cannot be measured based on quoted prices

in active markets, their fair value is measured using valuation techniques including the

discounted cash 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 establishing fair values. Judgements include considerations of input such as liquidity

risk, credit risk and volatility. Changes in assumptions relating to these factors could affect

the reported fair value of ﬁnancial instruments and is discussed further below.

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

management judgment after considering the period of restrictions and the nature

of the underlying investments.

●

The Company enters into derivative ﬁnancial instruments with various counterparties,

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

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.

5. OPERATING SEGMENTS

5.1 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-

diversiﬁed 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, 2023, consists of 63 thousand units (2022: 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.

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5.2 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, 2023
	in € millions
				Total
	Note	Commercial	GCP	reportable	Adjustments	Total
		portfolio	portfolio
				segments
Segment revenue	6	996.8	607.7	1,604.5	(1.7)	1,602.8
Net operating income		655.3	328.7	984.0	(1.7)	982.3
Property revaluations and	7	(2,327.5)	(890.0)	(3,217.5)	-	(3,217.5)
capital (losses) / gains
Impairment of goodwill	14	(76.7)	(60.3)	(137.0)	-	(137.0)
Share of loss from equity-
accounted investees	16					(149.8)
Administrative and other
expenses	9					(64.7)
Depreciation and amortization	14, 15					(17.9)
Finance expenses	10					(230.1)
Other ﬁnancial results	10					(14.4)
Loss before tax						(2,849.1)
Current tax expenses	11					(120.4)
Deferred tax income	11					543.1
Loss for the year						(2,426.4)

Segment revenue, net operating income and revaluation and capital gains / (losses)

as well as impairment of goodwill represent the results earned by each segment

without allocation of the depreciation and amortization, 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


	Year ended December 31, 2022
		in € millions
	Note	Commercial	GCP	Total	Adjustments	Total
		portfolio	portfolio	segments
Segment revenue	6	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 (losses) / gains	7	(615.1)	117.8	(497.3)	-	(497.3)
Impairment of goodwill	14	(141.4)	(262.9)	(404.3)	-	(404.3)
Share of proﬁt from equity-
accounted investees	16					5.9
Administrative and other
expenses	9					(62.5)
Depreciation and amortization	14, 15					(21.1)
Finance expenses	10					(184.8)
Other ﬁnancial results	10					(194.1)
Loss before tax						(422.1)
Current tax expenses	11					(117.4)
Deferred tax income	11					82.4
Loss for the year						(457.1)

allocation and assessment of segment performance. The geographical 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 6

and 13, respectively.

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Consolidated Financial Statements

6. REVENUE

	Year ended December 31,
	2023	2022
	in € millions
Net rental income	1,192.8	1,222.1
Operating and other income	410.0	387.8
	1,602.8	1,609.9

Geographical distribution of revenue

	Year ended December 31,
Country	2023	2022
	in € millions
Germany	1,198.0	1,195.2
The Netherlands	176.6	159.1
United Kingdom	148.7	173.9
Belgium	27.3	26.0
Others	52.2	55.7
	1,602.8	1,609.9

The Group is not exposed to signiﬁcant revenue derived from an individual customer.

7. PROPERTY REVALUATIONS AND CAPITAL (LOSSES) / GAINS

	Year ended December 31,
	2023	2022
	in € millions
Property revaluations	(3,174.8)	(539.9)
Capital (losses) / gains	(42.7)	42.6
	(3,217.5)	(497.3)

8. PROPERTY OPERATING EXPENSES

	Year ended December 31,
	2023	2022
	in € millions
Ancillary expenses and purchased services	(409.8)	(390.8)
Maintenance and refurbishment	(49.3)	(51.1)
Personnel expenses	(62.7)	(58.6)
Depreciation and amortization	(17.9)	(21.1)
Other operating costs (*)	(98.7)	(173.3)
	(638.4)	(694.9)

(*) the Group recognized an allowance for expected credit loss and other impairment on trade and other

receivables in the total amount of €65.9 million (2022: €133.2 million), also containing an allowance for

uncollected hotel rents

As at December 31, 2023, the Group had 1,706 employees (2022: 1,705 employees).

On average, the Group had 1,745 employees (2022: 1,688 employees) for which

the personnel expenses are presented in the property operating expenses and the

administrative and other expenses.

The amount of direct operating expenses (including maintenance and refurbishment)

arising from investment property that generates net rental income during the year

amounted to €628.3 million (2022: €690.5 million). The amount of direct operating

expenses (including maintenance and refurbishment) arising from investment property

that did not generate net rental income during the year amounted to €10.1 million

(2022: €4.4 million).

194

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9. ADMINISTRATIVE AND OTHER EXPENSES

	Year ended December 31,
	2023	2022
	in € millions
Personnel expenses	(30.9)	(28.8)
Legal and professional fees	(13.4)	(12.1)
Audit and accounting expenses	(7.1)	(7.2)
Marketing and other administrative expenses	(13.3)	(14.4)
	(64.7)	(62.5)

The following table shows the breakdown of audit and audit-related services that are

presented in the audit and accounting expenses above, as well as tax and other services

rendered by KPMG audit ﬁrm network and by other audit ﬁrms:

	Year ended December 31,
	2023		2022
	in € millions
	KPMG	Other	KPMG	Other
	Network	audit ﬁrms	Network	audit ﬁrms

Audit services	3.4	3.1	(*) 3.9	(*) 2.4
Audit-related services	0.3	0.3	(*) 0.5	(*) 0.4
Tax and other services	0.2	0.7	0.1	0.4
	3.9	4.1	4.5	3.2

(*) reclassiﬁed

10. FINANCE EXPENSES AND OTHER FINANCIAL RESULTS

	Year ended December 31,
	2023	2022
	in € millions
Finance expenses
Interest to ﬁnancial institutions, bonds and
third parties, net	(213.3)	(173.9)
Finance expenses on lease liabilities	(16.8)	(10.9)
Other ﬁnancial results	(230.1)	(184.8)
Changes in fair value of ﬁnancial assets and
liabilities, buy-backs and early repayment costs, net (*)	14.8	(168.6)
Finance-related costs	(29.2)	(25.5)
	(14.4)	(194.1)

(*) for the gain resulted in the bond buybacks, see note 21.2.1

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Consolidated Financial Statements

11. TAXATION

11.1 Tax rates applicable to the Group

The Company is subject to taxation under the laws of Luxembourg. The corporation

tax rate for Luxembourg companies is 24.94% (2022: 24.94%).

The German subsidiaries 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, 2023 (2022: 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

corporation tax rate for Cypriot companies is 12.5% (2022: 12.5%). Under certain

conditions interest income of the Cypriot companies may be subject to special defense

contribution at the rate of 30.0% (2022: 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% (2022: 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 2023 is 25.8% (reduced rate of 15%

applies to taxable income up to €395 thousand) (2022: 25.8% 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 25.0% (reduced rate of 19% applies to taxable income up to

GBP 250 thousand) for December 31, 2023 (2022: 19.0%). 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%

(2022: 27.9%).

11.2 Current tax expenses


	Year ended December 31,
	2023	2022
	in € millions
Corporate income tax	(72.1)	(69.0)
Property tax	(48.3)	(48.4)
	(120.4)	(117.4)

11.3 Global minimum top-up tax

Pillar Two legislation was enacted in several jurisdictions in which the Group operates.

Since the Pillar Two legislation was not effective at the reporting date, the Group has

no related current tax exposure. The Group applies the exception to recognising and

disclosing information about deferred tax assets and liabilities related to Pillar Two

income taxes, as provided in the amendments to IAS 12 issued in May 2023.

Under the legislation, the group is liable to pay a top-up tax for the difference between

their Global Anti-Base Erosion (GloBE) effective tax rate per jurisdiction and a 15%

minimum rate.

The Group is in the process of assessing its exposure to the Pillar Two legislation.

Due to the complexities in applying the legislation and calculating GloBE income,

the quantitative impact of the enacted or substantively enacted legislation is not yet

reasonably estimable. The Group is currently engaged with tax specialists to assist them

with applying the legislation.

196

Consolidated Financial Statements

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11.4 Movements in the deferred tax assets and liabilities

Deferred tax liabilities


	Derivative	Fair value
	ﬁnancial	gains on
	instruments and	investment	Total
	other deferred tax	property
	liabilities
	in € millions
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 / (loss)	28.2	(1.1)	27.1
Disposed of through deconsolidations and others	-	(24.4)	(24.4)
Transfer to liabilities held for sale	-	(33.0)	(33.0)
Netting of deferred taxes (*)	-	3.3	3.3
Balance as at December 31, 2022	42.0	2,620.3	2,662.3
Charged to:
Consolidated statement of proﬁt or loss	(3.7)	(542.5)	(546.2)
Other comprehensive loss	(17.7)	(2.0)	(19.7)
Disposed of through deconsolidations and others	-	(10.3)	(10.3)
Transfer from liabilities held for sale and others	-	18.7	18.7
Netting of deferred taxes (*)	-	1.7	1.7
Balance as at December 31, 2023	20.6	2,085.9	2,106.5
Excess of deferred tax liabilities as at
December 31, 2022			2,597.2
Excess of deferred tax liabilities as at
December 31, 2023			2,040.7

As at December 31, 2023, the Group did not recognize cumulative deferred tax liabilities

amounting to €555.8 million (2022: €529.4 million) on fair value gains on investment

property due to the initial recognition exception on acquisitions that did not meet the

deﬁnition of business combination.

Deferred tax assets

	Derivative
	ﬁnancial		Total
	instruments and	Loss carried
	other deferred	forward, net
	tax assets
	in € millions
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 loss	(30.4)	-	(30.4)
Disposed of through deconsolidations and others	-	(2.0)	(2.0)
Transfer (to) from assets held for sale	-	3.0	3.0
Netting of deferred taxes (*)	-	3.3	3.3
Balance as at December 31, 2022	31.7	33.4	65.1
Charged to:
Consolidated statement of proﬁt or loss	3.0	(6.1)	(3.1)
Disposed of through deconsolidations and others	-	(1.8)	(1.8)
Transfer from assets held for sale and others	-	3.9	3.9
Netting of deferred taxes (*)	-	1.7	1.7
Balance as at December 31, 2023	34.7	31.1	65.8

(*) 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, 2023, a cumulative amount

of €165.5 million was netted (2022: €167.2 million)

As at December 31, 2023, the Group had not recognized cumulative deferred tax assets

amounting to €385.2 million (2022: €210.7 million) on carried forward losses, carried

forward interest amounts and other tax attributes, as it was not considered probable that

there would be taxable proﬁts available in the relevant entities in the foreseeable future.

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Consolidated Financial Statements

11.5 Reconciliation of effective tax rate


	Year ended December 31,
	2023	2022
	in € millions
Loss before tax	(2,849.1)	(422.1)
Tax using domestic rate	24.94%	24.94%
Tax computed at the statutory tax rate	(710.6)	(105.3)
Decrease in taxes on income resulting from the
following factors:
Group’s share in earnings from companies
accounted for as equity-accounted investees	37.4	(1.5)
Effect of different tax rates of subsidiaries
operating in other jurisdictions	225.1	80.7
Income and expenses on which the Group did not
recognize deferred tax and others	25.4	61.1
Total current and deferred tax (income) expenses	(422.7)	35.0
Effective tax rate (in %)	14.8	(8.3)

12. NET EARNINGS PER SHARE ATTRIBUTABLE TO THE

OWNERS OF THE COMPANY

12.1 Basic earnings per share

The calculation of basic earnings per share for the year ended December 31, 2023, is

based on the loss attributable to the owners of €1,987.6 million (2022: loss of €645.1

million), and a weighted average number of ordinary shares outstanding of 1,093.0

million (2022: 1,109.9 million), calculated as follows:

Loss attributed to the shareholders (basic)


Year ended December 31,
	2023	2022
	in € millions
Loss for the year, attributable to the owners of the	(1,987.6)	(645.1)

Company

Weighted average number of ordinary shares (basic)


	Year ended December 31,
	2023	2022
	in millions of shares
Issued ordinary shares on January 1, net of treasury shares	1,065.0	1,103.6
Scrip dividend and share incentive effect (*)	0.3	14.0
Mandatory convertible notes effect	27.7	27.7
Shares buy-back effect (*)	-	(35.4)
Weighted average number of ordinary shares	1,093.0	1,109.9
Basic loss per share (in €)	(1.82)	(0.58)

(*) weighted average

amount

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12.2 Diluted earnings per share

The calculation of diluted earnings per share for the year ended December 31, 2023,

is based on diluted loss attributable to the owners of €1,985.5 million (2022: loss of

€645.2 million), and a weighted average number of ordinary shares outstanding after

adjustment for the effects of all dilutive potential ordinary shares of 1,094.5 million

(2022: 1,111.3 million), calculated as follows:

Loss attributed to the shareholders (diluted)

	Year ended December 31,
	2023	2022
	in € millions
Loss for the year, attributable to the owners of the Company	(1,987.6)	(645.1)
(basic)
Dilutive effect of the Company’s share of proﬁt in investees	2.1	(0.1)
Loss for the year, attributable to the owners of the Company
(diluted)	(1,985.5)	(645.2)

Weighted average number of ordinary shares (diluted)

	Year ended December 31,
	2023	2022
	in millions of shares
Issued ordinary shares on January 1, net of treasury shares	1,065.0	1,103.6
Scrip dividend and share incentive effect (*)	1.8	15.4
Mandatory convertible notes effect	27.7	27.7
Shares buy-back effect (*)	-	(35.4)
Weighted average number of ordinary shares	1,094.5	1,111.3
Diluted loss per share (in €)	(1.82)	(0.58)
(*) weighted average amount

Hannover

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Consolidated Financial Statements

13. INVESTMENT PROPERTY

13.1. Reconciliation of investment property

	Year ended December 31,
	2023	2022
	(*) Level 3	(*) Level 3
	in € millions
Balance as at January 1	27,981.0	29,115.9
Plus: investment property classiﬁed as held for sale	909.1	1,009.3
Total investment property	28,890.1	30,125.2
Additions	211.5	469.2
Modernization, pre letting modiﬁcation and capital expenditures	334.6	407.5
Disposals (see note 13.2.1)	(1,273.1)	(1,431.3)
Effect of foreign currency exchange differences	52.4	(140.6)
Fair value adjustments	(3,174.8)	(539.9)
Total investment property	25,040.7	28,890.1
Less: investment property classiﬁed as held for sale (see note 13.2.2)	(408.3)	(909.1)
Balance as at December 31	24,632.4	27,981.0

(*) 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,
	2023	2022
	in € millions
Germany	18,079.7	21,313.5
The Netherlands	2,101.4	2,379.5
United Kingdom	2,299.5	2,392.8
Belgium	609.9	615.5
Other locations	1,541.9	1,279.7
	24,632.4	27,981.0

(*) excluding investment property classiﬁed as held for sale

13.2 Disposals and assets / liabilities held for sale

13.2.1 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 2023 and 2022:

	As at December 31,
	2023	2022
	in € millions
Investment property	1,273.1	1,431.3
Trading property	-	103.2
Other assets, net	11.5	10.4
Deferred tax liabilities, net	(18.0)	(22.4)
Total net assets disposed of	1,266.6	1,522.5
Non-controlling interests deconsolidated	(2.9)	(3.2)
Total consideration (*)	(1,221.0)	(1,561.9)
Capital (loss) / gain	(42.7)	42.6

(*)

the sales consideration in 2023 included vendor loans granted by the Group as a seller in the volume

of €228.1 million (2022: €243.1 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

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13.2.2

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 debt repayments.

Some properties are expected to be disposed through sale of subsidiaries. Accordingly,

assets and liabilities relating to these subsidiaries (“Disposal Group”) and some

properties which are expected to be disposed through asset deals are presented as

assets held for sale and as liabilities held for sale in the consolidated statement of

ﬁnancial position. As at December 31, 2023, 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,
	2023	2022
	in € millions
Investment property	408.3	909.1
Cash and cash equivalents	0.2	9.3
Other assets	1.0	12.9
Total assets classiﬁed as held for sale	409.5	931.3
Loans and borrowings	-	109.5
Deferred tax liabilities	18.6	31.4
Other liabilities	7.0	51.8
Total liabilities associated with assets
	25.6	192.7

classiﬁed as held for sale

13.3 Measurement of fair value

The fair value of the properties of the Group is determined at least once a year by

external, 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, PwC 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 beneﬁts

and liabilities of ownership over the asset’s life including an exit or terminal value. This

method involves the projection of a series of cash ﬂows on a real property interest. To

this projected cash ﬂow series, an appropriate, market derived discount rate is applied

to establish the present value of the income stream associated with the asset. The exit

yield is normally separately determined and differs from the discount rate.

The duration of the cash ﬂows and the speciﬁc timing of inﬂows and outﬂows are

determined by events such as rent reviews, lease renewal and related re-letting,

redevelopment, and refurbishment. The appropriate durations are typically driven by

market behavior that is a characteristic of the class of real property.

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Consolidated Financial Statements

Periodic cash flows are typically estimated as gross income less vacancy, non-

recoverable expenses, collection losses on future rents, lease incentives, maintenance

cost, agent and commission costs and other operating and management expenses. The

series of periodic net operating income, along with an estimate of the terminal value

anticipated at the end of the projection period, is then discounted.

●

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 square meter

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 completion

of the planned development project. This ﬁgure is derived by subtracting the non-

recoverable operating costs (e.g., maintenance and management costs) from the

potential gross sale value. In order to determine the net capital value, the purchaser’s

costs have to be deducted. The costs for the assumed development are subtracted

from the net capital value, resulting in the remainder (residuum). These costs include

building fees as well as other required fees, which are necessary for the construction

of a building, depending on its type of use.

The additional construction costs are also part of the total development costs. The

following additional costs are common for constructions: planning, construction,

official review and approval costs as well as financing required immediately for

construction. The amount of additional construction costs depends on the type of

building, its ﬁnishes and the location. All of the construction and additional building

costs as well as other project costs including ﬁnancing costs and developer’s proﬁt are

subtracted from the calculated gross sale value of the completed development. The

difference of the gross sale value and the development costs results in the remainder

(residuum). In order to acquire the residual value, ﬁnancing and additional purchasing

costs for the property are deducted from this remainder. The residual value represents

the amount, which an investor would spend for the development of the property under

speciﬁc economic conditions.

As at December 31, 2023, 91% (2022: 95%) of investment property have been valued

using the discounted cash ﬂows method, 6% using the comparable approach (2022: less

than 1%) and 3% using the residual value approach (2022: nearly 5%).

Munich

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The key assumptions used to determine the fair value of the investment property are

further discussed below:

		As at December 31,
		2023	2022
Valuation technique	Signiﬁcant	Range (weighted average)
	unobservable inputs
	Rent growth p.a. (%)	0.1 – 3.0 (2.0)	0.2 – 3.0 (2.1)
	Long-term vacancy rate (%)	0.0 – 7.2 (0.8)	0.0 – 4.1 (1.0)
DCF method
	Discount rate (%)	3.3 – 13.3 (6.1)	2.5 – 12.8 (5.6)
	Capitalization rate (%)	2.1 – 16.3 (5.1)	1.7 – 15.1 (4.7)
Market comparable
approach	Price per sqm (in €)	2,000 – 13,200 (4,100)	1,200 – 16,800 (4,800)
	Rent price per sqm (in €)	7.7 – 59.3 (25.8)	10.0 – 41.1 (21.5)
	Sales price per sqm (in €)	1,550 – 14,000 (7,100)	3,000 – 9,700 (8,000)
Residual value
approach	Development cost per sqm (in €)	800 – 7,200 (3,700)	1,000 – 5,500 (3,600)
	Developer margin (%)	7.5 – 20.0 (13.0)	9.0 – 20.0 (12.8)

Signiﬁcant increases (decreases) in estimated rental value and rent growth per annum

in isolation would result in a signiﬁcantly higher (lower) fair value of the properties.

Signiﬁcant increases (decreases) in the long-term vacancy rate and discount rate (and exit

yield) in isolation would result in a signiﬁcantly lower (higher) fair value.

Generally, a change in the assumption made for the estimated rental value is accompanied

by a directionally similar change in the rent growth per annum and discount rate (and exit

yield), and an opposite change in the long-term vacancy rate.

The table below presents the weighted average and range of the discount rate and

capitalization rate for nearly all the portfolio, per asset type:

		As at December 31,
		2023		2022
		Discount	Capitalization	Discount	Capitalization
Asset type	Parameter	rate	rate	rate	rate
	Range	4.0% - 11.8%	3.6% - 11.5%	2.5% - 9.5%	3.3% - 12.0%
Ofﬁce	Average	6.3%	5.4%	5.4%	4.9%
	Range	3.8% - 13.3%	3.5% - 11.1%	3.3% - 12.8%	3.1% - 10.6%
Hotel	Average	7.4%	5.9%	6.8%	5.3%
	Range	4.0% - 8.4%	2.1% - 7.8%	2.5% - 7.0%	1.7% - 7.3%

Residential	Average	5.2%	4.0%	4.6%	3.6%
	Range	4.3% - 9.8%	3.6% - 10.4%	3.5% - 11.0%	3.4% - 9.0%
Retail	Average	6.7%	6.1%	6.2%	5.5%
Logistics/	Range	3.3% - 9.9%	3.0% - 16.3%	3.0% - 10.3%	2.2% - 15.1%
wholesale/
other	Average	5.7%	5.1%	5.1%	4.3%

●

Highest and best use

As at December 31, 2023, the current use of all investment property is considered the

highest and best use, except for 5.3% (2022: 11.1%) 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.

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14.

GOODWILL AND INTANGIBLE ASSETS

		Computer
		software
	Goodwill	and other	Total
		intangible
		assets
		in € millions
COST
Balance as at December 31, 2021	1,699.0	31.1	1,730.1
Additions, net	-	2.8	2.8
Balance as at December 31, 2022	1,699.0	33.9	1,732.9
Additions, net	-	1.4	1.4
Balance as at December 31, 2023	1,699.0	35.3	1,734.3
IMPAIRMENT / AMORTIZATION
Balance as at December 31, 2021	4.5	8.3	12.8
Amortization for the year	-	7.7	7.7
Impairment for the year	404.3	-	404.3
Balance as at December 31, 2022	408.8	16.0	424.8
Amortization for the year	-	6.8	6.8
Impairment for the year	137.0	-	137.0
Balance as at December 31, 2023	545.8	22.8	568.6
CARRYING AMOUNTS
Balance as at December 31, 2022	1,290.2	17.9	1,308.1
Balance as at December 31, 2023	1,153.2	12.5	1,165.7

14.1 Annual impairment test of goodwill

In July 2021, following the business combination with GCP, goodwill in the amount of

€862.9 million was recognized. 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.

During the year 2022, goodwill on GCP and TLG was impaired in a total amount of €404.3

million, and as of December 31, 2022 amounted to €600.1 million and €680.7 million,

respectively.

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, goodwill, speciﬁc additional ﬁnancial assets and

deferred tax liabilities recognized during the business combination but not yet reversed)

and amounted to €8,921.8 million as at December 31, 2023 (2022: €10,221.0 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 €8,861.5 million (2022:

recoverable amount of €9,958.1 million, being the fair value less costs of disposal) and

therefore concluded an impairment of €60.3 million on the goodwill on GCP for 2023

(2022: €262.9 million) to a residual amount of €539.8 million. The Company assumed

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the fair value less costs of disposal as of December 31, 2023, was higher than the value

in use, mainly due to the increased 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 TLG, the carrying CGU amount as at December 31, 2023,

amounted to €2,725.2 million (2022: €3,736.1 million) (being the investment property,

goodwill and deferred tax liabilities recognized during the business combination but

not yet 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 €2,648.5

million (2022: recoverable amount of €3,594.7 million, being the fair value less costs of

disposal) and therefore concluded with an impairment of €76.7 million on the goodwill

on TLG for 2023 (2022: €141.4 million) to a residual amount of €604.0 million. The

Company assumed the fair value less costs of disposal as of December 31, 2023, was

higher than the value in use, mainly due to the increased cost of capital that would affect

the discounted cash ﬂows model on which the value in use is based.

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 13.3. The assumed costs of disposal parameter utilized

in the impairment assessments was 75 basis points. Any change of +/- 10 basis points in

the assumed costs of disposal would lead to a further / less impairment of €11.4 million.

15. PROPERTY AND EQUIPMENT

		Furniture,
	Owner-
	occupied	ﬁxtures and	Total
	properties (*)	ofﬁce
		equipment
	in € millions
COST
Balance as at December 31, 2021	67.2	85.6	152.8
Additions, net	-	63.1	63.1
Revaluations	18.2	-	18.2
Held for sale	-	(0.2)	(0.2)
Balance as at December 31, 2022	85.4	148.5	233.9
Additions, net	-	28.0	28.0
Revaluations	(4.8)	2.0	(2.8)
Held for sale	-	(0.3)	(0.3)
Balance as at December 31, 2023	80.6	178.2	258.8
DEPRECIATION
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
Depreciation for the year	1.7	9.4	11.1
Balance as at December 31, 2023	6.6	38.7	45.3
CARRYING AMOUNT
Balance as at December 31, 2022	80.5	119.2	199.7
Balance as at December 31, 2023	74.0	139.5	213.5

(*)

owner-occupied properties are measured at fair value less accumulated depreciation and impairment 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

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16. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES

16.1 Reconciliation of investment in

equity-accounted investees

	Year ended December 31,
	2023	2022
	in € millions
Balance as at January 1	1,291.9	1,222.5
Additions, net	117.4	109.6
Dividends received	(39.2)	(34.8)
Share of (loss) / proﬁt from investees	(149.8)	5.9
Changes through OCI and other equity reserves	1.3	(11.3)
Initial consolidations (*)	(135.1)	-
Balance as at December 31	1,086.5	1,291.9

(*) in May 2023, the Group obtained control over real estate portfolio and

initially consolidated investment property with value of €196 million

16.2 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, 2023 and 2022

are as follow:


			Main place of	Rate of effective
Name of investee	Principal	Place of	principal	ownership interest
	activity	incorporation	activities	by the Group as at
				December 31,
				2023	2022
				in %
Globalworth Real Estate Investments			Poland and
Limited (through 50% in Tevat Limited)	Real estate	Guernsey	Romania	30.38	30.31

Utrecht

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16.3 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	2023	2022
Investments Limited (“GWI”)
	in € millions
Current assets	480.1	329.0
Of which cash and cash equivalents	396.3	163.8
Non-current assets	2,965.1	3,039.9
Of which investment property	2,843.1	2,945.5
Current liabilities	101.3	82.3
Non-current liabilities	1,741.3	1,615.3
Of which loans, borrowings and bonds	1,574.8	1,433.6
Equity attributable to the owners	1,601.1	1,656.5
Revenue	240.4	239.3
Finance expenses, net	33.9	49.8
Current and deferred tax income (expenses)	7.7	(4.9)
Net loss attributed to the owners	(54.2)	(16.1)
Total comprehensive loss attributed to the owners	(54.2)	(21.5)
Quoted market price per share (in €)	2.6	4.1
Group’s share of loss in the investee	(13.6)	(1.7)
Dividends received in the Group from the investee (*)	20.1	19.2
Impairment of investment	(26.2)	(23.2)

(*) for both of the interim dividends announced in March 2023 and August 2023, GWI offered a scrip dividend

alternative to its shareholders, so instead of cash dividend, the shareholder would get new shares in GWI at

the price of €2.28 and €2.00 for each interim dividend, respectively). The Group accepted the scrip option for

dividends and hence received new 9.4 million shares in GWI that increased its proportional stake to 30.38%

Reconciliation of the above summarized

ﬁnancial information to the carrying amount:

Equity attributable to the owners	1,601.1	1,656.5
Group’s interest	30.38%	30.31%
Group’s share	486.4	502.1
Surplus on investment	0.2	24.3
Total carrying amount of equity-accounted investee	486.6	526.4

16.4 Aggregate information of investment in equity-accounted

investees that are not individually material

	As at and for the year ended
	December 31,
	2023	2022
	in € millions
The Group’s share of (loss) / proﬁt	(110.0)	30.8
The Group’s share of other comprehensive income / (loss)	1.3	(11.3)
The Group’s share of total comprehensive (loss) / income	(108.7)	19.5
Dividends received in the Group from the investees	19.1	15.6
Aggregate carrying amount of the Group’s interests and
loans in these investments	599.9	765.5

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Consolidated Financial Statements

17. OTHER NON-CURRENT ASSETS

		As at December 31,
		2023	2022
	Note	in € millions
Tenancy deposits	1	65.3	61.2
Trade receivables	2	50.5	53.1
Investment in non-current ﬁnancial assets	3	1,325.9	(*) 1,172.1
Other balances		16.4	17.4
		1,458.1	1,303.8

(*) reclassiﬁed

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

consists of mainly the revenue straight-lining effect arising from the rent-free granted to tenants

consists of mainly non-current investments in loans connected with future real-estate transactions (with maturi-

ties primarily by 2027 and an annual interest rate of up to 10% p.a.), long-term deposits and the non-current por-

tion of the loans provided by the Group as a seller (vendor loans). The vendor loans have maturities between 2024

and 2026, carrying weighted average interest rates of ca. 5% p.a. and are secured against the properties sold at an

initial LTV in the range of 40%-70% at the time of disposal. An amount of €161.0 million (2022: €199.9 million)

is accounted for at fair value through proﬁt or loss and includes mainly investment in various real estate funds

18. TRADE AND OTHER RECEIVABLES

		As at December 31,
		2023	2022
	Note	in € millions
Rent and other receivables		114.6	91.8
Operating costs receivables	1	499.0	454.7
Prepaid expenses		28.8	23.9
Tax receivable from authorities		132.8	91.0
Other short-term ﬁnancial assets	2	233.1	506.7
		1,008.3	1,168.1

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

satisﬁed, 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 mainly includes the current portion of vendor loans granted by the Group as part of the sale

transactions and of loans in connection with future real estate transactions.

The Group recognized an allowance for expected credit losses and other impairments on

trade and other receivables in the total amount of €65.9 million (2022: €133.2 million)

through the property operating expenses in the consolidated statement of proﬁt or loss.

19. TOTAL EQUITY

19.1 Equity attributable to the owners of the Company

19.1.1

Share capital

	As at December 31,
	2023		2022
	Number of		Number of	in € millions
	shares		in € millions	shares
Authorized
Ordinary shares of	3,000,000,000	30.0	3,000,000,000	30.0
€0.01 each
Issued and fully paid
Balance as at	1,537,025,609	15.4	1,537,025,609	15.4
January 1
Balance at the end
of the year	1,537,025,609	15.4	1,537,025,609	15.4

Issued capital

There were no movements in the share capital during the years 2023 and 2022.

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19.1.2

Treasury shares

	2023	2022
	Number of shares
Balance at January 1	471,981,352	433,459,625
Acquired during the year	-	70,123,968
Delivered as part of scrip dividend
distributions (see note 19.1.3)	-	(31,134,933)
Delivered as part of mandatory convertible
notes settlement (see note 19.1.5)	(27,691,319)	-
Delivered as part of share-based payment	(402,820)	(467,308)
Balance at December 31	443,887,213	471,981,352
Rate from the total share capital of the	28.88	30.71

Company (in %)

The treasury shares were acquired by the Group via tender offers and buyback programs

(pursuant to resolutions taken by the Company’s Board of Directors that followed the

authorization received by the ordinary general meeting held in May 2020 to buying back

of own shares) and have been serving the Company in settling of scrip dividends and

other share-based transactions.

The treasury shares are accounted for at their original purchase price and are not

subsequently revaluated. Upon sale or delivery, 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.

The shares bought back and which are held in treasury by the Company and the Company’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.

19.1.3 Dividend distributions

On June 29, 2022, the shareholders’ annual general meeting 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

Company’s treasury shares and cash payment of €212.5 million.

On March 28, 2023, the Board of Directors of the Company has decided not to recommend

a dividend payment for 2022 ﬁnancial year at the Company’s annual general meeting,

following the increase in macro-economic and capital markets uncertainty and volatility.

The decision not to pay was resolved by the shareholders’ annual general meeting that

took place on June 28, 2023.

19.1.4

Share premium and other reserves

The capital reserves include share premium derived directly from the capital increases

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, which temporarily

cannot be distributed.

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, 2023, the legal reserve

amounted to €1.1 million.

19.1.5

Mandatory convertible notes

In March 2023, the Company delivered to the mandatory convertible notes investors

27,691,319 of its own shares from the Company’s treasury shares to settle the mandatory

convertible notes originally issued in March 2020, according to which the notes shall be

mandatorily converted into shares of the Company in the following three years after issuance,

using a preset conversion price (dividend adjusted). The delivered treasury shares amounted

to €138.5 million which was the historical cost upon their buyback by the Company.

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Consolidated Financial Statements

19.2 Perpetual notes

19.2.1

Overview of the Group’s perpetual notes

As described in the material 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 (or GCP’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 a perpetual note, the annual coupon rates for following periods are updated

according to the “Next Reset Margin” (updated every 5 years from the time when the

perpetual note is not called by the Group, presented as the “Next Reset Date”), and the

next possible call date shall be in each subsequent year.

Set below are the outstanding nominal values as of December 31, 2023:

			Nominal amount	Nominal amount	Annual coupon	Next possible	Next Reset
Issuer	Note	Currency	in original	in euro	rate until Next	Call Date	Date	Next Reset Margin
			currency		Reset Date
			in € millions	in € millions	%			%
ATF Netherlands B.V.	19.2.2	EUR	368.9	368.9	7.078	01/2024	01/2028	4.625 + 5Y Mid-Swap
Grand City Properties S.A.	19.2.2	EUR	200.0	200.0	6.332	01/2024	01/2028	3.887 + 5Y Mid-Swap
AT Securities B.V.	(a), 19.2.2	USD	641.5	561.1	7.747	07/2024	07/2028	3.796 + 5Y Mid-Swap
Grand City Properties S.A.	19.2.2	EUR	350.0	350.0	5.901	10/2024	10/2028	2.682 + 5Y Mid-Swap
Aroundtown SA	(c), 19.2.2	EUR	394.5	394.5	2.125	01/2024	01/2024	2.000 + 5Y Mid-Swap
Aroundtown SA	(a), (b)	GBP	400.0	447.9	3.000	06/2024	06/2024	4.377 + 5Y Mid-Swap
Aroundtown SA		EUR	600.0	600.0	3.375	09/2024	12/2024	3.980 + 5Y Mid-Swap
Aroundtown SA		EUR	500.0	500.0	2.875	01/2025	01/2025	3.460 + 5Y Mid-Swap
Grand City Properties S.A.		EUR	700.0	700.0	1.500	06/2026	06/2026	2.184 + 5Y Mid-Swap
Aroundtown SA	(c)	EUR	578.8	578.8	1.625	07/2026	07/2026	2.419 + 5Y Mid-Swap

(a) the euro amount is based on the historical rate as of placement of the notes

(b)

effective euro coupon rate using cross-currency swap

(c)

an aggregate amount of €26.7 million nominal value has been bought back by the Group during 2023

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19.2.2

Decision not to exercise options to call

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

exercise their option to voluntarily redeem the €368.9 million and €200.0 million

nominal value perpetual notes with ﬁrst call date in January 2023 issued by ATF

Netherlands B.V. (a fully owned subsidiary of the Company) and GCP, respectively.

As stipulated in the terms and conditions of the perpetual notes, the coupon for

the period starting from January 2023 was set to be the 5-year Mid-Swap rate

plus a margin of 4.375% p.a. (7.08% p.a.) (for the notes issued by ATF Netherlands

B.V.), and 5-year Mid-Swap rate plus a margin of 3.637% p.a. (6.33% p.a.) (for the

notes issued by GCP).

During 2023, similar decision was taken on the $641.5 million perpetual notes

with first call date in July 2023 issued by AT Securities B.V. (a fully owned

subsidiary of the Company) and the €350 million perpetual notes with ﬁrst call

date in October 2023 issued by GCP. Consequently, to the decisions not to use the

option to redeem, the coupons on these perpetual notes starting from July 2023

and October 2023 were set to be 5-year Mid-Swap rate plus a margin of 3.546%

p.a. (7.75% p.a.), and 5-year Mid-Swap rate plus a margin of 2.432% p.a. (5.9% p.a.).

In December 2023, the Company announced its Board of Directors’ decision not

to exercise its option to voluntarily redeem its €400 million perpetual notes on

their ﬁrst call date being January 2024. The annual coupon rate starting from

January 2024 was amended to 5-year Mid-Swap rate plus a margin of 2.0% p.a.

(4.54% p.a.).

The Company and GCP have the option to call the uncalled perpetuals at every

future coupon payment date, and the uncalled perpetuals have been and will

continue being accounted for as equity in the consolidated statement of ﬁnancial

position.

19.3 Non-controlling interests

19.3.1

Reconciliation of non-controlling interest:

	Note	in € millions
Balance 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	(1)	(451.4)
Balance at December 31, 2022		3,490.4
Share of loss for the year		(592.2)
Share of OCI for the year		1.2
Transactions and dividend with/to NCI, and deconsolidations	(2)	(149.9)
Balance as at December 31, 2023		2,749.5

(1) 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 acquisitions 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.

(2) Transactions in 2023

An amount of €0.2 million of NCI increased due to initial consolidations of €3.1 million

that took place during 2023, offset by €2.9 million of deconsolidated NCI.

During 2023, the Company changed its holding rate in subsidiaries within the Group,

thereof mainly an increase in GCP (increase in holding rate from 60.11% to 62.68% as at

December 31, 2023), that led to a total decrease of €90.1 million in the NCI amount (the

negative cash effect of these acquisitions amounted to €33.8 million). The effect on the

shareholders’ equity was increase of €56.9 million that reﬂected the variance between

the NCI book value and acquisition price). Furthermore, the Group subsidiaries distributed

dividends to the NCI in the amount of €60.0 million, thereof €50.6 million paid in cash.

211

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Consolidated Financial Statements

The following are subsidiaries that have material NCI reﬂected in the consolidated

ﬁnancial statements of the Group:

19.3.2 TLG Immobilien AG

TLG Immobilien AG is an Aktiengesellschaft (stock corporation) incorporated in

Germany with its registered ofﬁce at 1, Alexanderstraße, 10178 Berlin, Germany. It

holds and operates commercial 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

combination adjustments (together: “Financial Information”), and holding rate

from the Group’s point of view:

	As at and for the year ended
	December 31,
	2023	2022
NCI percentage (also reﬂects the voting rights)
as at the year-end	11.89%	11.84%
	in € millions
Accumulated amount of NCI presented in the Group	352.1	400.7
(Loss) / proﬁt allocated to NCI presented in the Group	(39.4)	23.6
Dividend paid to NCI	11.7	11.9
Financial Information of TLG:
Current assets	672.1	501.0
Of which cash and cash equivalents	389.6	141.1
Non-current assets	4,239.5	5,065.7
Of which investment property	2,613.2	3,422.7
Current liabilities	173.0	231.9
Non-current liabilities	1,992.9	2,161.1
Of which loans, borrowings and bonds	1,189.5	1,185.6
Total equity	2,745.7	3,173.7
Net asset attributable to NCI	326.5	375.9
Revenue	173.9	201.7
Net (loss) / proﬁt	(329.1)	200.2
Cash ﬂows from operating activities	60.6	181.0
Cash ﬂows from investing activities	411.3	662.1
Cash ﬂows used in ﬁnancing activities	(223.3)	(1,008.4)
Net change in cash and cash equivalents	248.6	(165.3)

212

Consolidated Financial Statements

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19.3.3. 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.

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 intensive 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

combination adjustments (together: “Financial Information”), and holding rate

from the Group’s point of view:

	As at and for the year ended
	December 31,
	2023	2022
NCI percentage (also reﬂects the voting rights) as at the
year-end	37.32%	39.89%
	in € millions
Accumulated amount of NCI presented in the Group	1,405.2	1,800.0
(Loss) / proﬁt allocated to NCI presented in the Group	(279.4)	108.5
OCI allocated to NCI presented in the Group	1.2	(3.3)
Dividend paid to NCI	17.0	44.4
Financial Information of GCP:
Current assets	1,838.1	1,134.0
Of which cash and cash equivalents	1,129.2	324.9
Non-current assets	9,077.9	10,008.7
Of which investment property	8,498.6	9,447.6
Current liabilities	655.0	308.7
Non-current liabilities	5,205.3	5,134.0
Of which loans, borrowings and bonds	4,262.4	4,096.3
Total equity	5,055.7	5,700.0
Net asset attributable to Perpetual notes investors	1,262.7	1,253.8
Net asset attributable to NCI	1,415.7	1,773.8
Revenue	607.2	577.0
Net (loss) / proﬁt	(587.0)	225.0
Total OCI	3.6	(8.5)
Total comprehensive (loss) / income	(583.4)	216.5
Cash ﬂows from operating activities	249.4	216.1
Cash ﬂows from (used) in investing activities	147.8	(150.6)
Cash ﬂows from (used) in ﬁnancing activities	405.3	(633.9)
Net change in cash and cash equivalents	802.5	(568.4)

213

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Consolidated Financial Statements

20.

SHARE-BASED PAYMENT AGREEMENTS

20.1 Description of share-based payment arrangements

As at December 31, 2023, 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 management 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 Aroundtown’s strategic targets.

The key terms and conditions related to program are as follows:

	Number of shares	Contractual life of the
Grant date	(in thousands)	incentive
January 2020 – December 2026	3,636	Up to 4 years

20.2 Reconciliation of outstanding share options

The number and weighted average number of shares under the share incentive program

and replacement awards were as follows:

	2023	2022
	Number of shares	Number of shares
	in thousands
Outstanding on January 1	2,552	2,924
Granted during the year, net	2,620	433
Exercised during the year (*)	(1,536)	(805)
Outstanding on December 31	3,636	2,552

(*) in accordance with the terms and conditions of the incentive share plan, 403 thousand shares (2022: 467

thousand) were delivered from the Group’s treasury shares to employees across the Group, and the rest

amounts were either settled in cash or withheld at source to reﬂect the tax impact

During the year, the total amount recognized as share-based payment was €5.3 million

(2022: €5.4 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.

21.

LOANS, BORROWINGS, BONDS AND SCHULDSCHEINS

21.1 Composition

			As at December 31,
			2023	2022
	Weighted average
	interest rate as at
	December	Maturity	in € millions
	31, 2023
Non-current
Bank loans (1) - (3)	3.7%	2025-2082	2,124.2	1,266.0
Straight bonds and schuldscheins	1.9%	2025-2039	11,698.0	13,307.4
Total non-current			13,822.2	14,573.4
Current
Bank loans (4)	3.7%	2024	26.2	11.2
Loan redemptions (4)	2.6%	2024	53.7	11.7
Straight bonds	1.2%	2024	340.0	100.0
Total current			419.9	122.9

(1)

the bank loans have the serving assets as their main security (as at December 31, 2023 and 2022, €200

million and €140 million, respectively, are unsecured). The Group is in compliance with its obligations

(including loan covenants) to the ﬁnancing banks under the existing loan agreements that include, inter

alia, ranges for minimum debt service coverage ratio (DSCR) of 105%-225% and loan to value minimal

ratio (LTV) of 50%-75%

(2)

as at December 31, 2023, approximately €6.7 billion of the investment property is encumbered (2022:

approximately €5.8 billion)

(3)

in 2023, the Group raised from ﬁnancial institutions a net amount of ca. €900 million. The debt drawn down

had an average maturity and margin of over 7 years and 1.4%, respectively. Moreover, the Group signed a

secured bank facility to enable further drawdowns of €41.8 million on demand (no drawdowns took place

in the reporting period). The Group repaid bank loans of ca. €85 million during the year

(4) including accrued interest

214

Consolidated Financial Statements

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21.2 Bonds and schuldscheins composition

Set out below, is an overview of the Group’s bonds and schuldscheins as at December 31, 2023, and December 31, 2022:

Series	Note	Currency	Nominal amount in	Nominal amount	Coupon rate (p.a.)	Contractual	Carrying amount as	Carrying amount as
			original currency	in euro		maturity	at December 31,	at December 31,
			as at December 31, 2023		%		2023	2022
			in millions	in € millions	%		in € millions
Non-current portion
Series H	(a) (b) (c)	USD	400.0	372.4	1.365	03/2032	349.4	361.0
Series NOK	(a) (b) (c)	NOK	750.0	79.3	0.818	07/2027	66.2	70.6
Series I	21.2.1	EUR	206.9	206.9	1.88	01/2026	205.0	247.6
Series J	21.2.1	GBP	483.5	556.3	3.00	10/2029	545.6	551.2
Series K	21.2.1	EUR	478.9	478.9	1.00	01/2025	476.7	684.1
Series L	(b) (c) (f)	USD	150.0	125.2	1.78 + Euribor (6M)	02/2038	115.4	123.4
Series M	(c), 21.2.1	CHF	239.8	214.4	0.73	01/2025	258.7	253.5
Series N		EUR	800.0	800.0	1.63	01/2028	788.4	785.7
Series O	21.2.1	EUR	296.8	296.8	2.00	11/2026	294.5	301.9
Series P	(b) (c) (g), 21.2.1	AUD	202.0	127.3	1.24 + Euribor (6M)	05/2025	118.6	151.9
Series R	(b) (c) (h), 21.2.1	CAD	181.8	119.5	2.72 + Euribor (6M)	09/2025	116.8	167.7
Series T	(b) (i)	EUR	150.0	150.0	2.27 + Euribor (6M)	09/2030	149.9	149.9
Series U		EUR	75.0	75.0	2.97	09/2033	73.7	73.6
Series V		EUR	50.0	50.0	2.70	10/2028	49.7	49.7
Series W		EUR	76.0	76.0	3.25	11/2032	74.9	74.8
Series X	(c), 21.2.1	CHF	99.8	91.3	1.72	03/2026	107.6	101.4
Series 27	(b) (c)	HKD	430.0	48.3	1.62	03/2024	-	51.7
Series 28	(b) (c) (j), 21.2.1	USD	540.8	478.5	2.64 + Euribor (6M)	03/2029	453.2	527.7
Series 29	(b) (c) (k)	NOK	1,735.0	179.0	2.52 + Euribor (6M)	03/2029	132.2	148.8
Series 30	(b) (c) (l), 21.2.1	GBP	388.7	455.3	2.11 + Euribor (6M)	04/2031	382.9	369.0
Series 31	(c)	JPY	7,000.0	61.3	1.42	05/2029	44.6	49.6
Series 32	21.2.1	EUR	603.8	603.8	0.63	07/2025	599.9	775.8
Series 33		EUR	600.0	600.0	1.45	07/2028	593.4	592.1
Series 34	(b) (c)	NOK	500.0	45.9	1.055	07/2025	44.4	47.5
Series 36	21.2.1	EUR	519.5	519.5	1.50	05/2026	528.3	614.0

215

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Consolidated Financial Statements

Series	Note	Currency	Nominal amount in	Nominal amount	Coupon rate (p.a.)	Contractual	Carrying amount as	Carrying amount as
			original currency	in euro		maturity	at December 31,	at December 31,
			as at December 31, 2023		%		2023	2022
			in millions	in € millions	%		in € millions
Non-current portion
(continued)
Series 38	21.2.1	EUR	727.8	727.8	0.00	07/2026	720.1	985.1
Series 39	21.2.1	EUR	1,027.9	1,027.9	0.375	04/2027	1,011.6	1,224.3
GCP series E	21.2.1	EUR	194.4	194.4	1.50	04/2025	198.0	211.4
GCP series G	21.2.1	EUR	577.4	577.4	1.38	08/2026	594.0	624.0
GCP series H	21.2.1	EUR	255.0	255.0	2.00	10/2032	276.8	279.2
GCP series I	(b) (c) (m)	HKD	900.0	104.3	1.17 + Euribor (6M)	02/2028	100.3	102.0
GCP series J		EUR	667.6	667.6	1.50	02/2027	690.4	697.7
GCP series K	(c)	CHF	125.0	135.0	0.96	09/2026	137.2	130.0
GCP series L	(c)	JPY	7,500.0	48.0	1.20	06/2038	46.6	53.1
GCP series M	(b) (n)	EUR	47.0	47.0	1.39 + Euribor (6M)	07/2033	48.0	45.3
GCP series N	(b)	EUR	88.0	88.0	1.71 + Euribor (3M)	02/2039	79.8	75.8
GCP series O	(b)	EUR	15.0	15.0	1.68 + Euribor (3M)	02/2034	13.8	13.2
GCP series P	(b) (c)	HKD	290.0	33.6	1.38 + Euribor (3M)	03/2029	32.1	31.9
GCP series Q	(c)	CHF	130.0	140.4	0.57	06/2024	-	132.9
GCP series R		EUR	40.0	40.0	2.50	06/2039	46.0	46.3
GCP series U		EUR	80.0	80.0	0.75	07/2025	80.8	81.3
GCP series V	(b) (o)	EUR	70.0	70.0	1.50	08/2034	69.6	63.8
GCP series W	21.2.1	EUR	148.8	148.8	1.70	04/2024	-	207.2
GCP series X		EUR	1,000.0	1,000.0	0.13	01/2028	982.9	978.7
Total non-current portion							11,698.0	13,307.4
Series S	(e), 21.2.1	EUR	100.0	100.0	0.75 + Euribor (6M)	08/2023	-	100.0
Series 27	(b), (c)	HKD	430.0	48.3	1.62	03/2024	49.8	-
GCP series Q	(c)	CHF	130.0	140.4	0.57	06/2024	140.7	-
GCP series W	21.2.1	EUR	148.8	148.8	1.70	04/2024	149.5	-
Total current portion							340.0	100.0
Total accrued interest
on bonds and	(d)						116.3	123.7
schuldscheins

216

Consolidated Financial Statements

AROUNDTOWN

(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 1.78% 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)

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 2.636% p.a. plus Euribor (6M),

semi-annually 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

Berlin

217

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Consolidated Financial Statements

21.2.1

Buy-back and redemption of bonds

During 2022 and 2023, the Company and its subsidiaries bought back some of the Group’s

straight bonds through tenders as well as in the secondary market. 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. The bonds buybacks in 2023 were in average price of

80% of the nominal value (2022: around nominal value), and resulted in recognizing a gain

of €243.6 million that is presented as other ﬁnancial results in the consolidated statement

of proﬁt or loss (2022: gain of €0.9 million).

Set forth are the amounts bought back and redeemed upon maturity during the year 2023:

					Outstanding nominal value
Straight bond /	Currency	Contractual	Nominal value bought-back
schuldschein		maturity		in millions	as at December 31, 2023
			in millions
			(original currency)	in € millions	(original currency)
Series I	EUR	01/2026	44.1	44.1	206.9
Series J	GBP	10/2029	16.5	19.3	483.5
Series K	EUR	01/2025	211.2	211.2	478.9
Series M	CHF	01/2025	10.3	10.5	239.8
Series O	EUR	11/2026	8.4	8.4	296.8
Series P	AUD	05/2025	48.0	29.3	202.0
Series R	CAD	09/2025	68.2	46.8	181.8
Series S	EUR	08/2023	100.0	100.0	Fully redeemed
Series X	CHF	03/2026	0.2	0.2	99.8
Series 28	USD	03/2029	59.2	53.3	540.8
Series 30	GBP	04/2031	11.3	13.3	388.7
Series 32	EUR	07/2025	180.2	180.2	603.8
Series 36	EUR	05/2026	80.5	80.5	519.5
Series 38	EUR	07/2026	272.2	272.2	727.8
Series 39	EUR	04/2027	222.1	222.1	1027.9
GCP Series E	EUR	04/2025	11.2	11.2	194.4
GCP Series G	EUR	08/2026	22.6	22.6	577.4
GCP Series W	EUR	04/2024	55.9	55.9	148.8
Total nominal value bought-back /				1,381.1

redeemed

Set forth are the amounts bought back and redeemed upon maturity during the

year 2022:

Outstanding nominal

Bond /	Currency	Original	Nominal value bought-back /		value as at December
schuldschein		maturity	redeemed		31, 2022
			in millions		in millions
			(original currency)	in € millions	(original currency)
Series F of GCP
(convertible	EUR	03/2022	263.3	263.3	Fully redeemed
bond) (a)
Series K	EUR	01/2025	9.9	9.9	690.1
Series Q	GBP	07/2027	81.1	97.3	Fully redeemed
Series Y	EUR	02/2026	100.0	100.0	Fully redeemed
Series Z	EUR	02/2024	125.0	125.0	Fully redeemed
Series 32	EUR	07/2025	16.0	16.0	784.0
Series 37	EUR	09/2022	221.7	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

218

Consolidated Financial Statements

AROUNDTOWN

21.3 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
				Acquisition		Change in
	31.12.2022	Finance	Other cash ﬂows	(disposal) of	Foreign	liabilities	Other (1)	Other changes (2)	31.12.2023
		expenses paid		subsidiaries, net	exchange effect	held for sale
	in € millions
Straight bonds and schuldscheins (3)	13,531.1	(203.1)	(1,128.6)	-	(20.7)	-	4.1	(28.5)	12,154.3
Loans, borrowings and others (4)	1,288.9	(54.1)	798.0	1.8	-	109.5	(0.5)	60.5	2,204.1
Lease liability	248.0	(10.8)	(1.7)	51.3	1.5	5.3	5.6	12.6	311.8
Net derivative ﬁnancial liabilities and
others	192.0	-	(249.0)	-	121.3	-	(9.4)	-	54.9
	15,260.0	(268.0)	(581.3)	53.1	102.1	114.8	(0.2)	44.6	14,725.1

		Financing cash ﬂows		Non-cash changes
				Acquisition		Change in
	31.12.2021	Finance	Other cash ﬂows	(disposal) of	Foreign	liabilities	Other (1)	Other changes (2)	31.12.2022
		expenses paid		subsidiaries, net	exchange effect	held for sale
	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 and borrowings (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 (assets)
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

(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

219

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Consolidated Financial Statements

21.4 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)

which are outstanding as at 31 December 2023. 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)

incurred 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 Indebtedness

to the satisfaction of the Trustee; or

(ii)

such other Security Interest or other arrangement is provided either (i) as the Trustee

in its absolute discretion deems not materially less beneﬁcial to the interests of

the Senior Noteholders or (ii) as is approved by an Extraordinary Resolution of the

Senior Noteholders.

The exposure of the Company to interest rate risk in relation to ﬁnancial instruments is

reported in note 25.3.1.1 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.

220

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22.

OTHER NON-CURRENT LIABILITIES

	As at December 31,
	2023	2022
	in € millions
Tenancy deposits	73.4	67.8
Lease liability (see note 22.1)	311.8	248.0
Non-current payables	249.9	251.4
	635.1	567.2

22.1 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,
	2023	2022
	in € millions
As at January 1	248.0	167.9
Additions (disposals), net	54.2	86.9
Interest expenses	16.8	10.9
Payments (*)	(12.5)	(11.7)
Transferred to liabilities held for sale	5.3	(6.0)
Balance at December 31	311.8	248.0

(*) 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 21.3)

Amsterdam

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23.

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.

23.1 Key Management Personnel remuneration

The Company has undertaken since the ﬁnancial year 2022 to align the Board

of Directors’ and senior management’s remuneration with the provisions of the

Remuneration Policy. During the ﬁnancial year 2023, the Company has conformed the

total remuneration package (consisting of base salary, allowances as well as short-

term and long-term incentive remuneration) of its executive directors and senior

management with the requirements of the Remuneration Policy. In particular, the

variable remuneration (consisting of short-term cash incentives and long-term share

incentives) granted to the Company’s executive directors and senior management is

tied to the achievement of certain pre-deﬁned performance measures as provided

for in the Company’s Remuneration Policy. The changes agreed are scheduled to

take effect as of ﬁnancial year 2023 (in the case of three (3) executive directors and

members of the senior management) and 2024 respectively (in the case of two (2)

members of the senior management).

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 €1,525 thousand, of which €750

thousand was in bonus.

Mr. Eyal Ben David, the Company’s Chief Financial Ofﬁcer, was entitled to a total

remuneration of €2,310 thousand, of which €1,540 thousand was in the form of long-

term share incentives.

Mr. Oschrie Massatschi, the Company’s Chief Capital Markets Ofﬁcer, was entitled to a

total remuneration of €610 thousand, of which €87 thousand was in the form of long-

term share incentives.

Balances with Executive Directors and Chief ofﬁcer

As at December 2023, the Company had outstanding loans of €4 million to Executive

Directors and Chief ofﬁcers. The loans are payable from 2024 and until 2027 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 20.

	Year ended December 31, 2023

	Executive directors		Non-executive director		Independent directors
	in € thousands

Fixed and variable incentive	Mr. Frank	Ms. Jelena	Mr. Ran	Mr. Markus	Ms. Simone	Mr. Markus	Mr. Daniel Malkin (5)	Total
	Roseen (3)	Afxentiou	Laufer (3)	Leininger	Runge-Brandner (4)	Kreuter
Salary, fees and supplementary payments (1)	360,000	336,601	170,000	150,616	187,000	125,000	104,589	1,433,806
Share incentive program (2)	124,000	55,800	-	-	-	-	-	179,800
Total Remuneration	484,000	392.401	170,000	150,616	187,000	125,000	104,589	1,613,606

(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

(5)

appointed in June 2023

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23.2 Other related party transactions

The transactions and balances with related parties are as follows:

	Year ended December 31,
	2023	2022
	in € millions
Interest income on loans to associates	22.1	18.1

	As at December 31,
	2023	2022
	in € millions
Loans to associates (*)	316.1	349.1

(*) the loans given to associates carry interest rate in the range between 4% and 15% p.a. (2022: range between

4% and 13% p.a.), measured at amortized cost and presented as part of the investment in equity-accounted

investees balance

24.

TRADE AND OTHER PAYABLES

	As at December 31,
	2023	2022
	in € millions
Trade and other payables	176.2	158.5
Prepayments received from tenants on operating costs	407.6	366.7
Deferred income	59.9	60.1
Other current liabilities	27.8	80.7
	671.5	666.0

London

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25.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

25.1 Financial assets

Set out below, is an overview of ﬁnancial assets, held by the Group as at December 31,

2023, and December 31, 2022:

		As at December 31,
		2023	2022
	Note	in € millions
Financial assets at amortized cost:
Trade and other receivables	1	1,009.6	1,179.0
Cash and cash equivalents	1	2,641.3	2,314.6
Short-term deposits		127.1	137.5
Loans to associates	23.2	316.1	349.1
Other non-current assets	1	1,458.1	1,304.4
Financial assets at fair value through proﬁt or loss:
Financial assets at fair value through proﬁt or loss	2	257.7	266.5
Derivative ﬁnancial assets	3, 25.4.1	259.9	60.3
Total ﬁnancial assets		6,069.8	5,611.4

(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 €126.2 million (2022: €192.3 million).

25.2 Financial liabilities

Set out below, is an overview of ﬁnancial liabilities, held by the Group as at December

31, 2023, and as at December 31, 2022:

		As at December 31,
		2023	2022
	Note	in € millions
Financial liabilities at amortized cost:
Trade and other payables	1	672.3	670.8
Tax payable	1	72.5	94.2
Loans and borrowings	2	2,204.1	1,398.4
Bonds and schuldscheins		12,038.0	13,407.4
Accrued interest on bonds and schuldscheins		116.3	123.7
Other long-term liabilities	1	640.1	569.5
Financial liabilities at fair value through proﬁt or loss:
Derivative ﬁnancial liabilities	3, 25.4.1	193.2	240.7
Total ﬁnancial liabilities		15,936.5	16,504.7

(1) Including liabilities held for sale.

(2) Including liabilities held for sale, loan redemptions and accrued interest.

(3)

Excluding derivative ﬁnancial liabilities designated as hedging instruments in hedge relationships in the

amount of €247.8 million (2022: €203.9 million).

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25.3 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.

25.3.1

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.

25.3.1.1

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, 2023, after considering the effect of the hedging, the

interest proﬁle of the Group’s interest-bearing debt was as follows:

	As at December 31,
	2023	2022
	in € millions
Fixed rate	10,980.4	13,855.7
Capped rate	1,055.8	304.6
Floating rate	2,205.9	536.0
	14,242.1	14,696.3

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	Increase / decrease	Effect on proﬁt before
December 31,	in basis points	tax and pre-tax equity
in € millions
	+100	(26.1)
2023
	-100	29.0
	+100	(6.8)
2022
	-100	8.2

The Group had no long-term debt for which the benchmark rate had been

replaced with an alternative benchmark rate as at December 31, 2023.

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25.3.1.2. 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 25.4.2.1 and 25.4.2.2.

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 25.4.2.3

25.3.1.3. 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.

25.3.2. 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 25.1).

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,
	2023	2022
	in € million
Not past due and past due 1–30 days	46.2	32.6
Past due 31–90 days	28.3	25.9
Past due above 90 days	11.6	8.8
	86.1	67.3

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.

226

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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 highly-rated (mostly between A- to A+ by the leading global rating

agencies) banks and ﬁnancial institutions located mainly in Switzerland,

Germany, Luxembourg and the Netherlands. Concentration risk is mitigated by

not limiting the exposure to a single counter party. The Company has performed

an expected credit loss (“ECL”) calculation on the cash and cash equivalents

accounts and presented the current balance net of the ECL provision that

amounted to €3.3 million as at December 31, 2023 (2022: €3.5 million).

The composition of cash and cash equivalents was as follows:

	As at December 31,
	2023	2022
	in € million
Cash at banks	1,186.7	1,562.8
Cash deposits of up to three months	1,454.5	742.6
Total cash and cash equivalents	2,641.2	2,305.4

None of the cash and cash equivalents items are restricted. Most of the cash at

banks includes overnight deposits that bear interest.

Credit line

The Group ensures accessible additional liquidity by maintaining active

revolving credit facilities (“RCF”) from various ﬁnancial institutions. As at

December 31, 2023, the Group had approximately €1 billion RCF with maturity

of more than one year, 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 21.4, with

relevant adjustments.

Frankfurt

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25.3.3. 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, 2023, and as at December

31, 2022:

As at December 31, 2023

	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)	2,204.1	2,664.8	3.9	148.2	256.6	203.4	2,052.7
Straight bonds (2)	12,154.3	13,422.9	44.0	495.2	2,080.1	2,738.4	8,065.2
Lease liability	311.8	3,330.3	2.4	11.9	14.5	14.6	3,286.9
Trade and other payables	176.2	176.2	29.4	146.8	-	-	-
Total	14,846.4	19,594.2	79.7	802.1	2,351.2	2,956.4	13,404.8

(1)

includes current portion of long-term loans, loan redemptions and accrued interest

(2)

includes accrued interest

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	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

(

include current portion of long-term loans and loan redemptions and excludes loans classiﬁed as held for sale

(

includes accrued interest

228

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25.3.4. Operating risk

Operational risk is the risk that derives from the deﬁciencies relating to the

Group’s information technology and control systems as well as the risk of human

error and natural disasters.

The Group’s systems are evaluated, maintained and

upgraded continuously.

25.3.5. Other risks

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, Russia initiated a full-scale invasion of Ukraine and escalating the

Russo-Ukraine War (the “War”) and hostilities have continued since then. The War has

received widespread international condemnation and in reaction to Russian hostilities

many nations and organizations, including Germany and the European Union, have

announced sanctions against Russia, Russian companies, and individuals in and from

Russia. The Group is not directly impacted by the War, as neither its portfolio nor its

operations have direct exposure to Ukraine or Russia. However, the Group is impacted

by the indirect consequences of the War. As a result of the War, inﬂationary pressures

have increased, speciﬁcally heating and energy costs, which have an impact on the

operating costs of the Group. Such pressures may also have an impact on the ability

of the group’s tenants to pay rent and/or for the Group to recover expenses related to

recoverable expenses from tenants. Furthermore, the increased energy costs have led

to a wider inﬂationary pressure. Higher levels of inﬂation have impacted interest rates

and borrowing costs, while increased volatility in the capital markets have reduced

the Group’s ability to raise capital at attractive prices, resulting in an increase in its

cost of capital and potentially limiting its growth opportunities. While much of the

volatility has reduced and price levels have reduced to some extent in recent periods,

risk of renewed price volatility remains, which could have negative ﬁnancial impacts

on the Company.

As a result of the large number of refugees that have entered and are expected to

continue enter the European Union and Germany following the War. This has resulted

in an increased strain on the residential real estate market in Germany. This further

exacerbates the supply and demand mismatch, increase political pressure for home

construction or market intervention. The full effects are currently still unclear and

will depend signiﬁcantly on the duration and ﬁnal outcome of the Invasion as well

as the distribution of refugees across the European Union.

While the War is currently limited to Ukraine on one side and Russia and several

of its allies on the other, continued escalation may result in other countries joining

the conﬂict and at this stage the group is unable to assess the full impact of such a

scenario on the Company, and the likelihood of its occurrence.

Inﬂationary environment

The COVID-19 pandemic, supply chain disruptions, the high amount of cash injected

into the market as a monetary response and the geopolitical situation around

Russia and Ukraine, among others, have resulted in a high inﬂationary environment.

Inﬂationary pressure has been particularly strong in energy prices, in particular for

oil and gas, caused by the War, and material prices.

While in recent periods pressures

have eased to a certain extent, inﬂation remains above central bank targets.

Furthermore, risks remain that may result in inﬂationary pressures increasing once

more. This may also result in tenant’s inability to bear the costs that are passed

through to them as part of the lease agreements. While in the recent period of high

inﬂation no material losses in regard to collection from tenants has been recorded,

it cannot be ruled out that losses of rent will occur in the future or that the Group

will be unable to collect operating costs from tenants and that the Group will lose

considerable rental income. In order to mitigate the risk, the Company is proactively

informing tenants on their consumption of energy and provides information on how

to reduce consumption.

Higher levels of inﬂation particularly for energy and materials may have an impact

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Consolidated Financial Statements

on the Group’s ability to acquire materials for capex measures at a reasonable price

and increase utility costs or result in delays across the Group’s operations. Furthermore,

higher levels of inﬂation across the economy may result in higher personnel expenses

and expenses related to external services, which could have a negative impact on

the Group’s proﬁtability. In addition, higher levels of inﬂation have resulted in rapid

and signiﬁcant increases in interest rates and consequently

resulted in signiﬁcant

volatility in capital markets, which has a negative impact on the cost and availability

of new ﬁnancing for the Group on one hand and may put further upward pressure on

discount rates and cap rates if prolonged, which could consequently have a further

adverse impact on the fair value of the Group’s assets and share price performance.

The ability of landlords to increase rents under existing tenancy agreements is limited

under German law, especially in residential properties in Germany where rent increases

may be limited as a result of tenant protection. In the commercial portfolio, the

majority of the leases are indexed or have stepped rent which enables the Company to

capture inﬂation faster. However, it may take the Company to capture the full impact

of inﬂation and the inﬂation rate may exceed the Company’s ability to increase rents

for certain properties. In addition, even if rent increases are contractually agreed, or

legally permissible, enforcement may not be feasible in certain cases due to solvency

issues of tenants that cannot afford such rent increases.

An increase in interest rates

In order to battle the increased inﬂation levels, the European Central Bank has raised

interest rate levels rapidly and has declared that it would maintain high interest levels

at least until inﬂation slows down and it reached the desired level. This has led to a

signiﬁcant rise in interest rates in Germany and throughout the Eurozone and led to a

decrease in real estate valuations and investments, resulting in lower transaction level

and lower demand for real estate, among other effects. An increase in interest rates

could adversely impact the Group’s business in a number of ways, including:

The discount and cap rates used to calculate the value of the Group’s properties

recorded on the Company’s balance sheet in accordance with 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 seek to reduce their exposure to the real estate

sector and also might be subject to increased equity requirements and balance sheet

regulations resulting in restraints to lend out money to customers which could make it

more diffcult for the Group to obtain bank ﬁnancing at desired terms. In general, rising

interest rates (or market expectations regarding future increases in interest rates)

would make ﬁnancing required by the Group for its reﬁnancing, acquisition, capital

expenditure and/or other real estate activities more expensive, which could reduce

the Group’s proﬁts.

When negotiating ﬁnancing agreements or extending such agreements, the Group

depends on its ability to agree to terms and conditions that will provide for interest

payments that will not impair its proﬁt targets, and for 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

interest rates, the rates that the Company would pay on a new issuance may differ

materially from the reset rate, it may therefore be uneconomical for the Company to

call the respective notes and issue new notes, as has been the case with its notes with

the ﬁrst call date in January, July and October 2023.

The willingness of purchasers to acquire real estate in an environment of rising

interest rates may be negatively affected, thereby restricting the Group’s ability to

dispose of its properties on favorable terms when desired. Most purchasers ﬁnance

their acquisitions with lender provided ﬁnancing through mortgages and comparable

230

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security (in Germany so-called land charges). Lack of availability of such ﬁnancing at

attractive rates therefore reduces demand for properties.

Any of the foregoing factors may have a material adverse effect on the Group’s business,

net assets, ﬁnancial condition, cash ﬂows and results of operations.

Climate-related risks

The signiﬁcant impact of human activity on ecosystems and the climate have become

apparent in recent years, with temperatures rising, severe weather events such as

drought, ﬂoods and wildﬁres occurring more frequently, changes in rainfall patterns

and mean global sea levels rising, as well as increased pressures on biodiversity, among

others. Consequently, climate risks have increased and environmental impacts have

become more important in the decision making of investors, lenders, regulators and

consumers. As a result, the Company does not only face changing physical climate risks

but also transitional climate risks resulting from changes in investor and consumer

demand, from regulatory changes as well as from other societal factors.

The Company faces several physical climate-related risks. As a result of changing

climate patterns severe weather events in the group’s regions become more likely and

severe, which may result in more frequent ﬂooding or other weather-related damages.

The Company actively attempts to identify these risks and implement measures to

mitigate the impact of such risks to the Company, for example through insurance. To

better understand the Company’s exposure to physical risks, the company has adopted

a tool for asset-level assessment of physical risk develop. This analysis will serve

the Company in determining which risks are material in order to develop adaptation

solutions. However, it cannot be guaranteed that the Company correctly identiﬁes all

risks and therefore may be underinsured against such risks. Furthermore, increased

occurrence of severe weather events will likely result in higher insurance premiums. In

addition, increased ﬂood risk as well as increasing sea levels put increased stress on

dikes, levees and related infrastructure which will likely result in higher costs for such

infrastructure which in turn may lead to higher fees and taxes to fund the increased

costs, particularly impacting the group’s assets situated in regions affected by increased

ﬂood risk and/or rising sea levels. While the above-mentioned insurance costs, taxes

and fees can generally be passed on to tenants through the service charges, in case of

vacancies such costs are carried by the Company.

In addition to physical climate-related risks the Company also faces transitional risks.

As a result of the more apparent impact of climate changes in recent years regulators

have increased their efforts to mitigate current as well as potential future impacts of

climate change through a wide range of regulations.

As part of its Climate Action Programme 2030, the German federal government has

introduced a ﬁxed price for carbon dioxide emissions in the transport and real estate

sectors as from January 2021. The price per metric ton of carbon dioxide emitted as

heating or fuel emissions (CO

and CO

levy) was set at an initial price of euro 25.00

per 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

January 1, 2023 the Carbon Dioxide Cost Sharing Act came into effect, according to

which the landlord will be obliged to bear part of the costs (previously carried in full

by tenants). 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 of the relevant

costs to landlords will have a negative effect on the Company’s operating margins and

ﬁnancial results.

Emerging regulations in the Group’s regions pursuing a phase-out of fossil fuels and

improved energy efﬁciency present technological risks to the Company which requires

careful attention when planning maintenance and capex measures. Some examples

are Germany’s Building Energy Act (GEG), which bans the installation of new oil

heating systems in 2026, whereas the UK Government announced in September 2023

several coming changes to the Heat and Buildings Strategy, one notable point being

delaying the banning the installation of gas boilers from 2026 now until 2035. At the

EU level, the EU Council and EU Parliament reached an agreement in December 2023

on the recast of the Energy Performance of Buildings Directive (EPBD) to include new

minimum energy performance requirements for buildings that progressively increase

over time, although the speciﬁc requirements can only be known once national-level

implementation commences among member states who will deﬁne their own target

pathways.

Noncompliance with the energy requirements under the new EPBD would

result in an inability to let the assets and requires increased capital expenditures to

become compliant. In the UK the Domestic Minimum Energy Efﬁciency Standard limits

letting of properties with EPC ratings F or G, and although a bill for more aggressive

requirements had been in the works it has since been scrapped by the government

and it remains unclear whether any further requirements will be set. The Company

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Consolidated Financial Statements

continuously monitors changes in regulations and aims to minimize the ﬁnancial risk

through pro-active carbon reduction and energy efﬁciency policies and programs.

The increased focus of regulators and market participants has additionally resulted in

increased reporting and transparency requirements for companies. Higher reporting

and transparency requirements result in increased administrative hurdles and costs for

the Group, negatively impacting its efﬁciency and ﬁnancial results. Furthermore, the

Group’s sustainability strategy incorporates self-set targets for material environmental,

social and corporate governance matters (ESG). If any of these self-set ESG goals are

not met, this could damage the Group’s reputation. Considering the increasing focus

of market participants and lenders on sustainability and “green ﬁnancing”, this could

have a negative impact on the Group’s reﬁnancing and access to further ﬁnancing, for

example, via the capital market or by taking out loans, at all or on attractive terms. If

the Group fails to meet expectations and trends related to sustainability aspects in a

timely manner or at all, there could be a decline in demand from tenants. Furthermore,

this could also lead to investors divesting from the Group’s bonds or shares, as they

also expect ESG goals to be met. From a regulatory perspective, failure to achieve

the sustainability goals may also have a negative impact on the Group. For example,

the introduction of the CO

levy, minimum energy performance standards or further

tightening of regulatory requirements to achieve alignment with the targets of the

Paris Agreement could directly or indirectly increase the Group’s costs or decrease

rental income. To take on a proactive approach, the Company has developed a CO

pathway to guide the investment in on-site renewable energy and building energy

efﬁciency improvements needed to achieve it’s 2030 emission reduction target while

enabling further emission reductions down the line.

In order mitigate risks related to CO

emissions, and in order to reach the Company’s

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 2022, the Company began the process of aligning to the Task Force on Climate-

Related Financial Disclosures (TCFD) Recommendations framework. Although the

TCFD has been disbanded and integrated into the International Sustainability

Standards Board (ISSB), the framework’s core principles for corporate climate-related

risk disclosures have also been adopted by the European Sustainability Reporting

Standards (ESRS) E1 Standard, with which the Company must be fully compliant in its

reporting beginning for the year 2024.

The early decision to align to best practices on

climate-related risk disclosures leaves the Company in a good position for ensuring

compliance, although it is a process requiring continuous effort. As part of this

process, the Company continuously updates its climate-related risk assessment each

year, with the most prominent and emerging climate-related risks already integrated

into the enterprise risk management system. The Building Resilience Task Force, an

interdepartmental team dedicated to this effort, continues to further develop control

mechanisms and risk mitigation measures for climate-related risks.

Baden Baden

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25.4 Hedging activities and derivatives

25.4.1. Derivative financial instruments

		As at December 31,
		2023	2022
	Note	in € millions
Derivative ﬁnancial assets
Derivatives that are designated as hedging
instruments in cash ﬂow hedge	25.4.2.1	22.6	43.5
Derivatives that are designated as hedging
instruments in fair value hedge	25.4.2.2	103.2	144.2
Derivatives that are designated as hedging
instruments in net investment hedge	25.4.2.3	0.4	4.6
Derivatives that are not designated as hedge
accounting relationships		60.9	60.3
Other derivative ﬁnancial instruments	25.4.3	199.0	-
Derivative ﬁnancial liabilities		386.1	252.6
Derivatives that are designated as hedging
instruments in cash ﬂow hedge	25.4.2.1	21.3	4.9
Derivatives that are designated as hedging
instruments in fair value hedge	25.4.2.2	189.2	185.7
Derivatives that are designated as hedging
instruments in net investment hedge	25.4.2.3	37.3	13.3
Derivatives that are not designated as hedge
accounting relationships		78.3	(*) 113.7
Other derivative ﬁnancial instruments	25.4.3	114.9	(*) 127.0
		441.0	444.6

(*) reclassiﬁed

25.4.2. Hedge accounting relationships

25.4.2.1. Cash flow hedges

As at December 31, 2023, the Company had foreign exchange rate and

interest rate swap agreements in place, as follows:

			Company
			receives	Company
Hedged item	Hedging	Notional currency	(in notional	pays – in €
	instrument (*)		currency	millions
			millions)
Bond series H	FX-Swap	United States Dollar	400.0	372.4
Bond series NOK	FX-Swap	Norwegian Krone	750.0	79.3
Bond series 27	FX-Swap	Hong Kong Dollar	430.0	48.3
Bond 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.

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Consolidated Financial Statements

As at December 31, 2023, the Company had interest rate cap agreements

in place, as follows:

Hedged item	Hedging instrument (*)	Carrying amount of hedged
		item (in € million)
Loans and borrowings	Cap derivatives	375.3

(*) all instruments are linked to loans’ maturity

The caps are being used to hedge the exposure to variability in cash

outﬂows of the Group’s bank loans which arise from interest rate risks.

There is an economic relationship between the hedged items and the

hedging instruments.

The Group designated the intrinsic value of the cap contracts as the hedging

instrument. The terms of the hedging instruments match the terms of the

hedged items, as described. The Group has established a hedge ratio of 1:1

for the hedge relationships, as the underlying risk being the interest rate

and the cap derivatives are designed to mitigate the exposure.

To test the hedge effectiveness, the Group uses the hypothetical derivative

method and compares the changes in the fair value of the hedging

instruments against the changes in fair value of the hedged items

attributable to the hedged risk. The hedge ineffectiveness can arise from:

●

Different foreign exchange and interest rates’ curve applied to the hedge

items and hedging instruments.

●

Differences in timing of cash ﬂows of the hedged items and hedging

instruments.

●

The counterparties’ credit risk differently impacting the fair value

movements of the hedging instruments and hedged items.

The impact of the hedging instruments (FX-Swap and Cap derivatives) on

the consolidated statement of ﬁnancial position is, as follows:

	Carrying amount
			Line item in the	Net change in
Risk Category	Assets	Liabilities	consolidated	fair value used
			ﬁnancial	for measuring
			statements	ineffectiveness
				for the year
	in € millions		in € millions
As at December 31, 2023
Foreign exchange rate			Derivative
and interest rate swaps	22.6	21.3	ﬁnancial assets /	(93.5)
and caps			liabilities
As at December 31, 2022
Foreign exchange rate			Derivative
and interest rate swaps	43.5	4.9	ﬁnancial assets /	72.9
and caps			liabilities

The impact of the hedged items on the consolidated statement of ﬁnancial

position is, as follows:

		Line item in the	Net change in
	Carrying	consolidated	fair value used
	amount	ﬁnancial	for measuring
		statements	ineffectiveness
			for the year
	in € millions		in € millions
As at December 31, 2023
Straight bonds	509.8	Straight bonds	93.9
Loans and borrowings	375.3	Loans and borrowings	(0.3)
As at December 31, 2022
Straight bonds	530.8	Straight bonds	(74.0)
Loans and borrowings	-	Loans and borrowings	-

The ineffectiveness recognized in the consolidated statement of proﬁt or

loss was a proﬁt of €0.1 million (2022: loss of €1.1 million).

234

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25.4.2.2. Fair value hedges

As at December 31, 2023, the Company had foreign exchange rate and

interest rate swap agreements in place, as follows:

			Company receives	Company
Bond	Hedging	Notional currency	–in notional	pays – in €
	instrument (*)		currency millions	millions
Series L	FX-Swap	United States Dollar	150.0	125.2
Series M	FX-Swap	Swiss Franc	239.8	204.1
Series P	FX-Swap	Australian Dollar	202.0	127.3
Series R	FX-Swap	Canadian Dollar	181.8	119.5
Series X	FX-Swap	Swiss Franc	99.8	87.7
Series 28	FX-Swap	United States Dollar	540.8	478.5
Series 29	FX-Swap	Norwegian Krone	1,735.0	179.0
Series 30	FX-Swap	British Pound	388.7	455.3
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	Swiss Franc	130.0	119.4
(*) all swaps are lin ked to bonds’ m aturity

In addition, the Company has entered into several interest rate swap

agreements. For further information regarding the effective coupon rate

see note 21.2.

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

movements of the hedging instruments and hedged items.

The impact of the hedging instruments on the consolidated statement of

ﬁnancial position is as follows:

	Carrying amount
			Line item in the	Net change in
Risk Category	Assets	Liabilities	consolidated	fair value used
			ﬁnancial	for measuring
			statements	ineffectiveness
				for the year
	in € millions		in € millions
As at December 31, 2023
Foreign exchange rate			Derivative
and interest rate swaps	103.2	189.2	ﬁnancial assets/	19.4
			liabilities
As at December 31, 2022
			Derivative
Foreign exchange rate	144.2	185.7	ﬁnancial assets/	(213.5)
and interest rate swaps			liabilities

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Consolidated Financial Statements

The impact of the hedged items on the consolidated statement of ﬁnancial

position is as follows:

			Net change in
		Line item in the	fair value used
	Carrying	consolidated	for measuring
	amount	ﬁnancial	ineffectiveness
		statements	for the year
	in € millions		in € millions
As at December 31, 2023
Straight bonds	2,186.9	Straight bonds	(22.2)
As at December 31, 2022
Straight bonds	2,342.9	Straight bonds	218.3

The ineffectiveness recognized in the consolidated statement of proﬁt or

loss was a loss of €2.8 million (2022: proﬁt of €4.8 million).

25.4.2.3. Hedge of net investments in foreign operations

The Group uses foreign exchange forward contracts as a hedge of its

exposure to foreign exchange risk on its investments in foreign subsidiaries.

The foreign exchange forward contracts are being used to hedge the Group’s

exposure to the GBP foreign exchange risk on these investments. Gains or

losses on the retranslation of the forward contracts are transferred to OCI

to offset any gains or losses on translation of the net investments in the

subsidiaries.

There is an economic relationship between the hedged item and the

hedging instruments as the net investment creates a translation risk that

will match the foreign exchange risk on the 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			in € millions
As at
December 31, 2023
Foreign currency				Derivative
forward contracts	GBP 1,615.0	0.4	37.3	ﬁnancial	(38.2)
				assets
As at
December 31, 2022
Foreign currency				Derivative
forward contracts	GBP 1,965.0	4.6	13.3	ﬁnancial	122.7
				assets

The impact of the hedged item on the consolidated statement of ﬁnancial position is,

as follows:

	Foreign currency	Change in fair value
	translation reserve	used for measuring
		ineffectiveness for the year
	in € million
Year ended December 31, 2023
Net investment in foreign subsidiaries	54.4	38.2
Year ended December 31, 2022
Net investment in foreign subsidiaries	(288.3)	(122.7)

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.

236

Consolidated Financial Statements

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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):

Financial	Notional
instrument	currency	Notional amount as at December 31,
		2023	2022
		in notional currency millions
Bond series J	British Pound	483.5	500.0

The net change in the above non-derivative hedging ﬁnancial instruments

resulted in expense of €12.2 million (2022: income of €30.4 million)

presented as an OCI impact on the NIFO. Consequently, together with

designated derivative hedging instruments, the net result of the OCI item

foreign currency – translation difference and NIFO amounted to a gain of

€4.0 million (2022: €10.8 million) and a post-tax loss of €12.1 million (2022:

loss of €33.4 million).

25.4.3. Derivatives not designated as hedging instruments

The Group uses interest rate swaps, collars, caps and ﬂoors to manage its

exposure to interest rate movements on its bank borrowings. These derivative

ﬁnancial instruments are linked to the bank loan maturities (see note 21.1).

Furthermore, in certain bond series, the Group implemented interest rate swap

and cross-currency swap derivative instruments as described in note 21.2).

25.4.4. Other derivatives

As part of the share-to-share voluntary takeover offer the Company has made

to the shareholders of TLG in February 2020, the Company and an existing

shareholder of TLG (the “Investor”) entered into an agreement (the “Agreement”),

pursuant to which the Investor had agreed to refrain from tendering ca. 12

million of TLG shares (the “Custody Shares”) in the offer or to dispose of them

in the absence of the Company’s consent in a due time and no sooner than 34

months after entering the Agreement (“Minimum Period”). As a consideration

for such undertaking, the Investor has been entitled to receive for the period

it held the Custody Shares an agreed minimum gross return on the Custody

Shares (“Custody Interest”) and a preset share price for the Custody Shares.

Following the Minimum Period, the Investor has the right to dispose of the

Custody Shares. By doing so, the Company committed to indemnify the Investor

for any difference between the consideration of such disposal and the preset

share price (“PPM Instrument”). To postpone such disposal decision for up to 10

years, the Company has the option to provide an interest-bearing loan, secured

by the Custody Shares, in the amount of the preset share price multiple by

the Custody Shares. In accordance with IFRS, the Company accounted for the

Custody Interest as a ﬁnancial liability in its consolidated statement of ﬁnancial

position and the PPM Instrument as a derivative ﬁnancial liability measured

at fair value through proﬁt or loss, derived by the share price of TLG being the

underlying asset. During the year, the Company made available €350 million,

backed with the Custody Shares, of which €199 million in the form of short-

term credit default swap which is presented as a derivative ﬁnancial asset

and accounted for at fair value. As at December 31, 2023, the PPM Instrument

amounted to €114.9 million (2022: €127.0 million).

25.5 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 cal-

culated, 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

below the Board of Directors’ guidance of 45%. As at December 31, 2023, the LTV ratio

was at 43% (2022: 40%), 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 Com-

pany complied with all externally imposed capital requirements.

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26. 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,
	2023	2022
	in € millions
First year	816.9	849.6
Between one to two years	774.7	817.7
Between two to three years	698.3	746.4
Between three to four years	605.1	640.5
Between four to ﬁve years	511.3	525.7
More than ﬁve years	3,176.6	3,616.0
	6,582.9	7,195.9

27.

COMMITMENTS

As at December 31, 2023, 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 €0.2 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.

28.

CONTINGENT ASSETS AND LIABILITIES

The Group had no signiﬁcant contingent assets and liabilities as at December 31, 2023.

Düsseldorf

238

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29.

GROUP SIGNIFICANT HOLDINGS

The details of the signiﬁcant holdings under the Group are as follows:

				Holding rate as at
				December 31,
			Main place of
Name	Place	Principal activities	principal activity	2023	2022
	of incorporation
Subsidiaries held directly and indirectly by the Company			in %
ATF Netherlands B.V.	Netherlands	Financing	Netherlands	100	100
AT Securities B.V.	Netherlands	Financing	Netherlands	100	100
			Germany, Netherlands,
Aroundtown Limited	Cyprus	Holdings		100	100
			United Kingdom
			Germany, Netherlands,
Aroundtown Real Estate Limited	Cyprus	Holdings		100	100
			United Kingdom
Grand City Properties S.A.	Luxembourg	Holdings and real estate	Germany, United Kingdom	62.68	60.11
Edolaxia Group Limited	Cyprus	Holdings	Cyprus	100	100
TLG Immobilien AG	Germany	Holdings and real estate	Germany	88.11	88.16
WCM Beteiligungs- und Grundbesitz- AG	Germany	Holdings and real estate	Germany	86.39	86.12
Primecity Investment PLC	Cyprus	Holdings and real estate	Germany	99.97	99.97
Aroundtown Holdings B.V.	Netherlands	Holdings and real estate	Germany, United Kingdom	100	100
Aroundtown Holdings S.à r.l.	Luxembourg	Holdings and real estate	United Kingdom, Switzerland	100	100
BSC München Grundstücks GmbH & Co. KG	Germany	Real estate	Germany	49.09	49.09
Associates and joint arrangements held indirectly by the Company
Globalworth Real Estate Investment Limited	Guernsey	Real estate	Poland, Romania	30.38	30.31
Tevat Limited	Cyprus	Holdings	Cyprus	50	50
Capitals Property S.à r.l.	Luxembourg	Real estate	Germany	30	30

30.

SIGNIFICANT SUBSEQUENT EVENTS

After the reporting period, the Group signed over €110 million of new secured bank

debt with an average maturities and margins of over 5 years and 1.9%, respectively.

After the reporting period, outstanding deals to sell investment property in value

of over €80 million were successfully completed.

On March 26, 2024, the Company’s Board of Directors has decided not to

recommend a dividend payment for 2023 at the Company’s Annual General

Meeting scheduled for June 26, 2024.

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AROUNDTOWN

Consolidated Financial Statements

Amsterdam

240

Opinion

We have audited the consolidated financial statements of Aroundtown SA and its

subsidiaries (the “Group”), which comprise the consolidated statement of ﬁnancial

position as at 31 December 2023, and the consolidated statement of comprehensive

income, consolidated statement of changes in equity and consolidated statement of

cash ﬂows for the year then ended, and notes to the consolidated ﬁnancial statements,

including material accounting policy information and other explanatory information.

In our opinion, the accompanying consolidated ﬁnancial statements give a true and

fair view of the consolidated ﬁnancial position of the Group as at 31 December 2023

and of its consolidated ﬁnancial performance and its consolidated cash ﬂows for the

year then ended in accordance with IFRS Accounting Standards as adopted by the

European Union.

Basis for opinion

We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law

of 23 July 2016 on the audit profession (“Law of 23 July 2016”) and with International

Standards on Auditing (“ISAs”) as adopted for Luxembourg by the Commission de

Surveillance du Secteur Financier (“CSSF”). Our responsibilities under the EU Regulation

N° 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the

CSSF are further described in the « Responsibilities of “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 2023?

REPORT OF THE RÉVISEUR

D’ENTREPRISES AGRÉÉ

Report on the audit of the consolidated financial statements

To the Shareholders of

Aroundtown SA

37, Boulevard Joseph II

L-1840 Luxembourg

Luxembourg

241

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 15 “Investment Property” in the consolidated ﬁnancial

statements of Aroundtown SA.

As at 31 December 2023 the Group held a portfolio of investment property with a fair

value of MEUR 24,632.4 (31 December 2022: MEUR 27,981.0) and investment property

within assets held for sale with a fair value of MEUR 909.1 (31 December 2022: MEUR

1,009.3).

The valuation of investment property is a signiﬁcant judgement area and is underpinned

by a number of assumptions.

The

fair value measurement of investment property is inherently subjective and

requires valuation experts and the Group’s management to use certain assumptions

regarding rates of return on the Group’s assets, future rent, occupancy rates, contract

renewal terms, the probability of leasing vacant areas, asset operating expenses, the

tenants’ ﬁnancial stability and the implications of any investments made for future

development purposes in order to assess the future expected cash ﬂows from the

assets. Any change in the assumptions used to measure the investment property could

cause a signiﬁcant change in its fair value.

The Group uses external valuation reports issued by external independent professionally

qualiﬁed valuers to determine the fair value of its investment property.

The external valuers were engaged by management and performed their work

in compliance 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 agreements and rental income. They apply assumptions for yields and

estimated market rent, which are inﬂuenced by prevailing market yields and comparable

market transactions, to arrive at the ﬁnal valuation.

The signiﬁcance of the estimates and judgments involved, coupled with the fact that

only a small percentage difference in individual property valuations, when aggregated,

could result in a material misstatement in the consolidated statement of proﬁt or loss

and consolidated statement of ﬁnancial position, warrants speciﬁc audit focus in this area.

b) How the matter was addressed during the audit?

Our procedures over valuation of investment properties 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 report including the consolidated

management report and the Corporate Governance Statement but does not include

the consolidated ﬁnancial statements and our report of the “réviseur d’enStreprises

agréé” thereon.

Our opinion on the consolidated financial statements does not cover the other

information and we do not express any form of assurance conclusion thereon.

242

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 IFRS Accounting Standards as

adopted by the European Union, and for such internal control as the Board of Directors

determines is necessary to enable the preparation of consolidated ﬁnancial statements

that are free from material misstatement, whether due to fraud or error.

The Board of Directors is responsible for presenting [and marking up] the consolidated

ﬁnancial statements in compliance with the requirements set out in the Delegated

Regulation 2019/815 on European Single Electronic Format (“ESEF Regulation”).

In preparing the consolidated ﬁnancial statements, the Board of Directors is responsible

for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going concern basis of accounting

unless the Board of Directors either intends to liquidate the Group or to cease

operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s ﬁnancial

reporting process.

Responsibilities of the réviseur d’entreprises agréé for the audit of the consolidated

ﬁnancial statements

The objectives of our audit are to obtain reasonable assurance about whether the

consolidated ﬁnancial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue a report of the “réviseur d’entreprises agréé”

that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with the EU Regulation N° 537/2014,

the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will

always detect a material misstatement when it exists. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could

reasonably be expected to inﬂuence the economic decisions of users taken on the basis

of these consolidated ﬁnancial statements.

Our responsibility is to assess whether the consolidated ﬁnancial statements have

been prepared in all material respects with the requirements laid down in the ESEF

Regulation.

As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July

2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional

judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated ﬁnancial

statements, whether due to fraud or error, design and perform audit procedures

responsive to those risks, and obtain audit evidence that is sufﬁcient and appropriate

to provide a basis for our opinion. The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from error, as fraud may involve

collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control.

Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose

of expressing an opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Board of Directors.

Conclude on the appropriateness of the Board of Directors‘ use of the going

concern basis of accounting and, based on the audit evidence obtained, whether a

material uncertainty exists related to events or conditions that may cast signiﬁcant

doubt on the Group’s ability to continue as a going concern. If we conclude that

a material uncertainty exists, we are required to draw attention in our report of

the “réviseur d‘entreprises agréé” to the related disclosures in the consolidated

ﬁnancial statements or, if such disclosures are inadequate, to modify our opinion.

Our conclusions are based on the audit evidence obtained up to the date of our

report of the “réviseur d‘entreprises agréé”. However, future events or conditions may

cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated

ﬁnancial statements, including the disclosures, and whether the consolidated

ﬁnancial statements represent the underlying transactions and events in a manner

that achieves fair presentation.

243

Obtain sufﬁcient appropriate audit evidence regarding the ﬁnancial information of

the entities and business activities within the Group to express an opinion on the

consolidated ﬁnancial statements. We are responsible for the direction, supervision and

performance of the Group audit. We remain solely responsible for our audit opinion..

We communicate with those charged with governance regarding, among other matters,

the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any

signiﬁcant deﬁciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have

complied with relevant ethical requirements regarding independence, and to

communicate with them all relationships and other matters that may reasonably be

thought to bear on our independence, and where applicable, actions taken to eliminate

threats or safeguards applied.

From the matters communicated with those charged with governance, we determine

those matters that were of most signiﬁcance in the audit of the consolidated ﬁnancial

statements of the current period and are therefore the key audit matters. We describe

these matters in our report unless law or regulation precludes public disclosure about

the matter.

Report on other legal and regulatory requirements

We have been appointed as “réviseur d’entreprises agréé” by the Shareholders on 15

December 2023 and the duration of our uninterrupted engagement, including previous

renewals and reappointments, is seven years.

The consolidated management 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 management report. The

information required by Article 68ter paragraph (1) letters c) and d) of the law of 19

December 2002 on the commercial and companies register and on the accounting

records and annual accounts of undertakings, as amended, is consistent with the

consolidated ﬁnancial statements and has been prepared in accordance with applicable

legal requirements.

We conﬁrm that the audit opinion is consistent with the additional report to the audit

committee or equivalent.

We conﬁrm that the prohibited non-audit services referred to in the EU Regulation

N° 537/2014 were not provided and that we remained independent of the Group in

conducting the audit.

We have checked the compliance of the consolidated ﬁnancial statements of the Group

as at 31 December 2023 with relevant statutory requirements set out in the ESEF

Regulation that are applicable to consolidated ﬁnancial statements.

For the Group it relates to:

•

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

December 2023, identiﬁed as 529900H4DWG3KWMBMQ39-2023-12-31-en.zip, have

been prepared, in all material respects, in compliance with the requirements laid down

in the ESEF Regulation.

Our audit report only refers to the consolidated ﬁnancial statements of Aroundtown SA

as at 31 December 2023, identiﬁed as 529900H4DWG3KWMBMQ39-2023-12-31-en.zip,

prepared and presented in accordance with the requirements laid down in the ESEF

Regulation, which is the only authoritative version.

Luxembourg, 27 March 2024

KPMG Audit S.à r.l.

Cabinet de révision agréé

Muhammad Azeem

Partner

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Consolidated Financial Statements

Berlin

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AROUNDTOWN

Consolidated Financial Statements

Berlin