CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 NUREMBERG / FÜRTH LEIPZIG CONTENTS Board of Directors’ report 2 EPRA Performance Measures 60 Report of the Rèviseur d’Enterprises Agréé (Independent Auditor) 72 Consolidated statement of profit or loss 76 Consolidated statement of comprehensive income 77 Consolidated statement of financial position 78 Consolidated statement of changes in equity 80 Consolidated statement of cash flows 82 Notes to the consolidated financial statements 84 IMPRINT Publisher: Grand City Properties S.A. | 1, Avenue du Bois | L-1251 Luxembourg phone: +352 28 77 87 86 | e-mail: [email protected] | www.grandcityproperties.com Board of Directors’ Report | 1 KEY FINANCIALS BALANCE SHEET HIGHLIGHTS in €’000 unless otherwise indicated Dec 2019 Dec 2018 Dec 2017 Total Assets 9,851,428 8,860,526 7,508,292 Total Equity 4,966,599 4,666,987 3,849,662 Loan-to-Value 33% 34% 36% Equity Ratio 50% 53% 51% P&L HIGHLIGHTS in €’000 unless otherwise indicated 1–12/2019 Change 1–12/2018 Rental and operating income 560,303 3% 544,977 Net rental income 382,605 5% 364,365 EBITDA 696,741 -11% 782,313 Adjusted EBITDA 297,662 8% 275,530 FFO I 211,966 7% 197,854 FFO I per share (in €) 1.27 7% 1.19 FFO I per share after perpetual notes attribution (in €) 1.07 6% 1.01 FFO II 381,387 14% 334,456 Profit for the year 493,360 -15% 583,034 EPS (basic) (in €) 2.43 -18% 2.95 EPS (diluted) (in €) 2.30 -17% 2.76 2019* Change 2018 Dividend per share (in €) 0.8238 7 % 0.7735 *2019 dividend is subject to the next AGM approval and based on a payout policy of 65% of FFO I per share NAV HIGHLIGHTS EPRA NAV including in €’000 unless otherwise indicated NAV EPRA NAV perpetual notes EPRA NNNAV Dec 2019 4,564,344 4,120,427 5,150,477 3,890,832 Dec 2019 per share (in €) 27.2 24.5 30.6 23.1 Per share growth +9% +9% +7% +3% Dec 2018 4,162,463 3,753,022 4,783,072 3,752,781 Dec 2018 per share (in €) 24.9 22.5 28.7 22.5 For further clarification of the alternative performance measures please see the relevant section in this report 2 | Board of Directors’ Report COLOGNE Board of Directors’ Report | 3 HIGHLIGHTS Adjusted EBITDA FFO I FFO II (in € millions) (in € millions) (in € millions) Over €1.1 billion realized over 4 years CAGR CAGR +10% +10% 381 334 298 276 248 225 229 212 198 204 178 160 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 In-place rent Value/sqm Accretive capital (in €/sqm) (in €/sqm) recycling Sale of non-core and mature assets CAGR CAGR +8% +19% €6.8 €1,543 €6.0 €500 €5.65 €1,257 €5.35 €1,155 million €924 Disposals: 52% over total costs 7% over book value Dec Dec Dec Dec Dec Dec Dec Dec 2016 2017 2018 2019 2016 2017 2018 2019 Accretive acquisition of approx. €650 million in strong locations +2.9% +3.6% +0.7% L-F-L In-place rent L-F-L growth L-F-L Occupancy Dec 2019 Total net rent growth Dec 2019 growth Dec 2019 4 | Board of Directors’ Report 8 Low average cost of debt years maintained with 1.3% Average Average debt long average cost maturity debt maturity of debt Low Leverage Unencumbered assets (Loan-To-Value) €6.5 BN 45% Board of Director’s limit €4.8 BN 36% €4.1 BN 34% 33% 79% of value 65% 64% of of value value Dec 2017 Dec2018 Dec 2019 Dec 2017 Dec 2018 Dec 2019 Credit rating Interest Coverage Ratio Moody’s Moody’s Long-term target A3 Baa1 6.6x ICR 6.0x 2019 ICR 2018 S&P Long-term S&P target A- BBB+ 3RD CONSECUTIVE YEAR 95TH SS PERCENTILE IN FEB 2019 Board of Directors’ Report | 5 HIGHLIGHTS EPRA NAV (in € millions) Total Equity (in € millions) EPRA NAV EPRA NAV incl. perpetual notes 50% Equity CAGR CAGR Ratio +17% +17% Dec 2019 EPRA NAV 5,150 4,967 4,783 4,667 4,120 3,993 3,850 3,753 3,327 3,208 3,065 2,541 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2016 Dec 2017 Dec 2018 Dec 2019 EPRA NAV per share FFO I per share Dividend per share (in €) (in €) (in €) EPRA NAV FFO I per share per share CAGR after perpetual CAGR notes attribution CAGR +14% +7% +6% EPRA NAV EPRA NAV FFO I per share FFO I incl. perpetual per share per share notes per share FFO I Dividend Yield 1) yield 1) 2) 7.3% 1.27 4.7% 30.6 1.19 28.7 1.12 1.05 1.07 1.01 24.2 24.5 0.96 22.5 0.92 2) 20.7 20.2 0.82 0.77 0.73 16.4 0.68 Dec 2016 Dec 2017 Dec 2018 Dec 2019 2016 2017 2018 2019 2016 2017 2018 2019 1) based on a share price of €17.4 2) 2019 dividend subject to the next AGM approval and based on a payout policy of 65% of FFO I per share 6 | Board of Directors’ Report BERLIN Board of Directors’ Report | 7 LETTER OF THE MANAGEMENT BOARD Dear Stakeholder, ■■ In 2019 we focused on internal growth and London portfolio. Most of the acquisitions in on capital recycling, while maintaining our dis- London were of vacant units at the final de- ciplined acquisition criteria. Therefore, it is our velopment stage before letting. As expected, great pleasure to present to all our stakeholders, we have experienced robust demand for living the positive annual results in addition to some spaces in these areas and were able to increase of the key achievements during the year. the occupancy on lettable units in London to Following on with our accretive capital re- over 95%. cycling, we continued to enhance our invest- As of December 2019, total assets on our ment portfolio on two fronts – asset quality and balance sheet amounted to almost €10 billion, portfolio diversity. During the year 2019, GCP up from €8.9 billion at the end of 2018. The recycled €500 million of properties at 7% over increase is primarily due to net acquisitions the net book values from disposals (52% profit of quality assets coupled with value creation margin on total costs). The proceeds of the cap- across the portfolio. ital recycling were channeled into acquisitions GCP continues to maintain a strong bal- mainly in London, and also in German cities ance sheet by giving preference to financial such as Berlin and Munich. Our London port- discipline. As compared to the end of 2018, we folio reached to 13% of our portfolio as of the were able to lower the average cost of debt from end of December 2019 and is focused on assets 1.6% to 1.3% while also increasing our inter- located in good middle-class neighborhoods. In est coverage ratio from 6.0x to 6.6x during the particular, the portfolio is well connected with same period. Underlining the strength of our immediate access to different modes of public operational profitability was the growth of 8% transport, which coupled with the quality of in GCP’s adjusted EBITDA year-over-year. The these assets results in strong demand for our Company’s solid financial position was also ev- 8 | Board of Directors’ Report ident with both S&P and Moody’s, re-affirming take this commitment very seriously. We es- the investment grade credit ratings of BBB+ tablished the GCP Foundation which will invest and Baa1 respectively. As of the end of Decem- into charitable projects which serve local com- ber 2019, GCP’s balance of cash and liquid as- munities. These projects will broadly be in the sets which amounted to over €1 billion (over areas of child-welfare, education, sports, as- 10% of our Balance Sheet size), ensures that the sistance to the elderly, and other similar proj- Company is protected from a downturn scenar- ects. The Company has already made efforts to io, especially considering the current unstable invest into the lives of the next generation and environment. Additionally, the strong liquidi- has used sports as a medium to do so. GCP is ty position also provides us with the financial the main sponsor of the FC Union Berlin Youth flexibility to capture attractive opportunities football team and the Company continues to as and when they arise. sponsor different local sports teams on various With our focus largely on maximizing levels. Such sports activities help the next gen- tenant satisfaction while also ensuring value eration to develop useful character traits such creation for our other stakeholders, we capi- as teamwork, communication, perseverance, talized on our extensive experience in order discipline and leadership. to provide high quality tenant service. Our ef- The importance of sustainable business forts were rewarded through the strong like- operations cannot be overstated, and we have for-like rental growth of 3.6% on the back of a taken various measures in making our busi- stronger letting activity and enhanced vacancy ness far more sustainable than the year before. reduction measures. Furthermore, improved With regards to the environment, 90% of all business efficiencies also led to higher oper- landlord-obtained energy requirements have ating margins. The trickledown effect of these been switched to renewables or climate-neu- actions was especially evident with the FFO I tral energy sources, while pool cars have been increasing by 7% each to €212 million and to switched to an eco-friendly fuel.