CORPORATES CREDIT OPINION Grand City Properties S.A. 24 June 2021 Update following rating affirmation Update Summary Grand City Properties S.A.'s (Grand City) Baa1 issuer rating primarily reflects its focus on stable residential activities within the German regulated housing framework; Grand City's very good liquidity, long-dated debt maturity profile, and good access to a variety of funding sources, accompanied with a high level of unencumbered assets; the geographical RATINGS diversification of its property portfolio across multiple German metropolitan areas, with Grand City Properties S.A. continued, but moderating, rent increases; and the company’s reduced acquisition speed of Domicile Luxembourg, turnaround portfolios, resulting in continuing improvements in vacancies. Luxembourg Long Term Rating Baa1 These positives are partly offset by the company's still-elevated but improving vacancy rate; Type LT Issuer Rating - Dom Curr its diversification into London as a non-regulated residential market; and the general concern Outlook Stable for the German market of further tightening rent regulations in combination with increased environmental-related spending requirements. Please see the ratings section at the end of this report for more information. The ratings and outlook shown Grand City is solidly positioned in the Baa1 rating category, despite an elevated debt/assets reflect information as of the publication date. ratio of 46% as of March 2021, given the unusually high cash position of the company. We expect the company to slowly reduce its cash balance by acquiring own shares and further assets. We expect gross debt/assets to moderately decline, the fixed-charge cover to remain Contacts stable, and net debt/EBITDA to increase with the use of cash for the acquisition of assets and Federico Zugaro +49.69.7073.8654 share buy backs. Associate Analyst [email protected] Exhibit 1 Anke Rindermann +49.69.70730.788 Debt/gross assets elevated due to the substantial cash and cash equivalents amount Associate Managing Director Moody's-adjusted debt/gross assets and EBITDA/fixed charges [email protected] Moody's-adjusted Debt/Gross assets (LHS) Debt/Gross assets downgrade trigger Debt/Gross assets upgrade trigger Moody's-adjusted EBITDA/Fixed charges (RHS) CLIENT SERVICES 50% 6.0x 42% - 45% Americas 1-212-553-1653 45% 5.5x Asia Pacific 852-3551-3077 40% 5.0x Japan 81-3-5408-4100 35% 4.3x - 4.7x 4.5x EMEA 44-20-7772-5454 30% 4.0x 2016 2017 2018 2019 2020 LTM Mar-2021 Moody's 12-18 Month Forward View [1] [1] This represents Moody's forward view, not the view of the issuer. Source: Moody's Financial Metrics™ This document has been prepared for the use of michael Bar-Yosef and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's. MOODY'S INVESTORS SERVICE CORPORATES Credit strengths » Focus on the stable and regulated rental residential property market in Germany » Moderate leverage » Very good liquidity, a long-dated and extending debt maturity profile, and good access to a variety of funding sources, accompanied with a high level of unencumbered assets » Good geographical and income diversification in its residential property portfolio across multiple German metropolitan areas, with continued while moderating rent increases Credit challenges » Potential tightening of regulations as a result of social and political pressure on the housing market » Still-elevated vacancy rate compared with that of peers » Diversification into London as a non-regulated residential market » Investment requirements for improved energy efficiency conflicting with increased sensitivity around rental increases Rating outlook The stable outlook on Grand City's rating mainly reflects our expectation of continued robust operating performance and stable financial metrics over the next two years. The stable outlook also reflects our expectation of an unchanged favourable outlook for the German residential property sector as a whole. Factors that could lead to an upgrade » Strong operating performance, with a further reduction in vacancies and high rental growth » Debt/gross assets sustained below 40%, accompanied by a corresponding trend in net debt/EBITDA, and a corresponding tightened financial policy » Fixed-charge cover sustained above 4.5x » Maintenance of solid liquidity, including a high unencumbered asset pool » Unchanged favourable outlook for the German residential property sector as a whole Factors that could lead to a downgrade » Debt/gross assets sustained above 45% » Fixed-charge cover sustained below 3.5x » Further transitioning of the portfolio towards unregulated markets, with more immediate supply-and-demand responses to rental income and higher market value volatility » Unfavourable changes in the outlook for the German residential property sector as a whole, potentially driven by unfavourable regulatory changes » Weakening operating performance (rental growth or vacancy rates) This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. 2 24 June 2021 Grand City Properties S.A.: Update following rating affirmation This document has been prepared for the use of michael Bar-Yosef and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's. MOODY'S INVESTORS SERVICE CORPORATES Key indicators Exhibit 2 Grand City Properties S.A. [1] This represents Moody's forward view, not the view of the issuer, and unless noted in the text, does not incorporate significant acquisitions and divestitures. All figures and ratios are calculated using Moody’s estimates and standard adjustments based on audited accounts. Source: Moody's Financial Metrics™ Profile Grand City Properties S.A. (Grand City) is a publicly listed real estate company that owns, manages and acquires residential properties, mainly in Germany. As of March 2021, the company owned more than 60,000 residential units, mainly located in the metropolitan areas of Berlin, North Rhine-Westphalia, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Bremen, Hamburg and London. The portfolio generated net rents of €91 million in the first three months of 2021, or €343 million on an annualised basis. Exhibit 3 Nearly half of Grand City's portfolio is located in Berlin and London Portfolio split by market value as of 31 March 2021 Others 11% Nuremberg/Fürth/Munich North Rhine-Westphalia 3% Hamburg/Bremen 17% 5% Mannheim/Kaiserslautern/Frankfurt/Mai nz 5% Berlin 25% London 21% Dresden/Leipzig/Halle 13% Source: Company reports Grand City is registered in Luxembourg and is listed on the Frankfurt Stock Exchange, with a market capitalisation of €4 billion as of 15 June 2021, trading at a small discount to net asset value. Detailed credit considerations Stable operating environment because of its focus on regulated rental housing activities in Germany, diluted through investments in London Roughly 79% of Grand City's portfolio is invested in German residential assets. The German residential sector is one of the most stable asset classes in the European real estate industry, with high demand and limited supply supporting rents and values. While the potential for tighter regulation is a threat to property values and cash flow growth, it will also probably intensify the supply and demand imbalance. The German rental market is highly regulated: reletting rents and rent increases for existing tenants are capped with reference to a local index (Mietspiegel) calculated by local authorities, reflecting the location and quality of the units. Rent increases are mostly capped to 3 24 June 2021 Grand City Properties S.A.: Update following rating affirmation This document has been prepared for the use of michael Bar-Yosef and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's. MOODY'S INVESTORS SERVICE CORPORATES 20% over a period of three years, or 15% in tense markets (5% a year; allowance made for modernisation, the cap on which is 8% per year). From a longer-term perspective, prices and rents for residential properties have been more stable in Germany than in any other large developed economy, even after taking into account recent increases. Since 1970, German house prices have increased broadly in line with inflation, but have never declined more than 3% in any given year.1 Average rents remain affordable despite recent rent and value increases. Nevertheless, affordability fluctuates in tandem with the absolute amount of household income, which exposes lower-income households in particular to higher rental cost-to-income ratios. Grand City has accumulated a portfolio of €1.7 billion of residential assets in London. They are largely new, and do not represent high-end type of stock. Nevertheless the London investments dilute the strength of its traditional German operating environment. We favour markets with structural supply constraints that often come with regulation, which limits income downsides and reduces property value volatility, and the strength of the German residential debt funding market. On the positive side, London has also been a notoriously undersupplied market, which should support achievable rents and limit downside potential, despite recent volatility in rents and values. The total portfolio's location and property quality improves with the largely newly built London portfolio. Good geographical and income diversification, with stable, although moderating, like-for-like rental growth The granularity of the portfolios owned by residential landlords enhances the stability of their revenue and cash flow, particularly in regulated markets, such as Germany. Grand City's portfolio is centred around North Rhine-Westphalia (17% by value), Berlin (25%), London in the UK (21%) and other areas in Germany.