EPH European Property : Annual Report 2022 2022

ANNUAL REPORT

2022

MANAGEMENT REPORT

1. OPERATING AND FINANCIAL REVIEW

1. PROPERTY REVIEW

1. EXECUTIVE INTERVIEW

1. BOARD OF DIRECTORS

1. MANAGEMENT COMMITTEE

1. SUSTAINABILITY REPORT

CORPORATE GOVERNANCE REPORT

1. GROUP STRUCTURE AND SHAREHOLDERS

1. CAPITAL STRUCTURE
2. BOARD OF DIRECTORS
3. MANAGEMENT COMMITTEE
4. COMPENSATIONS, SHAREHOLDINGS AND LOANS
5. SHAREHOLDERS' PARTICIPATION
6. CHANGES OF CONTROL AND DEFENSE MEASURES

1. AUDITING BODY
2. INFORMATION POLICY

1. QUIET PERIODS

EXTERNAL REPORTS

1. INDEPENDENT AUDITOR'S REPORT

1. REPORTS EXTERNAL VALUERS

FINANCIAL REPORT

1. CONSOLIDATED FINANCIAL STATEMENTS

1. NOTES TO THE CONSOLIDATED ACCOUNTS

GENERAL INFORMATION

1. INVESTMENT GUIDELINES
2. CORPORATE DETAILS
3. IMPRESSUM

DEAR

SHAREHOLDERS

The past year 2022 confronted the entire real estate industry with major challenges that continue to persist. The impacts of the conflict in the Ukraine, high construction and energy costs, historic high of inflation, and, above all, the massive increases in interest rates since the summer of 2022 have significantly changed the market environment.

Furthermore, in the past financial year, we made an important strategic decision to strengthen the stability of our business development and the long-term performance of our portfolio. We decided, in the interest of our stakeholders, to sell the Russian portfolio. This marked the logical next step in the implementation of our strategy to focus on Western Europe and was accelerated in response to the conflict in Ukraine and the sanctions imposed on Russia. Our shareholders approved the sale of the Russian real estate portfolio, including its Cypriot and German holding companies, within the framework of a management buy-out, which was completed by April 2023.

We are more than pleased that continuing part of our company has demonstrated stability even in these times of difficult general conditions. For over 20 years, EPH has been active as a real estate investor and has proven to be a reliable and secure partner for its stakeholders, shareholders and tenants. And once again, our sensibility for market changes and the evolving needs of tenants is all the more important. As a long-term real estate investor, the creation of sustainable values, long-term capital preservation and stable risk-adjusted revenues are at the top of our company's agenda. We keep focussing on high-quality properties in strong economies in prime locations in Europe, such as Germany and Austria, and on highly professional asset management with strong local teams. These factors form a stable basis.

Since the sale of the Russian properties, our real estate portfolio consists of nine core assets with a total value of approximately EUR 895 million (as at 31 December 2022). The properties are located in prime locations in Vienna (Austria) and in four major markets in Germany (Berlin, Hamburg, Stuttgart and Dresden). All properties are let to tenants with strong credit ratings on long-term leases. Due to the quality of the properties and the professional asset management, the European properties performed above expectations in the reporting period and further increased their market value despite difficult market conditions.

As the closing of the sale of the Russian portfolio took place after the end of the reporting period, the Russian portfolio is still included in the financial figures as assets classified as held for sale in the statement of financial position and net profit from discontinued operations in the statement of profit or loss. Net rental income from the European portfolio increased from 19.35 million in 2021 to 25.93 million in 2022. This increase is mainly caused by the fact that the properties QBC 1, 2 and 7 have started to generate full income after the expiry of the rent-free periods, first income has been received by newly refurbished LASS1 property and moderate rent indexation in other properties in Vienna and Germany.

For some years now, EPH has been increasingly focused on real estate in Eu- rope. Due to the significant expansion of EPH's European real estate portfolio and the strategy to focus investments on major European cities, we relocated the EPH Group's headquarters to Cyprus, in February 2022 and changed the

functional and reporting currency of the EPH Group's financial reports from US dollars (USD) to euros (EUR) with effect from 1 January 2022.

Apart from the that we have achieved another notable milestone in the reporting period: The refurbishment project LASS 1 in Vienna was only slightly delayed and construction work on the building was completed in 2022 and taken over from the general contractor in January 2023. Completion of the outdoor areas is scheduled for the first half of 2023. The property is located near the city centre of Vienna in the promising, up-and-coming 2nd district with excellent infrastructure and transport connections. It is part of Quartier Lassalle with a variety of restaurants and supermarkets in the immediate vicinity. On nine floors with a total area of almost 45,000 square metres, LASS 1 offers its tenants modern working space. Tenants include the Wiener Gesundheitsverbund ("Vienna Healthcare Group"), Wiener ArbeitnehmerIn- nen Förderungsfonds ("Vienna Employment Promotion Fund"), and ISS Aus- tria, which has also taken over the facility management for the property.

Despite the challenging market situation, our high-quality as well as sustainable European portfolio and our strong asset management give us good reasons to be optimistic about the future development of EPH. We see a great demand for modern, sustainable and centrally located space in our target markets, especially in the office asset class in strong economic regions such as Vienna and Germany. The hotel segment also continues to offer very good potential, provided that the properties are in excellent locations and operated by large hotel chains - such as our hotels in Berlin and Dresden. At the same time, the supply of real estate product is very limited, and rising construction and financing costs can in turn have a positive effect on the market value for existing projects and properties if the fundamentals are right.

Furthermore, our high-quality properties satisfy high standards in terms of sustainability, as confirmed by their numerous Green Building Certifications and low carbon footprints. This means that our portfolio meets a great demand for sustainable real estate space which will increase even further in future. Seven out of eight office and hotel buildings of our portfolio have certificates in DGNB Platinum, DGNB Gold, or LEED Gold. For potential future acquisitions, we are targeting green building certification of at least "Gold". This will allow us to ensure the long-term stability in income and value growth of our portfolio.

In this report, we have integrated a section on our ESG strategy as well as on our sustainability measures to make our approach transparent. Our objectives also include, for example, improving the dataset and implementing annual re-evaluations of the corporate carbon footprint calculation, the central data monitoring and the renewable energy potentials of our buildings. We would like to thank all our shareholders for the trust they continue to place in our company, and our business partners for their exceptional col- laboration.

Sincerely,

The Board of Directors

26 April 2023

MANAGEMENT

REPORT