Prospectus. of 153,788,883 existing bearer shares (the Shares ), - each with a nominal value of 0.10 and full dividend rights from 1 January

Transcription

1 Prospectus for the admission to trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) (the Admission ) of 153,788,883 existing bearer shares (the Shares ), - each with a nominal value of 0.10 and full dividend rights from 1 January of Grand City Properties S.A. (a public limited liability company (société anonyme), incorporated under the laws of the Grand Duchy of Luxembourg, having its registered office at 24, Avenue Victor Hugo, L-1750 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (Registre de commerce et des sociétés) under number B ) (the Company ) International Securities Identification Number (ISIN): LU Trading Symbol: GYC THIS PROSPECTUS IS NOT PUBLISHED IN CONNECTION WITH AND DOES NOT CONSTITUTE AN OFFER OF SECURITIES BY OR ON BEHALF OF THE COMPANY IN THE EUROPEAN ECONOMIC AREA OR ELSEWHERE AND HAS ONLY BEEN PREPARED FOR THE PURPOSE OF THE ADMISSION. This prospectus (the Prospectus ) constitutes a prospectus within the meaning of Article 5 para. 3 of Directive 2003/71/EC of the European Parliament and the Council of 4 November 2003 (as amended, inter alia, by Directive 2010/73/EU) (the Prospectus Directive ). This Prospectus will be published in electronic form on the website of the Luxembourg Stock Exchange ( This Prospectus has been approved by the Commission de Surveillance du Secteur Financier of the Grand Duchy of Luxembourg (the CSSF ) in its capacity as competent authority under the Luxembourg law of 10 July 2005 on prospectuses for securities, as amended (Loi relative aux prospectus pour valeurs mobilières telle que modifiée, the Luxembourg Prospectus Law ), which implements the Prospectus Directive into Luxembourg law. The Company will be authorised to carry out the Admission once the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungaufsicht - BaFin), which is the competent authority in Germany, has been notified about the approval of the Prospectus in accordance with the applicable provisions of German law implementing Section 18 of the Prospectus Directive. By approving the Prospectus, the CSSF assumes no responsibility and does not give any undertaking with regard to the economic and financial soundness of the transaction or the quality or solvency of the Company in line with the provisions of article 7 (7) of the Luxembourg Prospectus Law. Investing in the Shares involves certain risks. Prospective investors should read the entire document and, in particular, see Risk Factors beginning on page 1 for a description of certain risks that should be carefully considered by potential investors prior to an investment in the Shares. The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state and other securities laws of the United States. This Prospectus does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to acquire, Shares in any jurisdiction. The date of this Prospectus is 4 May 2017

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3 CONTENTS SUMMARY OF THE PROSPECTUS... 1 Section A - Introduction and Warnings... 1 Section B - Issuer... 2 Section C - Securities Section D - Risks Section E - Offer GERMAN TRANSLATION OF THE SUMMARY OF THE PROSPECTUS ZUSAMMENFASSUNG DES PROSPEKTS A - Einleitung und Warnhinweise B - Emittent C - Sicherheiten D - Risiken E - Angebot RISK FACTORS... 1 Risks Relating to the Real Estate Market... 1 Risks Related to the Business of the GCP Group... 8 Valuation Risks Financial Risks Legal and Regulatory Risks Tax Risks Risks Relating to the Shares, the Admission and the Shareholder Structure GENERAL INFORMATION Responsibility Statement Purpose of this Prospectus Forward-Looking Statements Appraiser Information Derived from Third Parties; Sources Documents on display Currency and Financial Data Figures Statutory Auditors Rating THE ADMISSION OF THE SHARES TO TRADING Admission to the Frankfurt Stock Exchange and Commencement of Trading, Reasons, Costs. 53 Information on the Shares of the Company Approval of this Prospectus Designated Sponsors Material Interests of Persons regarding the Admission, including Conflict of Interests i

4 DIVIDEND POLICY, DIVIDEND DISTRIBUTIONS General Provisions Relating to Profit Allocation and Dividend Payments History of Dividend Policy and Earnings Per Share CAPITALIZATION AND INDEBTEDNESS, STATEMENT ON WORKING CAPITAL Capitalization Indebtedness Statement on Working Capital SELECTED CONSOLIDATED FINANCIAL INFORMATION Selected Consolidated Comprehensive Income Statement Data Selected Data from the Consolidated Balance Sheet Selected Data from the Consolidated Cash Flow Statement Selected Other Consolidated Key Financial Information MANAGEMENT DISCUSSION AND ANALYSIS OF NET ASSETS, FINANCIAL POSITION, AND RESULTS OF OPERATIONS Overview Key Factors Influencing the Net Assets, Financial Condition and Results of Operation Factors that influence comparability of financial information Results of Operations Liquidity and Capital Resources Assets and Liabilities Investments Loan-To-Value EPRA NAV Quantitative and Qualitative Description of Market Risks Significant Accounting Policies MARKETS AND COMPETITION Market Overview Competition BUSINESS Business Overview History Competitive Strengths Strategy Business Activities Employees Patents, Licenses and Trademarks Legal and Arbitration Proceedings Insurances MATERIAL CONTRACTS ii

5 Acquisition Agreements Finance Agreements REGULATORY ENVIRONMENT Limitations of German Tenancy Law Statutory limits on rent increases Commercial Leases Current Developments in Tenancy Law Limitation for the Use of the Properties Liability for Contamination of the soil and buildings Restitution Claims Social Law Framework German Tax Law on Property Purchases Access for Foreign Investors to German Real Estate GENERAL INFORMATION ON THE COMPANY AND THE GROUP Formation, Incorporation, Registered Office, Commercial Name, Financial Year Corporate Purpose Group Structure Information on Material Subsidiaries and Shareholdings Publications, Paying Agent DESCRIPTION OF SHARE CAPITAL General Subscribed Share Capital Development of Subscribed Share Capital Authorized Capital Convertible Bonds ( Series F Bonds ) Employee Stock Option Plan Shareholders Rights Repurchase of the Shares Reduction of Capital Form and Transfer of the Shares General Meetings of the Company s Shareholders Voting at Shareholders Meetings Amendment of the Company s Articles of Association Shareholder Actions in relation to the Company Issuance of Additional Shares and Preferential Subscription Rights Dividends and Distributions Winding-up of the Company Takeover Bids Squeeze-Out and Sell-Out Rights iii

6 Provisions Preventing a Change of Control Manager s Transactions, Insider Dealing and Market Manipulation Notification of the Acquisition or Disposal of Major Shareholdings MANAGEMENT, BODIES AND SENIOR MANAGEMENT Management Structure Members of the Board of Directors Senior Management Advisory Board Audit Committee Risk Committee Remuneration Committee Corporate Governance SHAREHOLDER STRUCTURE RELATED PARTY TRANSACTIONS Overview Business Relationships and transactions between the Company and Shareholders of the Company Business Relationships and transactions between the Company and Companies of the Group200 Business Relationships and transactions between the Company and members of the Board of Directors and the Senior Management TAXATION IN THE GRAND DUCHY OF LUXEMBOURG Taxation of the Company Taxation of Investors TAXATION IN THE FEDERAL REPUBLIC OF GERMANY Taxation of Dividends Taxation of Capital Gains If the Company Qualified as a Corporate Investment Company German CFC Rules Inheritance and Gift Tax Other Taxes The Proposed Financial Transaction Tax PROPERTY APPRAISAL REPORT... D-1 FINANCIAL INFORMATION... F-1 GLOSSARY... G-1 RECENT DEVELOPMENT AND OUTLOOK... R-1 ADDRESSES... A-1 iv

7 SUMMARY OF THE PROSPECTUS Summaries are made up of disclosure requirements known as elements ( Elements ). These Elements are numbered in Sections A - E (A.1 to E.7). This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the Summary with the mention of not applicable. Section A - Introduction and Warnings A.1 Warnings This summary should be read as an introduction to this Prospectus. Any decision to invest in the securities should be based on consideration on the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the relevant member states of the European Economic Area, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Grand City Properties S.A., Luxembourg, Grand Duchy of Luxembourg (the Company and together with its consolidated subsidiaries the GCP Group or the Group ) assumes responsibility for the content of this summary and its German translation. Those persons who are responsible for the summary including any translation thereof or for the issuing can be held liable but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus or it does not provide, when read together with other parts of the Prospectus, key information in order to aid investors when considering whether to invest in the Shares. A.2 Consent Not applicable. Consent regarding the use of this Prospectus for a subsequent resale or placement has not been granted. S-1

8 Section B - Issuer B.1 Legal and commercial name. B.2 Domicile and legal form, legislation under which the issuer operates and country of incorporation. B.3 Description of, and key factors relating to, the nature of the issuer s current operations and its principal activities, stating the main categories of products sold and/or services performed and identification of the principal markets in which the issuer competes. Grand City Properties S.A. is the legal and the commercial name of the Company. The Company has its registered office at 24, Avenue Victor Hugo, L Luxembourg, Grand Duchy of Luxembourg. The Company is a public limited liability company (société anonyme) pursuant to, and governed by, the laws of the Grand Duchy of Luxembourg. The Company was incorporated on 16 December 2011 and is registered with the Luxembourg Register of Trade and Companies (Registre de Commerce et des Sociétés Luxembourg) under number B Grand City Properties S.A. is a leading specialist real estate company focused on investing in and managing value-add opportunities in the German residential real estate market. As of 28 February 2017, the GCP Group s portfolio consisted of approximately 84,000 units located in densely populated areas mainly in Germany s largest federal state, North Rhine-Westphalia ( NRW ), Berlin, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Bremen and Hamburg. As of 31 December 2016 the Group assessed the total market value of its real estate portfolio at 4.8 billion. As of end of February 2017, the Group assessed the total market value of its real estate portfolio at 4.95 billion. As of that date the real estate portfolio consisted of 77,465 residential units, 5,031 commercial units, 1,606 nursing home units, 20,819 garages and external parking space and 1,773 miscellaneous units (e.g. cellars, storages, antennas). The GCP Group is active in all asset and property management activities along the real estate value chain. The Group s business model is focused on buying real estate properties with strong underlying fundamentals which are not optimally managed or positioned and improving the properties through property and tenant management as well as targeted modernisations. This enables the Company to create significant value in its portfolio. As of the date of this Prospectus, the Group employs over 800 employees. Whereas S-2

9 the Group has its operational headquarters in Berlin, the Group s asset management, sales, and marketing activities are organised locally to better capture regional demand and necessities. The GCP Group s investment focus is on densely populated areas of the German real estate market. The Group believes to benefit from favourable fundamentals that will support stable profit and growth opportunities in the foreseeable future. The Company considers its platform, experience and systems have positioned it for further strong performance and will allow it to continue to drive value growth from its portfolio potential. The Group also believes that there are sufficient acquisition opportunities in the markets in which it operates to support its external growth strategy in the medium to long term. The Company believes that its business is characterised by the following competitive strengths which have been a primary driver for the Group s growth over the past three years: - Through its fully integrated platform the GCP Group provides efficient in-house management to its existing real estate portfolio as well as support for the execution of its expansion plans. Specialized teams cover the entire range of the real estate value chain from acquisition to construction and refurbishment, sales and marketing. In particular, its proprietary IT/software enables the Company to closely monitor its portfolio and tenants to continuously optimize yields and implement strict cost discipline. - The GCP Group s considers its focus on identifying properties with value-add opportunities that match the Company s experience and skills, and improving their operational performance as a competitive advantage in the German real estate market. Since 2012 the Group s portfolio has grown from approximately 12,000 units to approximately 84,000 units as of February The Group believes that its existing portfolio is made up of a well-balanced mix of properties that are attractively located and geographically well distributed. - The Group not only focuses on acquiring properties with upside potential but also in creating and executing tailor made strategies for each asset in order to improve its performance, S-3

10 which it believes results in value appreciation. The GCP Group s value-add management focuses on increasing cash flows through raising rents, decreasing vacancy levels, as well as maintaining cost discipline. The Group exhibits growth from the operational optimization of its existing portfolio as well as expansion through the acquisition of additional properties with value-add potential. - The Group believes to have a conservative financial policy, according to its overall low cost of debt and diversified balance sheet structure. With 632 million in cash and liquid assets and over 200 million in unused credit lines as of 31 December 2016 the Company has a high amount of financial flexibility, which is also reflected in the 2.8 billion of unencumbered assets as of year-end The LTV (as defined in Element B.7 below) of the Group as of 31 December 2016 was 35 %. - The Company s current stable credit profile is reflected in the investment grade rating by S&P that was raised most recently, in November 2016, to BBB+, as well as the investment grade rating of Baa2 assigned by Moody s in February 2015 and upgraded to a positive outlook in November Following the listing of its shares on the Frankfurt Stock Exchange in the Entry Standard segment in May 2012, the Company has also successfully raised funds on the capital markets through various issues resulting in a well balanced mix of debt and equity. B.4a Description of the most significant recent trends affecting the issuer and the industries in which it operates. The development of the German residential real estate market as a whole and, in particular, the development in the regional sub-markets where the Group s properties are located, may have a significant impact on the Group s business and the future prospects. By fair value the Group holds 32% of its portfolio in NRW, 17% in Berlin, 18% in Dresden, Leipzig and Halle as well as significant holdings in other major cities such as Mannheim, Frankfurt and Mainz, Nuremberg-Furth, Munich, Bremen and Hamburg (all percentages given according to the fair value assessment of the Company as of end of February 2017). In Germany, it is expected that population will S-4

11 decline and will increasingly age while the amount of households will increase and the average household size will decrease. Thus, the population decline might not have any influence on the demand for residential real estate in general. These trends have recently led to a stronger demand for one and two person households. However, the number of households and the amount of space needed per person might not increase to the extent projected. In addition, if the population begins to decline sooner or more rapidly than expected, and the number of households and average amount of space needed per person does not increase or increases more slowly than expected, the demand for rented space may decline. Also, demographic forecasts for large and rapidly growing cities in Germany deviate from forecasts for less densely populated areas, and it is expected that such regional differences will grow further. A declining population in rural areas may result in a decreasing demand in the respective housing markets and in an oversupply of housing. This trend of high vacancies affects cities and municipalities in the eastern part of Germany as well as regions in the western part facing structural problems. The Group generates two types of income: rental and operating income and income from property sales. Both income types are generally affected by market prices for properties in the regional submarkets the Group operates in, which in turn reflect rent levels, vacancies and other factors. In the past three years the German real estate industry and the results of the Group were positively affected by positive developments in the real estate market. In particular, low interest rates, positive employment and wage prospects, the influx of immigrants and increasing households purchasing power continue to drive demand for property in Germany. B.5 If the issuer is part of a group, a description of the group and the issuer s position within the group. The Company is the holding company of the GCP Group, which consists of more than 500 companies mainly in Luxembourg, Cyprus, Germany, the Netherlands and Denmark, of which more than 200 are German companies. Its primary role within the GCP Group is to function as a management and finance holding company. The business (with respect to the Group s property portfolio) is conducted primarily by the subsidiaries of the GCP Group. The chart below shows the current structure of the GCP Group in a S-5

12 simplified form. Grand City Properties S.A. Grand City Property Ltd. (1) Cypriot and Luxembourg Sub-holding Companies (2), (3) German Sub-holding Companies (2), (4) Cypriot Sub-holding Companies (2) German Property Companies (5), (6) Luxembourg Property Companies (5), (7) German Property Companies (5), (8) Danish Property Companies (5) The entities referred to in the footnotes below are those which individually (directly or indirectly) hold properties accounting for at least 2 % of the market value of the GCP Group s total investment property as of 31 December Over 78 % of the Group s investment property portfolio is held by German property companies. (1) Grand City Properties S.A. holds 94.8 % in Grandcity Property Ltd., Cyprus. (2) Companies held 94 % and above by Grandcity Property Ltd. (3) Bunavento Limited, Gutburg Holding Limited, Sedoy Investments Ltd., Carmiliana Ltd., Satemol Ltd., Pesoria Ltd., Sparol Ltd., Bafitek Ltd., Oyster I HoldCo S.á r.l. (4) Holdings GmbH, GCP Real Estate Holdings GmbH. (5) All companies are controlled. (6) AssetCo Halle GmbH, Cato zweite Immobilienbesitz und -verwaltungs GmbH, Bonny 35 GmbH. (7) Gutburg Immobilien S.A. (8) Cerise Hollyhock Property GmbH, Brown Grodaldo Property GmbH. B.6 In so far as is known to the issuer, the name of any person who, directly or indirectly, has an interest in the issuer s capital or voting rights which is notifiable under the issuer s national law, together with the amount of each such person s interest. The table below sets forth the information known to the Company with respect to its shareholders and the shareholder structure of the Company as of the date of this Prospectus. The shareholdings may have changed since the date on which the Company obtained knowledge of the shareholding. Shareholder Direct ownership of the Company in % Edolaxia Group Limited* FMR LLC Merrill Lynch International 2.57 Odey Asset Management 2.26 Other Freefloat Total 100 * Edolaxia Group Limited is a subsidiary of Aroundtown Property Holdings plc ( Aroundtown ), a publicly listed company the shares of which are included for trading on the Alternext segment of Euronext Paris stock exchange. Aroundtown is controlled though its major shareholder Avisco Group plc holding approximately 50% of the shares in Aroundtown. Avisco Group plc is controlled by Mr. Yakir Gabay. Whether issuer s shareholders different rights if any. the major have voting Not applicable. All shares in the Company provide for the same voting rights. There are no arrangements known to the Company involving major shareholders and their voting rights. S-6

13 To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled and by whom and describe the nature of such control. B.7 Selected historical key financial information. Edolaxia Group Limited holds % of the voting rights in the Company. Edolaxia Group Limited is a subsidiary of Aroundtown. Aroundtown is controlled though its major shareholder Avisco Group plc holding approximately 50% of the shares in Aroundtown. Avisco Group plc is controlled by Mr. Yakir Gabay. Thus, Mr. Gabay currently controls % of the voting rights in the Company. If there was low shareholder attendance at the general meeting of the Company s shareholders, Edolaxia Group Limited could adopt and implement or prevent the adoption of resolutions by the general meeting of the Company s shareholders which require a simple majority or even higher majorities solely through the exercise of its own votes. Furthermore, Edolaxia Group Limited could prevent a general meeting of the Company s shareholders from adopting resolutions which require a qualified majority of the votes cast. The following selected historical financial information for the GCP Group is based on the audited consolidated financial statements of Grand City Properties S.A. for the fiscal years ended 31 December 2014, 2015 and 2016 (together the GCP Group s Financial Statements ). The GCP Group s Financial Statements were prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted in the European Union. The GCP Group s Financial Statements were audited by KPMG Luxembourg société coopérative and were issued in each case with an unqualified auditor's report. The following summary of financial information for the fiscal year 2014 is derived from the audited consolidated financial statements of the Company prepared in accordance with IFRS as of and for the fiscal year ended 31 December Certain balance sheet and profit and loss items relating to the fiscal year ended 31 December 2014 have been reclassified in the consolidated financial statements of the Company for the fiscal year 2015 to enhance comparability. Where financial data below is labelled audited, this means that it has been taken from the audited financial statements mentioned above. The label unaudited is used in the below tables to indicate financial data that has not been taken from the audited financial statements mentioned above but was taken either from the Group s S-7

14 accounting or controlling records, or is based on calculations of these figures. Also, some of the financial and performance indicators including non-ifrs measures reproduced below were taken from the Group s accounting records and are unaudited. In order to ensure that figures given in the text and the tables sum up to the totals given, the numbers are commercially rounded to the nearest whole number or in some cases to such number that facilitates the summing up. As a result of rounding effects, the aggregated figures in the tables may differ from the totals shown. Financial information presented in parentheses denotes the negative of such number presented. In respect of financial data set out in the main body of the Prospectus, a dash ( - ) or a zero ( 0 ) signifies that the relevant figure is not available or that the relevant figure is available but has been rounded to zero. Selected Consolidated Comprehensive Income Statement Data For the 12 months ended 31 December 2016 (audited) 2015 (audited) in thousand 2014 (audited) Revenue 442, , ,512 Rental and operating income 435, , ,837 Capital gains, property revaluations and other income 598, , ,969 Property operating expenses (204,108) (151,552) (100,175) Cost of buildings sold (4,971) 0 (14,425) Administrative & other expenses (9,550) (7,153) (5,650) Operating profit 822, , ,325 Finance expenses (36,319) (25,830) (22,040) Other financial results (11,121) (73) (32,664) Current tax expenses (26,799) (22,776) (13,863) Deferred tax expenses (95,518) (43,674) (29,924) Profit for the year 653, , ,834 Selected Data from the Consolidated Balance Sheet ASSETS S (audited) As of 31 December 2015 (audited) in thousand 2014 (audited) Investment property 4,768,487 3,845,979 2,179,982

15 Non-current assets 5,126,031 4,061,699 2,227,243 Current assets 1,027, , ,815 Total assets 6,153,733 4,688,903 2,629,058 EQUITY Total equity attributable to the owners of the Company 2,201,005 1,551, ,914 Equity attributable to perpetual notes investors 667, ,146 - Total equity attributable to the owners and perpetual notes investors 2,868,398 2,030, ,914 Non-controlling interests 196, ,260 90,736 Total equity 3,065,064 2,172,295 1,041,650 LIABILITIES Loans and borrowings 896, , ,217 Convertible bond 427, , ,451 Straight bonds 1,050,078 1,045, ,381 Deferred tax liabilities 325, , ,003 Non-current liabilities 2,750,344 2,239,291 1,434,142 Current portion of long term loans 18,406 19,998 5,792 Loan redemption 10,830 34,678 - Trade and other payables 251, , ,837 Current liabilities 338, , ,266 Total liabilities 3,088,669 2,516,608 1,587,408 Total equity and liabilities 6,153,733 4,688,903 2,629,058 Selected Data from the Consolidated Cash Flow Statement For the 12 months ended 31 December Net cash provided by operating activities Net cash used in investing activities Net cash provided by financing activities Net increase in cash and cash equivalents 2016 (audited) 2015 (audited) in thousand 2014 (audited) 201, , ,884 (557,184) (1,215,048) (327,903) 570,397 1,023, , ,506 (34,130) 137,589 S-9

16 Selected Other Consolidated Key Financial Information The Company presents certain non-ifrs financial information in this Prospectus. The Company uses this financial information because it believes that these are of use for its investors. According to the ESMA guidelines on Alternative Performance Measures ("APM"), the Company considers the following information presented in this Prospectus as APMs: EBITDA, Adjusted EBITDA, FFO I, FFO I per share, FFO II, LTV, EPRA NAV and EPRA NAV per share. All alternative performance measures used by the Company relate to its or the GCP Group's past performance. The Company believes that these measures are useful in evaluating the Group's operating performance, the net value of the Group's portfolio, and the level of indebtedness and of cash profits from the operations by the Group s business, because a number of companies, in particular in the real estate sector, also publish these figures. However, none of the aforementioned performance measures are acknowledged under IFRS and none of these performance measures are suitable to replace financial information such as total assets, total equity, total liabilities, rental and operating income, operating profit, profit for the year, net cash provided by operating activities or net cash used in finance activities or other line items of the Group s consolidated balance sheet, the consolidated comprehensive statement of consolidated income or the consolidated cash flow statement which have been prepared in accordance with IFRS. The alternative performance measures used by the Group not necessarily state if the Group has sufficient cash flow or liquidity and might not be suitable as performance indicators for the past operative result of the Group. The alternative performance measures are not suitable to predict a future performance. Because not all companies in the real estate sector use the same performance indicators and also might calculate them differently, the display of the alternative performance measures by the Group is not necessarily suitable to be compared with similar performance indicators of other companies. The below table contains a summary of alternative performance measures with respect to the fiscal years ended 31 December 2016, 2015 and S-10 As of or for the 12 months ended 31 December,

17 respectively (unaudited) in thousand (except as stated otherwise) EBITDA (1) 824, , ,228 Adjusted EBITDA (1) 224, , ,009 FFO I (2) 160, ,040 76,106 FFO I per share (in ) FFO II (3) 228, , ,212 EPRA NAV (4) 2,541,060 1,923,941 1,348,650 EPRA NAV per share (in ) LTV ratio (5) 34.9 % 41.9 % 45.1 % (1) EBITDA is defined as earnings before interest, tax depreciation and amortization. The figure is calculated by adding to the operating profit depreciation and amortization items. Adjusted EBITDA is an indicator of the recurring operational profit before interest and tax, excluding the effect of noncash items which do not have a strictly operational and recurring nature. The Adjusted EBITDA deducts from the EBITDA the effect of capital gains, property revaluations and other income, result on the disposal of inventories - trading properties and share in profit from investment in equity accounted investees. The Adjusted EBITDA further excludes the contribution to the management long term share incentive plan. The following table shows the calculation of the EBITDA and Adjusted EBITDA for the periods presented: For the 12 months ended 31 December (audited, except as stated otherwise) in thousand Operating Profit 822, , ,325 Total depreciation and amortization 1,695 1, EBITDA(*) 824, , ,228 Capital gains, property revaluations and other income Result on the disposal of inventories - trading properties Share in profit from investment in equityaccounted investees Management long term share incentive plan (598,280) (311,131) (230,969) (2,031) - (250) (541) - - 1, n/a Adjusted EBITDA(*) 224, ,274(**) 112,009 (*) (**) Unaudited and derived from the internal management accounts of the Company. Reclassified in 2016 in order to exclude the non-cash effect of the management s long term incentive plan from the expenses. S-11

18 (2) The funds from operations I FFO I is an indicator for the recurring profit from operations, after deducting from the adjusted EBITDA the finance expenses, the current tax and respective minorities contribution to this item. The FFO I per share is calculated by dividing the FFO I by the weighted basic amount of shares in the respective period. The following table shows the calculation of the FFO I and FFO I per share for the periods presented: (*) (**) (***) (****) For the 12 months ended 31 December (unaudited, except as stated otherwise) in thousand Adjusted EBITDA 224, ,274(**) 112,009 Finance expenses(*) (36,319) (25,830) (22,040) Current tax expenses(*) Contribution to minorities (26,799) (22,776) (13,863) (1,491) (628) n/a FFO I 160, ,040(***) 76,106 Weighted average basic shares in thousands(*) (****) 152, , ,577 FFO I per share in Audited. Reclassified in 2016 in order to exclude the non-cash effect of the management s long term incentive plan from the expenses. Reclassified in 2016 in order to exclude cash effective minority profits. Not considering the dilution effect of the management share plan as it is immaterial. (3) The funds from operations II FFO II includes results from the economic disposal profit of investment property and inventories. The FFO II is calculated by adding the total result from disposal properties to the FFO I. The following table shows the calculation of the FFO II for the periods presented: For the 12 months ended 31 December (unaudited) in thousand FFO I 160, ,040(*) 76,106 Total result from disposal properties 68,620 42,669 53,106 FFO II 228, , ,212 (*) Reclassified in 2016 in order to exclude cash effective minority profits. (4) EPRA NAV is defined by EPRA (European Public Real Estate Association) as the net asset value adjusted by including the properties and other investment interests at fair value and to exclude certain items not expected to crystallize in a long-term investment property business model. The purpose of EPRA NAV is to adjust the IFRS NAV in order to provide stakeholders with the most relevant information on the fair value of the Group s assets and liabilities within a true real estate investment company with a long-term investment strategy. The EPRA NAV is calculated by adding to the shareholder profit the effect of conversion of in-the-money convertible bonds, fair value measurements of derivative financial instruments and deferred tax liabilities. The EPRA NAV per share is calculated S-12

19 by dividing the EPRA NAV by the basic amount of shares, including in-themoney dilution effects. The following table shows the calculation of the EPRA NAV and EPRA NAV per share for the periods presented: As of 31 December (**) (unaudited, except as stated otherwise) in thousand Equity per the financial statements(*) Equity attributable to perpetual notes Investors(*) Equity excluding perpetual notes Effect of conversion of in-the-money convertible bond (***) Fair Value measurements of derivative financial instruments (*) 3,065,064 2,172,295 1,041,650 (667,393) (478,146) - 2,397,671 1,694,149 1,041, , ,451 11,536 6,995 9,282 Deferred tax liabilities 328, , ,003 NAV 2,737,726 2,066,201 1,439,386 Non-controlling interests(*) (196,666) (142,260) (90,736) EPRA NAV 2,541,060 1,923,941 1,348,650 EPRA NAV per share (*) (**) (***) Audited was reclassified for this Prospectus in order to fit the reconciliation of the comparable figures in 2015 and 2016 and deducts non-controlling interest from the NAV in order to get to the EPRA NAV. The amount includes accrued interest and deferred income of the convertible bonds. (5) The loan to value ratio ( LTV ) is an indicator to the financial leverage. The LTV is calculated by dividing the total net debt by the total value. By calculating its LTV, the Company includes into the total net debt the following items: loans and borrowings, loans and borrowings from liabilities held for sale, convertible bond, straight bonds, current portion of long term loans and loan redemption, net of cash and cash equivalents and traded securities at fair value through profit and loss. Total value is including investment property, inventories - trading property, advanced payments for investment property transactions, investment properties of assets held for sale and equity accounted investees. The following table shows the calculation of LTV for the periods presented: S-13

20 As of 31 December (unaudited, except as stated otherwise) in thousand Investment property (**) 4,850,634 3,876,839 2,191,271 Investment properties of assets held for sale (*) 146, Equity accounted investees (*) 117, Total value 5,114,497 3,876,839 2,191,271 Total Debt(***) 2,415,397 2,014,889 1,259,841 Cash and liquid assets(****) 631, , ,296 Net debt 1,783,493 1,625, ,545 Total 34.9 % 41.9 % 45.1 % (*) (**) (***) (****) Audited. Including advanced payments for investment properties and balance of inventories. Including loans and borrowings, loan redemption, financial debt classified as held for sale, straight bonds and convertible bonds. Including cash and cash equivalents and traded securities at fair value through profit and loss. Significant changes to the issuers financial condition and operating results during and subsequent to the period covered by the historical key financial information During the period covered by the historical key financial information, the property portfolio of the Group increased significantly through acquisitions from approximately 43,000 units as of 31 December 2014 to approximately 83,000 units as of 31 December This growth is reflected in the increase in fair value of investment property from 2.2 billion as of 31 December 2014 to 4.8 billion as of 31 December The increase in total assets from 2.63 billion as of 31 December 2014 to 6.15 billion as of 31 December 2016 is balanced by an increase in total equity from 1.04 billion as of 31 December 2014 to 3.07 billion as of 31 December 2016 and a respective increase in the total liabilities from 1.59 billion as of 31 December 2014 to 3.09 billion as of 31 December The strong portfolio growth also had significant impact on results of operations, which is reflected in the increase of income from rental and operating income of 217 million for the fiscal year ended 31 December 2014 to 436 million for the fiscal year ended 31 December During this period, the FFO I increased from 76 million in the fiscal year ended 31 December 2014 to 160 million in the fiscal year ended 31 December The basic earnings per share increased from 1.78 S-14

21 for the fiscal year 2014 to 3.56 for the fiscal year In the first two months of 2017, the Group acquired properties at a total amount of 0.1 billion. The Group focused its acquisition on its strategic locations, Berlin, NRW and Hamburg of which the majority of acquisition have been executed in NRW as well as Kaiserslautern. By the end of February 2017, the portfolio increased to over 84,000 units. The Group is currently looking into various acquisition opportunities of properties without having made binding decisions. On 20 March 2017 the board of directors has decided to increase the dividend policy to a payout ratio of 65 % of FFO I per share with effect for the financial year This dividend distribution proposal to the shareholders general meeting, which is expected to take place in July 2017, would result in 0.68 per share, compared to 0.25 per share for 2015, reflecting a 172 % increase. Besides the developments mentioned above, there has been no significant change in the financial or trading position of the Company or the Group since 31 December There has been no material adverse change in the prospects of the Company since 31 December B.8 Selected key pro forma financial information. B.9 Profit forecast and estimate. B.10 Qualifications in the audit report on the historical financial information. B.11 If the issuer s working capital is not sufficient for the issuer s present requirements, an explanation should Not applicable. There is no pro forma financial information. Not applicable. There is no pro forma forecast or estimate. Not applicable. The auditor s reports on the consolidated financial statements (IFRS) as of and for the fiscal years ended 31 December 2016, 31 December 2015 and 31 December 2014 of the Company have been issued without any qualifications. Not applicable. The Company is of the opinion that the GCP Group is in a position to meet the payment obligations that become due within at least the next twelve months. S-15

22 be included. Section C - Securities C.1 A description of the type and the class of the securities being offered and/or admitted to trading, including any security identification number. C.2 Currency of the securities issue. C.3 The number of shares issued and fully paid and issued but not fully paid. The par value per share, or that the shares have not par value. C.4 A description of the rights attached to the securities. C.5 A description of any restrictions on the free transferability of the securities. C.6 An indication as to whether the securities offered are or will be the object of an All shares of the Company are ordinary shares in bearer form having a par value of 0.10 each. The Shares have been assigned the International Securities Identification Number (ISIN) LU The trading symbol is GYC. The Shares are issued in euro currency. At the date of this Prospectus the Company has issued 153,788,883 ordinary shares (the Shares ). All issued Shares are fully paid up. The Shares have a par value of Each Share carries one vote at the Company s general shareholders meeting. There are no restrictions on voting rights. The Shares carry full dividend rights as of 1 January Not applicable. The Shares are freely transferable in accordance with the legal requirements for the transfer of bearer securities in book entry form. There are no prohibitions or restrictions on disposals with respect to the transferability of the Shares. The application for admission of the entire share capital of the Company for trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the S-16

23 application for admission to trading on a regulated market and the identity of all the regulated markets where the securities are or are to be traded. C.7 A description of dividend policy. Frankfurt Stock Exchange (the Admission ) was filed by the Company and quirin bank AG, Kurfürstendamm 119, Berlin, Germany ( quirin or the Listing Agent ) on 21 April The approval decision for the admission to trading is expected to be passed and announced on 8 May Trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional postadmission obligations (Prime Standard) is expected to commence on 9 May As of that date, the trading of the Company s shares on the open market (Freiverkehr) of Frankfurt Stock Exchange in the Scale segment will be cancelled. On 20 March 2017, the Board of Directors resolved on a dividend policy according to which 65 % of the Company's funds from operations ("FFO I") per share shall be distributed as annual dividends to the shareholders effective from the fiscal year 2016 onwards. This resolution raised the previous dividend policy as of 16 August 2016 (50 % of FFO I per share) and as of 14 January 2015 (30 % of FFO I per share). Any distribution of dividends is subject to a respective resolution of the shareholders annual general meeting. The following distributions of profits or reserves were made to shareholders of the Company in the current fiscal year, 2016, 2015 and 2014: - In 2017 no distribution of profits or reserves were made until the date of this Prospectus; the Board of Directors intends to propose to the shareholders annual general meeting which is expected to be held in June 2017 a distribution of a cash dividend according to its dividend policy. - For the fiscal year 2015, the shareholders annual general meeting has resolved on 29 June 2016 upon the distribution of a cash dividend in the amount of 0.25 per share. S-17

24 - For the fiscal year 2014, the shareholders annual general meeting has resolved on 24 June 2015 upon the distribution of a cash dividend in the amount of 0.20 per share. The Company is a holding company. The business of the GCP Group is primarily conducted through direct and indirect subsidiaries of the Company. The ability of the Company to distribute dividends to its shareholders depends partially on distributions by the Company s subsidiaries. Section D - Risks D.1 Key information on the key risks that are specific to the issuer or its industry. Risks Relating to the Real Estate Market The GCP Group is dependent on demographic and economic developments in Germany and regional market conditions in areas in Germany, where its properties are located, in particular in North Rhine-Westphalia, Berlin and the metropolitan areas of Dresden/Leipzig/Halle. The results of the "Brexit" referendum and the announcement of the United Kingdom to withdraw from the European Union have caused and may continue to cause significant political and economic uncertainty in the European Union, potentially limiting access to debt and equity financing for the GCP Group and resulting in defaults by the GCP Group's counterparties. The continuing uncertainty regarding the development of the global economy, for example due to the on-going sovereign debt and financial deficit crises particularly in the Eurozone as well as current geopolitical crises, may result in economic instability, limited access to debt and equity financing and possible defaults by the GCP Group's counterparties. The German real estate market and the business of the GCP Group are affected by changes in general economic and business conditions. The current economic situation is characterised by low interest rates and an increased demand for investments in real estate resulting in comparably high valuation of residential real estate. Any rise in interest rates could have a material adverse effect on the German real estate market and on the business of the GCP Group. The future growth of the GCP Group depends on the development of its specific market for real estate properties with value-add potential. The availability of property portfolios for sale at attractive prices is an important part of the GCP Group s business model. Increased competition S-18

25 could make it more difficult for the GCP Group to implement this strategy. A considerable portion of the GCP Group s property portfolio consists of commercial properties. The market for commercial real estate differs from the market for residential real estate and is subject to additional market risks. Risks Related to the Business of the GCP Group The GCP Group could fail in the repositioning of acquired properties or could not be as successful as intended in reducing vacancy rates and/or increasing rent on such properties. Regional composition of the property portfolio of the GCP Group might change in the future due to further acquisitions or divestures. The GCP Group is exposed to risks related to the maintenance and repair of its properties. Besides general investments into the maintenance of the GCP Group s real estate properties, the business model of the GCP Group requires investment to be made in the targeted modernisation and repositioning of the real estate properties. The modernisation and repositioning of acquired properties as well as maintenance projects could take more time or could become more expensive than originally expected. The future growth of the GCP Group depends on its continuing ability to acquire properties with upside potential. A key factor for the growth of the GCP Group has been its ability to acquire properties in using its sourcing network. The GCP Group may fail in its ability to source attractive deals. The loss of rent, rent reductions and higher vacancy rates could have a negative effect on the GCP Group s business, net assets, cash flows, financial condition and results of operations. The GCP Group may be unable to make acquisitions if it is unable to obtain the necessary funds. The acquisitions and investments of the GCP Group involve risks. These include unexpected liability claims, higher indebtedness and interest expenses. In addition, German real estate transfer tax might increase transaction costs. Also, acquired properties or portfolios might not develop as expected. There is a risk that the GCP Group may incorrectly appraise the value of acquired properties or property portfolios or real estate companies. With respect to certain of its properties the GCP Group is subject to contractual rent restrictions or restrictions on disposal inter alia, under so-called charters of social rights (Sozialchartas), which restrict its ability to freely divest parts of its portfolio. In addition, the GCP Group's portfolio is subject to subsidies from public authorities which restrict S-19

26 the level of rents chargeable on a part of the GCP Group s portfolio. Providers of the subsidised loans may also unilaterally exercise their right to increase the rate of interest payable on such loans. The investments of the GCP Group are predominantly investments in real estate. Due to the potentially illiquid nature of the real estate market the GCP Group may not be able to sell any portion of its portfolio on favourable terms. In addition to its current business model the GCP Group is engaged in single unit sales (privatisations), which may result in some units of the developed condominiums remaining unsold. The unsold units may require greater administrative resources and may lead to additional expenses and other negative consequences for the GCP Group. The GCP Group may be exposed to losses and liabilities (including tax liabilities) in respect of its assets as a result of the acts or omissions of vendors or previous owners or occupiers or relating to the prior period of ownership. Following an acquisition, the GCP Group is exposed to integration risks. Some of the GCP Group s properties are located in areas outside NRW, Berlin, Dresden, Leipzig and Halle, which may lead to higher management costs and limit the level of service that GCP Group is able to provide. Minority interests of third parties in subsidiaries of the GCP Group or co-investments may make it difficult to implement significant structural changes or other material decisions with regard to these entities, in particular, where those resolutions require a qualified majority or the unanimous consent of all shareholders of these entities. The GCP Group s business is exposed to risks from possible violations of the building code and other regulations. The GCP Group may incur environmental liabilities, e.g. from residual pollution including wartime ordnance, soil conditions, mining activities and contaminants in building materials. The GCP Group could sustain substantial losses not covered by, or exceeding the coverage limits of, its insurance policies. The GCP Group may face difficulties to replace key personnel if it loses them. Damage or interruptions to the GCP Group s information technology system could lead to diminished data security and limit the GCP Group s business operations. The GCP Group is exposed to the risk of impairments of its reputation. Negative publicity or press speculation might cause current or potential business partners to distance themselves from a relationship with the GCP Group. Valuation Risks S-20

27 In the event of a downturn in the real estate market, the fair value model could require the GCP Group to adjust current fair values of its properties (such as in the case of a change in interest rate levels or a deterioration of the market), which could have adverse effects on the valuation of the Group s property portfolios. Real estate valuation is based on assumptions that may change and are inherently subjective and uncertain. The value recorded in the Company s consolidated financial statements may not accurately reflect the value of the GCP Group s properties. Financial Risks The GCP Group is dependent on its current corporate investment grade rating to pursue its financing strategy, including the satisfaction of its future financing needs through the issuance of unsecured corporate bonds and notes. The GCP Group may not be able to extend its existing credit arrangements, refinance its debt on substantially similar terms when it matures or obtain acquisition financing on financially attractive terms as and when needed. A rise in general interest rate levels could increase the GCP Group s financing costs. When it attempts to mitigate interest rate risk by entering into hedging agreements, the GCP Group also becomes exposed to the risks associated with the valuation of hedge instruments and these hedges counterparties. The redemption by the Company of its outstanding bonds depends on a successful refinancing or a successful sale of the GCP Group s properties when they become due. Besides the final maturity dates as stipulated in the respective terms and conditions or any early redemption in accordance with the terms and conditions, the breach of covenants of the conditions (if any) by the Company under its outstanding bonds or a default of other obligations of the Company arising from its outstanding bonds may result in a substantial payment obligation for the Company before the final maturity dates of the bonds. A change of control in the Company and/or the decrease in the free float of the ordinary shares in the Company below a certain level may result in a substantial payment obligation for the Company with respect to its outstanding bonds. The Company s cash flows and possible future dividend payments are dependent on the profitability of the GCP Group or must be met by borrowed capital or by selling property. There are risks of foreclosure if the respective borrowing entity of the GCP Group does not fulfil its obligations under loans granted by banks. A breach of covenants or undertakings under loan agreements and/or a change of control within the GCP Group could result in substantial payment obligations for the GCP Group and could lead to S-21

28 the enforcement of the related collateral. The Group's historical earnings and other historical financial data are not necessarily predictive of future earnings or other key financial figures of the Group going forward. Legal and Regulatory Risks The GCP Group s business is subject to the general legal environment in Germany, which may change to its detriment. German laws protecting residential tenants and existing restrictions on the rate of rental increases could make it more difficult to evict tenants, increase the rents of residential units owned by the GCP Group or pass on ancillary costs or modernisation investment costs. Moreover, there are current political efforts to further restrict rent level increases. The GCP Group s use of standardised contracts could lead to additional legal risks. The GCP Group could be liable for properties it has sold. Entities of the GCP Group may be subject to litigation, administrative proceedings and similar claims. The risk management system of the GCP Group may prove to be partially or completely insufficient or fail so that unknown, unrecognised or unexpected risks may materialise. The GCP Group could be exposed to restitution claims. Control- and prevention mechanisms under the compliance system may not be sufficient to protect the GCP Group from financial and/or legal risks. Irregularities could result in investigations by competent authorities or claims of third parties. Tax Risks With the vast majority of its properties situated in Germany, the GCP Group is subject to the general tax environment in Germany. The GCP Group s tax burden may increase as a consequence of current or future tax assessments, tax audits or court proceedings based on changes in tax laws or changes in the application or interpretation thereof. The structure of the GCP Group is influenced by the general tax environment mainly in Germany, Cyprus and Luxembourg and changes in the tax environment in these countries may increase the tax burden of the GCP Group. D.3 Key information on the key risks that are specific to the securities. Risks Relating to the Shares, the Admission and the Shareholder Structure The Company's shares have not yet been publicly traded on a regulated market and there is no guarantee that a liquid market will develop or continue following the admission to trading on the regulated market. The price and trading volume of the Company's shares S-22

29 could fluctuate significantly, and investors could lose all or part of their investments. Future offerings of debt or equity securities by the Company or conversion under outstanding convertible bonds may materially adversely affect the market price of the shares, and future capitalization measures could lead to substantial dilution, i.e. a reduction in the value of the shares and the control rights, of existing shareholders interests in the Company. Following the admission to trading on the regulated market, Aroundtown Property Holdings plc will continue to be in a position to exert substantial influence on the Company. The interest pursued by this shareholder could differ from the interests of the other shareholders. Future sales or market expectations of sales of a large number of shares by the Company s largest shareholders or other shareholders could cause the share price to decline. The payment of future dividends will depend on the Group s business, net assets financial conditions and result of operations. The Company will face additional administrative requirements and incur higher ongoing costs as a result of the admission to trading on the regulated market of the Frankfurt Stock Exchange. Section E - Offer E.1 The total net proceeds and an estimate of the total expenses of the listing, including estimated expenses charged to the investor by the issuer or the offeror. E.2a Reasons for the offer, use of proceeds, estimated net amount of the proceeds. Not applicable. No total net proceeds will be generated through the Admission. The Prospectus does not refer to an offering. The Company estimates the total costs in connection with the Admission and the total expenses of the listing to amount to approximately 1 million. Not applicable. Investors will not be charged expenses by the Company. The Company considers the Admission to be in the best interests of the Company and its shareholders, as a whole, as it is believed that the admission will enhance the visibility and tradability of the Company s shares and will further support the entry into various stock indices. S-23

30 Not applicable. No proceeds will be generated by the Company as the Prospectus does not relate to an offering. E.3 A description of the terms and conditions of the offer. E.4 A description of any interest that is material to the issue/offer including conflicting interests. Not applicable. The Prospectus does not relate to an offer of shares. The Company and its shareholders have an interest in the admission to trading of the Company s shares on the regulated market, as the admission to trading in a regulated market is expected to have a positive impact on the liquidity of the Company s shares on the stock exchange. quirin which has applied together with the Company for the Admission in its role as listing agent has an interest in the admission to trading of the Company s shares on the regulated market, as is entitled to a commission for its services related thereto. Besides these interests, there are no other interests or potential conflicts of interest known to the Company that are material to the admission. E.5 Name of the person or entity offering to sell the security. Lock-up agreements: the parties involved; and indication of the period of the lock up. E.6 The amount and percentage of immediate dilution resulting from the offer. In the case of a subscription offer Not applicable. The Prospectus does not relate to an offering. Not applicable. To the knowledge of the Company there are no lock-up agreements. Not applicable. The Prospectus does not relate to an offering. No dilution will be effected by the Admission. S-24

31 to existing equity holders, the amount and percentage of immediate dilution if they do not subscribe to the new offer. E.7 Estimated expenses charged to the investor by the issuer or the offeror. Not applicable. The Company will not charge any expenses relating to the Admission to the investors. S-25

32 GERMAN TRANSLATION OF THE SUMMARY OF THE PROSPECTUS ZUSAMMENFASSUNG DES PROSPEKTS Zusammenfassungen bestehen aus geforderten Angaben, die als Punkte ( Punkte ) bezeichnet sind. Diese Punkte sind in den Abschnitten A - E (A.1 - E.7) fortlaufend nummeriert. Diese Zusammenfassung enthält alle Punkte, die für die vorliegende Art von Wertpapier und Emittent in eine Zusammenfassung aufzunehmen sind. Da einige Punkte nicht behandelt werden müssen, können in der Reihenfolge der Nummerierung Lücken auftreten. Selbst wenn ein Punkt wegen der Art des Wertpapiers und des Emittenten in die Zusammenfassung aufgenommen werden muss, ist es möglich, dass in Bezug auf diesen Punkt keine relevanten Informationen gegeben werden können. In solchen Fällen enthält die Zusammenfassung eine kurze Beschreibung des Punkts mit dem Hinweis Entfällt. A - Einleitung und Warnhinweise A.1 Warnhinweise Diese Zusammenfassung sollte als Einleitung zu diesem Prospekt verstanden werden. Bei jeder Anlageentscheidung sollte sich der Anleger auf die Prüfung des gesamten Prospekts stützen. Für den Fall, dass vor einem Gericht Ansprüche aufgrund der in diesem Prospekt enthaltenen Informationen geltend gemacht werden, könnte der als Kläger auftretende Anleger in Anwendung der einzelstaatlichen Rechtsvorschriften der Staaten des Europäischen Wirtschaftsraums die Kosten für die Übersetzung des Prospekts vor Prozessbeginn zu tragen haben. Grand City Properties S.A. (die Gesellschaft und zusammen mit ihren konsolidierten Tochtergesellschaften die GCP Gruppe oder die Gruppe ) übernimmt die Verantwortung für den Inhalt dieser Zusammenfassung und ihrer deutschen Übersetzung. Diejenigen Personen, die für den Inhalt der Zusammenfassung einschließlich etwaiger Übersetzungen hiervon die Verantwortung übernommen haben oder von denen der Erlass ausgeht, können zivilrechtlich haftbar gemacht werden, jedoch nur in dem Fall, dass die Zusammenfassung irreführend, unrichtig oder widersprüchlich ist, wenn sie zusammen mit den anderen Teilen des Prospekts gelesen wird, oder sie, wenn sie zusammen mit den anderen Teilen des Prospekts gelesen wird, nicht alle erforderlichen Schlüsselinformationen vermittelt um Investoren zu unterstützen, die erwägen in die Aktien zu investieren. S-26

33 A.2 Zustimmung Entfällt. Eine Zustimmung zur Verwendung des Prospekts für eine spätere Weiterveräußerung oder Platzierung der Aktien wurde nicht erteilt. B - Emittent B.1 Gesetzliche und kommerzielle Bezeichnung des Emittenten. B.2 Sitz und Rechtsform des Emittenten, das für den Emittenten geltende Recht und Land der Gründung der Gesellschaft. B.3 Art der derzeitigen Geschäftstätigkeit und Haupttätigkeiten des Emittenten samt der hierfür wesentlichen Faktoren, wobei die Hauptproduktund/oderdienstleistungs- kategorien sowie die Hauptmärkte, auf denen der Emittent vertreten ist, anzugeben sind. Die juristische und kommerzielle Bezeichnung der Gesellschaft ist Grand City Properties S.A. Die Gesellschaft hat ihren eingetragenen Sitz in 24, Avenue Victor Hugo, L-1750 Luxemburg, Großherzogtum Luxemburg. Die Gesellschaft ist eine Aktiengesellschaft (société anonyme), die im Großherzogtum Luxemburg gegründet wurde und dem Recht des Großherzogtums Luxemburg unterliegt. Die Gesellschaft wurde am 16. Dezember 2011 gegründet und ist im Luxemburger Handels- und Gesellschaftsregister (Registre de Commerce et des Sociétés Luxembourg) unter Nummer B eingetragen ist. Grand City Properties S.A. ist eine führende Immobiliengesellschaft mit einem Fokus auf Investitionen in und die Verwaltung von Wertsteigerungsmöglichkeiten im deutschen Wohnimmobilienmarkt. Am 28. Februar 2017 bestand das Portfolio der Gruppe aus etwa Einheiten, die sich in dicht besiedelten Regionen befinden, hauptsächlich in Deutschlands größtem Bundesland Nordrhein- Westfalen ( NRW ), Berlin, Dresden, Leipzig, Halle, Nürnberg, München, Mannheim, Frankfurt, Bremen und Hamburg. Am 31. Dezember 2016 bemaß die Gruppe den Marktwert ihres Immobilienportfolios mit 4,8 Milliarden. Per Ende Februars 2017 bemaß die Gruppe den Marktwert ihres Immobilienportfolios mit 4,95 Milliarden. An diesem Datum umfasste das Portfolio Wohneinheiten, Gewerbeeinheiten, Pflegeheimeinheiten, Garagen und Stellplätze sowie sonstige Einheiten (z.b. Keller, Lager, Antennen). Die Gruppe ist in allen Bereichen der Immobilienverwaltung und - bewirtschaftung entlang der Immobilienwertschöpfungskette tätig. Das Geschäftsmodell der Gruppe basiert auf dem Erwerb von Immobilien S-27

34 mit starken wirtschaftlichen Fundamentaldaten, welche jedoch nicht optimal verwaltet oder positioniert sind sowie auf der Verbesserung der Immobilien durch Maßnahmen der Immobilienverwaltung und - bewirtschaftung und zielgerichtete Modernisierungsmaßnahmen. Dies ermöglicht es der Gruppe, signifikante Wertsteigerungen ihres Portfolios zu erzielen. Zum Zeitpunkt dieses Prospekts beschäftigt die Gruppe über 800 Angestellte. Während die Gruppe ihr operatives Geschäft aus Berlin betreibt, werden Asset Management, Verkauf und Marketing der Gruppe lokal betrieben um regionalen Bedürfnissen besser gerecht zu werden. Der Fokus von Investitionen der Gruppe liegt vor allem auf dicht besiedelten Regionen des deutschen Immobilienmarktes. Die Gruppe geht davon aus, von vorteilhaften Fundamentaldaten, welche stabile Gewinn- und Wachstumsmöglichkeiten in der absehbaren Zukunft fördern, zu profitieren. Die Gruppe nimmt an, dass ihre Plattform und ihre Erfahrung die Grundlage für starke Leistungen in der Zukunft bilden können und es ihr erlauben werden aus dem Potential ihres Portfolios Wertsteigerungen zu erzielen. Die Gruppe ist ferner der Auffassung, dass es ausreichende Erwerbsmöglichkeiten in den Märkten gibt, in denen sie operiert, um ihre externe Wachstumsstrategie mittelfristig umzusetzen. Die Gruppe geht davon aus, dass ihre folgenden Wettbewerbsstärken ihre Geschäftstätigkeit prägen und dass diese ihr Wachstum über die vergangenen drei Jahre wesentlich befördert haben. - Durch ihre vollintegrierte Plattform verschafft die Gruppe ihrem bestehenden Portfolio ein effizientes In-House-Management und fördert die Durchführung ihrer Wachstumspläne. Spezialisierte Teams arbeiten über die gesamte Bandbreite der Immobilienwertschöpfungskette hinweg, vom Erwerb bis zu baulichen Maßnahmen und Sanierungen, Verkauf und Marketing. Ihr Datenverarbeitungssystem erlaubt der Gruppe die Durchführung detaillierter Analysen ihres Portfolios sowie der Mieter, um fortwährend Erträge zu optimieren und strenge Kostendisziplin einzuhalten. - Die Gruppe meint, dass ihr Fokus auf die Identifizierung von Immobilien mit Wertsteigerungsmöglichkeiten, welche zur S-28

35 Erfahrung und den Fähigkeiten der Gesellschaft passen, sowie die Steigerung der operativen Leistung solcher Immobilien ein Wettbewerbsvorteil im deutschen Immobilienmarkt ist. Zwischen dem Jahr 2012 und Februar 2017 ist das Portfolio der Gruppe von etwa Einheiten auf etwa Einheiten gewachsen. Die Gruppe meint, dass ihr bestehendes Portfolio aus einer ausgewogenen Mischung von Immobilien in attraktiver Lage besteht, welche geographisch gut verteilt sind. - Die Gruppe konzentriert sich nicht nur auf den Erwerb von Immobilien mit Wertsteigerungspotential, sondern auch auf die Entwicklung und Durchführung einer auf das jeweilige Asset abgestimmten Strategie, was nach der Auffassung der Gruppe ebenfalls zu Wertsteigerungen führt. Das Management zur Wertsteigerung konzentriert sich auf die Erhöhung von Cash Flows durch Mieterhöhungen und die Verringerung der Leerstandsquoten sowie auf Kosteneinsparungen. Die Gruppe wächst durch die operative Optimierung ihres bestehenden Portfolios und durch den Erwerb zusätzlicher Immobilien mit Wertsteigerungspotential. - Die Gruppe meint, mit ihren niedrigen Kosten von Fremdkapital und einer diversifizierten Bilanzstruktur eine konservative Finanzpolitik zu verfolgen. Mit 632 Millionen an Cash und liquiden Vermögensgegenständen und über 200 Millionen an ungenutzten Kreditlinien am 31. Dezember 2016 hat die Gruppe einen hohen Grad an finanzieller Flexibilität, welcher sich auch in unbelasteten Vermögensgegenständen in Höhe von 2,8 Milliarden am Jahresende von 2016 wiederspiegelt. Die LTV- Ratio (wie unter Punkt B.7 unten definiert) der Gruppe betrug am 31. Dezember %. - Das derzeitige stabile Kreditprofil der Gesellschaft spiegelt sich in dem Investment-Grade-Rating wider, welches jüngst im November 2016 von S&P auf BBB+ angehoben wurde sowie im von Moody s im Februar 2015 abgegebenen Investment- Grade-Rating Baa2, welches im November 2016 durch den Zusatz positiver Ausblick (positive outlook) verbessert wurde. - Nach der Notierung ihrer Aktien im Entry Standard der S-29

36 Frankfurter Wertpapierbörse im Mai 2012 nahm die Gesellschaft erfolgreich Finanzmittel auf den Kapitalmärkten auf. Die verschiedenen Wertpapierausgaben führten zu einer ausgewogenen Mischung von Fremd- und Eigenkapital. B.4a Wichtigste jüngste Trends, die sich auf den Emittenten und die Branchen, in denen er tätig ist, auswirken. Die Entwicklung des deutschen Wohnimmobilienmarktes im Ganzen und insbesondere die Entwicklung der regionalen Teilmärkte, in denen die Immobilien der Gruppe belegen sind, könnten signifikante Auswirkungen auf das Geschäft der Gruppe und ihre Zukunftsaussichten haben. Am Zeitwert gemessen hält die Gruppe 32 % ihres Portfolios in NRW, 17 % in Berlin, 18 % in Dresden, Leipzig und Halle sowie signifikante Teile in anderen größeren Städten wie Mannheim, Frankfurt und Mainz, Nürnberg-Furth, München, Bremen und Hamburg (alle Prozentangaben beziehen sich auf die von der Gesellschaft per Ende Februar 2017 ermittelten Zeitwerte). Es wird erwartet, dass die deutsche Bevölkerung abnehmen und zunehmend altern wird während die Anzahl der Haushalte steigen und die durchschnittliche Haushaltsgröße abnehmen wird. Daher könnte die Abnahme der Bevölkerung sich nicht auf die allgemeine Nachfrage nach Wohnimmobilien auswirken. Diese Trends haben in letzter Zeit zu einer stärkeren Nachfrage von Ein- und Zwei-Personen-Haushalten geführt. Allerdings könnten die Anzahl der Haushalte und die pro Person benötigte Fläche nicht in dem erwarteten Ausmaß steigen. Sollte die Abnahme der Bevölkerung früher beginnen oder stärker sein als erwartet und sich die Anzahl der Haushalte und die durchschnittlich pro Person benötigte Fläche nicht oder langsamer als erwartet erhöhen, könnte die Nachfrage von Mietraum abnehmen. Demographische Vorhersagen für große und schnell wachsende deutsche Städte weichen von Vorhersagen für weniger dicht besiedelte Gegenden ab. Es wird erwartet, dass derartige regionale Unterschiede zunehmen werden. Eine abnehmende Bevölkerung in ländlichen Gegenden könnte zu einer abnehmenden Nachfrage im jeweiligen Wohnimmobilienmarkt und in einem Überangebot von Wohnimmobilien führen. Dieser Trend zu vermehrtem Leerstand betrifft Städte und Gemeinden im Osten von Deutschland sowie Regionen im Westen von Deutschland, welche strukturellen Problemen ausgesetzt sind. Die Gruppe generiert zwei Arten von Einnahmen: Mieteinnahmen und Einnahmen aus Immobilienveräußerungen. Beide Arten von S-30

37 Einnahmen werden im Allgemeinen durch Marktpreise von Immobilien beeinflusst, die in den regionalen Teilmärkten belegen sind, in welchen die Gruppe operiert. Diese Marktpreise spiegeln wiederum Mietpegel, Leerstand und sonstige Faktoren wider. In den vergangenen drei Jahren wurden die deutsche Immobilienwirtschaft und das Ergebnis der Gruppe durch positive Entwicklungen im Immobilienmarkt begünstigt. Insbesondere niedrige Zinsen, positive Beschäftigungsund Gehaltsaussichten, Immigration und zunehmende Kaufkraft von Haushalten führen zu einer anhaltenden Nachfrage von Immobilien in Deutschland. B.5 Ist der Emittent Teil einer Gruppe, Beschreibung der Gruppe und der Stellung des Emittenten innerhalb dieser Gruppe. Die Gesellschaft ist die Muttergesellschaft der Gruppe, welche aus über 500 Konzerngesellschaften, hauptsächlich in Luxemburg, Zypern, Deutschland, den Niederlanden und Dänemark, besteht, darunter über 200 deutsche Gesellschaften. Die hauptsächliche Funktion der Gesellschaft in der Gruppe ist die einer Verwaltungs- und Finanzierungs-Holdinggesellschaft. Das Geschäft (bezüglich des Immobilienportfolios der Gruppe) wird vorwiegend von den Tochtergesellschaften der Gruppe geführt. Die nachstehende Grafik zeigt die derzeitige Struktur der Gruppe in vereinfachter Form. Grand City Properties S.A. Grand City Property Ltd. (1) Cypriot and Luxembourg Sub-holding Companies (2), (3) German Sub-holding Companies (2), (4) Cypriot Sub-holding Companies (2) German Property Companies (5), (6) Luxembourg Property Companies (5), (7) German Property Companies (5), (8) Danish Property Companies (5) Die in den unten stehenden Fußnoten in Bezug genommenen Gesellschaften sind solche, denen allein (direkt oder indirekt) Immobilien gehören, die wenigstens 2 % des Marktwerts der gesamten Investment Properties der Gruppe am 31. Dezember 2016 ausmachen. Über 78 % der Investment Properties der Gesellschaft gehören deutschen Immobiliengesellschaften. (1) Grand City Properties S.A. hält 94,8 % an Grandcity Property Ltd., Zypern. (2) Gesellschaften, die zu 94 % und mehr von Grandcity Property Ltd. gehalten werden. (3) Bunavento Limited, Gutburg Holding Limited, Sedoy Investments Ltd., Carmiliana Ltd., Satemol Ltd., Pesoria Ltd., Sparol Ltd., Bafitek Ltd., Oyster I HoldCo S.á r.l. (4) Holdings GmbH, GCP Real Estate Holdings GmbH. (5) Alle Gesellschaften werden kontrolliert. (6) AssetCo Halle GmbH, Cato zweite Immobilienbesitz und -verwaltungs GmbH, Bonny 35 GmbH. (7) Gutburg Immobilien S.A. (8) Cerise Hollyhock Property GmbH, Brown Grodaldo Property GmbH. S-31

38 B.6 Soweit dem Emittenten bekannt, Name jeder Person, die eine direkte oder indirekte Beteiligung am Eigenkapital des Emittenten oder einen Teil der Stimmrechte hält, die/der nach den für den Emittenten geltenden nationalen Rechtsvorschriften meldepflichtig ist, samt der Höhe der Beteiligungen der einzelnen Personen. Angabe, ob die Hauptanteilseigner des Emittenten unterschiedliche Stimmrechte haben, falls vorhanden. Soweit dem Emittenten bekannt, ob an ihm unmittelbare oder mittelbare Beteiligungen oder Beherrschungsver hältnisse bestehen, wer Die nachstehende Tabelle enthält die Informationen, welche die Gesellschaft über ihre Aktionäre und ihre Aktionärsstruktur am Datum dieses Prospekts hat. Die Beteiligungen können sich seit dem Tag, an welchem die Gesellschaft von ihnen Kenntnis erlangt hat, verändert haben. * Aktionär Direkte Beteiligung an der Gesellschaft in % Edolaxia Group Limited* 35,73 FMR LLC. 4,56 Merrill Lynch International 2,57 Odey Asset Management 2,26 Sonstiger Streubesitz 54,88 Gesamt 100 Edolaxia Group Limited ist eine Tochtergesellschaft von Aroundtown Property Holdings plc ( Aroundtown ), deren Aktien in den Handel im Segment Alternext der Börse Euronext Paris einbezogen sind. Aroundtown wird von ihrem Hauptaktionär Avisco Group plc kontrolliert, die etwa 50 % der Aktien in Aroundtown hält. Avisco Group plc ihrerseits wird von Herrn Yakir Gabay kontrolliert. Entfällt. Alle Aktien in der Gesellschaft gewähren die gleichen Stimmrechte. Der Gesellschaft sind keine Vereinbarungen bekannt, die Großaktionäre oder deren Stimmrechte betreffen. Edolaxia Group Limited hält % der Stimmrechte in der Gesellschaft. Edolaxia Group Limited ist eine Tochtergesellschaft von Aroundtown. Aroundtown wird von ihrem Hauptaktionär Avisco Group plc kontrolliert, die etwa 50 % der Aktien an Aroundtown hält. Avisco Group plc wird von Herrn Yakir Gabay kontrolliert. Somit kontrolliert Herr Gabay derzeit % der Stimmrechte in der Gesellschaft. Im Falle einer niedrigen Aktionärspräsenz in einer Hauptversammlung der Aktionäre der Gesellschaft könnte Edolaxia Group Limited durch S-32

39 diese Beteiligungen hält bzw. diese Beherrschung ausübt und welcher Art die Beherrschung ist. B.7 Ausgewählte wesentliche historische Finanzinformationen. die bloße Ausübung der eigenen Stimmrechte Hauptversammlungsbeschlüsse, welche einer einfachen Mehrheit oder höherer Mehrheiten bedürfen, fassen oder deren Fassung verhindern. Ferner könnte Edolaxia Group Limited die Beschlussfassung der Hauptversammlung der Aktionäre der Gesellschaft, welche eine qualifizierte Mehrheit der abgegebenen Stimmen erfordern, verhindern. Die folgenden ausgewählten wesentlichen historischen Finanzinformationen der Gruppe basieren auf den geprüften Konzernabschlüssen von Grand City Properties S.A. für die zum 31. Dezember 2014, 2015 und 2016 endenden Geschäftsjahre (zusammen die GCP Konzernabschlüsse ). Die GCP Konzernabschlüsse wurden in Übereinstimmung mit den Internationalen Rechnungslegungsvorschriften in der von der Europäischen Union übernommenen Form ( IFRS ) erstellt. Die GCP Konzernabschlüsse wurden von KPMG Luxembourg société coopérative geprüft und jeweils mit einem uneingeschränkten Bestätigungsvermerk versehen. Die nachfolgende Zusammenfassung von Finanzinformationen für das Geschäftsjahr 2014 beruht auf dem in Übereinstimmung mit IFRS für das am 31. Dezember 2015 endende Geschäftsjahr erstellen Konzernabschluss der Gesellschaft. Einige Posten der Bilanz und der Gewinn- und Verlustrechnung für das am 31. Dezember 2014 endende Geschäftsjahr wurden im Konzernabschluss der Gesellschaft für das Geschäftsjahr 2015 zur Verbesserung der Vergleichbarkeit umgegliedert. Finanzinformationen, die nachstehend als geprüft bezeichnet sind, sind den oben genannten geprüften Konzernabschlüssen entnommen. Der Zusatz ungeprüft beschreibt Finanzinformationen, welche nicht oben genannten geprüften Konzernabschlüssen entnommen sind, sondern entweder den Rechnungslegungs- oder Controlling- Unterlagen entnommen sind oder auf Berechnungen dieser Zahlen beruhen. Einige der Finanz- und Leistungsindikatoren einschließlich nicht nach IFRS definierten Größen, die nachfolgend wiedergegeben werden, sind den Rechnungslegungsunterlagen der Gruppe entnommen und sind ungeprüft. Um zu erreichen, dass die im Text und in den Tabellen verwendeten Zahlen in der Summe den S-33

40 angegebenen Gesamtsummen entsprechen, sind die Zahlen auf die nächste volle Zahl kaufmännisch oder auf eine die Addition erleichternde Zahl gerundet. Als Folge von Rundungen können die Summen der in den Tabellen angegebenen Werte von den jeweils angegebenen Gesamtbeträgen abweichen. In Klammern dargestellte Finanzangaben kennzeichnen negative Zahlen. In Bezug auf Finanzangaben bedeutet ein Strich ( - ) oder eine Null ( 0 ), dass die betreffende Finanzangabe nicht verfügbar ist oder die betreffende Finanzangabe verfügbar ist, aber auf null gerundet wurde. Ausgewählte Kennzahlen der Konzern-Gewinn- und Verlustrechnung Für das am 31. Dezember endende Jahr 2016 (geprüft) 2015 (geprüft) in tausend 2014 (geprüft) Umsatz Miet- und Betriebseinnahmen Veräußerungsgewinne, Gewinne aus der Bewertung von als Finanzinvestition gehaltenen Immobilien und sonstige Erträge Betriebskosten aus der Immobilienbewirtschaftung ( ) ( ) ( ) Wareneinsatz Gebäude (4.971) 0 (14.425) Verwaltungs- und sonstige Aufwendungen (9.550) (7.153) (5.650) Betriebsergebnis Finanzaufwendungen (36.319) (25.830) (22.040) Sonstige Finanzergebnisse (11.121) (73) (32.664) Laufender Steueraufwand (26.799) (22.776) (13.863) Latente Steueraufwendungen (95.518) (43.674) (29.924) Jahresergebnis Ausgewählte Daten der Konzernbilanz VERMÖGENSWERTE S (geprüft) Am 31. Dezember 2015 (geprüft) in tausend 2014 (geprüft) Als Finanzinvestition gehaltene

41 Immobilien Langfristige Vermögenswerte Kurzfristige Vermögenswerte Summe Vermögenswerte EIGENKAPITAL Auf die Anteilseigner des Mutterunternehmens entfallenes Eigenkapital Auf die Hybridkapitalinvestoren entfallenes Eigenkapital Summe des auf die Anteilseigner des Mutterunternehmens und die Hybridkapitalinvestoren entfallendes Eigenkapital Nicht beherrschende Anteile Summe Eigenkapital VERBINDLICHKEITEN Verbindlichkeiten gegenüber Kreditinstituten Wandelanleihe Festzinsanleihen Passive latente Steuern Langfristige Verbindlichkeiten Kurzfristige Verbindlichkeiten gegenüber Kreditinstituten Kreditrückführung Verbindlichkeiten aus Lieferungen und Leistungen und sonstige Verbindlichkeiten Kurzfristige Verbindlichkeiten Summe Verbindlichkeiten Summe Eigenkapital und Verbindlichkeiten Ausgewählte Daten aus der Konzernkapitalflussrechnung Für das am 31. Dezember endende Jahr Netto-Cashflow aus operativer Geschäftstätigkeit Netto-Cashflow aus Investitionstätigkeit 2016 (geprüft) 2015 (geprüft) in tausend 2014 (geprüft) ( ) ( ) ( ) S-35

42 Netto-Cashflow aus Finanzierungstätigkeit Netto-Zunahme von Zahlungsmitteln und Zahlungsmitteläquivalenten (34.130) Zusätzliche Kennzahlen Die Gesellschaft zeigt einige nicht auf IFRS beruhende Kennzahlen in diesem Prospekt. Die Gesellschaft verwendet diese Finanzinformationen, weil sie der Auffassung ist, dass sie für ihre Investoren von Nutzen sind. Gemäß den ESMA Leitlinien zu alternativen Leistungskennzahlen ( APM ), betrachtet die Gesellschaft die folgenden in diesem Prospekt wiedergegebenen Informationen als APM: EBITDA, Bereinigtes EBITDA, FFO I, FFO I pro Aktie, FFO II, LTV, EPRA NAV und EPRA NAV pro Aktie. Alle von der Gesellschaft eingesetzten APM beziehen sich auf die vergangenen Leistungen der Gruppe. Die Gesellschaft meint, dass diese Kennzahlen zur Bewertung der operativen Leistung der Gruppe, des Nettowerts des Portfolios der Gruppe, des Verschuldensgrads und die zahlungswirksamen gewinne des operativen Geschäfts nützlich sind, da eine Reihe von Gesellschaften, insbesondere aus dem Immobilienbereich, diese Kennzahlen auch veröffentlichen. Keine der vorgenannten Leistungskennzahlen ist unter IFRS anerkannt und keine der vorgenannten Leistungskennzahlen eignet sich als Ersatz für Finanzinformationen wie Summe Vermögenswerte, Summe Eigenkapital, Summe Verbindlichkeiten, Miet- und Betriebseinnahmen, Betriebsergebnis, Jahresergebnis, Netto-Cashflow aus operativer Geschäftstätigkeit oder Netto-Cashflow aus Investitionstätigkeit oder andere Kennzahlen der Konzernbilanz, Konzern-Gewinn-und- Verlustrechnung oder Konzern-Kapitalflussrechnung der Gruppe, die in Übereinstimmung mit IFRS erstellt wurden. Die von der Gruppe verwendeten APM geben nicht notwendigerweise wieder, ob die Gruppe über einen hinreichenden Cash Flow oder ausreichende Liquidität verfügt und können als Leistungsindikator für operative Ergebnisse der Gruppe aus der Vergangenheit ungeeignet sein. Die APM sind nicht dazu geeignet, zukünftige Leistungen vorherzusagen. Da nicht alle Gesellschaften aus der Immobilienbranche die gleichen Leistungsindikatoren verwenden und diese zudem gegebenenfalls unterschiedlich berechnen, sind die von der Gruppe dargestellten APM nicht notwendigerweise zum Vergleich mit Leistungsindikatoren S-36

43 anderer Gesellschaften geeignet. Die nachstehende Tabelle enthält eine Zusammenfassung von APM bezogen auf die am 31. Dezember endenden Geschäftsjahren 2016, 2015 und Für das Jahr bzw. das am 31. Dezember endende Jahr (ungeprüft) in tausend (wenn nicht anders angegeben) EBITDA (1) Bereinigtes EBITDA (1) FFO I (2) FFO I pro Aktie (in ) 1,05 1,01 0,66 FFO II (3) EPRA NAV (4) EPRA NAV pro Aktie (in ) 16,4 12,4 9,4 LTV-Ratio (5) 34,9 % 41,9 % 45,1 % (1) EBITDA ist als das Ergebnis vor Zinsen, Steuern und Abschreibungen definiert. Zur Berechnung der Kennzahl wird das Betriebsergebnis mit den Abschreibungen addiert. Bereinigtes EBITDA ist ein Indikator des wiederkehrenden operationellen Ergebnisses vor Zinsen und Steuern ohne nicht zahlungswirksame Posten, welche keinen strikt operationellen oder wiederkehrenden Charakter haben. Das Bereinigte EBITDA zieht vom EBITDA die Auswirkungen von Veräußerungsgewinnen, Gewinnen aus der Bewertung von als Finanzinvestition gehaltenen Immobilien und sonstige Erträge, Erlöse aus der Veräußerung von Vorräten - zur Veräußerung gehaltene Immobilien sowie das Ergebnis aus atequity bewerteten Finanzinvestitionen ab. Das Bereinigte EBITDA schließt zudem den Beitrag zum langzeitigen Management-Aktien-Anreizplan aus. Die nachfolgende Tabelle zeigt die Berechnungen des EBITDA und des Angepassten EBITDA für die dargestellten Berichtsperioden: Für das am 31. Dezember endende Jahr (geprüft, wenn nicht anders angegeben) in tausend Betriebsergebnis Abschreibungen EBITDA(*) Veräußerungsgewinne, Gewinne aus der Bewertung von als Finanzinvestition gehaltenen Immobilien und sonstige Erträge Erlöse aus der Veräußerung von Vorräten zum Handel bestimmte Immobilien ( ) ( ) ( ) (2.031) - (250) S-37

44 Ergebnis aus at-equity bewerteten Finanzinvestitionen Management-Aktien- Anreizplan Bereinigtes EBITDA(*) (541) n/a (**) (*) (**) Ungeprüft von der internen Managementberichterstattung der Gesellschaft abgeleitet. In 2016 umgegliedert, um die nicht zahlungswirksamen Auswirkungen des Langzeitanreizplans des Managements von den Ausgaben zu trennen. (2) Die Mittel aus der operativen Tätigkeit I FFO I sind ein Indikator für das wiederkehrende Ergebnis aus operationeller Tätigkeit, nach Abzug von Finanzaufwendungen, der laufenden Steueraufwendungen sowie der Beitrag an Minderheiten vom Bereinigten EBITDA. Die Berechnung des FFO I pro Aktie erfolgt durch die Teilung des FFO I durch den gewichteten Durchschnitt der unverwässerten Anzahl an Aktien in dem jeweiligen Zeitraum. Die nachfolgende Tabelle zeigt die Berechnungen des FFO I und FFO I pro Aktie für die dargestellten Berichtsperioden: Für das am 31. Dezember endende Jahr (ungeprüft, wenn nicht anders angegeben) in tausend Bereinigtes EBITDA (**) Finanzaufwendungen (*) Laufende Steueraufwendungen( *) Beitrag an Minderheiten (36.319) (25.830) (22.040) (26.799) (22.776) (13.863) (1.491) (628) n/a FFO I (***) Gewichtete Durchschnitt der unverwässerten Anzahl an Aktien in tausend (*) (****) FFO I pro Aktie in 1,05 1,01 0,66 (*) (**) (***) (****) Geprüft. In 2016 umgegliedert, um die nicht zahlungswirksamen Auswirkungen des Langzeitanreizplans des Managements von den Ausgaben zu trennen In 2016 umgegliedert, um zahlungswirksame Minderheitsgewinne auszunehmen. Der Verwässerungseffekt durch den Aktienplan des Managements ist wegen Unerheblichkeit nicht berücksichtigt. (3) Mittel aus der operative Tätigkeit II FFO II schließen Erträge aus der wirtschaftlichen Veräußerung von als Finanzinvestition gehaltene Immobilien und Vorräte ein. Zur Berechnung des FFO II werden das FFO I und die Gewinne aus der Veräußerung von Grundstücken addiert. Die nachfolgende Tabelle zeigt die Berechnungen des FFO II für die dargestellten Berichtsperioden: S-38

45 Für das am 31. Dezember endende Jahr (ungeprüft) in tausend FFO I (*) Gewinne aus der Veräußerung von Grundstücken FFO II (*) In 2016 umgegliedert, um zahlungswirksame Minderheitsgewinne auszunehmen. (4) Die EPRA (European Public Real Estate Association) definiert EPRA NAV als Nettovermögenswert, bereinigt durch den Einschluss von Grundstücken und anderen Investment-Beteiligungen zum Zeitwert sowie den Ausschluss bestimmter Posten, von denen zu erwarten ist, dass sie sich in einem Geschäftsmodell langfristiger Investitionen in Grundstücke nicht kristallisieren. Die Zweck des EPRA NAV ist die Anpassung des IFRS NAV, um Stakeholdern die wichtigsten Informationen über den Zeitwert der Vermögenswerte und Verbindlichkeiten der Gruppe in einer wahren Immobilien-Investment-Gesellschaft mit einer langfristigen Investitionsstrategie zu bieten. Die Berechnung des EPRA NAV erfolgt durch die Addition von auf die Anteilseigner des Mutterunternehmens entfallendes Eigenkapital, Wandlungen von Wandelanleihen, welche im Gelde sind, Zeitwertbestimmungen derivativer Finanzinstrumente sowie Latente Steuerverbindlichkeiten. Zur Berechnung des EPRA NAV pro Aktie wird das EPRA NAV durch die unverwässerte Anzahl an Aktien einschließlich Auswirkungen von Verwässerung im Gelde geteilt. Die nachfolgende Tabelle zeigt die Berechnung des EPRA NAV und des EPRA NAV pro Aktie für die dargestellten Berichtsperioden: Zum 31 Dezember (**) (ungeprüft, wenn nicht anders angegeben) in tausend Summe Eigenkapital (*) Auf die Hybridkapitalinvestore n entfallenes Eigenkapital (*) Eigenkapital ohne Perpetualpapiere Wanldungseffekt von Wandelanleihen welche im Gelde sind (***) Derivative Finanzinstrumente (*) Passive latente Steuern ( ) ( ) NAV Nicht beherrschende Anteile (*) ( ) ( ) (90.736) S-39

46 EPRA NAV EPRA NAV pro Aktie 16,4 12,4 9,4 (*) (**) (***) Geprüft wurde für diesen Prospekt zum Zwecke der Vergleichbarmachung mit den Vergleichszahlen für 2015 und 2016 umgegliedert und zieht nicht beherrschende Anteile vom NAV ab um das EPRA NAV zu ermitteln. Der Betrag schließt abgegrenzte Zinsen sowie passive Abgrenzungsposten in Bezug auf Wandelanleihen ein. (5) Die Beleihungsquote ( LTV ) ist ein Indikator für die Fremdkapitalstrukur. Zur Berechnung der LTV werden die Nettoverbindlichkeiten durch den Gesamtwert geteilt. Bei der Berechnung ihrer LTV schließt die Gesellschaft die folgenden Posten in die Nettoverbindlichkeiten ein: Verbindlichkeiten gegenüber Kreditinstituten, zur Veräußerung gehaltene Schulden, Wandelanleihen, Festzinsanleihen, derzeitiger Anteil kurzfristiger Verbindlichkeiten gegenüber Kreditinstituten und Kreditrückführung, abzüglich Zahlungsmittel und - zahlungsmitteläquivalente, und Finanzielle Vermögenswerte und Finanzinstrumente. Der Gesamtwert schließt als Finanzinvestition gehaltene Immobilien ein, Vorräte - zur Veräußerung gehaltene Immobilien, geleistete Anzahlungen für als Finanzinvestition gehaltene Immobilien, als Finanzinvestition gehaltene Immobilien, die zur Veräußerung bestimmt sind, sowie at-equity bewertete Finanzinvestitionen. Die nachfolgende Tabelle zeigt die Berechnung des LTV für die Berichtsperioden: Zum 31. Dezember (ungeprüft, wenn nicht anders angegeben) in tausend Als Finanzinvestition gehaltene Immobilien (**) Als Finanzinvestition gehaltene Immobilien, die zur Veräußerung bestimmt sind (*) At-equity bewertete Finanzinvestitionen. (*) Gesamtwert Gesamtverbindlichkeit en(***) Zahlungsmittel und Zahlungsmitteläquival ente (****) Nettoverbindlichkeiten Total 34,9 % 41,9 % 45,1 % (*) (**) (***) Geprüft. Einschließlich Vorauszahlungen für als Finanzinvestition gehaltene Immobilien und Wert von Vorräten. Einschließlich Verbindlichkeiten gegenüber Kreditinstituten, Kreditrückführung, zur Veräußerung gehaltene Schulden, S-40

47 (****) Festzinsanleihen und Wandelanleihen. Einschließlich Zahlungsmitteln und Zahlungsmitteläquivalenten sowie Finanzielle Vermögenswerte und Finanzinstrumente. Erhebliche Änderung der Finanzlage und des Betriebsergebnisses während des Zeitraums und nach dem Zeitraum, der von den historischen Finanzinformationen abgedeckt ist. Während des von den historischen Finanzinformationen abgedeckten Zeitraums vergrößerte sich das Immobilienportfolio der Gruppe durch Akquisitionen signifikant von etwa Einheiten am 31. Dezember 2014 auf etwa Einheiten am 31. Dezember Dieses Wachstum spiegelt sich in der Erhöhung des Zeitwerts der als Finanzinvestition gehaltenen Immobilien (Investment Property) von 2,2 Milliarden am 31. Dezember 2014 auf 4,8 Milliarden am 31. Dezember 2016 wider. Die Erhöhung der gesamten Vermögenswerte von 2,63 Milliarden am 31. Dezember 2014 auf 6,15 Milliarden am 31. Dezember 2016 wird durch eine Erhöhung des gesamten Eigenkapitals von 1,04 Milliarden am 31. Dezember 2014 auf 3,07 Milliarden am 31. Dezember 2016 sowie durch eine entsprechende Erhöhung der gesamten Verbindlichkeiten von 1,59 Milliarden am 31. Dezember 2014 auf 3,09 Milliarden am 31. Dezember 2016 ausgeglichen. Das starke Wachstum des Portfolios hatte auch signifikante Auswirkungen auf das Betriebsergebnis, welches die Erhöhung der Miet- und Betriebseinnahmen von 217 Millionen im am 31. Dezember 2014 endenden Geschäftsjahr auf 436 Millionen im am 31. Dezember 2016 endenden Geschäftsjahr wiederspiegelt. In diesem Zeitraum stieg das FFO I von 76 Millionen im am 31. Dezember 2014 endenden Geschäftsjahr auf 160 Millionen im am 31. Dezember 2016 endenden Geschäftsjahr. Der unverwässerte Gewinn pro Aktie stieg von 1,78 für das Geschäftsjahr 2014 auf 3,56 für das Geschäftsjahr In den ersten beiden Monaten des Jahres 2017 erwarb die Gruppe Grundstücke zu einem Gesamtbetrag von 0,1 Milliarden. Die erworbenen Grundstücke liegen vornehmlich in den strategischen Regionen Berlin, NRW und Hamburg; die Mehrheit der Einheiten lag in NRW und Kaiserslautern. Bis zum Ende Februar 2017 wuchs das Portfolio auf über Einheiten. Die Gruppe befasst sich derzeit mit verschiedenen Erwerbsmöglichkeiten von Grundstücken, ohne bereits bindende Entscheidungen getroffen zu haben. Am 20. März 2017 entschied der Verwaltungsrat (Board of Directors), die Dividendenpolitik auf ein Ausschüttungsverhältnis von 65 % des S-41

48 FFO I pro Aktie mit Wirkung für das Geschäftsjahr 2016 zu erhöhen. Der Vorschlag an die Hauptversammlung zur Dividendenausschüttung, welche voraussichtlich im Juni 2017 stattfinden wird, würde 0,68 pro Aktie ergeben, was verglichen mit 0,75 pro Aktie für 2015 eine Erhöhung um 172 % darstellt. Abgesehen von den oben erwähnten Entwicklungen hat es seit dem 31. Dezember 2016 keine signifikanten Änderungen der Finanz- und Handelslage der Gesellschaft oder der Gruppe gegeben. Es hat seit dem 31. Dezember 2016 keine wesentlichen nachteiligen Veränderungen der Aussichten der Gesellschaft gegeben. B.8 Ausgewählte wesentliche Proforma-Finanzinformationen, die als solche gekennzeichnet sind. B.9 Liegen Gewinnprognosen oder - schätzungen vor, ist der entsprechende Wert anzugeben. B.10 Art etwaiger Beschränkungen im Bestätigungsvermerk zu den historischen Finanzinformationen. B.11 Reicht das Geschäftskapital des Emittenten nicht aus, um die bestehenden Anforderungen zu erfüllen, sollte eine Entfällt. Es wurden keine Pro-forma-Finanzinformationen erstellt. Entfällt. Es wurden keine Gewinnprognosen oder -schätzungen erstellt. Entfällt. Die Prüfungsberichte über die Konzernabschlüsse (IFRS) für die am 31. Dezember 2016, 31. Dezember 2015 und 31. Dezember 2014 endenden Geschäftsjahre der Gesellschaft wurden mit uneingeschränkten Bestätigungsvermerken versehen. Entfällt. Die Gesellschaft ist der Ansicht, dass die Gruppe in der Lage ist, sämtliche Zahlungsverpflichtungen zu erfüllen, die in den nächsten zwölf Monaten fällig werden. S-42

49 Erläuterung beigefügt werden. C - Sicherheiten C.1 Beschreibung von Art und Gattung der angebotenen und/oder zum Handel zuzulassenden Wertpapiere, einschließlich jeder Wertpapierkennung. C.2 Währung der Wertpapieremission. C.3 Zahl der ausgegebenen und voll eingezahlten Aktien und der ausgegebenen, aber nicht voll eingezahlten Aktien. Nennwert pro Aktie bzw. Angabe, dass die Aktien keinen Nennwert haben. C.4 Beschreibung der mit den Wertpapieren verbundenen Rechte. C.5 Beschreibung aller etwaigen Alle Aktien der Gesellschaft sind Stammaktien in der Form von Inhaberaktien mit einem jeweiligen Nennbetrag von 0,10. Die International Securities Identification Number (ISIN) der Aktien lautet LU Das Ticker-Symbol ist GYC. Die Aktien sind in der Währung Euro ausgegeben. Die Gesellschaft hat aktuell Stammaktien (die Aktien ) ausgegeben. Das Grundkapital der Gesellschaft ist vollständig eingezahlt. Die Aktien lauten auf einen Nennbetrag von jeweils 0,10. Jede Aktie berechtigt zu einer Stimme in der Hauptversammlung der Gesellschaft. Es bestehen keine Stimmrechtsbeschränkungen. Die Aktien sind ab dem 1. Januar 2016 vollständig gewinnanteilsberechtigt. Entfällt. Die Aktien sind in Übereinstimmung mit den gesetzlichen Bestimmungen für globalverbriefte Inhaberpapiere frei übertragbar. Es S-43

50 Beschränkungen für die freie Übertragbarkeit der Wertpapiere. C.6 Angabe, ob für die angebotenen Wertpapiere die Zulassung zum Handel an einem geregelten Markt beantragt wurde bzw. werden soll, und Nennung aller geregelten Märkte, an denen die Wertpapiere gehandelt werden oder werden sollen. C.7 Beschreibung der Dividendenpolitik. bestehen keine Verfügungsverbote oder -beschränkungen hinsichtlich der Übertragbarkeit der Aktien. Der Antrag auf die Zulassung des gesamten Grundkapitals der Gesellschaft zum Handel am regulierten Markt der Frankfurter Wertpapierbörse bei gleichzeitiger Zulassung zum Teilbereich der Frankfurter Wertpapierbörse mit weiteren Zulassungsfolgepflichten (Prime Standard) (die Zulassung ) wurde von der Gesellschaft und der quirin bank AG, Kurfürstendamm 119, Berlin, Deutschland ( quirin oder der Listing Agent ) am 21 April 2017 gestellt. Die Entscheidung über die Zulassung zum Handel wird voraussichtlich am 8. Mai 2017 ergehen und bekanntgegeben. Der Handel am regulierten Markt der Frankfurter Wertpapierbörse bei gleichzeitiger Zulassung zum Teilbereich der Frankfurter Wertpapierbörse mit weiteren Zulassungsfolgepflichten (Prime Standard) wird voraussichtlich am 9. Mai 2017 aufgenommen. An diesem Tag wird der Handel der Aktien im Freiverkehr der Frankfurter Wertpapierbörse im Segment Scale eingestellt. Am 20. März 2017 beschloss der Verwaltungsrat (Board of Directors) der Gesellschaft eine Ausschüttungspolitik, nach der 65 % des FFO I pro Aktie als jährliche Dividende an die Aktionäre mit Wirkung ab dem Geschäftsjahr 2016 ausgeschüttet werden sollen. Dieser Beschluss entspricht einer Erhöhung der vorherigen Dividendenpolitik vom 16. August 2016 (50 % des FFO I pro Aktie) und der vom 14. Januar 2015 (30 % des FFO I pro Aktie). Jede Ausschüttung von Dividenden erfordert einen Beschluss der jährlichen Hauptversammlung. Die folgenden Verteilungen von Gewinnen und Reserven wurden an die Aktionäre im laufenden Geschäftsjahr sowie in den Geschäftsjahren 2016, 2015 und 2014 vorgenommen wurden bis zum Datum dieses Prospekts keine Verteilungen von Gewinnen oder Rücklagen vorgenommen; der Verwaltungsrat (Board of Directors) beabsichtigt, der jährliche Hauptversammlung, welche im Jahr 2017 voraussichtlich im Juni stattfinden wird, die Ausschüttung einer Bardividende S-44

51 entsprechend der beschlossenen Dividendenpolitik vorzuschlagen. - Für das Geschäftsjahr 2015 beschloss die jährliche Hauptversammlung am 29. Juni 2016 die Ausschüttung einer Bardividende in Höhe von 0,25 pro Aktie. - Für das Geschäftsjahr 2014 beschloss die jährliche Hauptversammlung am 24. Juni 2015 die Ausschüttung einer Bardividende in Höhe von 0,20 pro Aktie. Die Gesellschaft ist eine Holdinggesellschaft. Die Gruppe führt ihre Geschäfte durch unmittelbare und mittelbare Tochtergesellschaften der Gesellschaft. Die Fähigkeit der Gesellschaft, Dividenden an ihre Aktionäre auszuschütten, hängt teilweise von Ausschüttungen von Gewinnen der Tochtergesellschaften an die Gesellschaft ab. D - Risiken D.1 Zentrale Angaben zu den zentralen Risiken, die dem Emittenten oder seiner Branche eigen sind. Risiken im Zusammenhang mit dem Immobilienmarkt Die Gruppe ist von demographischen und ökonomischen Entwicklungen in Deutschland und regionalen Marktbedingungen in Gegenden von Deutschland abhängig, in welchen ihre Immobilien belegen sind, insbesondere in Nordrhein-Westphalen, Berlin und den Ballungsgebieten Dresden/Leipzig/Halle. Die Ergebnisse des "Brexit"-Referendums und die Bekanntgabe der Absicht des Vereinigten Königreichs, die Europäische Union zu verlassen, haben signifikante politische und ökonomische Unsicherheiten in der Europäischen Union verursacht, welche gegebenenfalls andauern werden und den Zugang der Gruppe zu Fremdfinanzierung und Eigenkapitalfinanzierung beschränken und zu Zahlungsausfällen der Geschäftspartner der Gruppe führen können. Die andauernde Unsicherheit bezüglich der Entwicklung der globalen Wirtschaft, zum Beispiel aufgrund der andauernden Finanzkrisen insbesondere im Euroraum, sowie aktuelle geopolitische Krisen, können zu wirtschaftlicher Instabilität führen, zu beschränktem Zugang zu Fremd- und Eigenkapitalfinanzierung und zu möglichen Zahlungsausfällen bei Geschäftspartnern der Gruppe führen. Der deutsche Immobilienmarkt sowie die Geschäftstätigkeit der Gruppe sind von Veränderungen allgemeiner wirtschaftlicher und geschäftlicher Rahmenbedingungen betroffen. Die derzeitige wirtschaftliche Lage ist durch niedrige Zinsen und eine erhöhte Nachfrage im Bereich der Immobilieninvestitionen gekennzeichnet, was zu vergleichsweise hohen Bewertungen von Immobilien führt. Jegliche Erhöhung von Zinssätzen könnte wesentliche nachteilige Auswirkungen auf den deutschen S-45

52 Immobilienmarkt und das Geschäft der Gruppe haben. Das zukünftige Wachstum der Gruppe hängt von der Entwicklung des spezifischen Marktes für Immobilien mit Wertsteigerungspotential ab. Die Verfügbarkeit von Immobilienportfolien, die zu attraktiven Preisen zum Verkauf stehen, ist ein wichtiger Teil des Geschäftsmodells der Gruppe. Verstärkter Wettkampf könnte es der Gruppe erschweren, diese Strategie umzusetzen. Ein nennenswerter Anteil des Immobilienportfolios der Gruppe besteht aus Gewerbeimmobilien. Der Markt für Gewerbeimmobilien unterscheidet sich vom Markt für Wohnimmobilien und unterliegt zusätzlichen Marktrisiken. Risiken bezüglich des Geschäfts der Gruppe Die Gruppe könnte bei der Neuausrichtung erworbener Immobilien scheitern und nicht so erfolgreich wie beabsichtigt bei der Reduzierung von Leerstandsquoten und/oder Mieterhöhungen bezüglich dieser Immobilien sein. Die regionale Zusammensetzung des Immobilienportfolios der Gruppe könnte sich zukünftig aufgrund weiterer Zukäufe und Veräußerungen verändern. Die Gruppe ist Risiken im Hinblick auf die Instandhaltung ihrer Immobilien ausgesetzt. Neben allgemeinen Investitionen in die Instandhaltung der Immobilien der Gruppe erfordert das Geschäftsmodell der Gruppe die Tätigung von Investitionen im Bereich der beabsichtigten Modernisierung und Neuausrichtung der Immobilien. Die Modernisierung und Neuausrichtung von erworbenen Immobilien sowie Instandhaltungsmaßnahmen könnten zeitaufwändiger oder kostspieliger als ursprünglich erwartet sein. Das zukünftige Wachstum der Gruppe hängt von der fortbestehenden Möglichkeit, Immobilien mit Wertsteigerungspotential zu erwerben, ab. Ein Schlüsselelement für das bisherige Wachstum der Gruppe war ihre Möglichkeit, Immobilien durch ihr Netzwerk zu erwerben. Die Gruppe könnte bei der Erschließung attraktiver Erwerbsgelegenheiten scheitern. Der Verlust von Mieteinnahmen, Mietminderungen und höhere Leerstandsquoten könnten negative Auswirkungen auf das Geschäft der Gruppe, Netto-Vermögenswerte, Cashflows sowie die Finanzlage und das Betriebsergebnis haben. Die Gruppe kann daran gehindert sein, Akquisitionen zu tätigen, wenn es ihr nicht gelingt, die hierzu erforderlichen Finanzmittel aufzubringen. Die Akquisitionen und Investitionen der Gruppe bergen Risiken. Diese umfassen unerwartete Haftungsverbindlichkeiten, höhere Verschuldung und Zinsausgaben. Zudem könnten Transaktionskosten durch Grunderwerbssteuern höher ausfallen. Erworbene Immobilien und Portfolien könnten sich nicht so entwickeln wie erwartet. Es besteht ein Risiko, dass die Gruppe erworbene Immobilien, Immobilienportfolios oder Immobiliengesellschaften falsch bewertet. S-46

53 Die Gruppe unterliegt im Hinblick auf bestimmte ihrer Immobilien unter anderem Mitzinsbeschränkungen und Verfügungsbeschränkungen aufgrund sogenannter Sozialchartas, welche die Möglichkeiten der Gruppe, Teile ihres Portfolios zu veräußern, einschränken. Zudem werden Teile des Portfolios der Gruppe durch Subventionen von öffentlichen Stellen gefördert, was die Höhe des Mietzinses bezüglich dieser Teile des Portfolios begrenzt. Im Falle von Förderdarlehen könnten die Darlehensgeber einseitig ihr Recht ausüben, den Darlehenszins zu erhöhen. Die Gruppe investiert überwiegend in Immobilien. Aufgrund potentiell nicht liquider Immobilienmärkte könnte es der Gruppe nicht gelingen, Teile ihres Portfolios zu vorteilhaften Bedingungen zu veräußern. Zusätzlich zu ihrem derzeitigen Geschäftsmodell veräußert die Gruppe auch einzelne Einheiten (Privatisierung), was zum Ergebnis haben kann, dass einige Einheiten der entwickelten Eigentumswohnungen unveräußert bleiben. Die unveräußerten Einheiten könnten einen höheren Verwaltungsaufwand und zusätzliche Ausgaben verursachen sowie weitere nachteilige Folgen für die Gruppe haben. Der Gruppe können aufgrund von Handlungen oder Unterlassungen von Veräußerern, vorherigen Eigentümern oder Besitzern oder bezüglich der vorherigen Besitzzeit Verluste und Verbindlichkeiten (einschließlich Steuerverbindlichkeiten) im Hinblick auf ihre Vermögenswerte entstehen. Im Anschluss an Akquisitionen ist die Gruppe Integrationsrisiken ausgesetzt. Einige der Immobilien der Gruppe sind in Regionen außerhalb von NRW, Berlin, Dresden, Leipzig und Halle belegen, was zu höheren Verwaltungskosten führen kann und das Maß an Dienstleistungen, welche die Gruppe anzubieten vermag, beschränken kann. Minderheitsbeteiligungen Dritter an Tochtergesellschaften der Gruppe oder Joint-Venture-Konstellationen können die Implementierung signifikanter struktureller Veränderungen oder anderer wesentlicher Entscheidungen bezüglich dieser Gesellschaften erschweren, insbesondere wenn Beschlussfassungen eine qualifizierte Mehrheit oder die einstimmige Zustimmung aller Gesellschafter dieser Gesellschaft erfordern. Das Geschäftsmodell der Gruppe ist Risiken durch mögliche Verstöße gegen das Baugesetzbuch und andere Rechtsvorschriften ausgesetzt. Die Gruppe kann Umwelthaftung treffen, zum Beispiel durch Altlasten, Kampfmittel, Bodenbeschaffenheiten, Minen und Schadstoffe in Baumaterialien. Die Gruppe könnte wesentliche Verluste zu tragen haben, die von ihren Versicherungspolicen nicht gedeckt sind oder deren Rahmen übersteigen. Die Gruppe könnte Schwierigkeiten dabei haben, Schlüsselpersonal zu ersetzen, wenn sie dieses verliert. S-47

54 Schäden oder Störungen des informationstechnischen Systems der Gruppe könnten die Datensicherheit einschränken und die Geschäftstätigkeit der Gruppe beschränken. Die Gruppe ist dem Risiko von Reputationsschäden ausgesetzt. Negative Meldungen oder Pressespekulation können aktuelle oder potentielle Geschäftspartner dazu veranlassen, von Beziehungen zu der Gruppe Abstand zu nehmen. Bewertungsrisiken Im Falle eines Abschwungs des Immobilienmarkts könnte es die Bewertungsmethode der Bewertung von Immobilien anhand des Zeitwerts für die Gruppe erforderlich machen, den aktuellen Zeitwert ihrer Immobilien anzupassen (wie im Falle einer Änderung der Zinssätze oder Abwärtsentwicklungen des Marktes), was sich nachteilig auf die Bewertung der Immobilien der Gruppe auswirken könnte. Immobilienbewertung basiert auf Annahmen, die sich ändern können und die naturgemäß subjektiv und unsicher sind. Der in den Konzernabschlüssen der Gesellschaft angegebene Wert könnte den Wert der Immobilien der Gruppe nicht zutreffend widerspiegeln. Finanzielle Risiken Die Gruppe ist zur Verfolgung ihrer Finanzierungsstrategie, einschließlich der Deckung ihres künftigen Finanzierungsbedarfs durch die Ausgabe unbesicherter Unternehmensanleihen und Schuldscheinen, von ihrem bestehenden Investment-Grade- Rating abhängig. Die Gruppe könnte nicht in der Lage sein, ihre bestehenden Kreditvereinbarungen zu verlängern, ihre Schulden bei Fälligkeit zu im Wesentlichen ähnlichen Bedingungen zu refinanzieren oder Akquisitionsfinanzierung bei Bedarf zu finanziell attraktiven Konditionen zu erlangen. Eine Steigerung der allgemeinen Zinssätze könnte die Finanzierungskosten der Gruppe erhöhen. Bei der Abmilderung von Zinsrisiken durch den Abschluss von Sicherungsgeschäften ist die Gruppe Risiken in Bezug auf die Bewertung von Sicherungsinstrumenten sowie Solvenzrisiken in Bezug auf die anderen Parteien dieser Sicherungsinstrumente ausgesetzt. Die Rückzahlung der ausstehenden Anleihen der Gesellschaft bei deren Fälligkeit setzt eine erfolgreiche Refinanzierung oder die erfolgreiche Veräußerung von Immobilien voraus. Abgesehen von der Rückzahlung der Anleihen zu den jeweiligen Fälligkeitszeitpunkten gemäß der Anleihebedingungen oder einer vorzeitigen Rückzahlung in Übereinstimmung mit den Anleihebedingungen, kann die Verletzung von Covenants unter den Anleihebedingungen (soweit vorhanden) oder ein Verstoß gegen andere Bestimmungen der Anleihebedingungen können zu substanziellen Zahlungsverpflichtungen der Gesellschaft vor dem jeweiligen Fälligkeitszeitpunkten der Anleihen führen. Ein Kontrollwechsel bei der Gesellschaft und/oder das Absinken des Streubesitzes der Aktien in der Gesellschaft unter eine bestimmtes Level könnte zu erheblichen S-48

55 Zahlungsverpflichtungen der Gesellschaft bezüglich ihrer ausstehenden Anleihen führen. Die Cashflows und mögliche künftige Dividendenausschüttungen der Gesellschaft hängen von der Profitabilität der Gruppe ab oder müssen durch die Aufnahme von Fremdkapital oder Veräußerung von Immobilien erreicht werden. Es bestehen Zwangsvollstreckungsrisiken, wenn die jeweilige fremdfinanzierte Konzerngesellschaft ihre Pflichten aufgrund von von Banken gewährten Darlehen nicht erfüllt. Die Verletzung von Covenants oder Zusicherungen in Darlehensverträgen und/oder ein Kontrollwechsel innerhalb der Gruppe könnten zu erheblichen Zahlungsverpflichtungen der Gruppe führen und könnten zur Verwertung von Sicherheiten führen. Die historischen Gewinne der Gruppe und andere historische Finanzdaten der Gruppe lassen nicht notwendigerweise Rückschlüsse auf künftige Gewinne oder andere Finanzkennzahlen zu. Rechtliche und Regulatorische Risiken Das Geschäft der Gruppe unterliegt dem allgemeinen rechtlichen Umfeld in Deutschland, welches sich nachteilig verändern kann. Deutsche gesetzliche Bestimmungen zum Mieterschutz und bestehende Begrenzungen des Ausmaßes von Mieterhöhungen könnten es schwieriger machen, Mieter zu kündigen, Erhöhungen der Mieten für Wohneinheiten der Gruppe durchzuführen oder Nebenkosten für Modernisierungen auf Mieter umzulegen. Außerdem gibt es derzeit politische Bestrebungen, die Möglichkeit von Mieterhöhungen weiter einzuschränken. Die Verwendung von Standardverträgen durch die Gruppe kann zu zusätzlichen rechtlichen Risiken führen. Die Gruppe könnte für veräußerte Grundstücke haften. Tochtergesellschaften der Gruppe könnten Klagen, Verwaltungsverfahren und anderen Formen der Rechtsverfolgung ausgesetzt sein. Das Risikomanagementsystem der Gruppe könnte sich teilweise oder gänzlich als unzureichend herausstellen oder versagen, so dass sich unbekannte, unbemerkte oder unerwartete Risiken realisieren könnten. Die Gruppe könnten Ersatzansprüche treffen. Kontroll- und Präventionsmechanismen des Compliance- Systems könnten nicht ausreichen, um die Gruppe vor finanziellen und/oder rechtlichen Risiken zu schützen. Unregelmäßigkeiten könnten zu Ermittlungen der zuständigen Behörden oder Klagen Dritter führen. Steuerliche Risiken Die überwiegende Mehrheit der Grundstücke der Gruppe ist in Deutschland belegen. Die Gruppe unterliegt den allgemeinen steuerlichen Rahmenbedingungen Deutschlands. Durch laufende oder künftige Steuerfestsetzungen, Steuerprüfungen S-49

56 oder Gerichtsverfahren auf der Grundlage geänderter steuerlicher Bestimmungen oder Änderungen der Anwendung oder Auslegung steuerlicher Bestimmungen kann sich die Steuerlast der Gruppe erhöhen. Die Struktur der Gruppe ist von den allgemeinen steuerlichen Rahmenbedingungen, maßgeblich Deutschlands, Zyperns und Luxemburgs beeinflusst. Veränderungen im Steuerumfeld dieser Staaten könnten die Steuerlast der Gruppe erhöhen. D.3 Zentrale Angaben zu den zentralen Risiken, die den Wertpapieren eigen sind. Risiken im Zusammenhang mit den Aktien, der Zulassung und der Aktionärsstruktur Die Aktien der Gesellschaft wurden bislang nicht an einem regulierten Markt gehandelt und es kann nicht garantiert werden, dass nach der Zulassung zum Handel am regulierten Markt ein liquider Markt entstehen oder fortbestehen wird. Der Preis und das Handelsvolumen der Aktien der Gesellschaft können signifikant schwanken und Investoren könnten ihre Investition ganz oder teilweise verlieren. Die künftige Ausgabe von Fremd- oder Eigenkapitalwertpapieren durch die Gesellschaft oder die Ausübung von Wandlungsrechten aufgrund ausstehender Wandelanleihen können wesentliche nachteilige Auswirkungen auf den Marktpreis der Aktien haben und zukünftige Kapitalmaßnahmen können zu einer wesentlichen Verwässerung, das heißt zu einer Wertminderung der Aktien und der Kontrollrechte, der Beteiligungen der bestehenden Aktionäre der Gesellschaft führen. Nach der Zulassung zum Handel am regulierten Markt wird Aroundtown Property Holdings plc weiterhin in der Lage sein, wesentlichen Einfluss auf die Gesellschaft auszuüben. Die von diesem Aktionär verfolgten Interessen können von denen anderer Aktionäre abweichen. Künftige Veräußerungen oder Markterwartungen von Veräußerungen einer großen Anzahl von Aktien durch die größten Aktionäre der Gesellschaft oder andere Aktionäre können zum Sinken des Aktienkurses führen. Die künftige Ausschüttung von Dividenden wird vom Geschäft der Gruppe, ihren Netto-Vermögenswerten sowie der Finanzlage und dem Betriebsergebnis abhängen. Aufgrund der Zulassung zum Handel am regulierten Markt der Frankfurter Wertpapierbörse werden der Gesellschaft zusätzlicher Verwaltungsaufwand sowie höhere laufende Kosten entstehen. E - Angebot E. 1 Gesamtnettoerlöse und geschätzte Gesamtkosten der Emission/des Entfällt. Durch die Zulassung werden keine Nettoerlöse generiert. Der Prospekt bezieht sich nicht auf ein Aktienangebot. Die Gesellschaft schätzt, dass sich die Gesamtkosten im Zusammenhang mit der Zulassung sowie die Gesamtkosten der S-50

57 Angebots, einschließlich der geschätzten Kosten, die dem Anleger vom Emittenten oder Anbieter in Rechnung gestellt werden. E.2a Gründe für das Angebot, Zweckbestimmung der Erlöse, geschätzte Nettoerlöse. E.3 Beschreibung der Angebotskonditionen. E.4 Beschreibung aller für die Emission/das Angebot wesentlichen, auch kollidierenden Beteiligungen. Börsennotierung auf etwa 1 Million belaufen. Entfällt. Die Gesellschaft wird Investoren keine Kosten in Rechnung stellen. Die Gesellschaft ist der Auffassung, dass die Zulassung im Interesse der Gesellschaft und ihrer Aktionäre ist, da sie annimmt, dass die Zulassung die Visibilität und Handelbarkeit der Aktien der Gesellschaft erhöhen wird und der Aufnahme in verschiedene Aktienindizes förderlich sein wird. Entfällt. Die Gesellschaft generiert keine Erlöse, da sich der Prospekt nicht auf ein Aktienangebot bezieht. Entfällt. Der Prospekt bezieht sich nicht auf ein Aktienangebot. Die Gesellschaft und ihre Aktionäre haben ein Interesse an der Zulassung der Aktien der Gesellschaft zum Handel an einem regulierten Markt, da zu erwarten ist, dass die Zulassung zum Handel an einem regulierten Markt positive Auswirkungen auf die Liquidität der Aktien der Gesellschaft an der Börse haben wird. quirin, die zusammen mit der Gesellschaft den Antrag auf Zulassung gestellt hat, hat ein Interesse an der Zulassung der Aktien der Gesellschaft zum Handel im regulierten Markt, da sie für die damit in Zusammenhang stehenden Dienstleistungen eine Vergütung erhält. Abgesehen von diesen Interessen sind der Gesellschaft keine anderen Interessen oder potentielle Konflikte bekannt, die für die Zulassung wesentlich sind. E.5 Name der Person/des Unternehmens, Entfällt. Der Prospekt bezieht sich nicht auf ein Aktienangebot. S-51

58 die/das das Wertpapier zum Verkauf anbietet. Bei Lock-up- Vereinbarungen die beteiligten Parteien und die Lock-up-Frist. E.6 Betrag und Prozentsatz der aus dem Angebot resultierenden unmittelbaren Verwässerung. Im Falle eines Zeichnungsangeb ots an die existierenden Anteilseigner Betrag und Prozentsatz der unmittelbaren Verwässerung, für den Fall, dass sie das neue Angebot nicht zeichnen. E.7 Schätzung der Ausgaben, die dem Anleger vom Emittenten oder Anbieter in Rechnung gestellt werden. Entfällt. Die Gesellschaft hat keine Kenntnis vom Bestehen von Lockup-Vereinbarungen. Entfällt. Der Prospekt bezieht sich nicht auf ein Aktienangebot. Die Zulassung führt nicht zu einer Verwässerung. Entfällt. Die Gesellschaft erhebt im Zusammenhang mit der Zulassung keine Kosten von den Investoren. S-52

59 RISK FACTORS An investment in the shares of Grand City Properties S.A. (the Company and together with its consolidated subsidiaries the GCP Group or the Group ) is subject to risks. In addition to the other information contained in this Prospectus, investors should carefully review and consider the following risk factors and the other information contained in this Prospectus when deciding whether to invest in the Company s shares. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by the Company which later may prove to be incorrect or incomplete. The occurrence of one or more of these risks alone or together with additional risks and uncertainties not currently known to the Company, or which the Company might currently deem immaterial, could adversely affect the business, net assets, cash flows, financial condition, results of operations and prospects of the GCP Group. The order in which the risks are presented does not reflect the likelihood of their occurrence or the magnitude or significance of the individual risks. The risks mentioned herein may materialize individually or cumulatively. The market price of the Company s shares could fall if any of these risks were to materialize, in which case investors could lose all or part of their investment. Risks Relating to the Real Estate Market The GCP Group is dependent on demographic and economic developments in Germany and regional market conditions in areas in Germany, where its properties are located, in particular in North Rhine-Westphalia, Berlin and the metropolitan areas of Dresden/Leipzig/Halle. The Company is a specialist real estate company focused on investing in and managing valueadd opportunities in densely populated areas in the German residential real estate market. As of end of February 2017, the GCP Group s portfolio comprised approximately 84,000 units primarily located in North Rhine-Westphalia ( NRW ), Germany s largest federal state and the cities of Berlin, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Mainz, Bremen and Hamburg. By market value the GCP Group holds 32 % of its portfolio in NRW, 17 % in Berlin and 18 % in Dresden, Leipzig and Halle as well as significant holdings in other major cities such as Mannheim, Frankfurt and Mainz, Nuremberg-Furth, Munich, Bremen and Hamburg (all percentages are based on the fair value assessment of the Company as of the end of February 2017). Accordingly, the GCP Group s business activities are affected by numerous demographic, economic and political factors. In particular the economic developments in and related to the residential property market in Germany and in its regional sub-markets are of significant importance for the GCP Group's business and future prospects. These developments play a - 1 -

60 decisive role in determining property prices, rent levels, turnover and vacancy rates and may vary significantly across Germany and within regional sub-markets. In Germany, it is expected that the population will decline and will increasingly age while the amount of households will increase and the average household size will decrease (Source: Federal Statistical Office, Statistical Yearbook 2013). Thus, the population decline might not have any influence on the demand for residential real estate in general if there are sufficient offsetting increases in the number of households and/or the amount of space required per person. However, the number of households and the amount of space required per person might not increase to the extent projected or at all. In addition, if the population begins to decline sooner than expected, and the number of households and average amount of space required per person does not increase or increases more slowly than expected, the demand for rented space may decline. Demographic forecasts for big and fast growing cities in Germany deviate from forecasts for less densely populated areas, and it is expected that the demographics of these regions will continue to grow further apart. A declining population in rural areas will likely result in decreased demand in the respective housing markets and in an oversupply of housing. This trend of high vacancies affects cities and municipalities in the eastern part of Germany as well as regions in the western part facing structural problems (Source: Bertelsmann Stiftung, Deutschland zwischen Wachstum und Schrumpfung). Conversely, it is expected that big cities in Germany will continue to attract national and international migration. In these areas, the number of households could grow relatively strong in the medium term due to population gains and the trend to smaller household sizes. A decline in the population in the markets in which the GCP Group holds properties, which is not counterbalanced by a rising number of households or an increase of the average amount of space needed, would lead to lower demand, and, as a result, may adversely affect the GCP Group s ability to achieve higher occupancy rates and average rent levels. Economic developments, such as local employment conditions in these locations or in case of a significant decline of the income or liquidity situation of the respective tenants, may also lead to losses with respect to rental income. In addition to the loss of rent, the GCP Group could also be exposed to increased vacancies. In such circumstances the GCP Group may not be able to re-let the properties on attractive terms or might only be able to do so after making additional investment. Approximately 50 % of the GCP Group s properties held as of 28 February 2017 were located in NRW and Berlin. Thus, there is also a dependence on the general macroeconomic developments of these regions. The economic conditions throughout NRW differ substantially from region to region. For example, the Ruhr region is still facing structural challenges following the withdrawal of the coal and steel industry, while the neighbouring Rhineland is one of the strongest economic areas in Germany. Berlin also faces challenges as to the economic and demographic - 2 -

61 development in certain parts of the city. The same applies to other densely populated areas in Germany. Thus, the GCP Group is not only dependent on general economic and demographic developments in Germany, but also on the particular circumstances in the regions and areas where the GCP Group s properties are located. While the GCP Group has taken steps to absorb the effects of the expected changing economic and demographic conditions, in particular, through the repositioning of units, as well as the targeted modernisation of its properties to comply with the expectations of its tenants, the GCP Group may nevertheless be negatively affected by unfavourable economic and demographic developments in Germany, or in the regional sub-markets where its properties are located. These economic and demographic developments have an impact on the demand for properties owned by the GCP Group, the rent the GCP Group is able to request and the payment behaviour of its tenants. Thus, these factors have significant impact on vacancy levels, results from operations of the GCP Group and the value of its properties. If the indicators discussed above develop negatively from the GCP Group's perspective in those areas where it owns properties, the dependency of the GCP Group on such macro-economic factors and any misjudgement, miscalculation or failure or inability to react to such developments may have a material adverse effect on the business, net assets, cash flows, financial condition, results of operations and prospects of the GCP Group. The results of the "Brexit" referendum and the announcement of the United Kingdom to withdraw from the European Union have caused and may continue to cause significant political and economic uncertainty in the European Union, potentially limiting access to debt and equity financing for the GCP Group and resulting in defaults by the GCP Group's counterparties. On 23 June 2016, voters in the United Kingdom voted in a referendum in favour of the United Kingdom leaving the European Union, a decision known as "Brexit". Because no major member of the European Union has previously chosen to leave the European Union, the legal and political process for doing so is untried and uncertain. On 29 March 2017 the United Kingdom submitted a formal departure notice to the European Council pursuant to Article 50 of the Treaty on European Union (the "EU Treaty"). The negotiations regarding the withdrawal of the United Kingdom from the European Union are expected to take up to two years. The Brexit vote has already resulted in a high degree of political and legal uncertainty within the United Kingdom and the European Union, both with respect to the implications of Brexit and the outcome of the negotiations regarding the withdrawal. The ongoing economic and political implications of the referendum for both the United Kingdom and the European Union are impossible to predict. Among other consequences, departure from the European Union may result in the United Kingdom no longer having access to the European - 3 -

62 Single Market. Although the United Kingdom is currently the second largest economy in the European Union, a withdrawal from the European Single Market is expected to have significant negative impact on the economy of the United Kingdom. If the United Kingdom no longer had access to the European Single Market, the Member States of the European Union would face greater barriers to trade and commerce with the United Kingdom, which may in turn diminish overall economic activity between the European Union and the United Kingdom, resulting in a general economic downturn throughout the United Kingdom, the European Union or both. The Brexit vote may also give rise to or strengthen tensions in other Member States regarding their membership in the European Union, potentially resulting in additional referendums or other actions in Member States regarding withdrawal from the European Union. The withdrawal of other Member States from the European Union would have unpredictable consequences and may threaten the existence of the European Union or the Eurozone as a whole. Because London is currently one of the world's leading financial centres, the European financial sector is likely to undergo significant changes in the course of any implementation of the United Kingdom's withdrawal from the European Union. Any negative economic or political developments in the European financial sector or the European Union generally may result in a new outbreak of the credit and banking crises that have plagued the European Union in recent years, and may make it more difficult for companies to access the financial markets and raise debt or equity financing. Because the GCP Group relies on access to the financial markets in order to refinance its debt liabilities and gain access to new financing, ongoing political uncertainty and any worsening of the economic environment may reduce its ability to refinance its existing and future liabilities or gain access to new financing, in each case on favourable terms or at all. Furthermore, the GCP Group's counterparties, in particular its hedging counterparties, may not be able to fulfil their obligations under their respective agreements due to a lack of liquidity, operational failure, bankruptcy or other reasons. The occurrence of any of these risks may have a material adverse effect on the GCP Group's business, net assets, financial condition, cash flow, results of operations, net profits and prospects. The continuing uncertainty regarding the development of the global economy, for example due to the on-going sovereign debt and financial deficit crises particularly in the Eurozone as well as current geopolitical crises, may result in economic instability, limited access to debt and equity financing and possible defaults by the GCP Group's counterparties. The severe global economic downturn in the years following the global economic and financial crisis of 2008 and 2009 and its effects, in particular the scarcity of financing, tensions in the capital markets and weak consumer confidence and declining consumption in many markets, adversely impacted economic development worldwide. This crisis was followed by sovereign debt and financial deficit crises in many parts of the world, particularly in the Eurozone, which are still - 4 -

63 on-going and have resulted in recessions in many of the impacted countries. If a long-lasting solution to the ongoing sovereign debt and financial deficit crises cannot be found, this may result in bankruptcies of states, withdrawal of states from the Eurozone and/or European Union and the re-introduction of national currencies. This macroeconomic environment gives rise to economic and political instability, including the possibility of a breakup of the Eurozone. In addition, the outcome of the Brexit vote and the United Kingdom s withdrawal from the European Union, the results of upcoming elections in a number of Eurozone countries (including France and Germany), the current severe geopolitical crises in the Middle East, North Korea, Ukraine, the ongoing economic sanctions against the Russian Federation, the world-wide threat of terror, the uncertain economic prospects in China and other parts of the world, the possibility of increased barriers to trade or trade wars in or with other countries and other factors, such as the fluctuation of raw material prices and currency fluctuations may have negative impacts on the European economy. Such instability and the resulting market volatility may also create contagion risks for economically strong countries like Germany and may spread to the German financial sector and the German residential real estate market. The German economy, which is highly dependent on its exports, might also be adversely impacted by trends to limit global free trade and by the introduction of market entry barriers such as market access taxes or tariffs. In particular, if the United States of America should introduce additional market access barriers for German or European businesses, this might negatively affect the overall German economic environment. For the refinancing of its debt liabilities, the GCP Group must be able to access the financial markets. Thus, any worsening of the economic environment or the capital markets may reduce its ability to refinance its existing and future liabilities on favourable terms and at all. Furthermore, the GCP Group's counterparties, in particular its hedging counterparties, may not be able to fulfil their obligations under the respective agreements due to a lack of liquidity, operational failure, bankruptcy or other reasons. Any of these risks could have material adverse effects on the GCP Group's business, net assets, financial condition, cash flow and results of operations. The German real estate market and the business of the GCP Group are affected by changes in general economic and business conditions. The current economic situation is characterised by low interest rates and an increased demand for investments in real estate resulting in comparably high valuation of residential real estate. Any rise in interest rates could have a material adverse effect on the German real estate market and on the business of the GCP Group. The global financial and economic crisis and concerns over the level of sovereign debt and financial deficits in many developed countries have caused a high level of uncertainty in many industries and markets and have resulted in reduced economic growth. During this time, interest - 5 -

64 rates have been set at relatively low levels in a number of countries, including Germany. In addition, the uncertainty of the general economic situation and the low interest return on more traditional investment methods has made investments in residential and commercial real estate more attractive. A rise in interest rates, as has already begun to happen in some parts of the world, could adversely impact the GCP Group's business in a number of ways. Although the GCP Group's current debt structure provides either for debt at fixed interest rates or, where variable interest rates apply, is predominantly subject to interest hedging agreements, a future rise of the interest rate level may have a negative impact on the GCP Group. In general, rising interest rates will make financings needed by the GCP Group for its acquisitions more expensive. The same applies to potential buyers whose willingness to make real estate purchases may be negatively affected as a consequence of increased financing costs, thereby restricting the GCP Group's ability to dispose of properties on favourable terms or at all when desired. The discount rate used to calculate the fair value of the GCP Group's properties tends to increase in an environment of rising interest rates, which in turn could result in the GCP Group's properties having a lower fair value as recorded on the Company s balance sheet in accordance with International Accounting Standards ( IAS ) 40 in conjunction with IFRS 13 under the International Financial Reporting Standards as adopted by the European Union ( IFRS ). Rising interest rates and economic recovery could also prompt investors to prefer investments which potentially have a higher yield than investments in real estate, which could lead to a general decrease of real estate value, thereby having a negative impact on the valuation of the GCP Group s property portfolio. Rising interest rates could impair the future performance of the GCP Group s business including its acquisitions and sales, and could have significant adverse effects on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The future growth of the GCP Group depends on the development of its specific market for real estate properties with value-add potential. The availability of property portfolios for sale at attractive prices is an important part of the GCP Group s business model. Increased competition could make it more difficult for the GCP Group to implement this strategy. The GCP Group s strategy is focused on the acquisition of value-add opportunities in the German residential real estate market, such as under-managed and/or under-occupied and/or underrented property portfolios. This investment strategy depends on the availability of such properties for purchase at reasonable prices. Given the current high demand for residential real estate in Germany, in particular in densely populated areas, such portfolios or properties may be - 6 -

65 unavailable or available only on unfavourable terms or at unattractive prices. Due to the ongoing consolidation process within the German residential real estate market the number of available properties has further decreased. Additionally, the supply of real estate portfolios might be limited, for example due to fewer sales of real estate portfolios by municipalities or federal states, or by private sellers. If municipalities and federal states cease privatising or if they reduce their privatisation activities, supply could be constricted, which could increase competition for acquisitions of properties that would be suitable for the GCP Group and could also motivate potential sellers to sell properties in an auction process. All this may result in a price increase of properties, which are in the strategic focus of the GCP Group. As a result, it could be more difficult for the GCP Group to compete and successfully acquire properties, which could limit the ability to grow its business effectively and could have an adverse effect on the future business, cash flows, financial condition and results of operations of the GCP Group. A considerable portion of the GCP Group s property portfolio consists of commercial properties. The market for commercial real estate differs from the market for residential real estate and is subject to additional market risks. As of end of February 2017, approximately 8 % of the GCP Group s portfolio (according to sqm) consisted of commercial real estate properties, based on the main usage of the individual property. The commercial properties are let to tenants and used for a variety of commercial purposes, such as office space, shops, medical, cultural and social institutions. The market for commercial real estate differs in material respects from the residential real estate market. Although in certain densely populated areas in Germany there has been an ongoing demand for affordable residential real estate over the last three years, in the same areas office space and commercial real estate properties are currently sufficiently available. In general, demand for commercial real estate is generally more flexible than for residential real estate and changes in the general economic situation have a more direct impact on the commercial real estate market than on the residential real estate market. Thus, rent levels of commercial real estate are often more volatile than rent levels of residential real estate. Further a decreasing demand for commercial real estate could have a material adverse effect on the business, net assets, cash flows, financial conditions and results of operations of the GCP Group. This risk may be increased in the event the portion of commercial real estate in the GCP Group s portfolio increases in the future

66 Risks Related to the Business of the GCP Group The GCP Group could fail in the repositioning of acquired properties or could not be as successful as intended in reducing vacancy rates and/or increasing rent on such properties. The GCP Group focuses on the acquisition of properties which are under-managed and which it considers to have an upside potential as to yield and value, i.e. the properties have vacancies and/or a relatively low level of rents compared to the market rent at the time of acquisition. The commercial success of the GCP Group depends significantly on the GCP Group s ability to successfully reposition acquired real estate properties by reducing the vacancy rate and operating costs while increasing the rent level. The GCP Group s ability to increase rental income from existing and new tenants and to reduce the vacancy rates for its properties depends on several factors. These factors include, in particular, the demand for properties, the local market rents, the condition and location of the units, refurbishment and modernisation measures that are undertaken and tenant turnover rates. Even if increased modernization measures would merit higher in-place rents as a business matter, the GCP Group is subject to certain limits in its ability to increase in-place rent. In setting the rent levels for its properties, the GCP Group is subject to the restrictions of German tenancy laws as well as, where applicable, conditions imposed as a consequence of having received public subsidies, or contractual restrictions under purchase agreements imposed by the seller, or specific terms agreed with tenants lease agreements. As a consequence, the GCP Group might not be able to reduce vacancy rates and increase rents in a manner or to the extent that it expects, which could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Regional composition of the property portfolio of the GCP Group might change in the future due to further acquisitions or divestures. The GCP Group pursues an opportunistic strategy and focuses on real estate property which it considers to have a high upside potential. Due to this acquisition strategy the GCP Group also seeks investment opportunities in densely populated parts of Germany that it believes meets with its strategy. This might lead to a change in the regional composition of the GCP Group s portfolio. The same would apply if the Company sold properties in NRW and Berlin, or in other regions that make up its real estate portfolio. A change in the composition of the real estate portfolio may lead to a greater geographical distribution of the properties and dependency on additional regional market conditions in such additional areas. This may also result in additional cost in connection with the management of the properties and also in a loss of advantages due to economies of scale. A wider geographical distribution could also result in a lower availability of market data, - 8 -

67 which could inhibit the GCP Group's ability to accurately predict the performance of its investments. This could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group is exposed to risks related to the maintenance and repair of its properties. Besides general investments into the maintenance of the GCP Group s real estate properties, the business model of the GCP Group requires investment to be made in the targeted modernisation and repositioning of the real estate properties. The modernisation and repositioning of acquired properties as well as maintenance projects could take more time or could become more expensive than originally expected. After acquiring properties, the GCP Group undertakes to maintain rented properties in good condition. For this reason, and also to avoid loss of value and maintain demand for a property, the GCP Group performs maintenance and repairs on the properties it owns. In addition, modernisation and refurbishment of properties may be necessary to increase their appeal or to meet changing legal requirements, such as the provisions relating to energy savings. Under a small number of loan agreements, the GCP Group has assumed the obligation to invest a certain amount into specified properties. The properties owned by the GCP Group from time to time may require investment for targeted modernisation and repositioning as these properties have often been undermanaged and so may not have received adequate investment from previous owners. In general, targeted modernisations can include the renovation of facades and staircases, construction of outdoor and indoor playgrounds, conversion of unit sizes and the refurbishment of units according to the tenants requests. Such measures can be expensive and may trigger costs that will exceed the costs of general maintenance. The GCP Group could underestimate the amount required to be invested for the targeted modernisation and repositioning of acquired properties as modernisation costs may have increased due to various factors, such as increased costs of materials, increased labour costs, increased energy costs, poor weather conditions, unexpected safety requirements or unforeseen complexities emerging at the building site. The GCP Group could also be exposed to risks due to delays in the implementation of modernisation or repositioning measures in connection with acquired property portfolios, against which the GCP Group might not have been contractually protected. The modernisation of a property may be delayed due to lack of a skilled labour force, bad weather conditions or if a contractor or subcontractor does not comply with the agreed time schedule or becomes insolvent during the modernisation project. Further, there is a risk that a necessary building permit for a planned modernisation may be delayed, only issued subject to further restrictions or refused completely, for example, due to objections of third parties such as neighbours

68 Higher than planned expenditures or unforeseen additional expenses for modernisation and maintenance that cannot be passed on to the tenant and a delay of the modernisation and repositioning of acquired properties might therefore negatively affect the business, net assets, cash flows, financial condition and results of operations of the GCP Group. In addition, the negative effects might be strengthened as compared to investors in properties without an investment backlog. The future growth of the GCP Group depends on its continuing ability to acquire properties with upside potential. A key factor for the growth of the GCP Group has been its ability to acquire properties in using its sourcing network. The GCP Group may fail in its ability to source attractive deals. A part of the business model of the GCP Group is the acquisition of properties with the potential for value-add in the meaning of capital growth and/or investment returns. The GCP Group relies on its ability to acquire properties through privileged access to potential sellers and thus depends on its sourcing network and contacts of its key personnel in order to identify suitable properties. The GCP Group may fail to maintain its sourcing network and contacts could be lost. As a result, the GCP Group may have difficulties finding suitable properties, which could have a material adverse effect on the future business, net assets, cash flows, financial condition, results of operations and prospects of the GCP Group. The loss of rent, rent reductions and higher vacancy rates could have a negative effect on the GCP Group s business, net assets, cash flows, financial condition and results of operations. The business of the GCP Group strongly depends on the rental income from its properties, which is influenced by the level of rent charged and the vacancy rate of its properties. Thus, a loss of rent, rent reductions and increased vacancies could lead to a decline in total current rental income of the GCP Group. There is therefore a risk that the GCP Group will be less profitable if demand for residential and, to a lesser extent, commercial real estate declines (in general due to social or economic market conditions or in relation to the condition of particular properties) as this may lead to increases in vacancy rates. If tenants fail to meet their rent payment obligations in whole or in part (e.g., due to a deterioration of their economic situation or a deterioration of their commercial activity), or if larger numbers of tenants give notice of termination without the GCP Group being able to re-let the property within a reasonable time period, the GCP Group could sustain a decrease in current rental income, which could have a significant adverse effect on its results of operations. To the extent that the GCP Group is able to re-let a unit, there is a risk that the GCP Group might no longer be able to do so on terms that are as attractive to it. The Group is also required to conduct its property management in such a manner that the properties are maintained in the condition as required by the lease agreements and by law. If this

69 is not possible for any reason and if the required maintenance measures are not performed on time or at all, this could lead to a reduction in rent that can be charged for such properties. All of these factors, individually or collectively, could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group may be unable to make acquisitions if it is unable to obtain the necessary funds. If the GCP Group is unable to obtain necessary funds in form of additional debt or equity financing, each on acceptable terms, this may limit the ability of the GCP Group to make further acquisitions. Any additional debt incurred in connection with future acquisitions could have a significant negative impact on the GCP Group's performance indicators, and could result in higher interest expenses for the GCP Group. If the GCP Group was no longer able to obtain the debt or equity financing it needs to acquire additional property portfolios, or if it was able to do so only on onerous terms, its further business development and competitiveness could be severely constrained. Since 2012, the Company has successfully raised debt and equity financing through the issue of new shares, debt securities and perpetual notes in addition to bank loans. It cannot be guaranteed that the GCP Group will be able to obtain debt or equity financing as needed to acquire additional properties in the desired volumes. A shortage of required financing may prevent the GCP Group from pursuing its growth strategy and could have significant adverse effects on the GCP Group s business, net assets, financial condition, cash flows, and results of operations. The acquisitions and investments of the GCP Group involve risks. These include unexpected liability claims, higher indebtedness and interest expenses. In addition, German real estate transfer tax might increase transaction costs. Also, acquired properties or portfolios might not develop as expected. Before acquiring a property, the GCP Group performs a due diligence exercise in order to evaluate the property and to identify risks connected with the property. There can be no assurance as to the adequacy or accuracy of information provided during any due diligence exercise or that such information will remain accurate in the period from conclusion of the due diligence exercise until acquisition of the relevant property. Finally, it is possible that the GCP Group may have overlooked or may overlook certain risks especially where transactions must be closed under time pressure. These risks, among others, relate to title and security searches, planning permissions and conditions, building permits, licences, fire and health and safety certificates and the compliance with related regulations as well as restrictions in connection with historic preservation laws, subsidised housing or contractual limitations imposed by the seller of the respective property that may relate to investment obligations, limitations as to rent increases

70 or other provisions for extra-statutory tenant protection. In particular if the acquisition of properties must be completed within short time, the risk that such acquisition risks are overseen in the due diligence process might be increased. The properties acquired by the GCP Group are also inspected prior to purchase in the course of a technical due diligence investigation with respect to their structural condition and, to the extent necessary, the existence of harmful environmental factors. However, the Group or the original acquirers, as the case may be, may not have been able to undertake (or obtain results for) inspections and surveys (including intrusive environmental and asbestos investigations and technical surveys) that the GCP Group would otherwise carry out in relation to comparable acquisitions. It is possible that damage or quality defects could remain entirely undiscovered, or that the scope of such problems may not be fully apparent in the course of the due diligence investigation, and/or that defects may become apparent only at a later time. In general, sellers exclude liability for hidden defects which would prevent a claim for any loss incurred by the GCPGroup. If liability for hidden defects has not been fully excluded, it is possible that the representations and warranties made in the purchase agreement with respect to the property failed to cover all risks and potential problems relating to the acquisition. Even if covered by representations and warranties, potential claims of the GCP Group might not be enforceable due to insolvency of the seller or for other reasons. In respect of certain properties in the Group s portfolio, only limited investigation or review was undertaken prior to purchase as to the existence of harmful environmental contamination. Besides the risks directly related to the properties to be taken over, any acquisition also involves significant use of internal personnel resources and management capacity, which cannot be used otherwise. If the Group is not successful in raising additional capital at reasonable costs, it could be unable to acquire additional properties. Additional indebtedness in connection with future acquisitions might have a negative impact on key performance indicators, such as net asset value calculated in accordance with the recommendations of the European Public Real Estate Association ( EPRA ) ( EPRA NAV ) and the loan-to-value ratio ( LTV ), which might trigger an increase in interest expenses. In addition, certain performance indicators material for the rating of the GCP Group might be adversely affected by acquisitions or the GCP Group might breach financial covenants under existing loan agreements or its outstanding debt securities (see Risk Factors - Financial Risks ). Since the introduction of section 1 para 3a of the German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz), real estate transfer taxes in Germany generally apply unless the direct and indirect ownership interest of the Company in newly acquired property companies is less than 95 %. Should the Company intend to acquire new properties on a tax neutral basis, the GCP Group might have to co-operate with one or more third parties, which will acquire 5 % or

71 more in the property. This might add complexity to the acquisition process, introduce stronger minority rights of partners and consequently might increase the acquisition costs and the management costs of the property. Accordingly, in the course of acquiring a property portfolio, specific risks might not be or might not have been, recognised or correctly evaluated which could lead to additional costs and could have an adverse effect on the proceeds from rental income and sales of the relevant properties. This could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. There is a risk that the GCP Group may incorrectly appraise the value of acquired properties or property portfolios or real estate companies. Prior to any acquisition, the GCP Group carries out an examination and evaluation of the properties to be acquired. In this respect, the Group sets a yield target, taking into account the need for required maintenance, refurbishment or modernisation measures. The GCP Group carries out such work with the objective of optimising the respective property to make it possible for the GCP Group to achieve higher occupancy or rental income from the properties and thereby increase the yield and value obtained from the property. The assumptions made in connection with the acquisition of a property portfolio, particularly with respect to anticipated rent, refurbishment investments and/or costs, and vacancy could be incorrect because of many factors that can affect the accuracy of these assumptions. During times of reduced real estate transactions levels, market prices for properties may be difficult to assess. In addition, valuation methods used could subsequently be found to have been unsuitable. Accordingly, there is a risk that the acquired properties may achieve less than the originally expected yields. In addition, it could subsequently become more difficult to lease or sell the property, the market rent at that location could decline, and there could be vacancies and income shortfalls from vacancy. The multitude of factors that affect the market rent that can be charged in a particular market make it difficult to project future rent, so that the rent projected in connection with the acquisition of a property may not be attainable. Incorrect and erroneous valuations in connection with the acquisition of property portfolios and other unforeseeable events could result in the GCP Group being unable to achieve its projected yields, leading to the risk that valuations of the properties have to be adjusted downwards. These revaluations can negatively affect the value of the property portfolio of the Group shown in the financial statements and lead to negative impacts on the business, net assets, cash flows, financial condition and results of operations of the GCP Group (see Risk Factors - Valuation Risks - Real Estate Valuation is based on assumptions that may change and are inherently subjective and uncertain. The values recorded in the Company s consolidated financial statements may not accurately reflect the value of the GCP Group s properties )

72 With respect to certain of its properties the GCP Group is subject to contractual rent restrictions or restrictions on disposal inter alia, under so-called charters of social rights (Sozialchartas), which restrict its ability to freely divest parts of its portfolio. In addition, the GCP Group's portfolio is subject to subsidies from public authorities which restrict the level of rents chargeable on a part of the GCP Group s portfolio. Providers of the subsidised loans may also unilaterally exercise their right to increase the rate of interest payable on such loans. Residential real estate transactions often include contractual provisions restricting a buyer's right to sell the acquired properties, to increase the rent or to terminate existing leases. These restrictions might reduce the attractiveness of the affected units for prospective purchasers. Such restrictions often result from so-called charters of social rights (Sozialchartas) which are especially common in connection with the privatisation of publicly-owned property, where the selling public authorities (particularly cities and municipalities) often intend to mitigate potential social effects of such transactions, or when these portfolios are subsequently sold on to third parties. Usually, most obligations lapse in full or in part after a certain period of time. In addition, the GCP Group holds certain properties which are subject to grants from public authorities in the form of construction subsidies, expenses subsidies, expenses loans and lowinterest loans that impose certain limitations on the GCP Group. Most of the subsidies are granted in the form of low-interest long-term loans. The public bodies granting a subsidised loan impose maximum rent levels on the properties constructed, acquired or modernised using such subsidised loan in order to compensate for construction, financing and property-related costs. Because the rent levels set by the public bodies are significantly below current market rents for a number of rent-restricted residential units, it may be difficult to increase rents to market levels even after the lapse of subsidy restrictions because of the lack of tenants who are willing or able to pay market level rents for such properties. Moreover, some of the GCP Group s subsidised loan agreements contain a clause pursuant to which the provider of the loan is granted the right to unilaterally increase the interest rates of the loans up to certain maximum amounts p.a. In such an event, the GCP Group is entitled to increase its rents accordingly. The lenders under these agreements have exercised this right only selectively in the recent past. It cannot be excluded, however, that lenders may exercise this right more frequently in the future. Should this be the case, notwithstanding its right to do so, the GCP Group may not in fact be in a position to increase its rents, either because tenants may not be able to pay the increased rents or because the increased rent would exceed the market rents for comparable units or otherwise. If the GCP Group fails to adapt its rent levels to market rent levels after the expiration of the subsidised loans, or if the lenders exercise their rights to increase interest rates and the GCP Group is not in a position to adjust rents accordingly, this could have

73 material adverse effects on the GCP Group s business, net assets, financial condition, cash flow and results of operations. As of 28 February 2017, approximately 6% of the GCP Group s units were rent-restricted due to either subsidies provided by publicly owned economic development banks or charters of social rights. Some of the aforementioned restrictions may limit the GCP Group s ability to attractively market parts of its portfolio, which in turn could potentially force the GCP Group to pass up opportunities for streamlining and generating profit. They could thereby lower the fair value of the GCP Group's property portfolio and limit its ability to generate cash flow from selective divestitures. This could have material adverse effects on the GCP Group s business, net assets, financial condition, cash flow and results of operations. The investments of the GCP Group are predominantly investments in real estate. Due to the potentially illiquid nature of the real estate market the GCP Group may not be able to sell any portion of its portfolio on favourable terms. The general strategy of the GCP Group is mainly to hold onto its acquired properties. However, the GCP Group might also sell a property or a portfolio of properties, among others, if attractive prices are being offered and other investment opportunities arise. The ability of the GCP Group to sell a property depends on the market liquidity at the time of the potential resale. The demand for real estate assets is influenced by, among other factors, the property status, the vacancy rate, the general economic situation, the level of interest rates and the availability of debt financing. As a result of general economic conditions and due to a variety of further reasons, there may not be a sufficient number of potential buyers to enable the GCP Group to dispose of a property when it wishes. If the GCP Group was required to liquidate parts of its total portfolio, in particular on short notice, there is no guarantee that the GCP Group would be able to do so on favourable terms or at all. In the case of a forced sale, for example if creditors realise collateral, there would likely be a significant shortfall between the fair value of a property or a property portfolio and the price achievable upon the sale of property or property portfolio in such circumstances, and there can be no guarantee that the price obtained would represent a fair or market value for the property or property portfolio. Any such shortfall could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. In addition to its current business model the GCP Group is engaged in single unit sales (privatisations), which may result in some units of the developed condominiums

74 remaining unsold. The unsold units may require greater administrative resources and may lead to additional expenses and other negative consequences for the GCP Group. The GCP Group selectively sells individual residential units to owner-occupants or small capital investors in single unit sales (privatisations). In general, individual residential units can be sold at a premium compared to bulk sales of residential properties and at prices exceeding their fair value. In executing such sales, the GCP Group would sell individual units but not necessarily all units within a building. Management of partially sold properties may require greater administrative resources than the management of units in properties entirely owned by the GCP Group. For example, owners of units in a residential property may decide on measures which concern the property as a whole by majority vote at the unit owner's assembly convened by the facility manager. If the GCP Group sells only individual units in a property it currently owns, it may lose its ability to control decision-making and could be forced to comply with decisions passed by a majority of the owners of other units in the relevant property with respect to property management, such as the performance of maintenance and modernisation, which could be economically impractical and might result in the incurrence of additional costs. Since the GCP Group would have to bear a proportionate share of these costs, this could adversely affect the GCP Group s profitability. In addition, pursuant to the German Condominium Act (Wohnungseigentumsgesetz), condominium owners may only engage a facility manager for a maximum of five years. Thereafter, the contract must be renewed or another manager can be engaged. Upon the expiration of the applicable contract, the GCP Group might not be reappointed as facility manager with respect to partially sold residential properties. If the GCP Group is not reappointed, this could increase the risk that the newly appointed facility manager may make decisions unfavourable for the GCP Group. The occurrence of any of these risks could have material adverse effects on the GCP Group's business, net assets, financial condition, cash flow and results of operations. The GCP Group may be exposed to losses and liabilities (including tax liabilities) in respect of its assets as a result of the acts or omissions of vendors or previous owners or occupiers or relating to the prior period of ownership. The GCP Group may be exposed to losses and liabilities including, but not limited to, tax and regulatory liabilities, in respect of properties the GCP Group has acquired or will acquire in the future, as a result of the acts and omissions of the relevant vendors or previous owners or occupiers of such assets or relating to the prior period of ownership in question. If any such risks materialise, this could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group

75 Following an acquisition, the GCP Group is exposed to integration risks. After the acquisition of a property portfolio, the properties must be integrated into the existing management platform. The GCP Group has developed an IT-based platform that provides efficient in-house management of its existing real estate portfolio as well as the integration of newly acquired properties. The integration of acquired portfolios may fail or take longer than anticipated and cost savings and synergies may not develop as expected, resulting in higher administrative and management costs. Also, the integration of IT systems of newly acquired property portfolios into the existing IT-platform of the GCP Group or transmission of the respective data into the IT system of the GCP Group could require significant time and effort and related costs. It is possible that further acquisitions could cause a significant increase of such costs which could have adverse effects on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Some of the GCP Group s properties are located in areas outside NRW, Berlin, Dresden, Leipzig and Halle, which may lead to higher management costs and limit the level of service that GCP Group is able to provide. Although the Company intends to acquire additional properties in those regions, where it already owns substantial portions of its portfolio, it cannot be excluded that the GCP Group will acquire properties in other regions, e.g., as part of the acquisition of an existing property portfolio by the GCP Group. The GCP Group has centralized most of its property management activities but also provides for on-site regional offices and services. The management of properties outside those regions where the GCP Group already owns other properties may trigger higher costs compared to the management of properties in the regions of NRW, Berlin, Dresden, Leipzig and Halle where the GCP Group held 67 % of its total portfolio (according to fair value as of the end of February 2017). Furthermore, there is a risk due to the lack of specific knowledge of the relevant regional markets that the GCP Group misjudges the requirements of potential tenants and makes investments that turn out to be inappropriate to satisfy the demand in the particular market. The occurrence of any of these risks could have an adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Minority interests of third parties in subsidiaries of the GCP Group or co-investments may make it difficult to implement significant structural changes or other material decisions with regard to these entities, in particular, where those resolutions require a qualified majority or the unanimous consent of all shareholders of these entities. In some entities of the GCP Group, the Company and/or its subsidiaries do not own all shares and/or do not hold all voting rights in such entities and are to that extent exposed to the influence

76 of other shareholders in the respective entity. In such cases the GCP Group is exposed to minority shareholders influence. Hence, significant structural changes or other material decisions with respect to such entity may only be implemented with qualified majority consent and/or the consent of the remaining shareholders or the joint venture partner. Such exposure to other shareholders influence and interests may limit the GCP Group s flexibility to implement the GCP Group s strategy. This could affect the distribution of dividends from such subsidiary or the sale of shares in such subsidiary or the respective property. Furthermore, a joint venture partner or minority shareholder may have economic or business interests or goals that are inconsistent with those of the GCP Group, take actions contrary to the GCP Group s policies or objectives, experience financial and other difficulties or be unable or unwilling to fulfil their obligations under the co-investment agreements. Any such inflexibility could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group s business is exposed to risks from possible violations of the building code and other regulations. The GCP Group s business is exposed to the risk of non-compliance with building codes and other regulations as regards the construction of buildings. In addition to the risk that properties did not comply with such regulations at the time of acquisition, it is also possible that landlord responsibilities could be further expanded with respect to fire, health and safety protection and environmental protection, which could require additional refurbishment, maintenance and modernisation measures. Furthermore, the projected cost of such measures is based on the assumption that the required permits are issued promptly and consistently with the GCP Group s schedules. It is possible, however, that the required building permits will not always be issued promptly. If such permits are not issued promptly, or are issued only subject to conditions, this can lead to substantial delays of the completion of such modernisation measures and may result in higher than projected costs and lower rental income for the relevant properties. Any of the above risks could impair the performance of the GCP Group s business and have a material adverse effect on the net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group may incur environmental liabilities, e.g. from residual pollution including wartime ordnance, soil conditions, mining activities and contaminants in building materials. Properties owned or acquired by the GCP Group may contain ground contamination, hazardous substances, wartime relics (including potentially unexploded ordnance) and/or other residual pollution and environmental risks. The GCP Group s properties and their fixtures might contain asbestos or other hazardous substances such as polychlorinated biphenyl ( PCB ), Dichlorodiphenyltrichloroethane ( DDT ), Pentachlorphenol ( PCP ) or Lindane above the

77 recommended levels or above the allowable or recommended thresholds, or the buildings could bear other environmental risks. The GCP Group would bear the risk of cost-intensive assessment, remediation or removal of such ground contamination, hazardous substances, wartime relics or other residual pollution. The discovery of any such residual pollution on the sites and/or in the buildings, particularly in connection with the letting or sale of properties or borrowing using the real estate as security, could trigger claims for rent reductions or termination of letting contracts for cause, for damages and other breach of warranty claims against a company of the GCP Group. Moreover, environmental laws, namely under the German Federal Soil Protection Act (Bundesbodenschutzgesetz), impose actual and contingent liabilities to undertake remedial action on contaminated sites and in contaminated buildings or to compensate for damages. These obligations may relate to sites the GCP Group currently owns or sites the GCP Group formerly owned as, according to this Act, not only the polluter but also its legal successor, the owner of the contaminated site and certain previous owners may be held liable for soil contamination. The costs of any removal, investigation or remediation of any residual pollution on such sites or in such buildings as well as costs related to legal proceedings, including potential damages, regarding such matters may be substantial, and it may be impossible, for a number of reasons, for the GCP Group to have recourse against a former seller of a contaminated site or building or the party that may otherwise be responsible for the contamination, for example, because the former seller or polluter cannot be identified, no longer exists or has become insolvent. Moreover, even the mere suspicion of the existence of ground contamination, hazardous materials, wartime relics or other residual pollution can negatively affect the value of a property and the ability to let or sell such a property. Moreover, laws and regulations, as may be amended over time, may also impose liability for the release of certain materials into the air or water from a property, including asbestos, and such release could form the basis for liability to third parties for personal injury or other damages. In addition, if the GCP Group s officers or employees infringe or have infringed environmental protection laws, the GCP Group could be exposed to civil or criminal damages. The GCP Group may be required to provide for additional reserves to sufficiently allocate towards its potential obligations to remove and dispose of any hazardous and toxic substances. In addition, approximately 70 % of the properties comprising the property portfolio as of 28 February 2017 (by fair value) were built during the 1950 s to the 1970 s, which may lead to an additional need for modernisation and maintenance measures. As of the date of this Prospectus, some of the GCP Group s buildings are located in the Ruhr region and a few buildings in this region are located on sites affected by mining activities conducted at depths of up to 100 metres below the surface. With regard to approximately 60 of

78 these buildings, certain waivers for mining damages (Bergschädenminderwertverzichte) are registered with the land register. At such sites there is a risk of future clean-up costs and other environmental liabilities due to their surface structure. Although, under German mining law, surface damages occurring within the sphere of influence of underground mining are assumed to result from mining activities, former mining operators and their legal successors, who are ultimately responsible for any such potential damages, may be able to refute this assumption. These operators may no longer exist or may lack sufficient funding and therefore or due to legal reasons or due to the fact that the GCP Group has waived its claims, the GCP Group may no longer be able to take recourse against them. Furthermore, when real estate is damaged by past or current deep-mining activities in the northern Ruhr area of Germany, the GCP Group s ability to recover the cost of any required remediation, which may be substantial, or any compensation from the relevant mining companies could be impaired by waiver agreements entered into with certain mining companies. The presence of any such mining damage, or the failure to remediate such damage properly, could also adversely affect the GCP Group s ability to sell or lease affected real estate or to obtain financing using the real estate as collateral. Additionally, mining damage may injure tenants, for which the GCP Group may be required to pay compensation. Any of these risks may have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group could sustain substantial losses not covered by, or exceeding the coverage limits of, its insurance policies. The properties held by the GCP Group are insured against losses due to fire, flooding, earthquakes and other natural hazards as well as terrorism to the extent usual for its business. The GCP Group s insurance policies are, however, subject to exclusions and limitations of liability. The GCP Group may, therefore, have limited or no coverage relating to third-party liability, other natural disasters and other environmental risks or war. The GCP Group may also have limited or no coverage relating to inflation, changes in planning laws or regulations, building codes and ordinances, title defects and defective construction. In addition, the GCP Group s insurance providers could become insolvent. The GCP Group also does not maintain separate funds or otherwise set aside reserves to cover losses or third-party claims from uninsured events. Should an uninsured loss or a loss in excess of the GCP Group s insurance limits occur the GCP Group could lose capital invested in the affected property as well as anticipated income and capital appreciation from that property. In such circumstances the GCP Group may incur further costs to repair damage caused by uninsured risks. The GCP Group could also remain liable for any debt or other financial obligation related to such property. Thus, the GCP Group may experience material losses in excess of insurance proceeds, which could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group

79 The GCP Group may face difficulties to replace key personnel if it loses them. The success of the GCP Group depends to a high extent on the performance of its management executives and qualified employees in key positions. This refers to employees active in the management activities of the GCP Group with substantial expertise as to the sourcing of new property portfolios and the repositioning of under-managed real estate. The loss of one or more members of the board of directors or other key employees of the GCP Group could impair the ability to manage the operations of the GCP Group effectively, if the GCP Group fails to attract new highly qualified management executives or qualified employees in key positions. The failure to provide the necessary management resources or to replace key employees may have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Damage or interruptions to the GCP Group s information technology system could lead to diminished data security and limit the GCP Group s business operations. The GCP Group's proprietary information technology system is an important facilitator of the GCP Group s business optimisation strategy and essential for its business operations and success. Any interruptions in, failures of or damage to this information technology system could lead to business process delays or interruptions. If the GCP Group s information technology system was to fail and back-ups were not available, the GCP Group would have to recreate existing databases, which would be time-consuming and expensive. The GCP Group may also have to expend additional funds and resources to protect against or to remedy potential or existing security breaches and related consequences. Any malfunction or impairment of the GCP Group's computer systems could interrupt its operations; lead to increased costs, and may result in lost revenue. The GCP Group cannot guarantee that anticipated and/or recognised malfunctions can be avoided by appropriate preventative security measure in every case. Damage to, malfunction or interruptions in the GCP Group s information technology system could therefore have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The GCP Group is exposed to the risk of impairments of its reputation. Negative publicity or press speculation might cause current or potential business partners to distance themselves from a relationship with the GCP Group. The business model of the GCP Group is based on the privileged access to attractive investment opportunities. This privileged access is rooted in established relationships with many financial institutions and real estate investors. These relationships may suffer if the GCP Group s reputation is damaged by negative publicity, press speculation and threatened or actual litigation related to its business. In Germany, the public's perception of financial investors in residential and

80 commercial properties is generally critical, so it cannot be excluded that the GCP Group is or becomes the target of negative publicity. Such negative publicity may cause business partners of the GCP Group to distance themselves from a relationship with the GCP Group, which could harm the sourcing network of the GCP Group. If the GCP Group is unable to maintain its reputation and high level of customer service, customer satisfaction and demand for its services and properties could suffer. In particular, harm to the GCP Group s reputation could make it more difficult for the GCP Group to let its residential units and could lead to delays in rental payments or the termination of rental contracts by its tenants. Any reputational damage due to the GCP Group s inability to meet customer service expectations could consequently limit its ability to retain existing and attract new customers. Furthermore, harm to the reputation could impair the GCP Group s ability to raise capital on favourable terms or at all. Thus, an impairment of its reputation may have an adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Valuation Risks In the event of a downturn in the real estate market, the fair value model could require the GCP Group to adjust current fair values of its properties (such as in the case of a change in interest rate levels or a deterioration of the market), which could have adverse effects on the valuation of the Group s property portfolios. The GCP Group accounts for its investment properties at fair value, i.e. on the balance sheet dates subsequent to the accession of the property the fair value of the property is used. The valuation is done by third party appraisers. The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs such as rent-free period and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality, duration and lease terms. The fair value thus reflects not only the circumstances directly connected with the property but also the general conditions of the real estate markets, such as regional market developments and general economic conditions or interest rate levels. Accordingly, there is a risk that in the event of a downturn in the real estate market or the general economic situation, the GCP Group will need to revise downward the values of its total portfolio. In addition, rising interest rates generally may have a negative influence on the fair value of property portfolios. Any change in fair value must be recognised as a profit or loss under the fair value adjustment. Any negative significant fair value adjustments the GCP Group is required to make could have

81 significant adverse effects on the GCP Group s financial condition and results of operations, as well as the market price of the Company s shares. Additionally, there would be negative effects on performance indicators, particularly the EPRA NAV and LTV, which may have a negative influence on the rating of the Company and may constitute a covenant breach under financing agreements. A negative change in the fair value may thus have a material adverse effect on the business, net assets, financial condition and results of operations of the GCP Group. Real estate valuation is based on assumptions that may change and are inherently subjective and uncertain. The value recorded in the Company s consolidated financial statements may not accurately reflect the value of the GCP Group s properties. The valuation report comprising valuations of the real estate portfolio of the GCP Group included in this Prospectus was prepared by the independent external appraiser Jones Lang LaSalle SE ( Jones Lang LaSalle ) (the Property Appraisal Report ), the appraisers of which include members of the Royal Institution of Chartered Surveyors ( RICS ). The Property Appraisal Report is reprinted in this Prospectus. The Property Appraisal Report is based on standard valuation principles and represents the opinion of the independent appraiser that prepared the report. The Property Appraisal Report is based on assumptions that could subsequently turn out to have been incorrect. Data provided by the GCP Group and used in the Property Appraisal Report were examined and verified for plausibility on a random sampling basis. The valuation of real estate is based on a multitude of factors that also include the appraiser's subjective judgment. These factors include, for example, the general market environment, conditions in the rental market and the quality of the location. The valuation of real estate contained in the Property Appraisal Report is therefore subject to numerous uncertainties. Real estate valuation is inherently subjective, subject to uncertainties and based on assumptions which may prove to be inaccurate or affected by factors outside the GCP Group s or an external appraiser's control. The past or future assumptions underlying the property valuations may later be determined to have been erroneous. The Property Appraisal Report was prepared based on information available as of specific dates, and there is no guarantee that such information or report will accurately predict the value of the underlying properties in the future. In valuing a property, an appraiser may consider factors such as real estate tax rates, operating expenses, potential environmental liabilities and the risks associated with certain construction materials in addition to expected rental income, the property s condition and its historic vacancy level. In addition, property valuations may be based on assumptions that may not be correct. An adverse change in one of the assumptions used or factors considered in valuing a property can decrease the assessed value of the property

82 The valuation of the GCP Group s property may not reflect the actual sale or market prices that the GCP Group could generate on a sale of its property, even where any such sales occur shortly after the relevant valuation date, or the estimated yield and annual rental income of any such property. In particular, during times of reduced real estate transaction levels, market prices for properties may be difficult to assess. Any re-valuation of the GCP Group s property could also cause the fair value determined for the respective valuation date to fall short of a property s book value, and could thereby result in a fair value loss. Under such circumstances, the GCP Group would be required to immediately write down the value of such real estate for the relevant accounting period. If any of the information or assumptions on which a valuation is based are subsequently found to be incorrect, the valuation figures may also be incorrect and may have to be reconsidered. In connection with the acquisition of property portfolios and other unforeseeable events this could result in the GCP Group being unable to achieve its expected returns. The occurrence of any of these factors could have material adverse effects on GCP Group s net assets, financial condition and results of operations. Financial Risks The GCP Group is dependent on its current corporate investment grade rating to pursue its financing strategy, including the satisfaction of its future financing needs through the issuance of unsecured corporate bonds and notes. A fundamental part of the GCP Group s financing strategy is to satisfy a significant portion of its future financing needs through the issuance of unsecured corporate bonds and notes. The Company received a corporate investment grade rating of "BBB-" from Standard & Poor's Credit Market Services Europe Limited (Niederlassung Deutschland) (German Branch) ("S&P") in November 2014, which was changed to "BBB+" on 23 November Companies with a "BBB" rating are considered by S&P to have adequate capacity to meet their financial commitments, but adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the issuers to meet their financial commitments. The outstanding unsecured bonds of the Company were also assigned a rating of BBB+ from S&P on 23 November On the same date, the subordinated perpetual notes of the Company were assigned a rating of BBB- from S&P. In addition, Moody's Investors Service, Inc ( Moody s ) assigned in February 2015 a corporate investment grade rating of Baa2 with a stable outlook to the Company. In December 2016 Moody's updated the outlook to "positive". A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation

83 If the Company were to lose its investment grade rating, future issuances of unsecured bonds and notes may become significantly more expensive or may not be possible in the targeted amounts. S&P and/or Moody s could downgrade the Company, for instance if the value of the GCP Group s assets, the GCP Group s debt-service or interest coverage ratio were to fall below, or the GCP Group s debt-to-capital ratio exceeds, certain values, if the GCP Group were unable to keep or render sufficient values of its assets unencumbered or if the residential real estate market in Germany deteriorates in general. If any of the risks described above were to materialise, it would be more difficult for the GCP Group to pursue its current financing strategy, which could have material adverse effects on the GCP Group s business, net assets, financial condition, cash flow and results of operations. The GCP Group may not be able to extend its existing credit arrangements, refinance its debt on substantially similar terms when it matures or obtain acquisition financing on financially attractive terms as and when needed. The GCP Group has a substantial level of debt; the nominal amount of the GCP Group s outstanding financial indebtedness was 2.41 billion as at 31 December In addition, the GCP Group had outstanding perpetual notes in a nominal amount of 700 million which are accounted for as equity under IFRS. The GCP Group may require additional funds to finance or refinance its debt, capital expenditures, future acquisitions and working capital requirements. The GCP Group will likewise need to borrow additional funds or to raise additional equity or debt capital. The extent of the GCP Group s future capital requirements will depend on many factors which may be beyond the GCP Group s control, and its ability to meet such capital requirements will depend on future operating performance and ability to generate cash flows. Additional sources of financing may include equity, hybrid debt/equity and debt financings or other arrangements. The Company believes that its debt structure with a LTV of 34.9 % as at 31 December 2016 and no material maturities before 2020 is conservative and provides the GCP Group with an adequate flexibility as to future financings. However, there can be no assurance that the GCP Group will be able to obtain additional financing on acceptable terms when required. If the GCP Group does not generate sufficient cash flows or if the GCP Group is unable to obtain sufficient funds from future equity or debt financings or at acceptable interest rates, the GCP Group may not be able to pay its debts when due or to fund other liquidity needs. Any or all, or a combination of these factors would limit operating flexibility, and could have a material adverse impact on the business, net assets, cash flows, financial condition and results of operations of the GCP Group

84 A rise in general interest rate levels could increase the GCP Group s financing costs. When it attempts to mitigate interest rate risk by entering into hedging agreements, the GCP Group also becomes exposed to the risks associated with the valuation of hedge instruments and these hedges counterparties. When concluding financing agreements or extending such agreements, the GCP Group depends on its ability to agree on terms for interest payments that will not impair its desired profit and amortisation schedules. In general, rising market interest rates would lead to higher financing costs in the future and so may have a material adverse effect on the business, financial condition and results of operations of the GCP Group. The GCP Group regularly enters into financing agreements with variable interest rates while hedging such variable interest rate with customary market hedging instruments, such as interest swaps or caps. However, the hedging instruments that the GCP Group uses may not be completely effective, or the GCP Group may be unable to enter into necessary extensions or renegotiations of financing agreements or hedging instruments at their current interest rate terms, including associated costs, or to the extent planned. Also, the hedging agreements the GCP Group enters into generally do not completely counterbalance a potential change in interest rates and interest rate fluctuations may have a negative impact on the GCP Group s equity. In addition, the GCP Group is exposed to the risk that its hedging counterparties will not perform their obligations as established by the hedging agreements into which the GCP Group has entered. Hedging counterparties may default on their obligations towards the GCP Group due to lack of liquidity, operational failure, bankruptcy or other reasons. The occurrence of any of these factors could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group. The redemption by the Company of its outstanding bonds depends on a successful refinancing or a successful sale of the GCP Group s properties when they become due. Besides the final maturity dates as stipulated in the respective terms and conditions or any early redemption in accordance with the terms and conditions, the breach of covenants of the conditions (if any) by the Company under its outstanding bonds or a default of other obligations of the Company arising from its outstanding bonds may result in a substantial payment obligation for the Company before the final maturity dates of the bonds. The Company has borrowed a significant amount of debt by the issue of bonds. As at 31 December 2016, the total aggregate amount of bonds outstanding was 1.5 billion, of which 500 million are due and repayable on 29 October 2021 (the Series D Bonds ), 550 million are due and repayable on 17 April 2025 (the Series E Bonds ) and 450 million under a convertible bond are due and repayable on 2 March 2022 (the Series F Bonds ; and together

85 with the Series D Bonds and the Series E Bonds also the Outstanding Bonds ). The Outstanding Bonds are unsecured. Under the terms and conditions of the Outstanding Bonds, the Company has made several undertakings with respect to the incurrence of further indebtedness, group structuring and the granting of security interests. The terms and conditions of the Outstanding Bonds require, in particular, that the GCP Group complies with certain financial covenants, such as a maximum LTV-ratio, a minimum debt-service or interest cover ratio, a minimum ratio of unencumbered properties and other assets or restrictions on the sale of properties. Any breach of such undertakings may trigger an event of default. An event of default under the Outstanding Bonds may also arise if the Company fails to repay any indebtedness provided that such due but unpaid indebtedness exceeds 10 % of the GCP Group s gross consolidated assets or if insolvency or similar proceedings are commenced against the Company or any other company of the GCP Group or if security granted by the Company or its subsidiaries is enforced. As a result of an event of default and cross default provisions, all Outstanding Bonds may become due and repayable in their respective principal amount plus any accrued interest. If the Company is not able to redeem the Outstanding Bonds plus accrued interest in full when required, this could lead to the insolvency of the Company. In addition, the Company has issued two different series of perpetual notes with an aggregate principal amount of 700 Million (which are accounted for as equity under IFRS). The Company can redeem the perpetual notes starting in The interest rates payable on the perpetual notes will increase following the first redemption dates and every subsequent five-year period. The Company generally intends to refinance its debt when it falls due through the issue of bonds, perpetual notes and credit facilities. The capability of the GCP Group to satisfy existing financial indebtedness when due through refinancing might be adversely impacted by market conditions, development of the GCP Group s business and overall level of indebtedness of the GCP Group. Although the GCP Group has successfully managed to refinance and reduce its debts and/or to extend maturity of its bank loan facilities, additional financing might become more difficult to access or only be available at less favourable terms. The occurrence of any of these factors could have a material adverse effect on the net assets, cash flows, financial condition and results of organisations of the GCP Group. A change of control in the Company and/or the decrease in the free float of the ordinary shares in the Company below a certain level may result in a substantial payment obligation for the Company with respect to its outstanding bonds. According to the conditions of the Outstanding Bonds, the holders of such bonds are entitled to request redemption of their bonds in the event of a change of control in the Company. Such change of control is deemed to be the acquisition of more than 50 % of the voting rights in the

86 Company by a third party (subject to limited exceptions) or the right of a third party to appoint and/or remove the majority of the members of the Company s board of directors. A repayment obligation under one series of the Outstanding Bonds will also trigger repayment obligation under the other series of Outstanding Bonds. Provided that the present number of Outstanding Bonds issued was also outstanding at the point in time a change of control in the Company occurred and all of the bondholders requested redemption, the potential payment obligations of the Company may total the aggregate principal amount of the Outstanding Bonds then outstanding plus accrued interest. Additionally, the holders of the Company s outstanding convertible bonds (Series F Bonds) may require redemption, if for any period of at least 30 consecutive days the number of shares comprising a certain free float definition is less than 15 %. Any such payment obligation would have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the Company. If the Company was not able to redeem the bonds to the extent required this may lead to insolvency of the Company. The Company s cash flows and possible future dividend payments are dependent on the profitability of the GCP Group or must be met by borrowed capital or by selling property. The Company is a holding company and conducts its business primarily through its subsidiaries. In order to service its loan debt (principal and interest) and to distribute dividends the GCP Group needs to continue to achieve positive cash flows from operating activities. The GCP Group generally generates such cash flows from rent and from proceeds of disposals. If the GCP Group is unable to generate positive cash flows from its operating activities in the future, the GCP Group could be forced to sell properties irrespective of the market situation and possibly on terms unfavourable to the GCP Group or borrow money on financially unattractive terms. To cover its operating costs and to enable dividend payments, the Company relies on, among other things, distributions that it receives from its subsidiary Grandcity Property Ltd. ( GrandCity ) and scheduled repayment of intercompany loans it has granted to GrandCity. The distributions by the subsidiaries depend, in turn, on the subsidiaries' operating results and their ability to make those distributions in view of their liquidity and under applicable law. As a whole, this could have a significant adverse effect on the net assets, cash flows, financial condition and results of operations of the GCP Group

87 There are risks of foreclosure if the respective borrowing entity of the GCP Group does not fulfil its obligations under loans granted by banks. A breach of covenants or undertakings under loan agreements and/or a change of control within the GCP Group could result in substantial payment obligations for the GCP Group and could lead to the enforcement of the related collateral. To secure its financial obligations, the GCP Group under certain financing agreements (other than the unsecured bonds and notes), has granted land security. The receivables resulting from loans granted by banks for the purpose of acquiring and re-developing properties are usually secured by first-ranking land charges in favour of the lending bank. If the relevant entity of the GCP Group does not fulfil its obligations under the loan, e.g. repayment of receivables when they become due, or a breach of covenants or undertakings not cured within the cure period, such entity could be forced to sell the respective property under time pressure or on unfavourable conditions, or the lending bank would be entitled to enforce into the property. Both may lead to a sale of property at lower prices than originally expected. Loan agreements between banks and entities of the GCP Group usually provide for financial covenants or undertakings. If the relevant entity is in breach of such covenants or undertakings, the lender may terminate the affected loan agreements. As at the date of this Prospectus, most of the loan agreements of entities of the GCP Group with banks provide for standard change of control clauses enabling the respective lender to terminate the loan agreement in case of a change of control without the lender's consent. Under a considerable portion of the loan agreements the respective lender may terminate the loan agreement if (a) the Company is no longer (directly or indirectly) the majority shareholder of the respective borrower or (b) the property management of the respective property is no longer performed by a member of the GCP Group. If a loan agreement is terminated due to the aforementioned reasons, the outstanding amounts (principal and interests) under the affected loan agreements are immediately due and payable, which could have a material adverse effect on the business, financial condition and results of operations of the affected entity and the GCP Group. The Group's historical earnings and other historical financial data are not necessarily predictive of future earnings or other key financial figures of the Group going forward. The financial information provided for and discussed in this Prospectus relate to the past performance of the Company and the GCP Group. The current group structure with the Company as the holding company of the GCP Group was established on 1 January Until that date, Grandcity Property Ltd. was the holding company of the business which is now conducted by the GCP Group. Since 2009 the GCP Group has enjoyed rapid growth. The future development of the GCP Group could deviate significantly from past results due to a large number of internal and

88 external factors. The historical earnings, historical dividends and other historical financial data of the Company and the GCP Group are therefore not necessarily predictive of future earnings or other key financial figures for the GCP Group going forward. Legal and Regulatory Risks The GCP Group s business is subject to the general legal environment in Germany, which may change to its detriment. German laws protecting residential tenants and existing restrictions on the rate of rental increases could make it more difficult to evict tenants, increase the rents of residential units owned by the GCP Group or pass on ancillary costs or modernisation investment costs. Moreover, there are current political efforts to further restrict rent level increases. The GCP Group s business is subject to the general legal framework applicable to real estate. This framework includes German tenancy law, as well as special provisions under other laws, including social legislation, construction laws, historic preservation laws and other public laws. Any changes to German or European laws, which could include changes that have retrospective effect, or changes in the interpretation or application of existing laws could, therefore, have a negative effect on the GCP Group. In particular, changes to tenant protection laws could make it more difficult to terminate rent contracts, increase rents or pass on ancillary costs or modernisation investment costs to the tenants. This could have material adverse effects on the profitability of the investments and results of operations of the GCP Group. If any such changes in the legal framework occur, or if other changes to the legal framework arise, this could have a material adverse effect on the GCP Group s revenue and earnings and, thus, have a material adverse effect on the net assets, financial conditions and results of operations of the GCP Group. In Germany, the landlord-tenant relationship is subject to a significant level of statutory regulation which, for the most part, provides far-reaching social protection for tenants under residential leases. According to German law, for example, the landlord may only terminate a lease agreement if there is a legitimate interest in doing so. Beyond that, a landlord may not increase residential rents of existing leases by more than an aggregate of 20 % compared to locally prevailing comparative rent levels over a three-year period (capping limit). The German Tenancy Law Amendment Act 2013 (Mietrechtsänderungsgesetz) provided inter alia the authorisation of German federal state governments to decrease the aforementioned capping limit to 15 % over a three-year period for specific municipalities. The German federal state governments of Bavaria, Berlin, Brandenburg, Bremen, Hamburg, Hessen, North Rhine-Westphalia, Schleswig-Holstein, Baden-Württemberg, Sachsen and Rhineland-Palatinate have made use of their option and decreased the capping limit (e.g. for the municipalities of Berlin, Frankfurt and Munich)

89 The Tenancy Law Amendment Act (Mietrechtsänderungsgesetz) - motivated partly because of necessities resulting from the Energy Concept which shall facilitate, inter alia, a reduction of the German primary energy need (Primärenergiebedarf) in 2050 by 80 % (compared to 1990) - was adopted on 11 March 2013 and came into effect in May Main amendments resulting therefrom are that (i) tenants shall have to endure - and be excluded from rent reduction for three months because of - maintenance measures (Erhaltungsmaßnahmen) and modernisation measures (Modernisierungsmaßnahmen), in particular energetic modernisation measures, unless such measures would constitute an unreasonable hardship; (ii) following the announcement of modernisation measures, tenants are entitled to a special termination right (außerordentliche Kündigung); (iii) except for certain types of measures that are not directly linked to the leased premises and unless this would constitute an unreasonable hardship for the tenant, landlords shall be entitled to allocate cost for such modernisation measures to tenants of residential units by way of an increase of the annual rent in the amount of 11 % of the cost accrued (less the cost accrued for maintenance measures anyway); (iv) German federal state governments are authorised to limit rent increases up to locally prevailing comparative rent level to 15 % in three years (capping limit) for specific municipalities; (v) as an alternative to the classic eviction procedure, the so-called Berliner Räumung, offering the landlord the cost effective opportunity to limit the eviction procedure to the procurance of possession, shall be implemented; (vi) eviction procedures shall furthermore no longer be tediously delayed because of a right of possession of a third person that is not covered by the executory title (Vollstreckungstitel); a further title against such third person shall be obtainable by way of an injunction (einstweiliger Rechtsschutz); (vii) the existing restriction of termination of lease agreements for a period of three years shall be extended to the case that in the course of a continuing lease the leased premises have been transformed into condominium and have subsequently been sold to a partnership or to more than one purchaser. Furthermore, the Tenancy Law Amendment Act (Mietrechtsänderungsgesetz) includes provisions according to which the costs resulting from heat-contracting (Wärmelieferung) can be charged to tenants as part of the service charges under certain conditions. These provisions have become effective as of 1 July Further statutory limitation on the rent for new lease agreements (so-called Mietpreisbremse) have been introduced by another German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) adopted on 21 April According to the German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz), which came into effect in June 2015, the limit shall apply to any newly agreed rent at a maximum of ten per cent above the relevant locally prevailing comparative rent level (ortsübliche Vergleichsmiete), unless the rent level agreed with the previous tenant was higher. It shall, however, neither apply to commercial lease agreements nor to the first lease agreements relating to new or fully modernised buildings. The German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) authorises the German federal state governments to implement such limitation (and thus a limitation would be at the discretion of each federal state) for specific regions which are subject to restrictions in the affordable housing

90 sector and will be designated by them in ordinances. The ordinances may be enacted until the year All federal states (Bundesländer) except for Mecklenburg-Vorpommern, Sachsen, Sachsen-Anhalt and Saarland have already implemented or have announced the implementation of respective ordinances. In addition, the German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz), contains provisions regarding the payment of real estate agents. Previously, the tenant had to pay the agent s commission even if the landlord hired the real estate agent. The German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) requires the landlord to pay the commission if the landlord hires the agent. In Germany, affordable housing continues to be a political topic receiving a high level of attention. The German Federal Ministry of Justice (Bundesjustizministerium) has presented another draft bill (Zweites Mietrechtsnovellierungsgesetz) on 12 April 2016 amending the calculation of lettable spaces and the regulation regarding modernisation measures. This topic and further regulatory implementations could further affect the ability of the GCP Group to freely agree on rental fees in new lease agreements to the extent described. Tightened rent restrictions might impair the ability of the GCP Group to increase rents, which in turn could adversely affect the business, net assets, cash flows, financial condition and results of operations of the GCP Group. In addition to such generally applicable rent increase restrictions, the GCP Group may be subject to additional restraints on rent increases arising from the acquisition agreements, in particular in agreements with government entities such as the states and municipalities, through which the real estate portfolio will be purchased. Such restrictions mainly limit the Group s ability to impose rent increases. More restrictive environmental laws could also result in additional expenses for the GCP Group. Starting 1 January 2009 for sales or new letting of residential units, potential buyers and tenants must be given an energy certificate upon request that discloses the property s energy efficiency. In undertaking modernisation measures, additions or extensions, an energy certificate must be prepared if an engineering assessment of the entire building s energy consumption is performed in the course of the modernisation that allows the certificate to be prepared at a reasonable cost. The energy certificate is generally valid for ten years. For buildings completed no later than 1965, the owner must already have had an energy certificate available starting 1 July The Energy Savings Ordinance (Energieeinsparverordnung) of 24 July 2007, as amended on 29 April 2009, also requires structural alterations for energy conservation. Failure to comply with these rules can be penalised as an administrative offence. A further amendment of the Energy Savings Ordinance has been published on 21 November 2013 and took effect as from 1 May The amendment requires inter alia additional structural alterations for energy conservation, which had to be implemented by 2015 regarding heating facilities that are older than 30 years and by 1 January 2016 regarding buildings. Further the energy certificate must be handed over to the

91 potential buyer or tenant prior to an entry into a new purchase or lease agreement. Furthermore, if a seller or landlord advertises the property via commercial media, the energy performance indicator of the respective property s existing energy certificate must be stated in the advertisement. The withholding of that kind of energy information may be penalised as an administrative offence. On 24 October 2015, the Asylum Procedure Efficiency Act (Asylverfahrensbeschleunigungsgesetz) came into effect, dealing with emergency housing for refugees. Regulations comprise, inter alia, the possibility to build or use existing buildings for refugee housing in residential areas, which might have a material adverse effect on the achievable net rent in the areas affected. Furthermore, local authorities might legally seizure residential buildings and compensate the owner accordingly, if buildings are needed to accommodate refugees. In case buildings are listed as protected monuments, certain restrictions set forth in the various monument protection acts of the federal states (Bundesländer) are applicable. Although the federal states monument protection acts differ in detail, the basic provisions are identical. Protected monuments must not be demolished, reconstituted, refitted or amended without a permit being issued by the competent authority. In the permit, the authority usually imposes certain requirements as to how to carry out the construction measures envisaged by the developer. These requirements might restrict the measures possible, cause additional costs and take additional time and, therefore, need to be taken into consideration before deciding on a development and in the course of such development. Theoretically and as very last resort, the competent authority could even expropriate the owner of a protected monument if the building cannot be protected otherwise. However, the owner is entitled to financial compensation in the case of an expropriation. The GCP Group s use of standardised contracts could lead to additional legal risks. The GCP Group maintains legal relationships with a large number of persons, primarily tenants and its employees. In this context, the GCP Group mainly uses standardised documents and standard form contracts. If such documents or contracts contain invalid clauses or contracts as a whole are invalid and thus substituted by statutory provisions which are unfavourable to the GCP Group, this may affect a large number of standardised terms or contracts. It is impossible to fully protect the GCP Group against risks from the use of such standardised contractual terms, due to the frequent changes to the legal framework, particularly court decisions relating to general terms and conditions of business. For example, the German Federal Court of Justice (Bundesgerichtshof) has ruled that standard clauses in letting contracts are invalid if they obligate the tenant to carry out cosmetic repairs (Schönheitsreparaturen) unless the apartment was fully renovated at the beginning of the lease

92 or to carry out cosmetic repairs within a fixed schedule or to fully renovate the apartment at the end of the letting term (Endrenovierung) or if they provide for compensation regarding ratios (Quotenabgeltung). The invalidity of such clauses results in the landlord being responsible for the repair and maintenance and being required to bear all related costs. If the tenant carries out such repair and maintenance works without actually being obliged to do so, the landlord might have to compensate the corresponding costs. Even in the case of contracts prepared with legal advice, it is impossible for the GCP Group to avoid problems of this nature in advance or in the future, because changes could occur in the legal framework, particularly case law, making it impossible for the GCP Group to avoid the ensuing legal disadvantages. This could have a material adverse effect on the business, cash flows, financial condition and results of operations of the GCP Group. The GCP Group could be liable for properties it has sold. With regard to the sale of properties, the GCP Group has to make representations, warranties, covenants and negative declarations of knowledge to purchasers with respect to certain characteristics of the sold properties. The resulting obligations of the GCP Group may continue to exist for several years after the GCP Group sells a property. Among other things, the GCP Group could be subject to claims for damages from purchasers who assert that the representations the GCP Group made to them were untrue, or that GCP Group failed to meet its obligations under the contract. The GCP Group could become involved in legal disputes with purchasers, as a consequence of which the GCP Group could be required to make payments for damages. As a seller of properties, the GCP Group is liable to tenants for any breach of letting contracts by the buyer unless it has notified the tenant of the change of ownership and the tenant fails to terminate the tenancy at the earliest permitted termination date. This applies specifically where the GCP Group no longer has any control over the property. Moreover, the GCP Group continues to be exposed to liability for breach of contract even in the event that the buyer resells the property and the subsequent buyer breaches the letting contract. As a rule, when selling properties, the GCP Group informs all tenants in writing of the change of landlord. Such release from liability does not apply for rental securities (Mietsicherheiten) provided by the tenants. If the tenant is unable to receive its rental security from the buyer of the property, the liability to repay such rental security remains with the seller. Legal or settlement costs, including the costs of defending lawsuits, whether justified or not, as well as potential damages associated with liability for properties that the GCP Group has sold could have an adverse effect on the cash flows, financial condition and results of operations of the GCP Group

93 Entities of the GCP Group may be subject to litigation, administrative proceedings and similar claims. Entities of the GCP Group have regularly been and probably will be in the future subject to administrative and legal proceedings in the ordinary course of business. Such litigation relates to matters such as outstanding rent payments and the termination of lease contracts. Although not material on a case-by-case basis, such litigation ties up resources and may have an adverse effect on the GCP Group s business if they occur frequently or in a concentrated manner. Further litigation may result from purchase agreements, either as seller or as purchaser, concerning breaches of representations and warranties. The risk management system of the GCP Group may prove to be partially or completely insufficient or fail so that unknown, unrecognised or unexpected risks may materialise. The GCP Group has a risk management system which has developed risk management strategies and processes tailored to the business of the GCP Group. These are continually updated and are particularly designed to monitor market risk, liquidity and financial risk, operational risk, organisational risk and the risk of reputational damage. The GCP Group could be faced with risks that have been underestimated or not previously detected. Inappropriate risk management measures may cause irregularities leading to official investigations or third-party claims against the GCP Group, which in turn could have financial and other consequences, as well as negative effects on its business, net assets, financial condition, cash flows, results of operations and its reputation. The GCP Group could be exposed to restitution claims. According to the German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen), persons who were expropriated of property within the former German Democratic Republic ( GDR ) can claim restitution or compensation under certain conditions, in particular if the property was seized without compensation or less compensation than citizens of the GDR were entitled to. The German Act on Unsettled Property Issues is also applicable to persons who lost property due to racist, political, religious or ideological reasons between 1933 and Although the notification deadline under the German Act of Unsettled Property Issues, subject to certain exemptions, expired at the end of 1992, the aforementioned restitution and compensation claims cannot be entirely excluded. If any such claims were asserted in respect of an entity of the GCP Group regarding properties owned by the Group, the GCP Group would be severely limited in its ability to manage such properties and may even be forced to transfer such properties to successful claimants without adequate compensation. Any such limitations or compulsory transfers of properties could have a material adverse effect on the business, net assets, cash flows, financial condition and results of operations of the GCP Group

94 Control- and prevention mechanisms under the compliance system may not be sufficient to protect the GCP Group from financial and/or legal risks. Irregularities could result in investigations by competent authorities or claims of third parties. To protect the GCP Group against legal risks and other potential harm, the GCP Group implemented a group-wide code of conduct. This binding policy addresses conduct, corruption prevention, conflicts of interest, information and data protection, discrimination and protection of company property and applies to all employees and the members of the board of directors. Moreover, the GCP Group has introduced a code of conduct for its business partners. Legal and compliance risks are addressed by the GCP Group's risk management. There can be no assurance, however, that the aforementioned compliance arrangements will be sufficient to completely prevent all unauthorised practices, legal infringements or corruption within the GCP Group. Any failure in compliance could have material adverse effects on its net assets, financial condition, cash flow, results of operations and reputation. Tax Risks With the vast majority of its properties situated in Germany, the GCP Group is subject to the general tax environment in Germany. The GCP Group s tax burden may increase as a consequence of current or future tax assessments, tax audits or court proceedings based on changes in tax laws or changes in the application or interpretation thereof. Most of the properties owned and managed by the GCP Group are situated in Germany. Thus, the GCP Group is subject to the general tax environment in Germany. The GCP Group s tax burden depends on various aspects of tax laws, as well as their application and interpretation. Amendments to tax laws may have a retroactive effect on the application or interpretation by tax authorities or courts may change. Furthermore, court decisions are occasionally limited to their specific facts by tax authorities by way of non-application decrease. This may also increase the GCP Group s tax burden. The GCP Group is among others subject to the following risks related to German tax environment: - According to German tax law the GCP Group has to file tax declarations for its German subsidiaries within certain statutory periods. All of the GCP Group s German property subsidiaries have filed tax declarations for income tax for the years until 2014; the majority of the GCP Group s German property subsidiaries have filed tax declarations for income tax for the years until The statutory submission period for filing the tax declarations for the German subsidiaries of the GCP Group for the year 2016 will end on 31 December

95 2017. Any tax assessments that deviate from the GCP Groups expectations in its tax declarations could lead to an increase in the GCP Groups tax obligations. - The German subsidiaries of the GCP Group are generally subject to tax audit (Betriebsprüfung) by the competent tax authorities. The most recent tax audit with regard to the entities of the GCP Group was concluded in 2017 and covered the fiscal years up to and including 2012, while for some of the German entities the year 2012 is still subject to a tax review. The tax audits resulted in no material outcome deviating from the GCP Group s tax declarations. Currently there are 13 tax audits with respect to 13 subsidiaries of the GCP Group ongoing. Generally, tax audits conducted by the competent tax authorities could result in the assessment of additional taxes. For example, certain expenses could be treated as non-deductible. Further, German real estate transfer tax or German trade tax could be assessed or a fiscal unit for value added tax purposes might not be accepted. Any of these findings could lead to an increase in the GCP Group's tax obligations and could result in the assessment of penalties. The GCP Group has established provisions for risks associated with audits based on its past experience. These provisions, however, may prove to be insufficient and when paid may negatively impact cash flows. - German subsidiaries of the GCP Group holding real estate in Germany generally rely on an extended deduction of the trade income for the calculation of German municipal trade tax that is available to pure asset holding companies only. Such tax preference might not be available in all cases and in all fiscal years, e.g. because a company is not owning real estate for the complete fiscal year or because activities other than leasing are conducted. - Acquiring new real estate portfolios by way of share deals may require adjustments to the structures existing before the acquisition. Although GCP Group is generally applying proven and tax efficient structuring approaches, it is not always possible to completely avoid tax leakages resulting from such restructurings. - The German subsidiaries of the GCP Group might not be able to offset unlimited interest expenses against profits. - Some of the German subsidiaries of the GCP Group form a fiscal unit for value added tax purposes (umsatzsteuerliche Organschaft). Although the GCP Group has no indication thereof, such a fiscal unit could be considered invalid or might not be accepted to the full extent by tax authorities. - Changes in the structure of the GCP Group may result in a partial or even complete forfeiture of loss and interest carry-forwards if directly and/or indirectly more than 25% (partial forfeiture) resp. more than 50% (full forfeiture) of shares in a respective company are transferred to another shareholder. As the Company s shares are listed at a stock

96 exchange, it cannot be fully excluded that relevant indirect transfers are incurred by trading shares in the Company. Exemptions from this general rule are available for specific forms of group restructurings and to the extent that losses of a company are covered by hidden reserves, which is the case for most of the German subsidiaries of the GCP Group. - Group restructurings may also become relevant in regard of German real estate transfer tax, if at least 95% of the shares in a property owning company are directly and/or indirectly accumulated by the Company or one of its subsidiaries. In case of real estate property held by a German partnership, also the direct and/or indirect transfer of at least 95% of the partnership shares within a period of five years incurs German real estate transfer tax. The latter may also become relevant due the trade of shares in the Company. - Group entities are or may become party to judicial tax proceedings. The outcome of such tax proceedings may not be predictable and may be detrimental to the GCP Group. Also, changes in tax legislation, administrative practice or case law, possible at any time on short notice, could have adverse tax consequences for the GCP Group. For example, there could be increases in the rates of property transfer tax, property tax or capital gains tax. Additionally, changes could be made to the ability to deduct expenses for tax purposes or to depreciate owned real estate. This could have an adverse effect on the attractiveness of residential and commercial real estate. Despite a general principle prohibiting retroactive application, amendments to applicable laws, orders and regulations can also be retroactive. Additionally, divergent statutory interpretations by the tax authorities or the courts are possible. If these changes in the tax framework conditions should occur, individually or together, or if other changes of the legal or tax framework conditions that negatively affect the business of the GCP Group should arise, this could have a material adverse effect on the net assets, financial condition and results of operations of the GCP Group. The structure of the GCP Group is influenced by the general tax environment mainly in Germany, Cyprus and Luxembourg and changes in the tax environment in these countries may increase the tax burden of the GCP Group. The organisational structure of the GCP Group has been established in the year 2012, when the Company became the holding company of the GCP Group in its present form. Besides the Company, the GCP Group today comprises of more than 500 companies which have its registered offices mainly in Germany, Cyprus and Luxembourg and thus are subject to the tax laws of these jurisdictions. The Company is a holding company. Its direct subsidiary GrandCity, having its registered office in Cyprus, acts as sub-holding company and through its permanent establishment in Germany also provides property and asset management services to the German property companies of the GCP Group. Most of the German property companies are held through further Cypriot subsidiaries which themselves are held by GrandCity. Thus, the structure of the

97 GCP Group involves numerous tax aspects, including the taxation of the holding entities under the respective national tax and contribution regimes as well as cross-border taxation issues governed by double-tax treaties between Germany, Cyprus and Luxembourg. It cannot be excluded that tax authorities in these countries might not share the view of the tax assessment of the GCP Group which could lead to additional tax burden of the GCP Group in any of these countries. Also, the tax laws in any of these jurisdictions or double-tax treaties between these countries might change in the future, even with a retroactive effect, which could cause additional tax burdens for the GCP Group. All these aspects could have a material adverse effect on the net assets, financial condition and results of operations of the GCP Group. Risks Relating to the Shares, the Admission and the Shareholder Structure The Company's shares have not yet been publicly traded on a regulated market and there is no guarantee that a liquid market will develop or continue following the admission to trading on the regulated market. Prior to the admission to trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange described in this Prospectus, the shares of the Company have been listed since May 2012 on the open market of the Frankfurt Stock Exchange and, until its cancellation in March 2017, in the Entry Standard segment, and since then in the market segment Scale. Neither the open market of the Frankfurt Stock exchange nor the Scale segment are regulated markets in the meaning of Directive 2004/39/EC of 21 April 2004 on markets in financial instruments ( MiFID ). Since its listing in 2012, the Company has issued approximately 103 million new shares in three capital increases and in various conversions under convertible bonds issued in 2012 and All equity and debt issuances were placed exclusively with institutional investors. There is no guarantee that an active liquid market for the shares will develop or be sustained following the admission to trading in the regulated market. If there is no active trading in the shares, investors may not be in a position to sell their shares quickly or at the price at which the latest trade was executed (market price). The price and trading volume of the Company's shares could fluctuate significantly, and investors could lose all or part of their investments. Following the admission to trading on the regulated market, the price of the shares will be affected primarily by the supply and demand for such shares as well as other factors, including, but not limited to, fluctuations in actual or projected operating results of the Company or its competitors, changes in projected earnings or failure to meet securities analysts earnings

98 expectations, changes in trading volume in the shares, changes in macroeconomic conditions, the activities of competitors, changes in the market valuation of similar companies, changes in investor or analysts perception of the GCP Group or the real estate industry, changes in the statutory framework in which the GCP Group operates, differences between the actual and the projected published portfolio value of the properties held by the GCP Group, assessments by investors with regard to the strategy described in this Prospectus as well as the assessment of the related risks, changes in the shareholder structure as well as other factors. Furthermore, external factors such as changing demand in the real estate markets, monetary or interest rate policy measures by central banks, seasonal influences or unique events can impact the revenues and the earnings of the GCP Group and lead to fluctuations in the price for the shares of the Company. The shares may therefore be subject to substantial fluctuations. Stock markets have experienced extreme volatility in recent years which has often been unrelated to the operating performance of particular company or industry sector. In addition, the Company s share price may also be subject to significant volatility. General market conditions and fluctuations in share prices and trading volumes generally, could adversely affect the trading price of the Company s shares. Future offerings of debt or equity securities by the Company or conversion under outstanding convertible bonds may materially adversely affect the market price of the shares, and future capitalization measures could lead to substantial dilution, i.e. a reduction in the value of the shares and the control rights, of existing shareholders interests in the Company. The Company may in the future require additional capital to finance its business and growth. In the future, the Company may seek to raise capital through offerings of debt securities (potentially including convertible debt securities) or additional equity securities or through other measures. The Company presently has outstanding convertible bonds in the aggregate principal amount of 450 million ( Series F Bonds or Convertible Bonds ). The Series F Bonds are initially convertible into up to approximately million shares at an initial conversion price of per share, representing up to 10.8 % of the fully diluted share capital of the Company. Given such conversion price and in the event that all of the bondholders decide to convert their bonds into ordinary shares such conversion might cause the issue of up to million new shares. The number of shares to be issued upon conversion might increase through future capital measures of the Company due to conversion price adjustments set forth in the terms and conditions of the Convertible Bonds. Conversions under the Convertible Bonds will dilute current shareholders and may adversely affect the trading price of the Shares. In addition, the conditions of the Convertible Bonds provide for adjustment of the conversion price in the event the Company distributes dividends. For this purpose, the bondholders of the Convertible Bonds will be compensated by an adjustment of the conversion price as if they already were holding shares at

99 the point in time of the dividend distribution. Therefore, any distribution of dividends will increase the dilution effect of potential conversions. Also an issuance of additional equity securities or debt securities with a right to convert into equity - such as convertible bonds - in the future could potentially reduce the market value of the shares and would dilute the economic and voting rights of existing shareholders if subscription rights were not granted to existing shareholders or, if granted, were not exercised by the existing shareholders. The issuance of additional shares or similar capital-raising measures and the timing and nature of any future offering would depend on market conditions of such an offering, the Company cannot predict or estimate the amount, timing or nature of future offerings. In addition, the acquisition of other companies or investments in other companies in exchange for newly shares of the Company, or a share issue in relation to possible future employee participation programs could lead to a dilution of the economic and voting rights of existing shareholders. Future offerings may adversely affect the trading price of the shares and/or dilute current shareholders. Following the admission to trading on the regulated market, Aroundtown Property Holdings plc will continue to be in a position to exert substantial influence on the Company. The interest pursued by this shareholder could differ from the interests of the other shareholders. Edolaxia Group Limited, a subsidiary of Aroundtown Property Holdings plc ( Aroundtown ), a public company the shares of which are listed on the Alternext segment of Euronext Paris, currently holds % of the voting rights in the Company and is the Company s largest shareholder. Aroundtown is controlled though its major shareholder Avisco Group plc holding approximately 50% of the shares in Aroundtown. Avisco Group plc in turn is controlled by Mr. Yakir Gabay. Through Edolaxia Group Limited Aroundtown is in a position to exert substantial influence at the general meeting of the Company s shareholders and consequently on matters decided by the general meeting of the Company s shareholders. If there was low shareholder attendance at the general meeting of the Company s shareholders, Edolaxia Group Limited could adopt and implement or prevent the adoption of resolutions by the general meeting of the Company s shareholders which require a simple majority or even higher majorities solely through the exercise of its own votes. Such resolutions include the appointment of members of the board of directors and the distribution of dividends. Furthermore, Edolaxia Group Limited could prevent a general meeting of the Company s shareholders from adopting resolutions which require a qualified majority of the votes cast. In any of the aforementioned instances, the interests of Aroundtown could deviate from the interests of other shareholders. Even if Aroundtown would not in fact use its stake to influence the

100 Company, the possibility of such an influence could have material adverse effects on the Company's share price and make it more difficult for the Company, for example, to raise capital. Future sales or market expectations of sales of a large number of shares by the Company s largest shareholders or other shareholders could cause the share price to decline. Edolaxia Group Limited currently holds % of the Company's share capital. There are no lock-up agreements in place with respect to the Shares, neither with the Edolaxia Group Limited nor with other shareholders. Thus, Edolaxia Group Limited and the other shareholders are free to sell their shares in the Company at any time. The Company's share price could fall substantially if Edolaxia Group Limited sells some or all of its shares or if such sales are anticipated by investors. This also applies if other significant shareholders sell shares in the market or if such a sale is expected. Edolaxia Group Limited has in the past pledged its shares held in the Company as security for credit facilities of various types and may do so in the future. Such credit facilities may include provisions with respect to mandatory prepayments and/or cancellations in the event of a change of control or in the case of the occurrence of certain events or triggers with respect to the pledged securities, including a decline in share price. An enforcement of securities granted over the shares may result in a sale of the respective shares which may lead to a significant decline in share price. In addition, the sale or market expectation of a sale of a large number of shares by Edolaxia Group Limited or other significant shareholders could make it difficult for the Company to issue new shares in the future on favourable terms. The payment of future dividends will depend on the Group s business, net assets financial conditions and result of operations The general meeting of the Company s shareholders will decide on matters relating to the payment of future dividends. Such decisions are based on the Company s particular situation at the time, including its earnings, financial and investment needs, and the availability of the distributable balance sheet income or reserves of the Company. As the Company conducts its operating business solely through its subsidiaries, the Company s ability to pay dividends depends directly on its operating subsidiaries distributions of earnings or repayment of loans to the Company. Current and future financing agreements entered into by the Company s subsidiaries or changes in tax laws under applicable jurisdictions and other applicable legislation may effectively limit the amount of cash available to the Company s subsidiaries to pay to the Company or may otherwise restrict the Company s subsidiaries ability to make cash contributions. In addition, some financing arrangements contain restrictions on the disposal of certain assets and covenants relating to leverage ratios. Any of these factors could restrict the Company s ability to pay dividends

101 The Company will face additional administrative requirements and incur higher ongoing costs as a result of the admission to trading on the regulated market of the Frankfurt Stock Exchange. After the admission to trading on the regulated market, the Company will for the first time be subject to the legal requirements and post-admission obligations for companies listed on the regulated market under the laws of Luxembourg and Germany. These requirements and postadmission obligations include periodic financial reporting and several other public disclosures of information (including those required by the stock exchange listing authorities) and other required disclosures which in general are more comprehensive and detailed than those the Company is presently exposed to due to the listing of its shares in the open market of the Frankfurt Stock Exchange (Scale segment). Such post admission obligations include, inter alia, publication of notification of the acquisition or disposal of major shareholdings, publication of certain information prior to the holding of general meetings of the Company s shareholders and the publication of voting results after general meetings of the Company s shareholders. There is no guarantee that the Group's accounting, controlling, compliance, legal or other corporate administrative functions will be capable of responding to these additional requirements without incurring significant additional expenditures and/or exposing the Company to legal, regulatory or civil costs or penalties. Furthermore, the preparation, convening and conduct of general shareholders' meetings and the Company's regular communications with shareholders and potential investors may entail substantially greater expense. The management of the Company will need to devote time to these additional requirements that it could otherwise devote to other aspects of managing the operations of the GCP Group, and these additional requirements could also entail substantially increased time commitments and costs for the accounting, controlling, compliance and legal departments and other GCP Group administrative functions. Any inability of the GCP Group's administrative functions to handle the additional demands placed on the GCP Group as well as any costs resulting thereof may have a material adverse effect on the business, results of operations and financial condition of the GCP Group

102 GENERAL INFORMATION Responsibility Statement Grand City Properties S.A., with its registered office at 24, Avenue Victor Hugo, L-1750 Luxembourg, Grand Duchy of Luxembourg, registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés de Luxembourg) under number B ( the Company, and together with its consolidated subsidiaries the GCP Group or the Group ) assumes responsibility for the content of this prospectus (the Prospectus ) pursuant to Article 9 of the Law of 10 July 2005 on prospectuses for securities (Loi du 10 Juillet 2005 relative aux prospectus pour valeurs mobilières) as amended (the Luxembourg Prospectus Law ) and declares that, having taken all reasonable care to ensure that such is the case, to the best of its knowledge as at the date of this Prospectus, the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect its import as at the date of this prospectus. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the member states of the European Economic Area, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Notwithstanding Article 13 of the Luxembourg Prospectus Law, the Company is not required by law to update this Prospectus. Purpose of this Prospectus This Prospectus has been prepared for the purpose of the admission of 153,788,883 ordinary bearer shares, having a par value of 0.10 each and full dividend rights as of 1 January 2016 (the Shares ), being the entire share capital of the Company, to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional postadmission obligations (Prime Standard) of the Frankfurt Stock Exchange. Forward-Looking Statements This Prospectus contains certain forward-looking statements. A forward-looking statement is a statement that does not relate to historical facts and events. They are based on analyses or forecasts of future results and estimates of amounts not yet determinable or foreseeable. These forward-looking statements are identified by the use of terms and phrases such as anticipate,

103 believe, could, estimate, expect, intend, may, might, plan, predict, project, will, aim and similar terms and phrases, including references and assumptions. This applies, in particular, to statements in this Prospectus containing information on future earning capacity, plans and expectations regarding the GCP Group s business and management, its growth and profitability, and general economic and regulatory conditions and other factors that affect it. Forward-looking statements in this Prospectus are based on current estimates and assumptions that the Company based on its present knowledge. These forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results, including the GCP Group s financial condition and results of operations, to differ materially from and be worse than results that have expressly or implicitly been assumed or described in these forward-looking statements. The GCP Group s business is also subject to a number of risks and uncertainties that could cause a forward looking statement, estimate or prediction in this Prospectus to become inaccurate. Accordingly, investors are strongly advised to read the following sections of this Prospectus: Summary, Risk Factors and General Information on the Company and the Group. These sections include more detailed descriptions of factors that might have an impact on the GCP Group s business and the markets in which it operates. In light of these risks, uncertainties and assumptions, future events described in this Prospectus may not occur. In addition, the Company assumes no obligation, except as required by law, to update any forwardlooking statement or to conform these forward-looking statements to actual events or developments. Appraiser The independent, external appraisers of Jones Lang LaSalle SE, Rahel-Hirsch-Straße 10, Berlin, Germany ( Jones Lang LaSalle ), prepared a report on the fair value of certain properties held by the Group with dates of valuation as of 31 December 2016 and 15 February 2017 respectively in accordance with the RICS Valuation - Professional Standards (current edition) published by the Royal Institution of Chartered Surveyors (RICS) as well as the standards contained within the TEGoVA European Valuation Standards, and in accordance with IVSC International Valuation Standard 1 (IVS 1), the International Accounting Standards (IAS), International Financing Reporting Standards (IFRS) as well as the current guidelines of the European Securities and Market Authority (ESMA) on the basis of Market Value (the Property Appraisal Report ). The Property Appraisal Report is reprinted in this Prospectus (see Property Appraisal Report ). Jones Lang LaSalle employs publicly appointed and sworn experts and members of the Royal Institution of Chartered Surveyors (RICS). The appraiser has consented to the inclusion of the Property Appraisal Report in the unmodified form authorized by them and have approved the context in which it is presented. The Company represents that, as at the date of this Prospectus, it is not aware of any material change in the value of the properties appraised

104 in the Property Appraisal Report since the respective appraisal dates of the Property Appraisal Report. Information Derived from Third Parties; Sources In this Prospectus, the GCP Group relies on and refers to information regarding its business and the markets in which it operates and competes. Certain economic and industry data, market data and market forecasts set forth in this Prospectus were extracted from market research, governmental and other publicly available information and independent industry publications. These external sources include: - Berliner Senatsverwaltung für Stadtentwicklung und Umwelt, Bevölkerungsprognose für Berlin und die Bezirke , Januar 2016 ( Berliner Senatsverwaltung für Stadtentwicklung und Umwelt, Bevölkerungsprognose für Berlin und die Bezirke ); - Bertelsmann Stiftung, Deutschland zwischen Wachstum und Schrumpfung, 2015 ( Bertelsmann Stiftung, Deutschland zwischen Wachstum und Schrumpfung ); - City of Dresden, Focus on Dresden - The Capital of Saxony in Figures 2014/2015, September 2014 ( City of Dresden, Focus on Dresden - The Capital of Saxony in Figures 2014/2015 ); - City of Dresden, online database, topics: Leben in Dresden, Statistik & Geodaten, 1. Bevölkerung & Gebiet, Haushalte, 2. Bauen, Wohnen, Verkehr & Sicherheit, Gebäude- und Wohnungsbestand, 2017 ( City of Dresden, Statistics ); - City of Leipzig, online database (Leipzig-Informationssystem LIS), topics: Kleinräumige Daten, 1. Bevölkerungsbestand, Personenhaushalte , 2. Bautätigkeit & Wohnen, Wohnungsbestand , 2017 ( City of Leipzig, LIS ); - City of Leipzig, Statistisches Jahrbuch 2014, November 2014 ( City of Leipzig, Statistisches Jahrbuch 2014 ); - City of Leipzig, Statistisches Jahrbuch 2015, September 2015 ( City of Leipzig, Statistisches Jahrbuch 2015 ); - empirica AG, CBRE-empirica-Leerstandsindex , May 2013 ( CBRE-empirica- Leerstandsindex ); - empirica AG, CBRE-empirica-Leerstandsindex , December 2015 ( CBREempirica-Leerstandsindex );

105 - empirica AG, CBRE-empirica-Leerstandsindex 2014 und Prognose 2020, December 2015 ( CBRE-empirica-Leerstandsindex 2014, Prognose 2020 ); - Eurostat - Statistical Office of the European Union, online database, topic: Unemployment Statistics, January 2017 ( Eurostat, Unemployment Statistics ); - Eurostat - Statistical Office of the European Union, online database, topic: Housing Statistics, November 2015 ( Eurostat, Housing Statistics ); - Federal Statistical Office, Bevölkerung und Haushalte, Entwicklung der Privathaushalte bis 2030, Ergebnisse der Haushaltsvorausberechnung, 2010, March 2011 ( Federal Statistical Office, Bevölkerung und Erwerbstätigkeit 2010 ); - Federal Statistical Office, online database, topic: National Accounts, 2017 ( Federal Statistical Office, National Accounts ); - Federal Statistical Office, online database, topic: Population, Migration, Migration Statistics, 2017 ( Federal Statistical Office, Migration Statistics ); - Federal Statistical Office, online database, topic: Population, Current Population, Population Projections, 2017 ( Federal Statistical Office, Population Projections ); - Federal Statistical Office, online database, topic: Population, Microcensus, 2017 ( Federal Statistical Office, Microcensus ); - Federal Statistical Office, online database, topic: Prices; Consumer prices, Consumer Price Index for Germany, 2017 ( Federal Statistical Office, Consumer Price Index for Germany ); - Federal Statistical Office, online database, topic Projected households, 2017 ( Federal Statistical Office, Projected households ); - Federal Statistical Office, press release no. 21, 20 January 2016 ( Federal Statistical Office, Press Release as of 20 January 2016 ); - Federal Statistical Office, Statistical Yearbook 2013, 4 October 2013 ( Federal Statistical Office, Statistical Yearbook 2013 ); - Federal Statistical Office and the statistical Offices of the Laender, online database, topic: Building and Housing; Buildings and Dwellings, Stock of Residential Buildings and Dwellings, 2017 ( Federal Statistical Office and the Statistical Offices of the Laender, Stock of Residential Buildings and Dwellings );

106 - Federal Statistical Office and the statistical Offices of the Laender, online database, topic: Population, Migration, Migration Statistics, 2016 ( Federal Statistical Office and the Statistical Offices of the Laender, Migration Statistics ); - Federal Statistical Office and the statistical Offices of the Laender, online database, topic: National Accounts - Gross Domestic Product, 30 March 2016 ( Federal Statistical Office and the Statistical Offices of the Laender, National Accounts - Gross Domestic Product ); - Immobilienverband IVD, IVD-Wohn-Preisspiegel 2009/2010, December 2009 ( IVD-Wohn- Preisspiegel 2009/2010 ); - Immobilienverband IVD, IVD-Wohn-Preisspiegel 2014/2015, October 2014 ( IVD-Wohn- Preisspiegel 2014/2015 ); - International Monetary Fund, database, topic: World Economic Outlook, October 2016 ( IMF, World Economic Outlook ); - Jones Lang LaSalle, Market Consideration - North Rhine-Westphalia, February 2013 ( Jones Lang LaSalle, Market Consideration - NRW ); - Jones Lang LaSalle, Residential property market Berlin - 1st half of 2016, 30 August 2016 ( Jones Lang LaSalle, Residential property market Berlin ); - Moody s Investors Service Inc., website of the company, 2017 ( Moody s ); - Standard & Poor s Financial Services LLC, website of the company, 2017 ( Standard & Poor s ); - Statistisches Landesamt des Freistaates Sachsen, Publication, Statistik in Sachsen, March 2011 ( Statistisches Landesamt des Freistaates Sachsen, Statistik in Sachsen 17-1/2011 ); - Statistisches Landesamt des Freistaates Sachsen, Publication, Statistik in Sachsen, April 2013 ( Statistisches Landesamt des Freistaates Sachsen, Statistik in Sachsen 19-1/2013 ). Where information in this Prospectus has been specifically identified as having been extracted from third party documents, the Company confirms that this information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Although the Company has no reason to believe that any of this information is inaccurate in any material respect, the Company has not independently verified

107 the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. The Company does not make any representation as to the accuracy of such information. This Prospectus also contains estimates of market data and information derived from these estimates that would not be available from publications issued by market research firms or from any other independent sources. This information is based on internal estimates of the Company and, as such, may differ from the estimates made by competitors of the Group or from data collected in the future by market research firms or other independent sources. In addition, the Company assumes no obligation, except as required by law, to give updates of these figures. Documents on display For the duration of the validity of this Prospectus, copies of the following documents referred to in this Prospectus, including the Prospectus, will be available free of charge for inspection during regular business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of the Company at 24, Avenue Victor Hugo, L-1750 Luxembourg, Grand Duchy of Luxembourg: (i) (ii) (iii) (iv) (v) (vi) the most recent version of the articles of association (the Articles of Association ) of the Company; the audited consolidated financial statements prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union ( IFRS ) of the Company for the fiscal year ended 31 December 2016 (the 2016 Consolidated Financial Statements ); the audited consolidated financial statements prepared in accordance with IFRS of the Company for the fiscal year ended 31 December 2015 (the 2015 Consolidated Financial Statements ); the audited consolidated financial statements prepared in accordance with IFRS of the Company for the fiscal year ended 31 December 2014 (the 2014 Consolidated Financial Statements ); this Prospectus; the Property Appraisal Report. This Prospectus will be published on the website of the Luxembourg Stock Exchange (

108 Currency and Financial Data In this Prospectus all references to, EUR or Euro are to the currency introduced at the start of the third stage of the European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the Euro, as amended. The financial data contained in this Prospectus is - except as stated otherwise - derived from the 2016 Consolidated Financial Statements, the 2015 Consolidated Financial Statements and 2014 Consolidated Financial Statements. The financial data in the section Capitalisation and Indebtedness, Statement on Working Capital is derived from the Company s internal accounting system. For more detailed information about financial information, see Selected Consolidated Financial Information and Financial Information. Where financial data in this Prospectus is labelled audited, this means that it has been taken from the audited financial statements mentioned above. The label unaudited is used in the Prospectus to indicate financial data that has not been taken from the audited financial statements mentioned above or is based on calculations of these figures. All of the financial data presented in the Prospectus are shown in thousands of euro (in thousands or thousand ), except as otherwise stated. Figures In order to ensure that figures given in the text and the tables sum up to the totals given, the numbers are commercially rounded to the nearest whole number or in some cases to such number that facilitates the summing up. As a result of rounding effects, the aggregated figures in the tables may differ from the totals shown. Financial information presented in parentheses denotes the negative of such number presented. In respect of financial data set out in the main body of the Prospectus, both a dash ( - ) or zero ( 0 ) are used to signify both unavailable figures and figures which are either exactly zero or have been rounded to zero. Statutory Auditors The operations of the Company are supervised by one or several statutory auditors. The statutory auditors are appointed by the general meeting of the Company s shareholders which determines their number, remuneration and term of office not exceeding six years. At the date of this Prospectus KPMG Luxembourg, a cooperative company (société coopérative) incorporated under the laws of Luxembourg and having its registered office at 39, Avenue John F. Kennedy, L-1855 Luxembourg, registered with the RCSL under number B ( KPMG

109 Luxembourg ) is appointed as the approved independent statutory auditor (réviseur d entreprises agréé) of the Company. Its mandate expires at the annual general meeting of the shareholders of the Company to be held in KPMG Luxembourg is registered as a corporate body with the official table of company auditors drawn up by the Luxembourg Ministry of Justice and is a member of the Institute of Auditors (l Institut des Réviseurs d Enterprises) and is approved by the CSSF in the context of the law of 18 December 2009 relating to the audit profession, as amended. The 2016 Consolidated Financial Statements, the 2015 Consolidated Financial Statements and the 2014 Consolidated Financial Statements have been audited by the statutory auditor of the Company, KPMG Luxembourg, which in each case provided an unqualified auditor s report reproduced in this Prospectus. Rating As at the date of this Prospectus, the Company as well as the Series D Bonds, the Series E Bonds and the Series F Bonds are assigned a BBB+ rating with a stable outlook for the Company by Standard & Poor s Credit market Services Europe Limited ( S&P ). Furthermore, as at the date of this Prospectus the Company as well as the Series D Bonds, the Series E Bonds and the Series F Bonds are assigned a Baa2 rating with a positive outlook for the Company by Moody's Investors Service, Inc ( Moody s ). The Perpetual Notes are assigned a BBB- rating by S&P and a Ba1 rating by Moody's. The credit rating opinions awarded by S&P range from the highest rating AAA, which is defined as extremely strong capacity to meet financial commitments to the lowest rating D, which is defined as Payment default on financial commitments (Source: Standard & Poor s). S&P define a BBB rating for a long-term issuer as follows: An obligor rated 'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. S&P define a BBB rating for a long-term issue obligation as follows: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The global long-term rating scales awarded by Moody s range from the highest rating Aaa, which is defined as Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk. to the lowest rating C, which is defined as Obligations rated C are

110 the lowest rated and are typically in default, with little prospect for recovery of principal or interest. (Source: Moody s). Moody s defines a Baa rating as follows: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. Moody s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a (hyb) indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms. Moody s defines a Ba rating as follows: Obligations rated Ba are judged to be speculative and are subject to substantial credit risk. Moody s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a (hyb) indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms. Both, S&P and Moody s are established in the European Community and are registered under Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, as amended by Regulation (EC) No 513/2011 of the European Parliament and of the Council of 11 May 2011(the CRA Regulation ). Both, S&P and Moody s are included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation at A rating by a rating agency or a third party is not a recommendation to buy, sell or hold shares and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency or third party. There is no guarantee that the rating will remain stable for a certain period of time and that it will not be reduced or withdrawn completely, should this be necessary in the rating agency s or third party s opinion

111 THE ADMISSION OF THE SHARES TO TRADING Admission to the Frankfurt Stock Exchange and Commencement of Trading, Reasons, Costs On 21 April 2017, the Company filed an application to have the entire share capital of the Company listed for trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange. Admission is expected to occur on 8 May The trading of the Shares on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) is expected to commence on or around 9 May Upon commencement of trading of the Shares on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange, the trading of the shares on the open market of the Frankfurt Stock exchange (Scale segment) will cease. The Board of Directors considers the admission to be in the best interests of the Company and the shareholders of the Company, as a whole, as it is believed that the admission will enhance the visibility and tradability of the Company s shares and will further support the entry into various stock indices. The Company estimates that the overall costs and expenses relating to the Admission (including commissions for the Listing Agent and fees for legal advisors, accountants and appraisers) will be approximately 1 million. Information on the Shares of the Company Class of shares, currency and governing legislation The Company s Articles of Association provide for one class of shares. The Shares are issued under Luxembourg law and are subject to the provisions of the Company s Articles of Association the Luxembourg law of 10 August 1915 on commercial companies, as amended and all other applicable laws. The Shares are issued in euro currency

112 Form and representation of shares In compliance with the Company s Articles of Association all existing Shares of the Company are in bearer form having a par value of 0.10 each. The present share capital in the amount of 15,378, is represented by several global share certificates without dividend coupons that are on deposit with Clearstream Banking AG, Eschborn. ISIN/Common Code/Trading Symbol International Securities Identification Number (ISIN) German Securities Code (WKN) LU A1JXCV Common Code Trading Symbol GYC Transferability All Shares of the Company are freely transferable. There are no prohibitions on disposal or restrictions with respect to the transferability of the Company s shares. Approval of this Prospectus This Prospectus constitutes a prospectus in the form of a single document within the meaning of the Prospectus Directive and the Luxembourg Prospectus Law and has been prepared in accordance with the Luxembourg Prospectus Law. The CSSF, in its capacity as competent authority in the Grand Duchy of Luxembourg under the Luxembourg Prospectus Law, has approved this document as a prospectus. By approving this prospectus, the CSSF assumes no responsibility and does not give any undertaking with regard to the economic and financial soundness of the transaction or the quality or solvency of the Company in line with the provisions of article 7(7) of the Luxembourg Prospectus Law. Designated Sponsors Each of Joh. Berenberg, Gossler & Co. KG, HSBC Trinkaus & Burkhardt AG, Baader Bank Aktiengesellschaft, Oddo Seydler Bank AG and DZ Bank AG have assumed the function of designated sponsor of the Company s Shares currently traded in the open market on the Frankfurt Stock Exchange on the Scale segment and will continue such function for the time being once the Shares are listed on the regulated market of the Frankfurt Stock Exchange

113 (Frankfurter Wertpapierbörse) in the Prime Standard segment. They may designate a duly authorized third party to perform the related functions. Pursuant to the respective designated sponsor agreements concluded between the respective designated sponsors and the Company, the designated sponsors will, among others things, place limited buy and sell orders for shares of the Company in the electronic trading system of Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) during daily trading hours. This is intended to achieve greater market liquidity for the Shares. Material Interests of Persons regarding the Admission, including Conflict of Interests The Company and its shareholders have an interest in the admission to trading of the Company s shares on the regulated market, as the admission to trading in a regulated market is expected to have a positive impact on the liquidity of the Company s shares on the stock exchange. quirin bank AG, Kurfürstendamm 119, Berlin, Germany ( quirin or the Listing Agent ) which will apply together with the Company for the Admission has an interest in the admission to trading of the Company s shares on the regulated market, as it is entitled to a commission for its services related thereto. Besides these interests, there are no other interests or potential conflicts of interest known to the Company that are material to the admission

114 DIVIDEND POLICY, DIVIDEND DISTRIBUTIONS General Provisions Relating to Profit Allocation and Dividend Payments All of the Shares carry equal dividend rights. The net profit of the Company is represented by the credit balance on the profit and loss account, after the deduction of the general expenses, social charges, write-offs and provisions for past and future contingencies, as determined by the Board of Directors. Every year, five per cent of the net profit will set aside in order to build up the legal reserve. This deduction will cease to be compulsory when the statutory reserve reaches one tenth of the issued share capital. Distribution from this reserve is restricted. The remaining balance of the net profit is at the disposal of the general meeting of the Company s shareholders. Dividends, when payable, are distributed at the time and place fixed by the Board of Directors within the limits of the decision of the general meeting of the Company s shareholders. Interim dividends may be distributed by the Board of Directors subject to the conditions provided for in article 72-2 of the law of 10 August 1915 on commercial companies, as amended and the Company s Articles of Association. The general meeting of shareholders of the Company may decide to assign profits and distributable reserves to the reimbursement of the capital without reducing the corporate capital. For details on the taxation of dividends paid by the Company to its shareholders, if any, see Taxation in the Grand Duchy of Luxembourg - Taxation of Investors and Taxation in the Federal Republic of Germany - Taxation of Dividends. History of Dividend Policy and Earnings Per Share History of Earnings Per Share For the year ended 31 December 2016 IFRS (audited) 2015 IFRS (audited) 2014 IFRS (audited) Total profit attributable to the owners of the Company (in thousands of Euro) 544, , ,575 Weighted average number of ordinary shares in thousands 152, , ,577 Basic Earnings per share in Total profit attributable to the owners of the Company (diluted) (in thousands of Euro) 545, , ,420 Weighted average number of ordinary shares (diluted) in thousands 168, , ,400 Diluted Earnings per share in

115 The Company is a holding company. The business of the GCP Group is primarily conducted through direct and indirect subsidiaries of the Company. The ability of the Company to distribute dividends to its shareholders depends on distributions by the Company s subsidiaries. On 20 March 2017, the Board of Directors resolved on a dividend policy according to which 65 % of the Company's funds from operations ("FFO I") per share shall be distributed as annual dividends to the shareholders from the next dividend payment in This resolution raised the previous dividend policy as of 16 August 2016 (50 % of FFO I per share) and as of 14 January 2015 (30 % of FFO I per share). Any distribution of dividends is subject to a respective resolution of the shareholders annual general meeting. The following distributions of profits or reserves were made to shareholders of the Company in the current fiscal year and for the fiscal years 2016, 2015 and 2014: - In 2017 no distribution of profits or reserves were made until the date of this Prospectus; the Board of Directors intends to propose to the shareholders annual general meeting which is expected to be held in June 2017 a distribution of a cash dividend according to its dividend policy for the fiscal year For the fiscal year 2015, the shareholders annual general meeting resolved on 29 June 2016 upon the distribution of a cash dividend in the amount of 0.25 per share - For the fiscal year 2014, the shareholders annual general meeting resolved on 24 June 2015 upon the distribution of a cash dividend in the amount of 0.20 per share

116 CAPITALIZATION AND INDEBTEDNESS, STATEMENT ON WORKING CAPITAL The following tables set forth the Group s actual capitalization and indebtedness as of 28 February Investors should read these tables in conjunction with Selected Consolidated Financial Information, Management Discussion and Analysis of Net Assets, Financial Position and Results of Operations and the audited consolidated financial statements as of and for the year ended 31 December 2016 and the related notes, which are included in this Prospectus, beginning on page F-1. Capitalization As of 28 February 2017 (1) (unaudited) In thousands of Euro Total Current debt 353,166 Thereof guaranteed (2) - Thereof secured (3) 40,563 Thereof unguaranteed/unsecured 312,603 Total Non- Current debt (excluding current portion of long term debt) 2,754,893 Thereof guaranteed (2) - Thereof secured (3) 899,346 Thereof unguaranteed/unsecured 1,855,547 Shareholder's Equity (4) 3,069,106 Issued share capital 15,379 Legal Reserve (5)(6) 2,142,166 Other reserve (5)(7) 43,460 Equity Attributed to perpetual notes 671,435 Non-controlling Interest (5) 196,666 Total 6,177,166 (1) (2) (3) (4) (5) (6) (7) Unless stated otherwise in the footnotes below. Liabilities that are secured by bank guarantees. Secured by mortgages and therefore also via rent assignment and assignment of insurance claims. Referred to as Total Equity in the consolidated statement of financial position of the Company. Refers to the amount which the company presented in the audited consolidated financial statements as of 31 December Legal reserves includes the line items Retained earnings and Share premium referred to in the consolidated statement of financial position of the Company as at 31 December Other Reserves refer to the line item Capital reserve in the consolidated statement of financial position of the Company as at 31 December

117 Indebtedness As of 28 February 2017 (unaudited) In thousands of Euro A Cash (1) 357,514 B Cash equivalents - C Trading Securities (2) 94,348 D Liquidity (A)+(B)+(C) 451,862 E Current financial Receivables (3) 240,799 F Current bank debt - G Current portion of non-current debt 37,689 H Other current financial debt (4) 287,921 I Current financial debt (F)+(G)+(H) 325,610 J Net current Financial Indebtedness (I)-(E)-(D) - 367,052 K Non-current bank loans (5) 899,346 L Bonds Issued (6) 1,479,767 M Other non-current financial loans (7) 49,798 N Non-current Financial Indebtedness (K)+(J)+(M) 2,428,911 O Net - Financial Indebtedness (J)+(N) 2,061,860 (1) (2) (3) (4) (5) (6) (7) Contains bank balance and cash. Contains traded shares and bonds of public companies. Contain trade and other receivable, rent receivable, prepaid expenses and short term financial assets. Contains trade and other payable, tax payable and other creditors that become due for payment within one year. Contains liabilities to banks that become due for payment after one year, measured in accordance with IFRS. Refers to non-current straight bonds and convertible bonds issued by the Company Contains liabilities under tenancy deposits and financed lease and other long term creditors including derivatives that become due for payment after one year. Since 28 February 2017 the Group has entered into no additional material financial indebtedness

118 As of 28 February 2017 the Company had no material indirect liabilities and contingent liabilities (defined as commitments and contingencies) becoming due within one year. Statement on Working Capital The Company is of the opinion that the GCP Group is in a position to meet the payment obligations that become due within at least the next 12 months from the date of this Prospectus

119 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following selected historical financial information for the GCP Group is based on the audited consolidated financial statements of Grand City Properties S.A. for the fiscal years ended 31 December 2014, 2015 and 2016 (together the GCP Group s Financial Statements ), all of which are reproduced elsewhere in this Prospectus, and should be read together with them. The GCP Group s Financial Statements were prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted in the European Union. The GCP Group s Financial Statements were audited by KPMG Luxembourg and were issued in each case with an unqualified auditor's report. The following summary of financial information for the fiscal year 2014 is derived from the audited consolidated financial statements of the Company prepared in accordance with IFRS as of and for the fiscal year ended 31 December Certain balance sheet and profit and loss items relating to the fiscal year ended 31 December 2014 have been reclassified in the consolidated financial statements of the Company for the fiscal year 2015 to enhance comparability. The consolidated financial statements for the fiscal year ended 31 December 2014 are included in the Financial Information section of this prospectus starting on page F-1. Where financial data below is labelled audited, this means that it has been taken from the audited financial statements mentioned above. The label unaudited is used in the below tables to indicate financial data that has not been taken from the audited financial statements mentioned above but was taken either from the Group s accounting or controlling records, or is based on calculations of these figures. Also, some of the financial and performance indicators including non-ifrs measures reproduced below were taken from the Group s accounting records and are unaudited. In order to ensure that figures given in the text and the tables sum up to the totals given, the numbers are commercially rounded to the nearest whole number or in some cases to such number that facilitates the summing up. As a result of rounding effects, the aggregated figures in the tables may differ from the totals shown. Financial information presented in parentheses denotes the negative of such number presented. In respect of financial data set out in the main body of the Prospectus, both a dash ( - ) or a zero ( 0 ) are used to signify either unavailable figures or figures which are either exactly zero or have been rounded to zero. The following summary of financial information should be read together with the section Management s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the consolidated financial statements and the related notes contained in the section Financial Information and the additional financial information contained elsewhere in this Prospectus

120 Selected Consolidated Comprehensive Income Statement Data For the 12 months ended 31 December 2016 (audited) 2015 (audited) in thousands of Euro 2014 (audited) Revenue 442, , ,512 Rental and operating income 435, , ,837 Capital gains, property revaluations and other income 598, , ,969 Property operating expenses (204,108) (151,552) (100,175) Cost of buildings sold (4,971) - (14,425) Administrative & other expenses (9,550) (7,153) (5,650) Operating profit 822, , ,325 Finance expenses (36,319) (25,830) (22,040) Other financial results (11,121) (73) (32,664) Current tax expenses (26,799) (22,776) (13,863) Deferred tax expenses (95,518) (43,674) (29,924) Profit for the year 653, , ,

121 Selected Data from the Consolidated Balance Sheet As of 31 December (audited) (audited) (audited) in thousands of Euro ASSETS Investment property 4,768,487 3,845,979 2,179,982 Non-current assets 5,126,031 4,061,699 2,227,243 Current assets 1,027, , ,815 Total assets 6,153,733 4,688,903 2,629,058 EQUITY Total equity attributable to the owners of the Company 2,201,005 1,551, ,914 Equity attributable to perpetual notes investors 667, ,146 - Total equity attributable to the owners and perpetual notes investors 2,868,398 2,030, ,914 Non-controlling interests 196, ,260 90,736 Total equity 3,065,064 2,172,295 1,041,650 LIABILITIES Loans and borrowings 896, , ,217 Convertible bond 427, , ,451 Straight bonds 1,050,078 1,045, ,381 Deferred tax liabilities 325, , ,003 Non-current liabilities 2,750,344 2,239,291 1,434,142 Current portion of long term loans 18,406 19,998 5,792 Loan redemption 10,830 34,678 - Trade and other payables 251, , ,837 Current liabilities 338, , ,266 Total liabilities 3,088,669 2,516,608 1,587,408 Total equity and liabilities 6,153,733 4,688,903 2,629,

122 Selected Data from the Consolidated Cash Flow Statement For the 12 months ended 31 December 2016 (audited) 2015 (audited) in thousands of Euro 2014 (audited) Net cash provided by operating activities 201, , ,884 Net cash used in investing activities (557,184) (1,215,048) (327,903) Net cash provided by financing activities 570,397 1,023, ,608 Net increase in cash and cash equivalents 214,506 (34,130) 137,589 Selected Other Consolidated Key Financial Information The Company presents certain non-ifrs financial information in this Prospectus. The Company uses this financial information because it believes that these are of use for its investors. According to the ESMA guidelines on Alternative Performance Measures ("APM"), the Company considers the following information presented in this Prospectus as APMs: EBITDA, Adjusted EBITDA, FFO I, FFO I per share, FFO II, LTV, EPRA NAV and EPRA NAV per share. All alternative performance measures used by the Company relate to its or the GCP Group's past performance. The Company believes that these measures are useful in evaluating the GCP Group's operating performance, the net value of the GCP Group's portfolio, and the level of indebtedness and of cash profits from the operations by the GCP Group s business, because a number of companies, in particular in the real estate sector, also publish these figures. However, none of the aforementioned performance measures are acknowledged under IFRS and none of these performance measures are suitable to replace financial information such as total assets, total equity, total liabilities, rental and operating income, operating profit, profit for the year, net cash provided by operating activities or net cash used in finance activities or other line items of the GCP Group s consolidated balance sheet, the consolidated comprehensive statement of consolidated income or the consolidated cash flow statement which have been prepared in accordance with IFRS. The alternative performance measures used by the GCP Group not necessarily state if the GCP Group has sufficient cash flow or liquidity and might not be suitable as performance indicators for the past operative result of the GCP Group. The alternative performance measures are not suitable to predict a future performance. Because not all companies in the real estate sector use the same performance indicators and also might calculate them differently, the display of the alternative performance measures by the GCP Group is not necessarily suitable to be compared with similar performance indicators of other companies. The below table contains a summary of alternative performance measures with respect to the fiscal years ended 31 December 2016, 2015 and

123 As of or for the 12 months ended 31 December, respectively (unaudited) in thousands of Euro (except as stated otherwise) EBITDA (1) 824, , ,228 Adjusted EBITDA (1) 224, , ,009 FFO I (2) 160, ,040 76,106 FFO I per share (in ) FFO II (3) 228, , ,212 EPRA NAV (4) 2,541,060 1,923,941 1,348,650 EPRA NAV per share (in ) LTV ratio (5) 34.9 % 41.9 % 45.1 % (1) EBITDA is defined as earnings before interest, tax depreciation and amortization. The figure is calculated by adding to the operating profit depreciation and amortization items. Adjusted EBITDA is an indicator of the recurring operational profit before interest and tax, excluding the effect of non-cash items which do not have a strictly operational and recurring nature. The Adjusted EBITDA deducts from the EBITDA the effect of capital gains, property revaluations and other income, result on the disposal of inventories - trading properties and share in profit from investment in equity accounted investees. The Adjusted EBITDA further excludes the contribution to the management long term share incentive plan. The following table shows the calculation of the EBITDA and Adjusted EBITDA for the periods presented: For the 12 months ended 31 December (audited, except as stated otherwise) in thousands of Euro Operating Profit 822, , ,325 Total depreciation and amortization 1,695 1, EBITDA(*) 824, , ,228 Capital gains, property revaluations and other income Result on the disposal of inventories - trading properties Share in profit from investment in equityaccounted investees (598,280) (311,131) (230,969) (2,031) - (250) (541) - - Management long term share incentive plan 1, n/a Adjusted EBITDA(*) 224, ,274(**) 112,009 (*) (**) Unaudited and derived from the internal management accounts of the Company. Reclassified in 2016 in order to exclude the non-cash effect of the management s long term incentive plan from the expenses

124 (2) The funds from operations I FFO I is an indicator for the recurring profit from operations, after deducting from the adjusted EBITDA the finance expenses, the current tax and respective minorities contribution to this item. The FFO I per share is calculated by dividing the FFO I by the weighted basic amount of shares in the respective period. The following table shows the calculation of the FFO I and FFO I per share for the periods presented: For the 12 months ended 31 December (unaudited, except as stated otherwise) in thousands of Euro Adjusted EBITDA 224, ,274(**) 112,009 Finance expenses(*) (36,319) (25,830) (22,040) Current tax expenses(*) (26,799) (22,776) (13,863) Contribution to minorities (1,491) (628) n/a FFO I 160, ,040(***) 76,106 Weighted average basic shares in thousands(*) (****) 152, , ,577 FFO I per share in (*) (**) (***) (****) Audited. Reclassified in 2016 in order to exclude non-cash effect the management long term incentive plan from the expenses. Reclassified in 2016 in order to exclude cash effective minority profits. Not considering the dilution effect of the management share plan as it is immaterial. (3) The funds from operations II FFO II includes results from the economic disposal profit of investment property and inventories. The FFO II is calculated by adding the total result from disposal properties to the FFO I. The following table shows the calculation of the FFO II for the periods presented: For the 12 months ended 31 December (unaudited) in thousands of Euro FFO I 160, ,040(*) 76,106 Total result from disposal properties 68,620 42,669 53,106 FFO II 228, , ,212 (*) Reclassified in 2016 in order to exclude cash effective minority profits. (4) EPRA NAV is defined by EPRA (European Public Real Estate Association) as the net asset value adjusted by including the properties and other investment interests at fair value and to exclude certain items not expected to crystallize in a long-term investment property business model. The purpose of EPRA NAV is to adjust the IFRS NAV in order to provide stakeholders with the most relevant information on the fair value of the Group s assets and liabilities within a true real estate investment company with a long-term investment strategy. The EPRA NAV is calculated by adding to the shareholder profit the effect of conversion of in-the-money convertible bonds, fair value measurements of derivative financial instruments and deferred tax liabilities. The EPRA NAV per share is calculated by dividing the EPRA NAV by the basic amount of shares, including in-the-money dilution effects. The following table shows the calculation of the EPRA NAV and EPRA NAV per share for the periods presented:

125 As of 31 December (**) (unaudited, unless stated otherwise) in thousands of Euro Equity per the financial statements(*) 3,065,064 2,172,295 1,041,650 Equity attributable to perpetual notes Investors(*) (667,393) (478,146) - Equity excluding perpetual notes 2,397,671 1,694,149 1,041,650 Effect of conversion of in-the-money convertible bond (***) Fair Value measurements of derivative financial instruments (*) - 125, ,451 11,536 6,995 9,282 Deferred tax liabilities 328, , ,003 NAV 2,737,726 2,066,201 1,439,386 Non-controlling interests(*) (196,666) (142,260) (90,736) EPRA NAV 2,541,060 1,923,941 1,348,650 EPRA NAV per share (*) (**) (***) Audited was reclassified for this Prospectus in order to fit the reconciliation of the comparable figures in 2015 and 2016 and deducts non-controlling interest from the NAV in order to get to the EPRA NAV. The amount includes accrued interest and deferred income of the convertible bonds. (5) The loan to value ratio ( LTV ) is an indicator to the financial leverage. The LTV is calculated by dividing the total net debt by the total value. By calculating its LTV, the Company includes into the total net debt the following items: loans and borrowings, loans and borrowings from liabilities held for sale, convertible bond, straight bonds, current portion of long term loans and loan redemption, net of cash and cash equivalents and traded securities at fair value through profit and loss. Total value is including investment property, inventories - trading property, advanced payments for investment property transactions, investment properties of assets held for sale and equity accounted investees. The following table shows the calculation of LTV for the periods presented:

126 As of 31 December (unaudited, unless stated otherwise) in thousands of Euro Investment property (**) 4,850,634 3,876,839 2,191,271 Investment properties of assets held for sale (*) 146, Equity accounted investees (*) 117, Total value 5,114,497 3,876,839 2,191,271 Total Debt(***) 2,415,397 2,014,889 1,259,841 Cash and liquid assets(****) 631, , ,296 Net debt 1,783,493 1,625, ,545 Total 34.9 % 41.9 % 45.1 % (*) (**) (***) (****) Audited. Including advanced payments for investment properties and balance of inventories. Including loans and borrowings, loan redemption, financial debt classified as held for sale, straight bonds and convertible bonds. Including cash and cash equivalents and traded securities at fair value through profit and loss

127 MANAGEMENT DISCUSSION AND ANALYSIS OF NET ASSETS, FINANCIAL POSITION, AND RESULTS OF OPERATIONS Investors are advised to read the following description and analysis of the Group s net assets, financial position and results of operations in connection with the sections entitled Business, Risk Factors and Financial Information. The following section contains forward-looking statements, which are subject to risks, uncertainties and other factors liable to cause actual events to deviate from the information contained in or suggested by such forward-looking statements (see Risk Factors and General Information - Forward-Looking Statements ). The financial information contained in this section is based on the Company s audited consolidated financial statements of the Group, prepared in accordance with the International Financial Reporting Standards as adopted by the EU ( IFRS ) as of and for the fiscal years ended 31 December 2016, 2015 and 2014, all of which are contained in the Financial Information section of this Prospectus, starting on page F-1. Where financial information below is labelled audited, this means that it has been taken from the audited financial statements mentioned above. Financial information which has not been taken from the aforementioned consolidated financial statements but, instead, is taken or derived from the Company s accounting records or internal management reporting systems or is based on calculations of financial information of the above mentioned sources is labelled in the following tables as unaudited. Some of the financial and performance indicators including non-ifrs measures reproduced below were taken from the Group s accounting records and are unaudited. Unless otherwise indicated, all the financial information presented in the text and the tables of this section of the Prospectus is shown in thousands of euros ( thousands) and is commercially rounded to one digit after the decimal point. Unless otherwise stated, all percentage changes in the text and the tables are commercially rounded to the first digit after the decimal point. As a result of rounding effects, the aggregated figures in the tables may differ from the totals shown and the aggregated percentages may not exactly equal %. Parentheses around any figures in the tables indicate negative values. Overview Grand City Properties S.A. is a leading specialist real estate company focused on investing in and managing value-add opportunities in the German residential real estate market. As of 28 February 2017, the Group s portfolio comprised approximately 84,000 units located in densely populated areas mainly in Berlin, NRW, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Bremen and Hamburg

128 As of 31 December 2016 the Group assessed the total market value of its real estate portfolio at 4.8 billion. As of the end of February 2017, the Group assessed the total market value of its real estate portfolio at 4.95 billion. The Property Appraisal Report included in this Prospectus that was used to determine fair value found the market value of the Group s real estate portfolio as of 31 December 2016 and 15 February 2017 to be 4.91 billion. The Property Appraisal Report covers 99% of the value of the Group s portfolio as of February The remaining properties are covered by other appraisers, causing some minor differences to the information presented in the Property Appraisal Report to the information presented by the Company. This results in a deviation of 40 million in investment property value, reflecting 300 units. Additionally, some operational differences arise from timing differences between the valuation report and the February 2017 portfolio presented by the Company. The valuation figures contained in the Property Appraisal Report differ by approximately 60 million (equal to approximately 1.26 %) higher to the equivalent figures contained in the Company s consolidated financial statements for the fiscal year ended 31 December 2016 mainly due to revaluation and minor differences refer to accounting policies (fair value versus cost method) and/or rounding differences. The GCP Group is active in all asset and property management activities along the real estate value chain. The Group s business model is focused on buying real estate properties with strong underlying fundamentals which are not optimally managed or positioned and improving the properties using intense property and tenant management as well as through targeted modernisations. The Group employs over 800 employees as of the date of this Prospectus. For the year ended on 31 December 2016, the GCP Group had revenues from rental and operating income of 436 million, an EBITDA of 825 million, an Adjusted EBITDA of 225 million, an FFO I of 160 million and a Net Profit of 653 million. As of 31 December 2016, Total Debt was 2.42 billion including convertible bonds, straight bonds and bank loans. As of 31 December 2016, Net Debt was 1.78 billion, resulting in a LTV of 34.9 %; EPRA NAV was 2.54 billion as of the same date. For a reconciliation of EBITDA, Adjusted EBITDA, FFO I, LTV and EPRA NAV see Selected Consolidated Financial Information - Selected Other Consolidated Key Financial Information. Key Factors Influencing the Net Assets, Financial Condition and Results of Operation The Company believes that the following factors and trends have affected the development of its net assets, financial results and business operation in the periods for which financial information is presented in this Prospectus. The Company s net assets, financial position and results of operations will continue to be subject to a range of influences that in turn depend on a number of other factors. These influences include, in particular:

129 Economic and demographic developments The Group s business activity is influenced by general economic factors relating to economic growth, opportunities for acquisitions, rental income levels, new regulations referring to the real estate sector, changes in interest rate levels, changes of tax rates, inflation and others. As the properties held by the Group are spread across various cities and regions in Germany, the Group s activities are directly and indirectly influenced by a number of demographic and economic factors. In particular the development of the German real estate market and the regional sub-markets the properties are located in may have a significant impact on the Group s business and the future prospects. As of end of February 2017, the Group s portfolio comprised approximately 84,000 units primarily in NRW, Germany s largest federal state, and the cities of Berlin, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Mainz, Bremen and Hamburg. By fair value the Group holds 32% of its portfolio in NRW, 17% in Berlin, 18% in Dresden, Leipzig and Halle as well as significant holdings in other major cities such as Mannheim, Frankfurt and Mainz, Nuremberg-Furth, Munich, Bremen and Hamburg, (all percentages given according to the fair value assessment of the Company as of end of February 2017). Because the performance of real estate markets is driven by changes in the overall economy, the Group s performance is affected not only by factors that impact the residential real estate markets, but also by factors that impact the economy more generally, such as interest rates, levels of public debt and inflation rates. In Germany, it is expected that population will decline and will increasingly age while the amount of households will increase and the average household size will decrease (Source: Federal States Office, Statistical Yearbook 2013). Thus, the population decline might not have any influence on the demand for real estate in general. However, the number of households and the amount of space needed per person might not increase to the extent projected. In addition, if the population begins to decline sooner or more rapidly than expected, and the number of households and average amount of space needed per person does not increase or increases more slowly than expected, the demand for rented space may decline. Also, demographic forecasts for large and rapidly growing cities in Germany deviate from forecasts for less densely populated areas, and it is expected that such regional differences will grow further. A declining population in rural areas may result in a decreasing demand in the respective housing markets and in an oversupply of housing. This trend of high vacancies affects cities and municipalities in the eastern part of Germany as well as regions in the western part facing structural problems (Source: Bertelsmann Stiftung, Deutschland zwischen Wachstum und Schrumpfung). A decline in the population in the markets in which the Group hold properties, which is not counterbalanced by a rising number of households or an increase of the average amount of space needed, would lead to lower demand, and, as a result, may adversely affect the Group s ability to achieve higher occupancy rates and average rent levels. Economic developments, such as local employment conditions in these locations or in case of a significant decline of the income or liquidity situation

130 of the respective tenants, may also lead to losses with respect to rental income. In addition to the loss of rent, the Group could also be exposed to increased vacancies. In such circumstances the Group may not be able to re-let the properties on attractive terms or might only be able to do so after making additional investment. For further information see Markets and Competition - Market Overview - Demand - Demographics in Germany, NRW, Berlin, Dresden and Leipzig and Markets and Competition - Market Overview - Supply - Housing Stock in Germany, NRW, Berlin, Dresden and Leipzig. Size of portfolio, rent levels and vacancy rates The Company s revenue is greatly affected by the rental income the properties generate. Factors influencing rental income are the portfolio size, in-place rent and vacancy rates. The Group focuses on acquiring properties which it believes have upside potential, primarily through operational improvements such as increased occupancy rates and rent levels. The following table sets forth information on the Group s property portfolio, its size and fair value, vacancy rates and in-place rent as of and for the years ended 31 December 2016, 2015 and 2014 as well as of 28 February As of 31 December As of 28 February (unaudited) (unaudited) (unaudited) (unaudited) Value (1) (in millions of ) 2,186 3,858 4,796 4,952 Area (2) (in 000' sqm) 2,921 4,861 5,192 5,298 EPRA Vacancy (3) 12.7% 12.5% 7.9% 7.8% Annualized net rent (4) (in millions of ) in-place rent per sqm (in ) Number of Units 42,555 75,636 82,673 84,102 Value per sqm (5) Rental yield (6) 7.1% 6.8% 6.4% 6.4% (1) (2) (3) (4) (5) (6) Means the book value of investment property recorded at fair value and inventories and trading properties recorded for at cost. Square meters of investment property, inventories and trading properties excluding ancillary areas such as storage. Estimated net rent of vacant area divided by the sum of net rent of occupied area and estimated net rent of vacant area; the Property Appraisal Report reprinted elsewhere in this Prospectus refers to the physical vacancy rate, which deviates from the EPRA Vacancy rate. The physical vacancy rate is calculated by dividing the vacant lettable area by the total lettable area. Net cold rent (Netto-Kaltmiete) of investment property and trading properties annualized as of the given cut-off date. Net cold rent (Netto-Kaltmiete) without parking and others divided by occupied area. Annualized net rent (Netto-Kaltmiete) divided by value. Portfolio size: The rental income of the Group is affected by the overall size of its investment portfolio. During the past three years the Group increased significantly the number of units in its portfolio. At the end of 2016, the Group owned 83 thousand units compared to 76 thousand units as of 31 December 2015 and 43 thousand units as of 31 December Correspondingly, rental

131 and operating income increased from 217 million in the fiscal year 2014 to 333 million in the fiscal year 2015 and further to 436 million in the fiscal year The Company intends as part of its strategy to further grow the portfolio through acquisitions. While such acquisitions will positively affect rental income, the impact on residential in-place rent (per month in per sqm), vacancy rates and operating measures such as FFO I, the LTV-Ratio and EPRA NAV will depend on the characteristics of the acquired portfolio and related financing. Rent levels: The rental income is directly affected by the level of residential in-place rent per square meter per month the Group is able to charge. Rent levels generally depend on the location and condition of the respective properties. The Group constantly monitors current market rents and rent indices (Mietspiegel) in individual regional markets where its properties are located and seeks to set rents in line with the current market level to the extent allowed by law and contractual arrangements. In the past three years, the Group average residential in-place rent per square meter per month increased from 5.2 in December 2014, to 5.3 in December 2015, to 5.4 in December Rental yield: The rental yield is defined as the annualized net rent divided by the value. The rental yield development is the result of the relative changes between rent levels and the portfolio value. In the past three years, the Group s rental yield decreased from 7.1% in December 2014, to 6.8% in December 2015, to 6.4% in December Vacancy rates and tenant turnover: Vacancy rates also affect the Group s profitability due to the loss of rental income and the inability to pass on to tenants the ancillary expenses with respect to vacant units. Whereas some of its competitors in the Company`s opinion generally aim to acquire properties which already provide for in-place rents at or around market level and low vacancy rates, the Group aims to acquire undermanaged properties in order to realise the potential of the acquired assets through its intense repositioning measures using property and tenant management as well as through targeted modernisations. Therefore, vacancy rates are often comparably higher when a property is acquired by the Group. Also tenant turnover contributes to the number of vacant units due to the fact that time may elapse before a newly vacated unit can be re-let. The vacancy rate of the Group s portfolio calculated according to EPRA was 12.7% as of 31 December 2014, 12.5% as of 31 December 2015 and 7.9% as of 31 December Subsidies: As of 31 December 2016 approximately 6% of the residential units held by the Group were rent-restricted due to subsidies or social charters. In addition, a portion of the Group s revenue is directly or indirectly dependent on social aid provided to or on behalf of the tenants, such as unemployment benefits (Arbeitslosengeld I), social welfare (Arbeitslosengeld II, Hartz IV) and housing subsidies (Wohngeld). See Risk factors - Risks Related to the Business of the GCP Group - With respect to certain of its properties the GCP Group is subject to contractual rent restrictions or restrictions on disposal inter alia, under so-called charters of social rights

132 (Sozialchartas), which restrict its ability to freely divest parts of its portfolio. Additionally, the GCP Group has received subsidies from public authorities restricting the level of rents chargeable on a part of the GCP Group s portfolio. Providers of the subsidised loans may also unilaterally exercise their right to increase the rate of interest payable on such loans. Acquisition opportunities The Group s portfolio growth is subject to the availability of properties for sale in the market at attractive prices. The Group seeks to acquire properties which the Company believes have valueadd potential, and the future growth of the Group depends on the availability of such properties for purchase at attractive prices. Given the current high demand for residential real estate in particular in Germany, and within Germany, in densely populated areas, such properties or portfolios of such properties may be unavailable or available only on unfavourable terms or at unattractive prices. Due to the ongoing consolidation process within the German residential real estate market the number of available properties has further decreased within the last two years. However, the Group believes that the growth of its portfolio over the past three years has successfully demonstrated that its sourcing network and focus on properties with repositioning potential provide sufficient acquisition opportunities. The Group also believes that further acquisition opportunities fitting its strategy will arise in the foreseeable future. Results from Fair Value adjustments of Investment Properties The Group accounts for its investment properties at fair value. The valuation model is predominantly based on the present value of net cash flows to be generated from the property, taking into account expected rental growth rates, occupancy rates, lease incentive costs such as rent-free periods and other costs not paid by tenants, as well as capex and maintenance expenses related to the property. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality, and lease duration and terms. The fair value thus reflects not only the circumstances directly connected with the property but also the general conditions of the real estate markets, such as regional market developments and general economic conditions or interest rate levels. Accordingly, there is a risk that in the event of a downturn in the real estate market or the general economic situation, the Group will need to revise downward the value of its properties. In addition, rising interest rates generally may have a negative influence on the fair value of property portfolios, and may impact the value of the Group s properties. Any change in fair value must be recognised as a profit or loss under the fair value adjustment. In the past three years the Group had strong increases in profits resulting from fair value adjustments. For the fiscal year ended 31 December 2015 changes in fair value in investment property amounted to 224 million which equals an increase by 17 % compared to

133 the fiscal year ended 31 December For the fiscal year ended 31 December 2016, changes in fair value in investment property increased from 224 million in 2015 to 562 million in 2016, reflecting an increase of 151 %. These increases result from materializing the value-add potential in the portfolio of the Group and repositioning its properties to higher quality assets alongside a larger portfolio resulting from acquisitions. Any negative significant fair value adjustments the Group is required to make in the future could have significant adverse effects on the Group s financial condition and results of operations, as well as the market price of the Company s shares. Additionally, there would be negative effects on performance indicators, particularly the EPRA NAV and LTV, which may have a negative influence on the credit rating of the Company. Interest rates and costs of debt An increase in interest rates could adversely impact the Group's business in a number of ways. 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, a future increase in interest rates may have a negative impact on the Group. As of the date of this Prospectus, approximately 97 % of the Group s interest rate exposure is hedged. In general, rising interest rates (or market expectations regarding future increases in interest rates) would make financing needed by the Group for its acquisition, capital expenditure and/or other real estate activities more expensive. Similarly, the willingness of purchasers to acquire real estate in such situations may be negatively affected, thereby restricting the Group s ability to dispose of its properties on favourable terms when desired. Rising interest rates could also impair the future performance of the Group s business, including its acquisitions and sales. In addition, the discount rate used to calculate the fair value of real estate properties tends to increase in an environment of rising interest rates, which in turn could result in the properties held by the Group having a lower fair value, resulting in significant losses for the Group. Rising interest rates and economic recovery could also prompt investors to prefer investments which potentially have a higher yield than investments in real estate, which could lead to a general decrease in the value of real estate, thereby having a negative impact on the valuation of the properties held by the Group. Debt financing and access to capital markets The Group has a substantial level of debt. As at 31 December 2016, the total carrying amount of the Group s Total Debt was approximately 2.42 billion and the Group's outstanding Net Debt (outstanding debt deducted by cash and liquid assets) was approximately 1.78 billion. When concluding financing agreements or extending such agreements, the Group depends on its ability to agree on terms for interest payments that will not impair its desired profit and amortisation schedules. As of 31 December 2016, the Group had bank loans in the amount of

134 937 million, including short term, loan redemption and debt held for sale. The bank loans are spread over more than 40 separate loans that are non-recourse to the Company and have no cross collateral or cross default provisions. In addition, as of 31 December 2016 the Group had outstanding 1.05 billion in principal amount of straight bonds and 428 million outstanding amount under convertible bonds. Maturities of material bank loans and the bonds issued range between 3 and 13 years, with the first material redemption in the amount of 500 million due in October In general, rising market interest rates would lead to higher financing costs in the future and so may have a material adverse effect on the business, financial condition and results of operations of the Group. The Company intends to refinance debt when falling due by refinancing through the issue of bonds, perpetual notes and credit facilities. The capability of the Group to satisfy existing financial indebtedness when due through refinancing might be adversely impacted by market conditions, development of the Group s business and overall level of indebtedness of the Group. Although the Group has successfully managed to refinance and reduce its debts and/or to extend maturity of its bank loan facilities, further increases in the level of total indebtedness might become more difficult or only available at less favourable terms. A part of the Group s financing strategy is to satisfy a significant portion of its future financing needs through the issuance of unsecured corporate bonds and notes. In November 2014, the Company obtained for the first time a corporate investment grade rating of "BBB-" from S&P which was improved to a BBB in July 2015 and was further upgraded to the Company s present BBB+ in November In addition, Moody s assigned to the Company a long-term issuer rating of Baa2 with a positive outlook. These rating improvements allowed the Group to reduce its costs of debt. As part of its financing strategy, the Groups aims to achieve a rating of A- by S&P or comparable rating by another rating agency in the long term. However, if the Company were to lose its investment grade rating, future issuances of unsecured bonds and notes may become significantly more expensive or may not be possible in the targeted amounts. S&P and/or Moody s could downgrade the Company, for instance if the value of its assets, its debt-service or interest coverage ratio were to fall below, or its debt-to-capital ratio exceeds, certain values, if the Group was unable to keep or render sufficient values of its assets unencumbered or if the real estate market in Germany deteriorates in general. If any of the risks described above were to materialise, it would be more difficult for the Group to pursue its current financing strategy. However, the Company believes that its debt structure, with an overall LTV of 34.9 % as of 31 December 2016, is conservative and provides the Company with adequate flexibility as to future financings. Property operating expenses The results of operations are impacted by the operating expense associated with the Group s properties. While the Group is able to pass on many of the operating expenses associated with its properties to its tenants, there are a significant number of expenses which the Group is not able

135 to pass along, including salaries and related expenses, net cost of utilities recharged and property operations and maintenance expenses. Unexpected or significant increases in operating expenses may have a corresponding impact on the Group s financial results. Factors that influence comparability of financial information The strong growth of the Group s portfolio over the periods under review influence the comparability of the financial information contained in the consolidated financial statements as of and for the fiscal years ended 31 December 2016, 31 December 2015 and 31 December Thus, the fair value of the Group s investment properties strongly increased during the period covered by the historical financial information from 2.2 billion as of 31 December 2014 to 4.8 billion as of 31 December Correspondingly, the income from rental and operating income increased from 217 million for the year ended 31 December 2014 to 333 million for the year ended 31 December 2015 and further increased to 436 for the year ended 31 December Results of Operations Revenue For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Rental and operating income 435, , ,837 Revenue from sales of buildings 7,002-14,675 Total revenue 442, , , compared to 2015 The revenue increased from 333 million in 2015 to 443 million in 2016, reflecting an increase of 33 %. The main driver for the strong growth is the increase in rental and operating income, which increased from 333 million in 2015 to 436 million in 2016, an increase of 31 %. The main driver for the increase results from the growth of the portfolio which increased from 76 thousand units at the beginning of the year to 83 thousand units as of 31 December Newly acquired assets contributed 30.5 million to the growth in rental and operating income in 2016, and the main other driver for the growth was the full year contribution of assets which were acquired in 2015 and thus could only impact the rental and operating income of 2015 on a pro rata basis. Other increasing effects are the Company s ongoing increases in rents and occupancy of the existing portfolio was a strong year in letting vacant apartments, supported by in

136 place rent increases. The Group also recorded revenue from sales of inventories at the amount of 7 million which is the result of the sale of properties which were held as inventory - trading properties. In 2015 no revenue from sale of buildings was recorded compared to 2014 The revenue increased from 232 million in 2014 to 333 million in 2015, reflecting an increase of 44 %. The increase is mainly the result of the increase in rental and operating income which increased in 2015 to 333 million, up from 217 million in 2014, reflecting an increase of 54 % or 116 million. The largest impact of the growth was from the portfolio extension to 76 thousand units as of yearend, up from 43 thousand units from the beginning of the year. The acquisitions in 2015 contributed 80 million to the rental and operating income of the entire period, almost 70 % of the growth of 116 million. The increase is also the result of acquisitions which were carried out in 2014 but only had a full year impact in In 2014, the Group recorded revenues from the sales of buildings from inventories of 14.7 million. In 2015, the Group did not dispose assets held as inventories and therefore no revenue was accounted in this item. Capital Gains, Property Revaluations and Other Income For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Change in fair value in investment property 561, , ,871 Profit arising from business combinations 33,187 85,763 35,472 Capital gains and other income 3, ,626 Total 598, , ,969 Capital gains, revaluations and other income are comprised of change in fair value in investment property and from capital gains, other income and profit arising from business combinations. Changes in fair value in investment property are revaluation gains (or losses), which are determined based on external valuation reports performed by independent professionally qualified valuators. The investment properties are valuated at least once a year and are determined primarily according to the Discounted Cash Flow ( DCF ) method, for a period of at least 10 years, implying the valuators assumptions and cash flow forecast. The valuator of the Company is predominantly Jones Lang Lassalle (for more information see General information - Appraiser ).

137 Profits arising from business combinations occur in a share deal acquisition where the fair value of the total identifiable net assets of the acquired company exceeds the purchase price. Capital gains and other income refer to gains from investment property disposals above their book value compared to 2015 The result in capital gains, property revaluations and other income increased from 311 million in 2015 to 598 million to 2016, reflecting an increase of 92 %. This increase in the values of the company s assets results from active management of the portfolio as well as from sourcing and acquiring properties with a potential to increase in value by reducing vacancy and increasing rent levels. The change in fair value in investment property, also known as revaluation gains, increased from 224 million in 2015 to 562 million in 2016, reflecting an increase of 150 %. This increase results from the Group materializing the value-add potential in its portfolio and repositioning its properties to higher quality assets. The item profit arising from business combinations decreased from 86 million in 2015 to 33 million in 2016, reflecting a decrease of 61 %. The decrease refers to more acquisitions performed through share deals in 2015 in comparison to Capital gains and other income increased from 1 million in 2015 to 3 million in 2016, reflecting an increase of 232 %. The 2016 gain is the result of disposal of 148 million non-core investment property above their book value of 145 million compared to 2014 The result in capital gains, property revaluations and other income increased from 231 million in 2014 to 311 million reflecting an increase of increase of 35 %. The largest portion of the generated profits of 311 million results from the change in fair value in investment property of 224 million which increased by 17 % from This increase is a result of the Group s successful operational repositioning of its properties, resulting in higher rental income, lower vacancies, better cost structure and a strong cash flow generation. The item profit arising from business combinations increased from 35 million in 2014 to 86 million in 2015, reflecting an increase of 142 % or 50 million and thus having the largest impact on the total increase in the line item of 80 million. The increase is the result of a higher number of acquisitions in 2015 completed through share deals compared to 2014 which results from sourcing deals at favourable acquisition prices. Capital gains and other income decreased from 4 million in 2014 to 1 million in 2015, reflecting a decrease of 74 %. The positive figure in both periods presents the gains from asset

138 disposal above their book value. In 2015, the Group sold non-core assets at the amount of 101 million, 1 million above the 100 million book value. In 2014 the Group disposed non-core properties for a total consideration of 137 million with a profit of 4 million. Property Operating Expenses For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Purchased services (149,357) (112,051)(*) (73,838) Maintenance and refurbishment (27,004) (21,202) (14,761) Personnel expenses (18,380) (12,119) (7,376) Depreciation and amortization (1,351) (1,382) (572)(*) Other operating costs (8,016) (4,798)(*) (3,628) (*) Total (204,108) (151,552) (100,175) (*) Reclassified compared to 2015 The property operating expenses increased from 152 million in 2015 to 204 million in 2016, reflecting an increase of 35 %. The main component of this item is purchased services which refer mainly to ancillary costs such as water and heating and are recoverable from the tenants. The purchased services increased from 112 million in 2015 to 149 million in 2016, an increase of 33 %. The increase is correlated with the increase in the rental and operating income item. The maintenance and refurbishment expenses relate to expenses required to maintain the current quality of the portfolio. This item increased from 21 million in 2015 to 27 million in 2016, reflecting an increase of 27 %, due to the growth of the portfolio. The maintenance and refurbishment expenses per sqm is an indicator enabling a proportional comparison based on the weighted average of the rentable area held during the periods. The maintenance and refurbishment per sqm amounted to 5.4 per sqm in 2015 compared to 5.3 per sqm in The stable spending per sqm reflects the Company s cost control while sustaining the quality level of its buildings. Personnel expenses relating to operations amounted in 2016 to 18 million, up from 12 million in 2015, an increase of 52 %, and other operating costs increased from 5 million in 2015 to 8 million in Both items increased due to the growth of the Company, the scope of services provided to maintain high tenant satisfaction and also due to increased efforts and success in increasing the portfolio s occupancy rate

139 2015 compared to 2014 The total property operating expenses amounted in 2015 to 152 million in comparison to 100 million in 2014, an increase of 51 % which is related to the growth of the rental and operating income which increased by 54 %. The increase in property operating expenses is largely the result of the increase in purchased services which are costs mainly related to rental operating income, items such as heating costs and water, costs defined as ancillary costs and recovered by the tenants. Due to the nature of recoverable expenses, this item increases in parallel to the increase in operating income. The expenses for maintenance and refurbishment increased in 2015 to 21 million, an increase of 44 % from The increase is the result of the increased portfolio. Based on a per average sqm level the maintenance expenses stayed stable at 5.4 /sqm in 2015 compared to 5.5 /sqm in 2014, reflecting the stable investment level to maintain the quality of the portfolio. The personnel expenses increased in 2015 to 12.1 million from 7.4 million in The increase is the result of the growth of the Company and its scope of operation. The increase in personnel supports the repositioning of the properties and provides a platform for future portfolio growth. Other operating costs, which are mainly related to nonrecoverable and one-time expenses, amounted to 4.8 million, up from 3.6 million in Capital expenditure For the 12 months ended 31 December 2016 (unaudited) 2015 (unaudited) 2014 (unaudited) Capex in thousands of Euro 56,325 33,804 22,201 Capex in /sqm Capital expenditure ( Capex ) measures include improvements to apartments, common areas and the property, such as adding balconies, improving the façade, improving insulation, replacing and modernizing heating and energy systems and adapting assets to specific tenant needs, such as elevators, ramps and elderly friendly staircases. The Group also supports the communal areas by investing in gardens, playgrounds and neighbourhood gathering areas around its properties. These investments are aimed to increase the attractiveness of the properties to both current as well as prospective tenants, reducing tenant churn and vacancy. Furthermore, the expenses are aimed to stabilize maintenance and service expenses to reduce future cost compared to 2015 The Group invested in 2016 a total amount of 56 million in capex, up from 34 million in 2015, reflecting an increase of 67%. Whereas the increase resulted mainly to the increase in portfolio size, the Group invested in 2016 also higher amounts compared to 2015 which can be seen on per average sqm basis. In 2016 the Group invested 11.1 per average sqm, up by 28% from

140 per average sqm in The Group targeted its capex investments on reducing vacancies through renovation of vacant apartments and improving the quality of its assets for its existing tenants to reduce churn rate and improve tenant satisfaction compared to 2014 The Group invested in 2015 a total amount of 34 million in capex, up from 22 million in 2015, reflecting an increase of 52%. The increase results from a larger portfolio compared to the previous year. On a per average sqm basis the investments stayed almost stable at 8.7 per average sqm in 2015 compared to 8.3 per average sqm in The capex investments are targeted at improving the asset quality, preventing future maintenance expenses and increasing the occupancy rate while keeping the churn rates low due to high tenant satisfaction. Administrative & Other Expenses For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Personnel expenses (2,629) (2,084) (1,772) Audit and accounting costs (1,849) (1,630) (1,230) Legal and professional consultancy fees (2,296) (1,500) (1,121) Depreciation and amortization (344) (347) (331) Marketing and other expenses (2,432) (1,592) (1,196) Total (9,550) (7,153) (5,650) The administrative and other expenses are expenses attributable to overhead expenses such as personnel costs, marketing expenses, legal and consultancy fees and depreciation compared to 2015 The administrative and other expenses amounted in 2016 to 9.6 million compared to 7.2 million in 2015, reflecting an increase of 34 %. The increase is due to the increase in size of the Company along the construction of a management platform supporting the increased operations of larger portfolio compared to 2014 Administrative and other expenses amounted in 2015 to 7.2 million, an increase of 27 % from The increase results from the growth of the Company but remains below the increase in

141 rental income generation, reflecting the Company s platform served to cater growth and capture economies of scale. Finance Expenses For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Finance expenses (36,319) (25,830) (22,040) 2016 compared to 2015 The finance expenses for 2016 amounted to 36 million compared to 26 million in 2015, an increase of 41 %. The increase results from the increased amount of debt in 2016 and due to debt raised during the course of 2015 which did not have a full year impact on the 2015 income statement. The cost of debt of the Group has decreased in 2016 to 1.6 %, and together with the Group s LTV of 35 % as of the end of 2016 (42 % in 2015), results in proportionally lower debt with lower cost. For information on interest coverage ratios, see Liquidity and Capital Resources - Adjusted EBITDA and Funds From Operations (FFO I) compared to 2014 Finance expenses increased in 2015 to 25.8 million, 3.8 million higher than in The increase of 17 % is the result of the Company s higher amount of debt from bank loans and bonds. The increase is marginally in relation to the growth of the Company and to the total debt balance. The marginally low increase is due to constant decrease in the cost of debt, which is a result of the strong capital and debt structure of the Company. In the end of 2014, the Company received an investment grade rating from S&P, which was further validated by a Baa2 initial rating granted by Moody s in the first quarter of In July 2015 S&P increased the Company s rating to BBB (further updated to BBB+ in November 2016). The credit rating improvement, together with refinancing of existing debt and issuing new debt at lower cost had a significant effect on the Group s cost of debt in In the last quarter of 2014, the Company replaced the 6.25 % coupon Series B with the 2 % coupon Series D Bonds. In 2015 the Company issued in two tranches of the Series E Bonds, a 550 million bond bearing a coupon of 1.5 %. For information on interest coverage ratios, see Liquidity and Capital Resources - Adjusted EBITDA and Funds From Operations (FFO I)

142 Other Finance Expenses For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Other finance expenses (11,121) (73) (32,664) Other financial results relate mainly to one-time, non-cash effects such as the change in fair value of financial assets which result from the value changes of financial derivatives and traded securities. Other financial results also include finance related costs which are related to one-time costs such as bank fees, early prepayment fees as well as debt issuance costs compared to 2015 The other financial results amounted in 2016 to 11 million, while in 2015 expenses were nearly levelled at around 0 million. The increase between the periods is the combined effect from higher finance related costs of 5.4 million compared to 2.9 million in 2015 and from a negative change in the value of financial assets which resulted in an expense of 5.7 million in 2016, compared to an income of 2.8 million in compared to 2014 The other financial results in 2014 were impacted significantly by the effect of the early redemption fees of Series B bond. In 2015 other financial results included change in fair value of financial assets and liabilities and finance-related costs which amounted to a mere expense of 0.1 million. Taxation For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Current tax expenses (26,799) (22,776) (13,863) Deferred tax expenses (95,518) (43,674) (29,924) Total (122,317) (66,450) (43,787) Current tax expenses are attributable to the operations and include property and corporation tax

143 Deferred tax expenses relate to the revaluation gains of the portfolio and account for the theoretical future property disposal through asset deal structures, which are subject to the German real estate tax of % compared to 2015 The Group recorded in 2016 total tax expenses at the amount of 122 million up by 84 % from 66 million in The majority of these expenses and the main reason for the increase between the periods refer to deferred tax expenses, which amounted to 96 million compared to 44 million in 2015, an increase of 119 %. The increase is the result of the higher revaluation gains recorded in The Company current practice is to fully account for theoretical future disposals through asset deals, however, as part of the long term operations of the Group s assets this remains a non-cash item. The current tax expenses amounted to 27 million, up by 18 % from 23 million and increased in relation to the Company s operational positive performance compared to 2014 In 2015 the total tax expenses increased to 66.5 million, reflecting an increase of 52 % from 43.8 million in The current tax increased by 64 % and is correlated with the Company s growth and growth in the operational profits. The deferred tax expenses increased along the recorded revaluation gains and increased by 46 % to 43.7 million from 30 million in Profit for the Period For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Profit for the year 653, , , compared to 2015 In 2016 total profits in the amount of 653 million were recorded, which is an increase of 66 % compared to 2015 s profit of 394 million. The increase is related mainly to the combined result of the recorded revaluation gains and the operational profits. In 2016 the profit attributable to the owners of the company amounted to 545 million, up from 344 million in 2015 and reflecting a 58% increase

144 2015 compared to 2014 The profit for 2015 amounted to 394 million, up 61 % in comparison to The recorded profitability is mainly due to operational profits and to gains of property revaluations and is supported by low cost levels along the income statement. In 2015 the profit attributable to the owners of the company amounted to 344 million, up from 206 million in 2014 and reflecting a 67% increase. Earnings per Share For the 12 months ended 31 December 2016 (audited) 2015 (audited) 2014 (audited) Basic earnings per share in Euro Diluted earnings per share in Euro Weighted average basic shares in thousands 152, , ,577 Weighted average basic shares (diluted) in thousands 168, , , compared to 2015 In 2016, the Company recorded basic earnings per share at the amount of 3.6, an increase of 31 % compared to the 2.7 recorded in On a diluted basis, taking into account the theoretical conversion of the Company s convertible bonds, the earnings per share resulted in 3.3, compared to 2.4 in 2015, reflecting an increase of 38 %. In comparison to the increase of the total earnings, the increase in the earnings per share was offset by a larger amount of outstanding shares from full conversion of the convertible bond Series C, completed in the beginning of 2016 and from the equity increase in September compared to 2014 The basic earnings per share increased by 52 % to 2.7 per share, compared to 1.78 per share in 2014, an increase of 52 %. The increase was offset in relation to the total profit due to dilution effects of conversions of the convertible bond and equity increase in September 2015 which increased the average basic amount of shares by 10 %. Accordingly, the diluted earnings per share increased to 2.4 per share in 2015, up from 1.5 per share in 2014 and reflecting an increase of 54 %

145 Liquidity and Capital Resources Cash Flows For the 12 months ended 31 December 2016 (audited) 2015 (audited) In thousands of Euro 2014 (audited) Net cash provided by operating activities 201, , ,884 Net cash used in investing activities (557,184) (1,215,048) (327,903) Net cash provided by financing activities 570,397 1,023, ,608 Net increase (decrease) in cash and cash equivalents 214,506 (34,130) 137, compared to 2015 In 2016 the net increase (decrease) in cash and cash equivalents amounted to 215 million compared to a decreasing amount of the cash balance of 34 million in The largest impact was the reduced amount of net cash used in investing activities by 658 million and the reduced amount of net cash provided by financing activities of 453 million compared to Net cash provided by operating activities in 2016 increased by 28 % compared to 2015 and amounted to 201 million. The item increased due to the additional cash flow generated from the overall larger portfolio following the new acquisitions made during 2016 and the full year effect of 2015 acquisitions in 2016 as well as the occupancy and rent increases in the portfolio. The Company additionally received a cash inflow from the sale of properties classified as inventories - trading properties at the amount of 2.4 million. For a detailed description of the items which impacted the cashflows, see the items described above in Results of Operations and below in Adjusted EBITDA and Funds From Operations (FFO I). The respective movements are correlated to the net cash provided by operating activities. Net cash used in investing activities amounted in 2016 to 557 million, a decrease of 54 % from 1.2 billion compared to The amount is net of funds received from disposals of properties, but the decrease however mainly results from a lower volume of acquisitions in 2016 of 0.7 billion compared to 1.4 billion in An additional driver for the lower amount was the net proceeds from traded securities and other financial assets of 33 million compared to a net investment in 2015 of 359 million. The Group invests and divest in traded securities to park short-term cash balances in order to minimize low interest payments on cash. Net cash provided by financing activities amounted in 2016 to 570 million, compared to 1,023 million in 2015, reflecting a decrease of 44 %. The net cash provided by financing activities was used to fund the Company s acquisition activities which were lower in 2016 than in 2016 as

146 reflected in the net cash used in investing activities. Whereas the major impact in 2016 results from capital market activities with a combined effect of 616 million from the convertible bond Series F issued during the first quarter of the year and the issuance of the perpetual notes during the third quarter the amount is significantly lower than the cash inflow from the capital market activities in 2015 of 1.2 billion from 6 different issues of straight bonds, perpetual notes and an equity capital increase performed during the year. The capital market activities in 2016 were complemented also by net funds received from bank loans at the amount of 54 million during the year. The cash distribution of dividends of 45 million decreased the net cash provided by financing activities as well as the net cash payments of interest and other financial expenses of 46 million compared to 24 million of dividends and 33 million of net interest and other financial expenses in compared to 2014 In 2015 the net increase (decrease) in cash and cash equivalents amounted to a decreasing amount of 34 million compared to an increasing amount of the cash balance of 138 million in The largest impact was the increase in net cash used in investing activities resulting from the Company s acquisition activities in 2015 as well as the increase in net cash provided by financing activities to finance the Company s acquisition activities. Net cash flow provided by operating activities increased in 2015 by 38 % to 157 million in comparison to The increase is the result of the operational performance of the Company which is a combined effect of portfolio growth in 2015, the full year effect of 2014 acquisitions, rent and occupancy increase and cost efficiency. For a detailed description of the items which impacted the cashflows, see the items described above in Results of operations and below in Adjusted EBITDA and Funds From Operations (FFO I). The respective movements are correlated to the net cash provided by operating activities. The Company s acquisition activities of 2015 are reflected in the cash flow used in investing activities. The increase of 271 % from 2014 to 1.2 billion is the result of higher acquisition activities in 2015 than in 2014, complemented by investments in traded securities (liquid assets which are used for short-term cash parking to minimize low interest payments on cash) and other financial assets and offset slightly by the cash inflow from disposals of 94 million. The Group financed its higher growth throughout the year with a wide mix of funds of various bond issuances, hybrid notes, capital increases and bank loans which is expressed in an increase of 191 % from 2014 in net cash flow provided by financing activities to 1.0 billion. The increase was offset by net bank loan repayments of 63 million, loan amortization of 12 million and dividend payments of 24 million which were paid first time in Compared to 2014 the Company s capital market activities increased in 2015 significantly with 6 issuances of 3 different instruments of straight bonds, perpetual notes and equity capital combining a total cash inflow

147 amount of 1.2 billion. In 2014, the Company executed 4 issuances of straight and convertible bonds plus an additional straight bond redemption totalling to a combined effect of 532 million. The Group used some of the proceeds from capital market activities to repay bank loans which lead to a cash outflow of 63 million in 2015 and 133 million in Adjusted EBITDA and Funds From Operations (FFO I) For the 12 months ended 31 December 2016 (unaudited) 2015 (unaudited) In thousands of Euro 2014 (unaudited) Operating Profit 822, , ,325 Total depreciation and amortization 1,695 1, EBITDA 824, , ,228 Capital gains, property revaluations and other income Result on the disposal of inventories - trading properties Share in profit from investment in equityaccounted investees (598,280) (311,131) (230,969) (2,031) - (250) (541) - - Management long term share incentive plan 1, n/a Adjusted EBITDA 224, ,274 (1) 112,009 Finance expenses (36,319) (25,830) (22,040) Current tax expenses (26,799) (22,776) (13,863) Contribution to minorities (1,491) (628) n/a FFO I 160, ,040 (2) 76,106 Weighted average basic shares in thousands (3*) 152, , ,577 FFO I per share in (1) (2) (3) Reclassified in 2016 in order to exclude the non-cash effect of the management s long term incentive plan from the expenses Reclassified in 2016 in order to exclude cash effective minority profits Not considering the dilution effect of the management share plan as it is immaterial The Adjusted EBITDA reflects the recurring operational profit before interest and tax, excluding the effect of non-cash items which do not have a strictly operational and recurring nature such as capital gains and revaluations profits, profits from disposal of inventories, share in profit from investment in equity accounted investees and the expenses for the management s share incentive plan. Funds from Operations I (FFO I) reflects the recurring profit from operations, after deducting the finance expenses, the current tax and respective minority contribution from the Adjusted EBITDA and is a market standard indicator in the real estate market to reflect the bottom line operational profits

148 2016 compared to 2015 The Adjusted EBITDA of the Group increased in 2016 by 27 % compared to 2015, amounting to 225 million. This increase results from both, the increasing rental income driven by strong operational results and by optimizing the operational cost structure. For a detailed description of the items which impacted the Adjusted EBITDA, see the items described above in Results of Operations - Revenue. The lower increase in the Adjusted EBITDA of 27 % compared to the increase in rental and operating income of 33 % is the result of a higher cost structure from a higher occupancy level of the portfolio in 2016 which resulted in additional operating and letting costs in comparison to FFO I recorded in 2016 increased by 25 % to 160 million, compared to 128 million in This growth is following the increase in the Adjusted EBITDA over the same period and is offset by higher finance expenses in comparison to the growth in the Adjusted EBITDA. For a detailed description of the items which impacted the Adjusted EBITDA, see the items described above in Results of operations - Finance Expenses. The FFO I per share increased by 4 % in 2016 to 1.05, compared to 1.01 in The increase was offset in relation to the 25 % increase of the total FFO I due to the dilution effect of the full conversion of the Series C convertible bonds in the beginning of 2016, as well as the effects of the equity increase in September of compared to 2014 Adjusted EBITDA increased in 2015 by 58 % to 177 million from 112 million in The stronger growth of Adjusted EBITDA in relation to the increase in rental and operating income of 54 % is the result of implemented cost efficiency measures. For a detailed description of the items which impacted the Adjusted EBITDA, see the items described above in Results of Operations - Revenue. FFO I in 2015 increased by 68 % to 128 million in comparison to 76 million in 2014 and increased more than the adjusted EBITDA due to marginally lower finance expenses deriving from a decrease of the cost of debt and improved financial conditions. For a detailed description of the items which impacted the Adjusted EBITDA, see the items described above in Results of Operations - Finance Expenses. FFO I per share increased in 2015 by 53 % to 1.01 from 0.66 in The increase in relation to the FFO I was offset due to dilution effects of conversions of the convertible bond and equity increase in September 2015 which increased the average basic amount of shares by 10 %

149 Interest coverage ratios The interest cover ratio (ICR) is the result of the Adjusted EBITDA divided by the finance expenses and thus reflects the multiple the interest expenses are covered by the Adjusted EBITDA. For the 12 months ended 31 December 2016 (unaudited) 2015 (unaudited) 2014 (unaudited) Interest Cover Ratio (1) 5.1 (1) As presented by the Company in Comparability to 2016 is only limited applicable due to reclassification of the reconciliation of the Adjusted EBITDA for 2015 in Applying the reconciliated figures, the ICR in 2015 would have been 6.9. Management considers the interest cover ratios over the three years shown in the table above as comparably high. The increase of the ICR from 2014 to 2015 from 5.1 to 6.8 is the result of a higher increase of the Adjusted EBITDA than the finance expenses, whereas the slight decrease from 2015 of 6.8 to 6.1 in 2016 results in an increase of the finance expenses that was relatively higher than the increase of the Adjusted EBITDA. Assets and Liabilities Assets 2016 (audited) 31 December 2015 (audited) In thousands of Euro 2014 (audited) Non-current assets 5,126,031 4,061,699 2,227,243 Investment property (1) 4,795,757 3,857,856 2,185,796 Current assets 1,027, , ,815 Total assets 6,153,733 4,688,903 2,629,058 (1) Including traded inventories. The majority of the balance of assets is comprised of investment property, representing the fair value of the real estate properties, as determined based on external valuation reports performed by independent professionally qualified valuators. The fair values represent a net figure, after deduction made by the valuators for the estimated legal costs, transfer tax and marketing commissions to be incurred by the purchaser, following disposal of the assets. The main valuator of the Group is JLL

150 Under Current assets, the item of Cash and liquid assets is a combined figure of the balance of cash and cash equivalents and traded securities at fair value through profit or loss, and cash in asset held for sale. In cases properties are classified as held for sale all the assets under a certain SPV and the additional balances of liabilities in such SPV are also classified as held for sale. The shown balance of assets held for sale above refers to the value of the investment properties alone. Similarly, cash in assets held for sale is added to the total balance of cash and liquid assets for purpose of presenting the entire liquid means of the Group. Asset held for sale is related to assets which he Group has resolved to dispose of in the next twelve months compared to 2015 Total assets increased from 4,689 million in 2015 to 6,154 million in 2016, reflecting an increase of 31 %. This increase resulted mainly from the increase in investment property. Investment property, including traded inventories, increased from 3,858 million in 2015 to 4,796 million in 2016, reflecting an increase of 24 %. The increase in investment property is the result of property revaluations, net acquisitions and investments in existing properties. The increase in investment property derived from 440 million of acquisitions of investment property during the year, 414 million of investment property arising from initial consolidation and 562 million of revaluation gains. The increase was offset by 348 million of disposal of investment property due to loss of control and the reclassification of investment property as assets held for sale at the amount of 146 million. The Group focused its acquisition activities on its strategic locations, mainly in Berlin, Halle, and various cities in NRW, such as Essen, Dortmund, Bochum and Gelsenkirchen. Additionally, the Group increased its position in Dresden, Nuremberg-Fürth and Kaiserslautern. At the end of 2016, the Group owned 83 thousand units compared to 76 thousand units in the beginning of the year. Assets held for sale amounted in 2016 to 146 million, up from 0 million in The management sees these as non-core properties and resolved to dispose these properties. These properties generate currently 10 million rental income per annum and are located across the portfolio s locations. Investments in equity-accounted investees amounted in 2016 to 118 million, up from 0 million in These investments are related to several companies which are not consolidated by the Company. Cash and cash equivalents increased from 236 million in 2015 to 449 million in 2016, reflecting an increase of 90 %. Traded securities at fair value through profit and loss increased from 153 million in 2015 to 181 million in 2016, reflecting an increase of 19 %. Together these two items account for the cash and liquid assets of the Company. The Group invests in traded securities to park short-term cash balances in order to minimize low interest payments on cash

151 2015 compared to 2014 In 2014 the total assets grew from 2,629 million to 4,689 million in 2015, reflecting an increase of 78 %. The main contribution of this increase is the 76 % increase in investment property, including traded inventories, which increased from 2,186 in 2015 to 3,858 million in The increase in investment property is the result of property revaluations, net acquisitions and investments in existing properties. The increase in investment property derived from 410 million of acquisitions of investment property during the year, 1.14 billion of investment property arising from initial consolidation and 224 million of revaluation gains. The increase was offset by 102 million of disposal of investment property due to loss of control and the reclassification of investment property as inventories - trading properties at the amount of 5 million. Current assets increased from 402 million in 2014 to 627 million in 2015, reflecting an increase of 56 % or 225 million. The increase in current assets derives mainly from increase in liquid assets, including cash and cash equivalents and traded securities, which increased by 117 million from 272 million in 2014 to 389 million in The other major impact is the growth of trade and other receivables which increased in 2015 to 226 million, from 124 million in This item increases in line with the growth of the company and increased renting of units. Liabilities 2016 (audited) 31 December 2015 (audited) In thousands of Euro 2014 (audited) Loans and borrowings 896, , ,217 Straight bonds 1,050,078 1,045, ,381 Convertible bond 427, , ,451 Deferred tax liabilities 325, , ,003 Derivative financial instruments 11,536 6,995 9,282 Other non-current liabilities 38,262 32,709 29,808 Current liabilities 338, , ,266 Total 3,088,669 2,516,608 1,587, compared to 2015 Total liabilities increased from 2,517 million in 2015 to 3,089 million in 2016, reflecting an increase of 23 %. The largest impact of the growth is the higher amount of debt the Group used to finance its acquisitions. Non-current loans and borrowings increased by 13 % to 897 million, convertible bonds increased by 249 % to 428 million whereas the balance of straight bonds

152 stayed stable at a slight increase of under 1 % to 1.1 billion as no straight bonds were issued in 2016 and no material amount was repaid. The increase in convertible bonds results from the issuance of convertible bond Series F in the first quarter of 2016 at the nominal amount of 450 million, which was offset by the full conversion of convertible bond Series C also in the first quarter of Deferred taxes liabilities increased from 239 million in 2015 to 326 million in 2016, reflecting an increase of 36 %. Deferred tax liabilities follow the treatment by accounting for the full German real estate tax effect of % on revaluations gains, assuming the theoretical future disposal by means of an asset deal. The deferred tax liabilities increased mainly as result of the increase of the revaluation gains during the period. The increase of 23 % in total liabilities is below the 41 % increase in total equity and 31 % increase in total assets, coinciding with the Group s conservative financial policy and contributing to the decrease in leverage from 42 % LTV as of 2015 to 35 % LTV as of December compared to 2014 Total liabilities increased from 1,587 million in 2014 to 2,517 million in 2015, reflecting an increase of 59 %. The increase is largely the result of the higher amount of debt. To finance the growth of its acquisitions, the Company increased its debt level through noncurrent loans and borrowings which increased from 537 million in 2014 to 792 million in 2015, reflecting an increase of 47 % and straight bonds which increased from 476 million in 2014 to 1,045 million in 2015, reflecting an increase of 119 %. The balance of straight bonds increased in 2015 due to the issuance of the Series E bonds at the nominal amount of 550 million. The convertible bond balance decreased from 240 million in 2014 to 123 million in 2015, reflecting a decrease of 49 % as a result of the conversion of nearly half of the Series C convertibles into equity. Deferred tax liabilities increased from 141 million in 2014 to 239 million in 2015, reflecting an increase of 70 %. The increase is a result of the revaluation gains in 2015 as deferred tax liabilities follow the treatment by accounting for the full German real estate tax effect of % on revaluations gains, assuming the theoretical future disposal by means of an asset deal. The growth in total liabilities of 59 % is below the 78 % increase of total assets resulting in a lower leverage with an LTV of 42 %, down from 45 % in

153 Investments Investments related to the period 1 January to 31 December 2014 In 2014 the Group acquired properties at the amount of 0.8 billion. The acquisitions were executed through numerous deals with the focus on the Group s strategic locations, NRW and Berlin. Additionally, through various acquisitions, the Group was able to reach a critical mass in further strategic locations such as Leipzig, Dresden, Halle, Bremen, Frankfurt, Hamburg, Mannheim and Kaiserslautern. As of 31 December 2014 the Group s portfolio increased to 43 thousand units, up from 26 thousand units at the beginning of the year. The Group s liquidity balance held at the end of 2013 comprised of cash and cash equivalents of 133 million, and 34 million in traded securities. During 2014 the Group executed several debt issuances on the capital markets: In February 2014 the Group issued its second convertible bond, Series C, at the nominal amount of 150 million which was tapped up by another 140 million nominal value in June The existing Series B Bonds was also tapped up by 160 million nominal value in April New straight bonds, the Series D Bonds, were issued in October 2014 with a nominal value of 500 million. During 2014 the Group disposed of assets through share deals for a total consideration of 137 million. Finally, in 2014, the net cash provided by operating activities amounted to 114 million, further supporting the financing sources Investments related to the period 1 January to 31 December 2015 The Group acquired in 2015 properties at the amount of 1.4 billion. The Group further increased the presence in its strategic locations Berlin, NRW, Leipzig, Dresden, and Halle through numerous deals with the largest increase in the metropolitan areas of Dresden, Leipzig and Halle. Until year-end, the Group s portfolio increased to 76 thousand units, up from 43 thousand units in the beginning of the year. The Group s liquidity balance held at the end of 2014 comprised of cash and cash equivalents of 270 million, and 2 million in traded securities. During 2015 the Group financed its acquisition activities mainly through numerous amounts of capital market issuances: The Group issued its first perpetual notes at a nominal amount of 500 million through three issuances in February, March and July of An additional straight bond series, Series E Bonds, was also issued in April 2015 and further tapped up in September 2015 to an aggregate nominal amount of 550 million. In September 2015 the Group completed a capital increase of over 150 million. During 2015 the Group sold properties through share deals for a total consideration of 94 million. Net cash provided by operating activities amounted in 2015 to 157 million

154 Investments related to the period 1 January to 31 December 2016 In 2016, the Group acquired properties at the total amount of 0.7 billion, mainly in Berlin, Halle, and various cities in NRW, such as Essen, Dortmund, Bochum and Gelsenkirchen. Additionally, the Group increased its position in Dresden, Nuremberg-Fürth and Kaiserslautern. At the end of 2016, the Group owned 83 thousand compared to 76 thousand units in the beginning of the year. The Group s liquidity balance held at the end of 2015 comprised of cash and cash equivalents of 236 million, and 153 million in traded securities. The Group financed its acquisitions in 2016 through two capital market activities: convertible bond issuance at the nominal amount of 450 million and perpetual notes issuance at the nominal amount of 200 million, supported by net proceeds from bank loans of 54 million. During 2016 the Group disposed of properties through share deals at a total consideration of 137 million. Net cash provided by operating activities amounted in 2016 to 201 million. Investments related to the period since 1 January 2017 In the first two months of 2017, the Group acquired properties at a total amount of 0.1 billion. The Group focused its acquisition on its strategic locations, Berlin, NRW and Hamburg of which the majority of acquisition have been executed in NRW as well as Kaiserslautern. By the end of February 2017, the portfolio increased to over 84 thousand units. The Group s liquidity balance held at the end of 2016 comprised of cash and cash equivalents of 449 million, and 181 million in traded securities. This balance was utilized in financing the acquisitions going into the year Besides the recent investments above, the Board of Directors has made no firm commitments on any significant future investment. However, the Group is currently in the process of negotiating various acquisitions of properties. The Group plans to finance future acquisitions with funds raised via the issuance of debt and equity

155 Loan-To-Value 2016 (unaudited) As of 31 December 2015 (unaudited) In 2014 (unaudited) Investment property (1) 4,850,634 3,876,839 2,191,271 Investment properties of assets held for sale 146, Equity accounted investees 117, Total value 5,114,497 3,876,839 2,191,271 Total Debt (2) 2,415,397 2,014,889 1,259,841 Cash and liquid assets (3) 631, , ,296 Net debt 1,783,493 1,625, ,545 Total 34.9 % 41.9 % 45.1 % (1) (2) (3) Including advanced payments for investment properties and balance of inventories. Including loans and borrowings, loan redemption, financial debt classified as held for sale, straight bonds and convertible bonds. Including cash and cash equivalents and traded securities at fair value through profit and loss compared to 2015 The total value in 2016 increased by 32 % to 5,114 million from 3,877 million in 2015 above the net debt increase of 10 % from 1,626 million to 1,783 in 2016 and thus decreasing the LTV to 34.9 %, down from 41.9 % in The decreasing leverage is in line to the Company s financial policy and the board of directors LTV limit of 45 %. Management sees the high buffer to this internal limit as headroom and protection in case of market downturn compared to 2014 The LTV ratio decreased from 2014 to 2015 to 41.9 % from 45.1 %. The decrease is the result of the increased total value by 77 % to 3,877 million from 2,191 million in 2014 above the increase of the total net debt of 65 % to 1,626 million from 988 million in The improved leverage reflects the Company s value creation and external growth while maintaining conservative leverage structures

156 EPRA NAV 2016 (unaudited, unless stated otherwise) As of 31 December 2015 (unaudited, unless stated otherwise) In thousands of 2014 (2) (unaudited, unless stated otherwise) Equity per the financial statements (1) 3,065,064 2,172,295 1,041,650 Equity attributable to perpetual notes investors (1) (667,393) (478,146) - Equity excluding perpetual notes 2,397,671 1,694,149 1,041,650 Effect of conversion of in-the-money convertible bond (3) - 125, ,451 Fair Value measurements of derivative financial instruments (1) 11,536 6,995 9,282 Deferred tax liabilities 328, , ,003 NAV 2,737,726 2,066,201 1,439,386 Non-controlling interests (1) (196,666) (142,260) (90,736) EPRA NAV 2,541,060 1,923,941 1,348,650 EPRA NAV per share (1) (2) (3) Audited. The figures as of 31 December 2014 were reclassified for this Prospectus in order to fit the comparable figures classification in 2015 and 2016 and deduct non-controlling interest from the NAV in order to calculate the EPRA NAV. The amount includes accrued interest and deferred income. EPRA NAV is defined by EPRA as the net asset value adjusted by including properties and other investment interests at fair value and to exclude certain items not expected to crystallize in a long-term investment property business model compared to 2015 As of year-end 2016 the Group s EPRA NAV amounted to over 2,541 million, reflecting an increase of 32 % compared to 1,924 million at year-end The increase is primarily the result from the increase in equity, which is mainly driven by the profit recorded over the period and offset by 38 million distributed dividends during the year. The significant increase in the equity balance is a result of the value creation of the Company s properties and the operational profits. The EPRA NAV translates accordingly to 16.4 on a per share basis, up by 32 % from 12.4 in

157 2015 compared to 2014 EPRA NAV increased in 2015 to 1,924 million, up 43 % from 1,349 million in The increase results mainly from the increase in equity which results from an equity increase in September 2015 as well as the profits generated in million of the EPRA NAV increase results from the growth of the deferred tax balance, which is the result of non-economic provisions due to property revaluation. EPRA NAV per share increased by 32 % to 12.4 up from 9.4 in The increase in EPRA NAV per share was offset by the higher amount of shares to the end of 2015 from 2014 due to the equity increase and conversions of the convertible bonds. Quantitative and Qualitative Description of Market Risks Interest Rate Risks The general business of the Group is subject to interest rate risks. Interest rate risks can occur, as changes in market interest rates impact on the fair value of fixed-interest financial instruments and also result in changes in interest expenditure on floating-rate financial instruments. In order to manage interest rate risks, the Group generally uses interest rate swaps where it swaps the difference between fixed-interest and floating-rate amounts calculated on the basis of an agreedupon nominal amount with its counterparty at regular intervals. These interest rate swaps hedge the underlying debt. As of 31 December 2016, 97 % of its interest rate exposure was hedged: 83% were fixed rate interest or subject to swap agreements, 14% were capped to certain maximum interest rates and 3% remain variable interest rates. Accordingly, only floating-rate financial liabilities not hedged by interest rate swaps are exposed to interest rate risk, i.e. the Group is exposed to cash flow risks with respect to 3 % of its financial debt. Default Risk The Group is exposed to default risk arising from rental agreements with tenants. The Group manages credit risk by careful selection of contractual counterparties and in general taking a deposit security of three months which will be returned upon termination of the lease agreement. In addition, receivables balances are monitored on an ongoing basis. Rental agreements are entered into with tenants with good credit history or with respect to whom the Company is otherwise confident that they will be able to meet their rental obligations when due. There are no significant concentrations of credit risk within the Group

158 Liquidity Risk The Group has a substantial level of debt. As at 31 December 2016, the total carrying amount of the Group s total debt was approximately 2.42 billion and the Group s outstanding net debt (outstanding debt deducted by cash and liquid assets) was approximately 1.78 billion. The Company is subject to liquidity risks with respect to future refinancing. The capability of the Group to satisfy existing financial indebtedness when due through refinancing might be adversely impacted by market conditions, development of Group s business and overall level of indebtedness. The Group monitors the risk of liquidity shortfalls daily. The monitoring takes into account the incoming and outgoing cash flows from the operating business as well as payments relating to financial debt. The Group seeks to ensure that sufficient liquidity is available at all times to cover future obligations at all times. With 632 million in liquid assets and over 200 million unused credit lines as of 31 December 2016 the Company believes to have a sufficient amount of financial flexibility, which is also reflected in the 2.8 billion of unencumbered assets. As of 31 December 2016, the Group had an LTV of 34.9 %. The Group has borrowed a significant amount of debt by the issue of bonds. As of 31 December 2016, the total aggregate amount of unsecured bonds and convertible bonds outstanding was approximately 1.56 billion, with 550 million will become repayable in 2021 and remaining 428 million under a convertible bond will become repayable in Additional 550 million under a straight bond will become repayable in The existing loan agreements and bonds require, in particular, that the Company complies with certain financial covenants, such as a maximum LTV, a minimum debt-service or interest cover ratio, a minimum ratio of unencumbered properties and other assets or restrictions on the sale of properties. As a result of an event of default and cross default provisions, all outstanding bonds may become due and repayable in their respective principal amount plus any accrued interest. If the Company is not able to redeem the bonds plus accrued interest in full when required, this could lead to the insolvency of the Company. In addition, the Company has issued perpetual notes with an aggregate principal amount of 700 million (which are accounted for as equity under IFRS). The Company can redeem the perpetual notes from 2022 and 2023 respectively. The interest rate payable on the notes will increase if they are not redeemed when first eligible for redemption. The Company obtained its current corporate investment grade rating of "BBB+" from S&P in November Additionally, the Company is assigned a Baa2 with a positive outlook from Moody s. Any negative change in the credit rating of the Company may make future financing and debt issuances by the Company and other members of the Group more difficult and expensive

159 Significant Accounting Policies The preparation of consolidated financial statements in accordance with IFRS 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 deviate from such estimates. The estimates and underlying assumptions are revised 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. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements refer to the opinion of the Company the fair value assessment of the investment properties, the impairment of the recoverability of investments in associates, the assessment in determining the provision for income taxes, impairment of intangible assets and goodwill as well as for legal claims and other provisions. For further information on significant accounting policies see Financial Information - Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2016 (IFRS) - Notes to the Consolidated Financial Statements for the year ended December 31, Basis of consolidation The Group s consolidated financial statements comprise the financial statements of the parent company Grand City Properties S.A. and the financial statements of its subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group has considered the impact of the amendment to IFRS 10 - Investment Entities, and has determined that it does not meet the definition of an Investment entity. Investment Property At present, the vast majority of the properties held by the Group are valued as investment property. An investment property is property comprising buildings held by the owner to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or for sale in the ordinary course of business. Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial recognition, investment property is measured at fair value which reflects market conditions

160 at the end of the reporting period. Gains or losses arising from changes in the fair values of investment property are included in profit or loss when they arise. The valuation of the investment properties is conducted by the Company annually with regular updates for its quarterly financial reporting in accordance with the definition of fair value by the International Valuation Standard Committee and according to the requirements of IAS 40 and IFRS 13. The valuation is based on the discounted cash flows model ( DCF ). This valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs such as rent-free period and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms. The fair value of the properties of the Group is determined at least once a year by external, independent and certified valuators, mainly Jones Lang La-Salle. The fair value of the properties was prepared in accordance with the RICS Valuation- Professional Standards (current edition) published by the Royal Institution of Chartered Surveyors ( RICS ) as well as the standards contained within the TEGoVA European Valuations Standards, and in accordance with IVSC International Valuation Standard ( IVS ), the International Accounting Standard ( IAS ), International Financial Reporting Standards ( 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 valuation reports of the appraisers. In addition, the Company has instructed the aforementioned appraiser to draw up a valuation report for the purpose of this Prospectus. The Company and the appraiser confirm that there is no actual or potential conflict of interest that may have influenced the valuator s status as external and independent valuator. The valuation fee is determined on the scope of complexity of the valuation report. The main range of the discount rates applied to the net annual rentals to determine the fair value of property is between 4.75% to 7.5%. All the investment property of the Group in total fair value amount of 4,768 million (2015: 3,846 million) has been categorized as a Level 3 fair value based on the inputs to the valuation technique used. For the valuation, the Group has assumed a market rental growth weighted average of 1.4 %, void periods average two to four months after the end of each lease, future occupancy rate in the range between 93% and 100% and risk adjusted discount rates in the range of 4.75 % to 7.5 % (weighted average of 5.94 %). The

161 estimated fair value would decrease if the expected market rental growth is lower, void periods were longer, the occupancy rates were lower and/or the risk-adjusted discount rate is higher. Assets held for sale Non-current assets or disposal groups, comprising assets and liabilities are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition 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. 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. Changes in the Group s ownership in existing subsidiaries Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. 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. Business combinations Acquisitions of businesses are accounted for using the acquisition method, i.e. when control is transferred to the Group. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Investment in associates and equity-accounted investees Associates are companies in which the Company has significant influence (as defined in IAS 28) and that are not subsidiaries. The results and assets and liabilities of associates are included in the consolidated financial statements of the Company using equity method of accounting. 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

162 held for sale, in which case it is accounted for in accordance with IFRS 5 Non current Assets Held for Sale and Discontinued Operations. No segment reporting In principal, the Group meets the definition of operating in two operating segments. The main operating segment is rental income relates to owned investment properties. The second operating segment relates to services charges to third parties (e.g. property management). The result from this segment is minor and does not meet the threshold to show as a separate reporting segment, and therefore only one reporting segment is presented in the Group s consolidated financial statements. New Accounting standards and interpretations not yet adopted The following new and revised standards and interpretations are in issue and have been endorsed by the EU but are not yet effective for these consolidated financial statements. (I) IFRS 9 - FINANCIAL INSTRUMENTS (2009, 2010) IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and to add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. (II) IFRS 15 - REVENUE FROM CONTRACTS WITH CUSTOMERS IFRS 15 establishes a five step approach to accounting for revenue from contracts with customers. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The following new and revised standards and interpretations are in issue but have not yet been endorsed by the EU and are hence not yet effective for these financial statements. (III) IAS 7 - DISCLOSURE INITIATIVE - AMENDMENTS TO IAS 7 The amendment to IAS 7 Statement of Cash Flows are part of the IASB s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes

163 (IV) IFRS 16 - LEASES IFRS 16 introduces a single, on balance sheet approach to lease accounting for lessees with optional exemptions for short-term leases and leases of low value items. (V) IFRS 2 - CLASSIFICATIONS AND MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS The Group has considered the above new standards, interpretations and amendments to published standards and will continue to evaluate the impact on the Group s consolidated financial statements. At this time, the impact of the above publications is not expected to be material to the Group s consolidated financial statements

164 MARKETS AND COMPETITION Market Overview The business activities of the GCP Group are influenced by various demographic, economic and political factors. The GCP Group s portfolio lies in densely populated regions in Germany with a focus on North Rhine-Westphalia ( NRW ), Berlin, Dresden, Leipzig and other densely populated cities and regions. Thus the development of the real estate market in Germany, and particularly in those densely populated regions is an important factor for the business of the GCP Group and its future development. The real estate market environment is important in shaping the future development of housing prices, rent levels, turnover and vacancy rates. The market for real estate is essentially influenced by population growth and economic development on the demand side and the availability of housing and different types of property on the supply side. Population growth and economic development depend in turn on demographic and macro-economic factors such as the rate of natural population change, migration, household size, consumer price levels, unemployment rates, economic developments, average income levels and inflation. Factors affecting the supply side of real estate markets include changes in the available housing stock, vacancy levels, construction costs, housing diversity in terms of size, locations, renovation level and homeownership rate. The real estate markets are greatly influenced by both current demographic and economic factors, as well as anticipated future developments. While the Group s portfolio is spread across Germany, the main focus of the property portfolio in terms of size and location is in the federal states of NRW and Berlin and other densely populated cities and regions such as Dresden and Leipzig (for a regional breakdown of the Group s property portfolio see the section Business - Business Activities - Property Portfolio ). Correspondingly, the following market description focuses on the core regions and cities with respect to the Group s portfolio, as well as general market conditions in Germany. Demand Demographics in Germany, NRW, Berlin, Dresden and Leipzig Germany s population has decreased in the past years due to a negative natural population change and reached 82.2 million in 2015, down from 82.5 million in 2005 (Source: Federal Statistical Office, Population Projections). This population decrease, however, has been offset by a positive net migration balance in Germany. Since the mid 1980 s and excluding 2008 and 2009, Germany s net migration balance has been positive: overall migration balance increased 119 % in

165 2011, 32 % in 2012, 16 % in 2013 and 28 % in 2014, each as compared to the prior year. In 2015, the net migration balance in Germany was positive and increased by another 107 % as compared to the previous year. (Source: Own calculations based on Federal Statistical Office, Migration Statistics). Nonetheless, official forecasts predict a decrease in population. However, these forecasts are based on an assumption of positive annual migration balance of 100, ,000 persons, with actual figures being over the top limit since 2011 and reaching more than 1,100,000 persons in 2015 (Source: Own calculations based on Federal Statistical Office, Migration Statistics). The current high migration numbers are unlikely to offset the long term demographic change but might reduce its pace and scale (Source: Federal Statistical Office, Press Release as of 20 January 2016). The trend of decreasing population is also present in NRW, Germany s most populated federal state. With 17.6 million in 2014, the population in NRW decreased since % annually, despite an average annual migration balance of 0.2 % from 2007 to However, when taking into account domestic inner-state migration to the big cities in NRW data indicate to a population increase. In the four biggest cities in NRW - Cologne, Düsseldorf, Dortmund and Essen - population count has increased 0.2 % annually since 2007, with a net annual migration balance of 0.7 % in total (Source: Own calculations based on Federal Statistical Office, 1. Population Projections, 2. Migration Statistics). Looking again at the state level, a decrease of 1.4 % in NRW s population is forecasted on average from 2014 until 2025 (Source: Own calculations based on Federal Statistical Office, Population Projections). According to an alternative forecast, NRW s population is expected to decrease by 1.5 % until 2025 (Source: Jones Lang LaSalle, Market Consideration - North Rhine-Westphalia). Berlin experienced opposite effects with a growing population. Berlin s net migration in 2010 was about 16 thousand and increased in 2014 to over 37 thousand (Source: Own calculations based on Federal Statistical Office and the Statistical Offices of the Laender, Migration Statistics). Between 2007 and 2014 Berlin s population increased 0.22 % annually, with an average annual migration balance of 0.8 % (Source: Own calculations based on 1. Federal Statistical Office and the Statistical Offices of the Laender, Migration Statistics, 2. Federal Statistical Office, Population Projections). Until 2025, forecasts predict a population increase in Berlin of an average of 7.6 % (Source: Federal Statistical Office, Population Projections). Alternative forecasts indicate a 7.5 % increase from 2014 to 2030 (Source: Berliner Senatsverwaltung für Stadtentwicklung und Umwelt, Bevölkerungsprognose für Berlin und die Bezirke ). The population in Saxony s most populous cities, Dresden and Leipzig, has grown between 2007 and 2013 by 0.8 % and 0.9 % annually due to an ongoing positive net migration. The populations of Dresden and Leipzig are expected to increase between 2009 and 2025 by 4.1 % and 1.2 % respectively (Source: Statistisches Landesamt des Freistaates Sachsen, Statistik in Sachsen 17-1/2011)

166 The development of the housing market is even more dependent on the development of private households than on population trends (Source: Jones Lang LaSalle, Market Consideration - North Rhine-Westphalia). Although Germany s population increased between 1991 and 2015 by about only 1.9 %, the amount of households increased over the same period by 15.7 %. (Source: Own calculations based on Federal Statistical Office, 1. Population Projections, 2. Microcensus). The number of households is forecasted to increase by another 1.2 % until 2030 from 2013 (Source: Own calculations based on Federal Statistical Office, Projected households). The forecasted increase in the amount of households is affected by a forecasted trend of decreasing household size. In % of households in Germany were 1-2 person households. By 2015 this ratio has increased to 76.4 % (Source: Own calculations based on Federal Statistical Office, Population; Microcensus). The trend is forecasted to continue, with the 1-2 persons households ratio expected to reach 81 % of total households in 2030 (Source: Own calculations based on Federal Statistical Office, Projected households). The average household size in 2013 was 2.00 persons per household and is expected to decrease to 1.87 until 2030 (Source: Own calculations based on Federal Statistical Office, Projected households). From 1991 to 2015, the number of households in NRW increased by 12.3 %, by 14.0 % in Berlin, and by 6.0 % in Saxony, including Dresden and Leipzig (Source: Own calculations based on Federal Statistical Office, Microcensus). In 2015 the average household size in NRW was 2.01 persons per household with 39.9 % single-households. In Berlin the average household size was 1.73, with 55.0 % single-households (Source: Own calculations based on Federal Statistical Office, Microcensus). Within Saxony the cities of Dresden and Leipzig reflect a trend towards smaller household size and single-households which is similar to Berlin s with an average household size in Dresden of 1.79 persons per household and 51 % single-households and 1.8 persons per household and 52 % single-households in Leipzig respectively (as of 2014) (Sources: City of Dresden, Focus on Dresden - The Capital of Saxony in Figures 2014/2015 and City of Leipzig, Statistisches Jahrbuch 2014 and City of Leipzig, Statistisches Jahrbuch 2015). Total number of households is forecasted to increase between 2009 and 2030 in overall Germany by 2.1 %, by 2.9 % in NRW and 2.6 % in Berlin. The forecast for Dresden and Leipzig predicts a more or less stable development with an expected increase in Dresden from 2011 until 2025 by 3.4 % and an increase by 1.0 % in Leipzig (Sources: Own calculations based on Federal Statistical Office, Bevölkerung und Erwerbstätigkeit 2010 and Statistisches Landesamt des Freistaates Sachsen, Statistik in Sachsen 19-1/2013). Macro-Economic Factors Germany s gross domestic product ( GDP ) increased in 2016 exceeding 3.1 trillion (Source: Federal Statistical Office, National Accounts). The unemployment rate in Germany as of December 2016 was 4.1 %, among the lowest in the Eurozone where the average rate is 9.8 % (Source: Eurostat, Unemployment Statistics)

167 In 2015, Germany had a stronger financial profile than the average in the Eurozone with a debt level (net) of 47.5 % of GDP (Eurozone: 66.1 %), a low budget surplus of 0.75 % of GDP (Eurozone: deficit of 2.3 %) and a S&P credit rating of AAA with a stable outlook, which is reflected in the lowest yield on ten year government bonds within the Eurozone (Source: IMF, World Economic Outlook). Within Germany, NRW s economy is the largest of the federal states in terms of GDP, contributing 21.3 % to Germany s total GDP in 2015 (Source: Federal Statistical Office and the Statistical Offices of the Laender, National Accounts - Gross Domestic Product). Berlin had from 2014 to 2015 a growth in GDP of 5.4 %, compared with the German average of 3.8 % (not priceadjusted). Overall between 2007 and 2015 Berlin s GDP has grown 31 %, the strongest growth of all federal states in Germany, with the overall German average of 20.4 % (Source: Federal Statistical Office and the Statistical Offices of the Laender, National Accounts - Gross Domestic Product). Dresden and Leipzig experienced GDP growth over the past years, rising between 2009 and 2014 by 17.0 % in Dresden and by 33.6 % in Leipzig (Source: Federal Statistical Office and the Statistical Offices of the Laender, National Accounts - Gross Domestic Product). The consumer price index ( CPI ) in Germany increased from 2010 to 2016 by 7.4 %, which reflects a price development of approx. 1.3 % a year (Source: Own calculations based on data of Federal Statistical Office, Consumer Price Index for Germany). Supply Housing Stock in Germany, NRW, Berlin, Dresden and Leipzig Although the supply of residential real estate is steadily increasing due to construction, overall supply continues to meet the demand created by the increasing number of households. Gaps between supply and demand may lead to increases in housing prices, which in turn may create additional incentives on the supply side. The number of households increased from 2004 to 2014 by 3.8 %, respectively, the stock of apartments increased by 3.2 %. (Sources: Own calculations based on Federal Statistical Office, Population; Microcensus and Federal Statistical Office and the Statistical Offices of the Laender, Stock of Residential Buildings and Dwellings). In NRW as of 2004 available housing stock is lower in comparison to the number of households, in an amount of approximately 88,600 units. In 2014 supply had still not yet met demand although the number of households increased by 1.1 % and the amount of housing increased by 3.9 % from 2004 to 2014 (Sources: Own calculations based on Federal Statistical Office, Microcensus and Federal Statistical Office and the Statistical Offices of the Laender, Stock of Residential Buildings and Dwellings)

168 In Berlin the number of households increased between 2004 and 2014 by 4.0 %, while the stock of housing increased by 0.1 %. A deficit in the available housing supply increased from approximately 28,000 units to approximately 103,000 units. (Sources: Own calculations based on Federal Statistical Office, Microcensus and Federal Statistical Office and the Statistical Offices of the Laender, Stock of Residential Buildings and Dwellings). Between 2010 and 2014 the number of households increased in Dresden by 5.0 % and by 9.1 % in Leipzig. This increase exceeded the increase in housing stock over the same period, which increased by 0.4 % in Dresden and by 5.0 % in Leipzig (Source: City of Dresden, Statistics; City of Leipzig, Leipzig-Informationssystem LIS). Housing market Compared to the European average the low home ownership rate of an average of 52 % in Germany in 2014 reflects a relatively larger demand for rental apartments (Source: Eurostat, Housing Statistics). Lower supply of housing generally leads to increasing rent prices. In 2010, gross cold rent prices in NRW and Berlin were above the German average gross cold rent prices of 6.37 /sqm with 6.42 /sqm in NRW and 6.74 /sqm in Berlin (Source: Federal Statistical Office, Statistical Yearbook 2013). Furthermore, in the first half of 2016 the prices of newly offered net rents in Berlin has increased to 9.55 /sqm, a 5.4 % increase year over year. In spite of repeated increases in the past, the trend of increasing net rents is expected to continue due to ongoing strong demand (Source: Jones Lang LaSalle, Residential property market Berlin - 1st half of 2016). In NRW rents largely remained stable over the past decade with a slight upward trend (Source: Jones Lang LaSalle, Market Consideration - North Rhine-Westphalia). Net rents increased between 2009 and 2014 in Dresden by 16 % and by 14 % in Leipzig (Sources: Immobilienverband IVD, IVD-Wohn-Preisspiegel 2009/2010 and Immobilienverband IVD, IVD- Wohn-Preisspiegel 2014/2015). Vacancy rates are also affected by decreasing housing supply. Markets with low vacancy rates are usually characterised by high demand and high prices. In 2014, the vacancy rates of apartments rentable in the short and medium term (Marktaktiver Leerstand) in Berlin with 1.5 % and Dresden with 2.2 % (2013) were below the German average of 3.0 %. Vacancy rates in NRW and Leipzig were above the German average with 3.1 % and 6.0 %, however, these have decreased since 2009 by 0.5 % and 4.1 % respectively (Sources: CBRE-empirica- Leerstandsindex and CBRE-empirica-Leerstandsindex and CBREempirica-Leerstandsindex 2014 und Prognose 2020)

169 Competition The German residential real estate market is comprised of approximately 40.5 million residential units (based on May 2011 census, excluding 15,000 units in inhabited accommodation (Bewohnte Unterkünfte), approximately 17.3 million (or approximately 43 per cent.) of which are owner occupied and approximately 23.3 million (or approximately 57 per cent.) of which are rental residential units. As the GCP Group focuses on investments in and managing of German residential properties which are undermanaged or have high value-add potential for other reasons, the GCP Group competes primarily with other repositioning specialist in the real estate market. To the knowledge of the Company, other companies active in this repositioning market, are either institutional investors, which focus on large portfolio transactions, which are currently outside of the investment scope of the Company or are smaller companies or individuals which focus on single properties, which are below the Company s investment range. Therefore, the Company believes that it currently has no permanent direct competitors in its primary target market. However, the GCP Group competes with respect to letting its properties to tenants and with respect to single acquisitions with other stock listed companies whose business strategy is purchasing and renting of real estate properties with a focus on residential units in Germany, such as Vonovia SE, Deutsche Wohnen AG, LEG Immobilien AG or TAG Immobilien AG and ADO Properties S.A. The Company believes that these companies have a strategy which is in part comparable to the GCP Group s strategy, e.g. these companies also focus on densely populated areas such as NRW, Berlin and other densely populated cities in Germany. Generally, in the Company`s opinion these companies mostly focus on larger portfolio transactions and also generally aim to acquire properties which already provide for in-place rents at or around market level and low vacancy rates, whereas the GCP Group is aiming at the acquisition of undermanaged or underinvested properties in order to achieve a repositioning and realise the potential of the acquired assets through its intense repositioning measures

170 BUSINESS Business Overview Grand City Properties S.A. is a leading specialist real estate companies focused on investing in and managing value-add opportunities in the German residential real estate market. As of 28 February 2017, the Group s portfolio consisted of approximately 84,000 units located in densely populated areas mainly in Berlin, NRW, Dresden, Leipzig, Halle, Nuremberg, Munich, Mannheim, Frankfurt, Bremen and Hamburg. As of 31 December 2016 the Group assessed the total market value of its real estate portfolio at 4.8 billion. As of end of February 2017, the Group assessed the total market value of its real estate portfolio at 4.95 billion. The GCP Group is active in all asset and property management activities along the real estate value chain. The Group s business model is focused on buying real estate properties with strong underlying fundamentals which are not optimally managed or positioned and improving the properties through property and tenant management as well as targeted modernisations. This enables the Company to create significant value in its portfolio. History The history of the Group s business dates back to 2006 while the Company was incorporated in December 2011 and became the holding company of the GCP Group in 2012 by purchasing 94.8 % of the shares in Grandcity Property Ltd. (formerly named: Adminond Trading & Investments Limited), a limited liability company organized under the laws of the Republic of Cyprus ( GrandCity ). A further 2.6 % in GrandCity is held through Pigmosa Limited and another 2.6 % is held through Brevol Limited. Until the incorporation of Grand City Properties S.A. and becoming the holding company of the GCP Group, GrandCity was the holding company of most of the entities in the GCP Group. GrandCity was incorporated in 2006 and had by 2010 built up a portfolio of 5,000 units. The focus of GrandCity s business model at that time was on realizing increases in value in its portfolio through capital recycling in order to free funds for further acquisitions. Brevol Limited and Pigmosa Limited were subsidiaries of Edolaxia Group Limited since incorporation. As a result of going public in 2012, the Company gained access to additional financing sources and shifted its business model to focus on long-term holdings with opportunistic selling in order to take advantage of increases in portfolio value. Below are some key events since 2006:

171 2006 Establishment of GrandCity. Until the incorporation of the Company, the business of the GCP Group was operated with GrandCity as parent company Growth of the portfolio, reaching 5,000 units by the end of Incorporation of Grand City Properties S.A. in the Grand Duchy of Luxembourg. Number of units at year s end: 8, Purchase of % of the shares in GrandCity by the Company and formation of the GCP Group in its current structure. Listing of the shares of Grand City Properties S.A. on the Open Market of the Frankfurt Stock Exchange in the Entry Standard segment. Capital increase of approximately 10 % of the then existing share capital against cash contributions with 15 million gross proceeds. Issue of Convertible Bonds with a principal amount of 100 million. Number of units at years end: approximately 12, Capital increase in February of approximately 15 % of the then existing share capital against cash contributions with 35.7 million gross proceeds. Assignment of a BB- credit rating by rating agency S&P. Issue of the Series B Bonds due 2020 with a principal amount of 200 million Completed conversion and redemption of the Convertible Bonds by October Capital increase in December of approximately 23 % of the present share capital with gross proceeds of million. Number of units at years end: approximately 26,

172 2014 Upgraded credit rating of BB+ assigned by rating agency S&P Issue of Series C Convertible Bonds in two tranches with a total principal amount of 275 million. Improvement of the rating to an investment grade rating BBB- by rating agency S&P. Number of units at years end: approximately 43, In February 2015, Moody s assigned a first-time long-term rating to the Company of Baa2 with a stable outlook. Upgrade of the credit rating to BBB by rating agency S&P. Issue of 500 million in aggregate principal amount of perpetual notes (Perpetual Notes I). Issue of 550 million 1.5 per cent. Series E Bonds. Capital increase and issue of 9.5 million shares (approximately 7.5 % of the then existing number of ordinary shares outstanding) with gross proceeds of approximately 151 million. The Board of Directors resolved on a dividend policy relating to the distribution of 30 % of FFO I per share Number of units at year s end: approximately 76, Redemption of all remaining outstanding Series C Bonds following the conversion of Series C Bonds with a total nominal amount of million into ordinary shares of the Company; as a result the Company s share capital was increased to 15,378, Issue of unsubordinated, unsecured, convertible bonds with a total nominal amount of 450 million (Series F Bonds). S&P upgraded the outlook of the BBB rating of the Company and its outstanding bonds from stable to positive. The Board of Directors resolved to upgrade the dividend policy to 50 % of FFO I per share

173 The Company announced its intention to apply for admission to trading on the regulated market of the Frankfurt Stock Exchange within the year Issue of 200 million in aggregate principal amount of perpetual notes (Perpetual Notes II). Upgrade of the credit rating to BBB+ by S&P and upgraded outlook of the rating assigned by Moody's to positive. Number of units at year s end: approximately 83, The Board of Directors resolved to upgrade the dividend policy to 65 % of FFO I per share. Competitive Strengths Fully integrated and scalable platform tailored to extract value-add potential Through its purpose-built platform the GCP Group provides efficient in-house management to its existing real estate portfolio as well as support for the execution of its expansion plans. The Group has established a strong operational platform employing over 800 employees. Specialized teams cover the entire range of the real estate value chain from acquisition to construction and refurbishment, sales and marketing, and key support functions such as finance, accounting, legal, and IT. The GCP Group puts strong emphasis on growing relevant skills in-house to improve responsiveness and generate innovation across processes and departments. In particular, its proprietary IT/software enables the Company to closely monitor its portfolio and tenants to continuously optimize yields and implement strict cost discipline. A rigorous focus on cost extends across the entire operations of the GCP Group, including those that are chargeable to its tenants. The GCP Group strategically positioned its operations for quick and rapid takeover processes. Given the efficiency measures taken, the portfolio today has the capacity to further grow at a marginal cost to the platform, and benefit from further economies of scale. The GCP Group is directed by an experienced and well-balanced management team, led by the Board of Directors, and operates through over a dozen different departments which all form an important component in the value creation cycle

174 Successful portfolio growth The GCP Group s considers its focus on identifying properties with value-add opportunities that match the Company s experience and skills, and improving their operational performance as a competitive advantage in the German real estate market. The GCP Group benefits from economies of scale, creating value throughout the Company s real estate chain. Since 2012 the Groups portfolio has grown from approximately 12,000 units to approximately 84,000 units as of February The GCP Group s existing portfolio is made up of a well-balanced mix of properties that are attractively located and geographically well distributed. The GCP Group s ability to increase rents and to reduce vacancy levels within its properties has enabled the Company to create significant value. Strong track record of value creation The GCP Group s skill lies not only in acquiring properties with significant upside potential but also in creating and executing tailor made strategies for each asset in order to improve its performance, resulting in the significant value appreciation. The GCP Group s continuous asset management efforts result in improved cash flow and in value creation. The Group s experience and in-house operational skills allow it to continuously maximize returns after the successful repositioning of the assets. Growing FFO with high potential The GCP Group s current portfolio generates growing funds from operations, demonstrated by a FFO I CAGR (cumulated aggregate growth) of +45 % since The GCP Group s value-add management focuses on increasing cash flows through raising rental income, decreasing vacancy levels, as well as maintaining strict cost discipline. The GCP Group exhibits strong growth from the operational optimization of its existing portfolio as well as expansion through the acquisition of additional properties with value adding potential. Conservative financial policy The GCP Group s financial policy is reflected in its capital structure, which the Group believes is conservative due to its overall low cost of debt and diversified balance sheet structure. With 632 million in liquid assets and over 200 million in unused credit lines as of 31 December 2016 the Company has a high amount of financial flexibility, which is also reflected in the 2.8 billion of unencumbered assets on its balance sheet. Substantial liquidity enables the Group to pursue attractive deals, and provides significant headroom and comfort to its debt holders. The LTV of the Group as of 31 December 2016 was 35 %, and the Company has set itself a management limit of 45 % LTV. Approximately 97 % of the Group s interest rate exposure is hedged. As of the

175 date of this Prospectus, the Group s bank loans are spread over more than 40 separate loans that are non-recourse and have no cross collateral or cross default provisions. Maturities of material bank loans and the bonds issued range between 3 and 13 years, with the first material redemption in the amount of 500 million due in October These relatively long maturity schedule enable the Company to fully complete the value-add cycle of its assets. This enables the Company to focus on its core business without the pressures of refinancing and ensures a high degree of financial flexibility in the future. In addition to bank loans, the Company has outstanding unsecured bonds in an aggregate principal amount of 1.05 billion at fixed interest rates, and convertible bonds in a principal amount of 450 million. Moreover, the Company has issued perpetual notes in the aggregate amount of 700 million which are accounted for as equity under IFRS. The Company s current stable credit profile is reflected in the investment grade rating that S&P initially assigned to the Company in November 2014 ( BBB- ) and raised most recently, in November 2016, to BBB+, as well as the investment grade rating of Baa2 assigned by Moody s in February 2015 and an upgraded outlook to positive in November Balanced funding mix between Debt and equity and proven ability to access capital markets Following the listing of its shares on the Frankfurt Stock Exchange in the Entry Standard segment in May 2012, the Company has also successfully raised funds on the capital markets through various issues resulting in a well balanced mix of debt and equity. Since 2012, the Company has raised million through the issue of new shares. In addition, the Company has raised 825 million in capital through the issue of convertible bonds (with over 370 million of which had been converted into shares of the Company as of 31 December 2016). Further, the Company has issued a total of 1.4 billion in straight bonds (of which are 1.05 billion are outstanding) and 700 million in perpetual notes which are accounted for as equity under IFRS. Strategy Focus on value-add opportunities in attractive, densely populated areas of the German real estate market, while keeping a conservative financial policy and investment grade rating The GCP Group s investment focus is on the German residential markets that it believes to benefit from favourable fundamentals that will support stable profit and growth opportunities in the foreseeable future. The Group s current Portfolio is predominantly focused on NRW, Berlin, the metropolitan regions of Leipzig, Halle and Dresden, and other major cities in Germany. The Company believes its platform, experience and systems have positioned it for further strong performance and will allow it to continue to drive value growth from its portfolio potential. The

176 Group also believes that there are sufficient acquisition opportunities in the markets in which it operates to support its external growth strategy in the medium to long term. The Company not only aims to keep its present investment grade rating, but strives to further improve it. A key item of the Company s financial policy is to achieve a A- corporate rating from Standard & Poor s in the long term, and will accordingly continue to implement measures to achieve this goal. Further, the Company focuses on maintaining a healthy mix between various debt-financing sources such as unsecured bonds, notes, and bank loans. Cash flow improvement through focus on rental income and strict cost discipline The GCP Group seeks to maximize its cash flows from its portfolio through management of its assets in order to increase rent, occupancy and cost efficiency. This process is initiated during the due diligence phase of each acquisition, through the development of a specific plan for each asset. Once taken over, and the initial business plan realized, the GCP Group regularly assesses the merits of on-going improvements to its properties to further enhance the yield of its portfolio by increasing the quality and appearance of the properties, raising rents and further increasing occupancy. GCP also applies significant scrutiny to its costs, systematically reviewing ways to increase efficiency and thus improve cash flows. Maximize tenant satisfaction The GCP Group s strategy is to provide high quality service to its tenants. The Company methodically tracks customer satisfaction and aims to respond quickly and efficiently to the feedback it receives. The GCP Group focuses on improving the image of its properties, for instance by designing surrounding gardens, adding indoor and outdoor playgrounds, adding sport facilities, or refurbishing aged facades. The GCP Group continues to implement structural changes to meet the special needs of the elderly and handicapped tenants. Operations supported by centralised IT / software The Group s proprietary and centralized IT/software plays a significant role in enabling the GCP Group to achieve its efficiency objectives. The key to this system is the detailed information that it provides not only on its portfolio but also on existing and prospective tenants, which staff can access on and off the road. This all-encompassing data processing enables the Group to track and respond to market rent trends, to spot opportunities for rent increases, and manage re-letting risks on a daily basis. The GCP Group s IT/software provides management with the detailed information necessary to monitor everything from costs to staff performance

177 Environmental and social responsibility The GCP Group is acting in a responsible manner with regard to the environmental and social impact of it operations. To increase its tenants' overall living standard, the GCP Group invests in social and community building activities, modernizes its facilities and provides current and prospective tenants with high quality service 24/7, 365 days a year. As an employer the GCP Group sees its responsibility in providing its employees opportunities for personal development and internal advancements and thus provides an ongoing leadership program. The GCP Group has a high retention rate of its employees including top and mid management. The company also continuously strives to reduce its carbon footprint and consistently increases the use of 100 % renewable energy for its properties, replacing heating systems with alternatives focused on renewable sources, which creates energy usage and saving awareness amongst its tenants, in order to reduce energy consumption and invest in efficiency solutions. Maintain a conservative capital structure The GCP Group seeks to preserve its capital structure, which it considers conservative, with a LTV ratio below 45 %, relatively low interest rates from bank loans that are mostly hedged, diversified financing sources and long maturities. In addition, the Company aims to keep its unencumbered assets at a ratio of above 50 %. A key feature of the Group s financing objectives is to maintain ample investment flexibility in order to take advantage of investment opportunities when they arise. Business Activities Property Portfolio As of 28 February 2017, the Group s portfolio comprised approximately 84,000 units in Germany. The Group s portfolio predominantly consists of properties held through fully consolidated subsidiaries of the Company. As at 31 December 2016, the Company assessed the total market value of its real estate portfolio at 4.8 billion (compared to 3.8 billion as at 31 December 2015). As at 28 February 2017, the Company assessed the total market value of its real estate portfolio at 4.95 billion. The increase since 31 December 2016 of 150 million is mainly based on the acquisition of further properties. The Property Appraisal Report included in this Prospectus that was used to determine fair value found the market value of the Group s real estate portfolio as of 31 December 2016 and 15 February 2017 to be 4.91 billion. As at 28 February 2017, the Company assessed the total market value of its real estate portfolio at 4.95 billion. The Property Appraisal Report covers

178 99% of the value of the Group s portfolio as of February The remaining properties are covered by other appraisers, causing some minor differences to the information presented in the Property Appraisal Report to the information presented by the Company. This results in a deviation of 40 million in investment property value, reflecting 300 units. Additionally, some operational differences arise from timing differences between the valuation report and the February 2017 portfolio presented by the Company. The valuation figures contained in the Property Appraisal Report differ by approximately 60 million (equal to approximately 1.26 %) higher to the equivalent figures contained in the Company s consolidated financial statements for the fiscal year ended 31 December 2016 mainly due to revaluation and minor differences refer to accounting policies (fair value versus cost method) and/or rounding differences. Overview on portfolio for the years 2016, 2015 and 2014 The following table provides an overview on certain key information for the Group s real estate portfolio as of and for 31 December 2016, 2015 and For changes in the real estate portfolio since 31 December 2016 see Recent Development and Outlook. Unless otherwise indicated, the figures in the table have been extracted from the Group s management information system: As of 31 December As of 28 February (unaudited) (unaudited) (unaudited) (unaudited) Value (1) (in millions of ) 2,186 3,858 4,796 4,952 Area (2) (in 000' sqm) 2,921 4,861 5,192 5,298 EPRA Vacancy (3) 12.7% 12.5% 7.9% 7.8% Annualized net rent (4) (in millions of ) in-place rent per sqm (in ) Number of Units 42,555 75,636 82,673 84,102 Value per sqm (5) Rental yield (6) 7.1% 6.8% 6.4% 6.4% (1) (2) (3) (4) (5) (6) Means the book value of investment property recorded at fair value and inventories and trading properties recorded for at cost. Square meters of investment property, inventories and trading properties excluding ancillary areas such as storage. Estimated net rent of vacant area divided by the sum of net rent of occupied area and estimated net rent of vacant area; the Property Appraisal Report reprinted elsewhere in this Prospectus refers to the physical vacancy rate, which deviates from the EPRA Vacancy rate. The physical vacancy rate is calculated by dividing the vacant lettable area by the total lettable area. Net cold rent (Netto-Kaltmiete) of investment property and trading properties annualized as of the given cut-off date. Net cold rent (Netto-Kaltmiete) without parking and others divided by occupied area. Annualized net rent (Netto-Kaltmiete) divided by value

179 Key information for the portfolio as of 28 February 2017 The following table provides an overview on certain key information for the Group s real estate portfolio as of 28 February For changes in the real estate portfolio since 28 February 2017 also see below and Recent Development and Outlook. Investment property (in millions of ) Area (in k sqm) EPRA vacancy Annualized net rent (in millions of ) (unaudited) Inplace rent per sqm (in ) Number of units Value per sqm (in ) Rental yield NRW 1,610 1, % , % Berlin % ,720 1, % Dresden/Leipzig/ Halle 887 1, % , % Mannheim/KL/ Frankfurt/Mainz % ,981 1, % Nuremberg/ Fürth/Munich % ,471 1, % Bremen/Hamburg % , % Others 928 1, % , % Total 4,952 ( * ) 5, % , % (*) The investment property as of 28 February 2017 was updated and increased by 42 million, to be in-line with the Property Appraisal Report. The Group s real estate portfolio as of 28 February 2017 consists of 77,465 residential units, 5,031 commercial units, 1,606 nursing home units, 20,819 garages and external parking spaces and 1,773 miscellaneous units (e.g. cellars, storages, antennas). The Group s units had a total rentable floor area of approximately 5.3 million square meters, the average unit size was 63 square meters as of 28 February The average in-place rent across the entire real estate portfolio of the Group as of 28 February 2017 was 5.4 per sqm. The average tenancy length is 14 years. As of 28 February 2017, approximately 6 % of the units of the Group s portfolio were subject to rent restrictions. Residential real estate transactions often include contractual provisions restricting a buyer's right to sell the acquired properties, to increase the rent or to terminate existing leases. These restrictions might reduce the attractiveness of the affected units for prospective purchasers. Such restrictions often result from so-called charters of social rights (Sozialchartas) which are especially common in connection with the privatisation of publiclyowned property. Usually, most obligations lapse in full or in part after a certain period of time. In addition, the Group holds certain properties which are subject to grants from public authorities in the form of construction subsidies, expenses subsidies, expenses loans and low-interest loans

180 that impose certain limitations on the Group. Most of the subsidies are granted in the form of lowinterest long-term loans. The public bodies granting a subsidised loan impose maximum rent levels on the properties constructed, acquired or modernised using such subsidised loan in order to compensate for construction, financing and property-related costs. Because the rent levels set by the public bodies are significantly below current market rents for a number of rent-restricted residential units, it may be difficult to increase rents to market levels even after the lapse of subsidy restrictions because of the lack of tenants who are willing or able to pay market level rents for such properties. Regional distribution The GCP Group focuses on properties in densely populated areas in Germany. As of 28 February 2017 the Group s portfolio comprised 28,029 units situated in NRW, 6,270 units in Berlin, 19,872 units in Dresden, Leipzig and Halle, 3,981 units in Mannheim/Kaiserslautern, Frankfurt und Mainz, 1,471 units in Nuremberg, Fürth and Munich, 3,844 units in Bremen/Hamburg and 20,635 units in other densely populated regions in Germany. The following chart shows the Group s real estate portfolio broken down by regions in percentages according to fair value. As of 28 February 2017 the Group s portfolio comprised 28,029 units situated in NRW. The following chart shows the distribution of units within NRW in percentages according to fair value

181 The portfolio distribution in NRW is focused on cities with strong fundamentals within the region. 19 % of the NRW portfolio is located in Cologne, the largest city in NRW, 10 % in Duisburg, 9 % in Gelsenkirchen, 8 % in Dortmund and 8 % in Essen. As of 28 February 2017 the Group s portfolio comprised 6,270 units situated in Berlin. The following figure shows the distribution of units within Berlin. 63 % of the Berlin portfolio is located in strong neighbourhoods. 50 % are located in the inner city, whereas 13 % are located in strong and growing areas outside the inner circle, such as West Charlottenburg/Wilmersdorf, Lichtenberg, south of Schöneberg, Schönefeld, Steglitz and others. The remaining 37 % is well located primarily in Reinickendorf, Treptow, Köpenick and Marzahn- Hellersdorf. As of 28 February 2017 the Group s portfolio comprised 19,872 units situated in the cities of Dresden, Leipzig and Halle. The following chart shows the distribution of units within Dresden, Leipzig and Halle in percentages according to fair value

182 Breakdown residential and commercial properties The real estate portfolio of the GCP Group primarily consists of residential properties and is complemented by commercial properties. The following table provides an overview on the portion of commercial real estate in the portfolio of the Group according to property size. 28 February 31 December 2017 (unaudited) 2016 (unaudited) 2015 (unaudited) 2014 (unaudited) commercial portion per sqm (*) 8% 8% 13% 20% (*) Based on main usage of the individual property. Acquisitions between 31 December 2016 and 28 February 2017 and after 28 February 2017 Since 1 March 2017 the Company has acquired no material additional properties. In the first two months of 2017, the Group acquired properties at a total amount of 0.1 billion. The Group focused its acquisition on its strategic locations, Berlin, NRW and Hamburg of which the majority of acquisition have been executed in NRW as well as Kaiserslautern. By the end of February 2017, the portfolio increased to over 84 thousand units (see Recent Development and Outlook ). Business activities The Group s business model is mainly focused on the acquisition of real estate properties with strong underlying fundamentals which are undermanaged and/or underperforming, and to reposition them through intensive tenant management and targeted modernisation. This enables the Company to create significant value in its portfolio through rental increases and property revaluations. This is complemented by the selected sale of assets on an opportunistic basis. The following chart provides an overview on the business model of the Group:

183 With over 800 employees at the date of this Prospectus, the GCP Group covers the full spectrum of the real estate value chain. Whereas the Group has its operational headquarters in Berlin, the Group s asset management, sales, and marketing activities are organised locally to better capture regional demand and necessities. The following chart gives an overview on the Group s asset management activities: Property Management The GCP Group believes that property management is a key factor for the successful repositioning of underperforming real estate assets. The Group s property management activities consist of staff located in the regional offices and directly in the properties. The property management comprises facility management, rent management including rent collection and rent increase as well as technical support control and supervision. The property management services are conducted by GrandCity through its permanent establishment in Berlin on the basis of various agency agreements entered into with the entities owning the properties, as a result of which it acts as service provider for the legal owners of the properties

184 Supply Management and Rental Expense Management Through centralised supply management, the Company seeks to improve purchasing and technical quality management and to implement strict cost related disciplines. All technical services (including construction management for modernisations and maintenance) and operational expenses (such as consumables, external service providers and energy) are typically awarded through country wide tender processes, which can result in higher cost transparency, increased quality, and material cost reduction through higher volumes per tender. The services provided to the Group are constantly monitored by the Group s regional on-site staff which allows the quality and the costs of the services provided by suppliers to be measured. The GCP Group is committed to transparent and fair calculation of rental expenses. The GCP Group s focus on cost extends to all of the operations of the Group, including costs that are chargeable to its tenants. As well as its tender offer initiatives, the introduction of consumption based billing models of heating, water and waste costs by introduction of wireless meters helps to increase transparency for rent expenses by providing fair, consumption based billing. Rent Management The Group s rent management activities generally aim to optimise the rent levels on an on-going basis according to current market conditions. The source of demand analysis helps to optimize marketing campaigns. The information is processed through an in-house developed proprietary IT software. The Group s rent management involves the analysis of the market rent and the purchasing power of its customers, as well as the monitoring of statutory or contractual rent restrictions imposed by German tenancy law or subsidies. The Group s rent management strategy aims at analysing the potential for rent increases for single units rather than whole properties. Market demand and supply is directly transferred into product development such as models to convert existing units (e.g. converting a big 3-room apartment into a 4-room apartment). The GCP Group seeks to increase rents to market levels and, agree higher rents for newly signed lease contracts or newly refurbished units. The centralized service centre is performing lead management 24 hours a day and seven days a week. An online portal is available to every tenant. Upon the receipt of a call or an from a tenant the centralized service centre automatically sends an SMS, or text message, to the tenant and issues a ticket which it then forwards to the property staff. The property staff in turn contacts the respective service company if necessary. Subsequently the centralized service centre performs a follow-up up call with the tenant and keeps a tenant survey via . The centralized service centre forwards sales leads on the basis of calls from prospective tenants instantly to the letting staff. Subsequently the centralized service centre performs a follow-up call with the prospective tenant and keeps a lead survey

185 Rent collection Rent collection is an internalised process and so the Group s rent collection managers are rapidly alerted to outstanding rents. The Group s overall strategy to optimise the collection of rents is to maintain high tenant satisfaction (which reduces defaults in rent payments) and, in the event of a default, to trace defaulting tenants immediately. The rent collection managers are supported by the Group s own service centre, by local in-house collectors based in the regional offices, by the legal department and by reputable debt collection agencies. The enforcement strategy may include legal proceedings, but also arrangements with the tenants for payments to be made in instalments or the termination of the lease contract. Regional offices and customer services The regional offices form an important part of the Group s property management business. Besides activities in sales and marketing, the staff of the two regional offices primarily conducts property management activities, provides technical support and are responsible for rent collection. The regional property management activities consist of approval of rent contracts, control of budgets as well as release of invoices rendered by third party suppliers for maintenance. The technical support for service and maintenance is organised by a centralised service centre, operating 24 hours a day, on seven days a week, which are instructed to follow-up on every service call and tenant request. In addition, the regional offices provide their own technical staff which take the requests, examine and verify the tenant s requests and remedy the issue. The regional offices are fully integrated into the Group s management platform, which provides the Group with regional market knowledge, facilitates effective cost control and is an important tool for increasing occupancy rates as well as optimising tenant structure and tenant satisfaction. Sales and Marketing The Group s sales and marketing department plays a prominent role in the Group s repositioning activities. Sales and marketing activities are organised in the regional offices and are predominantly conducted by internal sales and marketing specialists. Sales Sales activities aim to reduce the number of vacant units within the Group s portfolio. As part of its sales activities, the GCP Group pays significant attention to the generation and processing of customer leads. The service centre pools the data of the customer leads and sends through the CRM system all relevant customer data to the regional sales representatives who have applications for smart phone/handheld devices fully integrated into the CRM system. The Group s

186 sales representatives are instructed to follow-up on every lead and to regularly update the information in the CRM system on its progress with letting each unit. The tracking and evaluation of customer leads provides the Company with important data relating to location and customer expectations. This helps the GCP Group analyse the market and allows on-going adjustment of its marketing measures and distribution channels, as well as allowing for the control of related costs. In addition, the evaluation of customer expectations allows the Company e.g. to adjust unit sizes to market demands. Marketing The Group seeks to actively market its real estate units as good quality living space at affordable rents. Marketing activities are usually tailored to specific properties and regions. Marketing activities are widely spread across the Group s websites (which provide search engines for vacant units), specially designed advertising on internet portals with high traffic rates, local newspapers, and print material (including brochures and flyers). The GCP Group uses show units in some of its properties as a marketing tool to attract future tenants by showing the potential of the relevant units. Marketing campaigns targeting new tenants also include the granting of incentives such, as vouchers for furnishing or recreational activities. Customer Retention Activities The GCP Group considers customer retention an important part of its general objective to provide good quality living at affordable prices. The Group s retention activities aim at increasing tenant satisfaction and improving the image of the respective neighbourhood. Part of its retention focused approach is the high availability of the centralised service centre which can react to customer requests and instruct local representatives to react accordingly. After any customer request the service centre follows-up with a call to ensure that the customer was satisfied. Other retention methods include modernisation and refurbishment (such as renovation of façades and staircases, wireless meters as well as establishment of outdoor and indoor playgrounds for children (see Construction Management and ESG Measures ), elderly friendly installations, supporting local associations and the hosting of family friendly festivals and events for existing tenants. The GCP Group also offers tenants the opportunity to take an active role in the improvement process of the property they live in. Construction Management and ESG measures The Group s repositioning activities include various investments in targeted refurbishments and maintenance projects, which are organised by the Group s construction management team in its operational headquarters in Berlin together with engineers on site. Properties which are acquired in an early repositioning stage according to the Group s definition could require targeted

187 modernisation or refurbishment. The construction management team s role includes instruction and monitoring of third-party suppliers to implement the modernisation measures. On-going maintenance includes necessary repairs in on-going leases and is handled through the regional offices, which liaise with the headquarters on potential maintenance activities and supervise maintenance measures outsourced to third parties. The Group performs environmental, social and governance measures ( ESG measures ). Such measures include the replacement of heating systems to district heating from renewable resources or centralized gas with the focus on climate-neutrally produced gas and insulation measures, e. g. of windows and cellars. The majority of the Group s properties in common areas already receive energy from 100 % renewable resources. The Group aims to provide all of the Group s properties with energy that is 100 % supplied from renewable resources. As of the date of this Prospectus, all of the Group s offices are supplied with energy from 100 % renewable resources. Further, measures aimed at increasing energy efficiency include upgrading energy consuming elevator systems, evaluation of the entire portfolio to identify further energy saving potentials for the reduction of heating usage and CO2 emissions, creating awareness among the Group s tenants through handouts, language-independent explanatory videos for energy and heating saving behaviour and proper trash disposal. The Group has started a pilot project in which photo voltaic and solar installations in Dresden, Leipzig and Halle supply apartments, public areas technical building equipment with energy. Based on the results of this pilot project the Group will decide whether to extend corresponding modernizations to more properties. Further, energy modules are installed for the Group s proprietary IT and software systems. Property Transaction Management Acquisitions and acquisition management are core elements in the Group s business model. Besides that, the Group also sells properties in special cases and/or on an opportunistic basis. Acquisition management The Group adheres to strict investment criteria which limit its acquisition activities to properties which the Group believes have a high potential to create significant value once acquired. The main components of the Group s acquisition activities include: (a) constant market screening and permanent expansion and care of the Group s established sourcing network, and (b) the due diligence evaluation of said properties as well as the execution of acquisitions. During the due diligence process for properties, the Group develops a specific repositioning plan for each property, including (a) the comprehensive analysis of the relevant macro- and micro-economic location factors; (b) the potential for substantial reduction of vacancy rate and operational cost; (c) the potential for future rent increases; (d) the capital expenditure necessary for modernisation and

188 refurbishment measures; and (e) the capability for integration into the existing management platform. Over the years, the GCP Group has built up a wide-ranging sourcing network within the German real estate and financing industry which enables access to information on portfolios for sale which generally match its investment criteria. The GCP Group has established close relationships with some of the leading German banks, other reputable financial institutions, insolvency administrators and important market players. These relationships provide the GCP Group with access to multiple investment opportunities, often before they are widely promoted or publicised. The GCP Group believes it has established a relationship of trust and has acquired the status of a privileged potential buyer with many of the banks and financial institutions involved in the GCP Group s acquisitions over the years. For its acquisitions the GCP Group applies the following specific criteria - Acquisition in densely populated areas and major cities - High cash flow generating assets - Vacancy reduction potential - Rent level per sqm is below market level (under-rented), has upside potential and low downside risk - Purchase price below replacement costs and below market values - Potential to reduce the operating cost per sqm Sale of properties Generally, the Company aims to hold onto properties in order to realize the identified upside potential by its repositioning measures. Besides that, the Company s strategy also includes selling properties on an opportunistic basis where upside potential has been mostly realised and attractive prices can be achieved and at the same time the market offers investment opportunities with higher upside potential. The activities comprise the ongoing analysis of the properties, the designation of selected properties as objects for sale as well as the management of the transaction including the instruction of external lawyers and other advisors

189 Support Functions IT The Group has a centralized IT system that connects all departments and plays a significant support role for asset management of activities provided. The proprietary IT system was developed in-house. The core element of this IT system is the detailed information management that not only enables the Group to access all relevant financial and operational data on an available daily basis of the properties on portfolio level but also, through its integrated customer relationship management system ( CRM ), on existing and prospective tenants. The IT system is fully synchronized with the property management software and allows generating a wide range of reports from different data sources (for operational and accounting purposes) and thus facilitates the smooth integration of newly acquired properties. Tasks which are facilitated by the IT system include the continuous monitoring of portfolio operations, costs and staff performance, systematically following tenant leads, determining spot opportunities for rent increases, managing re-letting risks, monitoring rent collection and performing activities for customer retention. It support allows the Group to quickly gain control on new portfolios. The IT software enables the Group to completely monitor the portfolio and to identify tenant fluctuations. The Group believes its tenant management software to ensure tenant satisfaction and reduce termination. Finance In its finance department the Group manages its liquidity and debt. This department monitors the compliance with obligations and undertakings under existing loan agreements and other financing instruments, e.g. the bonds issued by the Company. The finance department aims at optimizing the financing structure in acquisitions and tailoring every bank loan to the specific needs of the Company. In addition, it monitors maturities, interest rate developments; interest hedging possibilities, capital investment possibilities for available liquidity and steadily screens the Group s financing structure to identify potentials for improvement. The finance department also monitors and controls key financial and operational information as cash flow, income and operation costs. Employees As of the date of this Prospectus, the Group employs 825 employees. The Company itself employs three employees; the remaining employees are employed with the subsidiaries of the Company

190 The following table shows the number of employees of the Group (headcount, including employees in part-time, mini-jobs, short-term employees and employees with limited-term employment agreements, but excluding the members of the Board of Directors and the Daily Manager as of the indicated reporting date. The figures indicated in the table below were derived from the Company s internal management system. as of 31 December 2016 as of 31 December 2015 as of 31 December 2014 Employees (Heads) The overwhelming majority of employees are employed with GrandCity and work for or in its permanent establishment in Germany. The Group does not employ more than ten temporary employees as at the date of this Prospectus. Neither the Company nor any of its subsidiaries currently has a works council. There are currently no works agreements (Betriebsvereinbarungen) or collective bargaining agreements (Tarifverträge) applicable to the Company or any of its subsidiaries. The Company has set up and long-term incentive scheme for certain employees of the Group (the MIP ). Under the MIP management and certain employees of the Group which are included in the MIP are entitled to acquire shares in the Company at certain terms subject to the duration of their employment with the Group. For more information on the MIP see Description of Share Capital - Employee Stock Option Plan. Besides the legally required contributions to government pension insurance carriers neither the Company nor any of its subsidiaries have set aside any amounts to provide pension, retirement or similar benefit. Patents, Licenses and Trademarks The GCP Group does not hold patents. As of the date of this Prospectus members of the GCP Group hold the following trademarks which are registered at the German Patent and Trademark Office in Munich (Deutsches Patent- und Markenamt): - Word mark Grand City Property Management, registered on 26 November 2008; - Figurative mark Grand City Property Management, registered on 26 November 2008; - Word mark Grand City, registered on 15 January 2009;

191 - Word mark Grand City Holland, registered on 15 January 2009; - Word mark Grand City Germany, registered on 15 January 2009; - Word mark Grand City U.K., registered on 15 January 2009; - Word mark Grand City France, registered on 15 January The three internet domains held by the Company are and Apart from the intellectual property rights mentioned above the Group holds no other significant intellectual property rights and is not dependent on patents or licenses material to its business. Legal and Arbitration Proceedings Companies of the GCP Group are regularly party to legal disputes with regard to their business activities; in particular rental or warranty disputes. None of these disputes, however, are material either individually or as a whole with respect to the financial situation or profitability of the Group. No company of the GCP Group is currently or has been in the past twelve month, party to any governmental, legal or arbitration proceedings (including such proceedings which are pending or - to the Company s knowledge - could be initiated) which could have a material effect on the financial position or profitability of the Group or which has had such effect recently. Insurances The GCP Group has concluded various operating insurance policies at market conditions covering inter alia the following risks: third party liability, fire, water, unidentified risks (all risks insurance) and, regarding its commercial portfolio, rent loss. The Company has purchased for its members of the board of directors several Directors and Officers insurance policies ( D & O Insurance ). The D & O Insurance covers liabilities up to 30 million per insured event with a sublimit of 3 million regarding Cyprus subsidiaries and legal expenses of up to 2 million per legal case and up to 2 million per criminal litigation or prosecution. Based on its current knowledge GCP Groups considers its insurances policies to be appropriate in particular as to the risks of its business and as to the insurance coverage. However, GCP cannot guarantee that it will not incur any losses or become subject to claims exceeding the

192 amount of the insurance coverage or that it will be able to obtain appropriate insurance policies in the future

193 MATERIAL CONTRACTS The following section provides an overview of material contracts other than contracts entered into in the ordinary course of business, to which the Company or any member of the GCP Group is a party. Acquisition Agreements Members of the GCP Group enter into acquisition agreements relating to real estate properties in the ordinary course of business and on a regular basis. Generally, such acquisitions are conducted either by way of an acquisition of the shares in the respective entity holding the properties (share deal) or by way of a purchase of the real estate properties (asset deal). The following section provides an overview on the material acquisition agreements in the years 2015 and 2016 until the date of the Prospectus to which members of the GCP Group are a party. Acquisition of Gutburg in June 2015 Through a share purchase and assignment agreement dated 23 June 2015, effective as of 1 July 2015, a subsidiary of the Company has acquired all shares in Gutburg Immobilien S.A. ( Gutburg ), the holding company of several property companies incorporated under Luxembourg law (the Gutburg Group ). The purchase price amounted to approximately 100 million and was subject to market-standard adjustment mechanisms. The sellers agreed to customary representations and warranties. The Gutburg Group owns a property portfolio of approximately 8,500 units primarily located in Leipzig, Halle, Cottbus, Plauen and other cities in the eastern part of Germany. On 2 July 2013 Gutburg issued unsubordinated, unsecured bonds with an aggregate nominal amount of CHF 55 million (see Finance Agreements - Gutburg Bonds ) which became financial indebtedness of the Group upon implementation of the acquisition. Acquisition of a real estate portfolio in November 2015 Through a share purchase agreement dated 20 November 2015, members of the GCP Group acquired a real estate portfolio comprising of approximately 3,500 units which were taken over in December The portfolio consists of real property as well as inheritable building rights (Erbbaurechte), primarily in NRW as well as in Bremerhaven and Hannover. Including the takeover of existing liabilities the purchase price (including the takeover of existing loan agreements) amounted to approximately 140 million and was subject to certain marketstandard adjustment mechanisms. The sellers agreed to customary representations and warranties

194 Acquisition of two real estate portfolios in 2016 In April 2016, a member of the GCP Group entered into a share purchase and assignment agreement and acquired all shares in a holding company, which holds 94.9 % of the shares in a property company. The property company owns a property portfolio of approximately 1,300 units primarily located in NRW. The purchase price (including the takeover of existing loan agreements) amounted to approximately 60 million and was subject to market-standard adjustment mechanisms. The sellers agreed to customary representations and warranties. Through a share purchase agreement entered into in April 2016 members of the GCP Group acquired a real estate portfolio comprising of approximately 1,000 units located in Gelsenkirchen which were taken over in June 2016 and approximately 1,500 units located in Duisburg which were taken over in September The total purchase price amounted to approximately 108 million and was subject to certain market-standard adjustment mechanisms. The sellers agreed to customary representations and warranties. Finance Agreements The GCP Group has entered into various financing agreements comprising of financial instruments as well as loan agreements. As of 31 December 2016 the outstanding total aggregate amount under the finance agreements of the GCP Group was approximately 2.42 billion. The total aggregate amount outstanding under the issued unsubordinated, unsecured bonds was 1.5 billion, including an outstanding amount of 450 million under a convertible bond. In addition, a member of the GCP Group has issued unsubordinated, unsecured bonds with an aggregate principal amount of CHF 55 million. The GCP Group has further issued perpetual notes with a total outstanding amount of approximately 700 million. The Perpetual Notes qualify as equity according to IFRS. In addition, members of the GCP Group have entered into various loan agreements with a total outstanding amount of approximately 937 as at 31 December Convertible Bonds In February 2016 the Company issued unsubordinated, unsecured bonds convertible into new ordinary shares of the Company with a total nominal amount of 450 million ( Series F Bonds ). The Series F Bonds are listed on the Open Market at Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with International Securities Identification Number (ISIN) XS The Series F Bonds mature on 2 March 2022 and bear interest of 0.25 % per annum, payable semiannually in arrears. The conditions of the Series F Bonds provide for an interest step up of 0.25 % in the event a change in the rating of the Company to an investment grade rating (as defined in the conditions of the Series F Bonds) does not occur or remains effective on or before ten

195 business days prior to 2 September The Series F Bonds have a denomination of 100,000 each. The Series F Bonds may be converted by their holders into new ordinary shares of the Company. The initial conversion price was fixed at The conversion price is subject to certain adjustment mechanisms which provide for a recalculation of the conversion price in the event of, amongst others, issuance of new shares or rights to subscribe for new shares or securities exchangeable or convertible into shares, or the payment of a non-cash dividend. Considering the initial conversion price the Series F Bonds may be converted into up to approximately million shares, representing up to approximately 10.8 % of the fully diluted share capital of the Company as of the date of this Prospectus. Under the conditions of the Series F Bonds the Company has agreed to certain customary undertakings and covenants. A breach of such customary covenants and obligations may lead to an event of default. The material covenants (which are subject to customary exemptions to allow the Company to carry on its business in the ordinary course) include to procure that - the consolidated indebtedness of the Group (as defined in the terms and conditions) does not exceed 60 % of the consolidated total assets of the Group (as defined in the terms and conditions) and, in addition, the consolidated secured indebtedness of the Group shall not exceed 45 % of the consolidated total assets of the Group; - the ratio of consolidated earnings before interest and taxes as set out in the Company's financial statements as at the relevant reporting date to the aggregate amount of net cash interest of the Group as at such reporting date corresponds at least to 2.0 (interest coverage ratio); and - the unencumbered assets of the Group (as defined in the terms and conditions) shall at no time be less than 125 % of the unsecured indebtedness of the Group (as defined in the terms and conditions). The Company may, at its discretion, redeem all but not some of the Series F Bonds if (i) the parity value (as defined in the conditions of the Series F Bonds) exceeds certain thresholds for at least 20 out of 30 consecutive dealing days and (ii) Series F Bonds in an aggregate nominal amount of 80 % of the initial total nominal amount have been converted and/or repurchased and cancelled and/or redeemed. The holders of Series F Bonds may request redemption of the Series F Bonds in the event of (i) a merger involving the Company (ii) a change of control in the Company or (iii) the free float in the Shares falling below 15 % for 30 consecutive dealing days. In addition, the Company may redeem the Series F Bonds for taxation reasons. The Company may purchase Series F Bonds at its discretion and hold, re-sell or cancel the purchased Series F Bonds. The Series F Bonds are governed by English law

196 As of the date of this Prospectus no Series F Bonds have been converted into shares of the Company. In addition, the Company had issued in February 2014 and June 2014 convertible bonds with an aggregate principal amount of 275 million, a term of five years and a denomination of 100,000 each ( Series C Bonds ). The Series C Bonds carried an interest rate of 1.50 % per annum and were listed on the Open Market (Freiverkehr) of Frankfurt Stock Exchange (ISIN XS ). The initial conversion price was 9.72 and had been adjusted in June 2015 to On 11 January 2016 more than 80 per cent of the aggregate principle amount of the Series C Bonds had been converted or redeemed and the Company exercised its right to redeem the outstanding Series C Bonds. Following conversions of the Series C Bonds the share capital of the Issuer was increased to its current amount of 15,378, (see Description of Share Capital - Development of Subscribed Share Capital ). The outstanding Series C Bonds which were not converted into shares of the Issuer were redeemed on 10 February At this date all obligations of the Company under the Series C Bonds have ceased. Unsubordinated, Unsecured Bonds The Company has further issued series of unsubordinated, unsecured bonds with an outstanding total nominal amount of 1.05 billion. The bonds are governed by English law and are listed on the regulated market (Main Securities Market) of the Irish Stock Exchange. Nominal Amount ISIN Maturity Date Coupon 500 million XS October % 550 million XS April % Under the conditions of the bonds the Company has agreed to certain customary undertakings and covenants. A breach of such customary covenants and obligations may lead to an event of default. The material covenants (which are subject to customary exemptions to allow the Company to carry on its business in the ordinary course) are the same as for the Series F Bonds (see Convertible Bonds ). The terms and conditions of the unsubordinated unsecured bonds provide for certain events of default which include, amongst others the non-compliance with regard to any covenant, payment obligation or other obligation under the bonds and a cross default relating to events of default under other indebtedness, however defined, if such default equals or exceeds, either alone or taken together with other defaults, more than 10 % of the portfolio value of the Group. Upon occurrence of an event of default (subject to curing provisions and thresholds for certain events of

197 default) the holders of the bonds are entitled to request redemption of the aggregate principal amount together with due and unpaid interest. Unless previously purchased and cancelled or redeemed early as outlined below the bonds are redeemable at their principal amount on their respective final maturity date as outlined above. The Company may redeem the bonds prior to the final maturity date at their discretion, for an amount defined in the respective conditions of the bonds. In addition, the Company may redeem each series of bonds in the event 80 % or more of the principal amount of the respective series of bonds have been purchased and cancelled or redeemed. Also, the Company may redeem the bonds for taxation reasons. Holders of each series of bonds are entitled to request redemption of the bonds in the event of a merger or a change of control in the Company for an amount as defined in the respective conditions of the bonds. Subject to applicable requirements of any stock exchange (if any) the Company or any member of the Group may purchase bonds. Bonds so acquired may be cancelled. Gutburg Bonds Gutburg issued on 8 July 2013 unsubordinated, unsecured bonds with an aggregate nominal amount of CHF 55 million and a denomination of CHF 5,000 each (the Gutburg Bonds ). Gutburg became a member of the Group in June 2015 (see Acquisition Agreements - Acquisition of Gutburg in June 2015 ) The Gutburg Bonds carry an interest rate of 4.75 per cent payable annually on 8 July each year and a final maturity date on 8 July The Gutburg Bonds are listed on the SIX Swiss Exchange and have been assigned the ISIN CH As of the date of this Prospectus, Gutburg Bonds in an aggregate nominal amount of CHF 55 million are outstanding. The Gutburg Bonds are governed by Swiss law. The conditions of the Gutburg Bonds provide for customary undertakings and covenants. The conditions of the Gutburg Bonds further provide for a change of control clause allowing the Neue Helvetische Bank AG, acting as a trustee, to declare all outstanding Gutburg Bonds due and repayable upon occurrence of a change of control event. Neue Helvetische Bank AG expressly waived its right to declare the Gutburg Bonds due and repayable in the course of the acquisition of the shares in Gutburg by the Group. Perpetual Notes The Company has issued perpetual notes with a total nominal amount of 500 million in tranches on 18 February 2015, 9 March 2015 and 4 August 2015 ( Perpetual Notes I ) and with a nominal amount of 200 million on 8 / 9 September 2016 ( Perpetual Notes II and together with the Perpetual Notes I the Perpetual Notes ). The obligations under the Perpetual Notes are

198 subordinated to other obligations of the Company. The Perpetual Notes rank senior only to the Shares and thus, qualify as equity of the Company for accounting purposes. The Perpetual Notes are governed by German law and admitted to trading on the regulated market (Main Securities Market) of the Irish Stock Exchange. Nominal Amount ISIN Initial Coupon Perpetual Notes I 500 million XS % Perpetual Notes II 200 million XS % The interest rate of the Perpetual Notes is subject to certain adjustment mechanisms and is recalculated every five years to apply for the subsequent five year period. Interest payments are due and payable annually. The Company may choose to defer interest payments at its discretion. The Company may redeem the Notes in whole but not in part at their principal amount on 18 February 2022 for the Perpetual Notes I and on 22 January 2023 for the Perpetual Notes II and on each subsequent interest payment date. In addition, in the event the qualification of the Perpetual Notes with regard to rating, accounting or taxation changes due to changes in, or interpretation of, applicable law or applicable accounting standards, the Company may redeem the Perpetual Notes in full but not in part for 101 % of their principal amount. In addition, the Company may redeem the Notes for their principal amount in the event 80 per cent of the Perpetual Notes initially issued have been redeemed or purchased and cancelled by the Company or the Company would, due to changes in legislation, be obliged to payment of additional amounts on the next interest payment date. Also, the Company may redeem the Perpetual Notes for their principal amount in the event a change of control in the Company occurs. Loan Agreements The GCP Group has entered into various bank loan agreements primarily for the purpose of property financing, with an aggregate total amount of approximately 937 million (including accrued interest) outstanding as at 31 December The loan agreements have no material maturity before 2020 and maturities range until 2042 and beyond. The loan agreements bear interest at fixed rates or rates to be adjusted on the change in EURIBOR or variable rates of three or six months EURIBOR plus margin. The weighted average interest rate of all loans outstanding is 2 % p.a. The interest rate depends, among other things, on the quality of the financed property, the total term, the loan-to-value ratio and the market conditions at the time of financial closing

199 The loan agreements are typically secured by land charges, assignments of rental payment claims, pledges on the shares of the relevant subsidiary and account pledge agreements. Almost all of the loan agreements contain financial covenants customary for real estate borrowing. Any breach of financial covenants would usually allow the bank to terminate the respective loan and claim early repayment of the entire loan unless the breach is cured within a cure period. The general terms and conditions of the relevant lender typically form part of the individual loan agreements which, inter alia, typically provide provisions regarding events of default linked to the commercial condition of the relevant borrower. As at the date of this Prospectus, most of the loan agreements of entities of the GCP Group with banks provide for standard change of control clauses enabling the respective lender to terminate the loan agreement in case of a change of control without the lender's consent. Under a considerable portion of the loan agreements the respective lender may terminate the loan agreement if (a) the Company is no longer (directly or indirectly) the majority shareholder of the respective borrower, or (b) the property management of the respective property is no longer performed by a member of the GCP Group. Material loan agreements with an initial nominal amount exceeding 50 million (or as stated otherwise in the table below) as at 31 December 2016 are described in more detail below. Lender Borrowing subsidiary of the GCP Group Contractual nominal loan amount In millions of (rounded) Outstanding nominal loan amount (including accrued interest) In millions of (rounded) Final maturity (year) Berlin- Hannoversche Hypothekenbank AG TH Zwei Terra GmbH TH 407 Terra GmbH Berlin- Hannoversche Hypothekenbank AG Landesbank Baden- Württemberg Deutsche Pfandbriefbank AG Deutsche Pfandbriefbank AG Corealcredit AG Bank Violet Bidens Property GmbH Azur Bongordia Property GmbH Pink Butea Property GmbH Green Bellium Property GmbH Purple Bowenia Property GmbH Lime Daylily Property GmbH White Pilea Property GmbH Peach Astilbe Property GmbH Papaver Leonotis Property GmbH Cerise Hollyhock Property GmbH Bonny 35 GmbH Blue Cordelia Property S.à r.l. Bright Tarvos Property S.à r.l. Red Mimas Property S.à r.l. White Janus Property S.à r.l. Pink Bestla Property S.à r.l. Perseus Immobilien Gesellschaft 1 S.à r.l. Perseus Immobilien Gesellschaft 2 S.à r.l. Perseus Immobilien Gesellschaft 3 S.à r.l

200 Lender UniCredit Bank AG Borrowing subsidiary of the GCP Group Perseus Immobilien Gesellschaft 4 S.à r.l. Perseus Immobilien Gesellschaft 5 S.à r.l. Perseus Immobilien Gesellschaft 13 S.à r.l. Auburn Gloxina Property GmbH Blush Pratia Property GmbH Brown Grodaldo Property GmbH Charcoal Sweetpea Property GmbH Cinereous Geranium Property GmbH Cleadon Misteltoe Property GmbH Drab Cervil Property GmbH Neovis Grundbesitz GmbH White Kalmia Property GmbH" Contractual nominal loan amount In millions of (rounded) Outstanding nominal loan amount (including accrued interest) In millions of (rounded) Final maturity (year) Interest and Hedging The aforementioned loan agreements bear variable interest rates calculated on the basis and to be adjusted according to the change in one- or three-month EURIBOR plus a fixed margin. The margin rates depend, among other things, on the quality of the financed property, the total term and the loan-to-value ratio, and range from approximately 1 % to 2 % p.a. In one case, the interest rate is calculated on the basis of the refinancing costs of the borrower at the final maturity date plus a fixed margin. With respect to 86 % of all loan agreements with variable interest rates the GCP Group has entered into hedging agreements to cover the majority of the risks arising from possible changes in the variable EURIBOR interest rates. Early repayment All loan agreements provide for a mandatory early repayment of the loan in the event the respective real estate properties of the borrowing members of the GCP group are sold. In such case the borrowers shall repay to the lender a proportional loan amount, which exceeds the respective value of the sold real estate properties attributed to such properties in the loan agreement. In addition, some of the loan agreements provide for an option of the borrower to effect early repayments of the loans. In such case, the borrower has to pay a certain prepayment penalty

201 Security and Financial Covenants The repayment claims of the lenders are secured by land charges on the financed properties, assignments of rental payment claims, pledges on the shares of the relevant subsidiary and account pledge agreements relating, amongst others, to rent accounts. The loan agreements contain certain financial covenants, including the maintenance of a certain LTV-ratio and a debt service coverage ratio. A breach of financial covenants usually entitles the lender to terminate the loan agreement if such breach is not cured within a certain period of time. Change of Control and Termination Provisions Most of the loan agreements provide for a change of control clause enabling the lender to terminate the loan agreement and request repayment of the outstanding loan amount together with due but unpaid interest in the event the respective borrowing entities do not belong to the Group any longer or a change of control occurs with respect to the Company. The loan agreements contain market standard termination provisions which include the right of termination for the lender in the event the borrower defaults on any payments due under the loan agreements or breaches certain financial or other covenants or files for insolvency. Revolving Credit Facility The Company has entered into several corporate credit facility agreements with leading international banks with a duration between December 2017 and January The Company may draw amounts under these revolving credit facilities as required for financing purposes. The total loan amount available under the revolving credit facility agreements amounts to 215 million. Drawn amounts bear interest of 0.65 % (margin) plus three month EURIBOR (if not agreed otherwise under a specific tranche). The interest rate is subject to adjustment mechanisms depending on the rating of the Company obtained from S&P and/or Moody s. The credit facility agreements provide for certain financial covenants, including amongst others, a consolidated coverage ratio of 2.0, a LTV ratio of 60 % as well as a secured LTV ratio of 45 % and an unencumbered asset ratio of 125 %. The credit facility agreements provide for a cross default provision, allowing the lenders to terminate the credit facility agreements in the event, the Company defaults on repayment of other indebtedness as further defined in the credit facility agreements. As of the date of this Prospectus the Company has not drawn any amounts under the credit facilities agreements

202 REGULATORY ENVIRONMENT The GCP Group s business activities are subject to legal requirements. The essential regulatory framework for the GCP Group s business activities is discussed below. Limitations of German Tenancy Law German tenancy law distinguishes between residential and commercial premises. The residential portfolio held by the Group is governed by residential tenancy law, which in large part favours tenants through extensive social safeguards. In particular, it imposes restrictions on the Group with regard to the increase of rent, allocation of ancillary costs including costs for repair and maintenance, the termination of letting contracts and the eviction of tenants which are in breach of contract. Further, the sale of residential space if converted into condominium property might trigger pre-emption rights and impair selling options. Statutory limits on rent increases With lease agreements that are not subject to rent control, e.g. by public subsidies regulations, the landlord may assert a right of contractual adjustment, subject to statutory and contractual requirements, up to locally prevailing comparative rent levels if the rent has remained unchanged for the 15 months preceding the intended increase. As a rule, however, the rent cannot be increased by more than 20 % in three years (capping limit). The German Tenancy Law Amendment Act 2013 (Mietrechtsänderungsgesetz) provided inter alia the authorization of German federal state governments to decrease the capping limit to 15 % over a three-year period for specific municipalities. The German federal state governments of Bavaria, Berlin, Brandenburg, Bremen, Hamburg, Hessen, North Rhine-Westphalia, Schleswig-Holstein, Baden- Württemberg, Sachsen and Rhineland-Palatinate have made use of their option and decreased the capping limit (e.g. for the municipalities of Berlin and Munich). When freely financed residential units are modernized, the landlord may also increase the annual rent by 11 % of the respective costs incurred in the modernization of the residential unit, subject to statutory and contractual requirements. Following the announcement of rent increase, the tenants may have a special termination right. According to German law and the Privatization Agreement, the GCP Group may only increase the rent within the limit set by the relevant rent index (Mietspiegel). Further, any modernization shall be in line with the standards of government subsidized apartment buildings (geförderte Wohnungsbaumaßnahmen), that is, the GCP Group may not undertake luxury refurbishments in order to increase the rent

203 Owner s repair and maintenance obligations Under German law, the landlord must repair and maintain the property (this obligation extends to the structure, the façade, the roof of the building, and also the interior of the residential units). In general, the landlord cannot transfer this repair and maintenance obligation. Subject to compliance with statutory limitations, the landlord may assign the repair and maintenance obligations for a residential unit s interior to the tenant. If the landlord assigns such obligations within standardized contracts, the terms must comply with the strict requirements for general terms and conditions (Allgemeine Geschäftsbedingungen). For example, the Federal Supreme Court has ruled that standard clauses in letting contracts are invalid if they obligate the tenant to carry out cosmetic repairs (Schönheitsreparaturen) within a fixed schedule or if they obligate the tenant to fully renovate the apartment at the end of the letting term (Endrenovierung) or if they provide for compensation regarding ratios (Quotenabgeltung). The invalidity of such clauses results in the landlord being responsible for the repair and maintenance and being required to bear all related costs. If the tenant carries out such repair and maintenance works without actually being obliged to do so, the landlord might have to compensate the corresponding costs. Statutory protection against termination and eviction As a rule, the landlord may terminate an unlimited lease agreement for residential space on a statutory basis only if the landlord has a legitimate interest in ending the tenancy. By law, a legitimate interest in ending the tenancy may only arise (i) if the tenant commits a culpable contractual breach with material effect, (ii) if the owner has a lawful claim of personal use in the property for himself, his family members, or members of his household, or (iii) if the owner would otherwise be prevented from reasonable economic utilization and would therefore suffer considerable detriment. Reasonable economic utilization as grounds for termination is intended to ensure the free economic disposability of property. Such grounds exist if the owner were to suffer considerable detriment from continuing the tenancy (for example, receiving a significantly lower purchase price; expenses significantly exceed income). However, a landlord s intention of converting housing into individually owned residential units, for example, would not qualify. If let residential space that is converted into condominium property, or is intended for such conversion, is to be sold to third parties, the German Civil Code (Bürgerliches Gesetzbuch) prohibits personal use and reasonable economic utilization as grounds for termination by the purchaser for three years after transfer of title if the residential space was already let to a tenant before the conversion to individual ownership. The German federal state governments are authorized to extend the prohibition up to a period of ten years after transfer of title. All federal states (Bundesländer) except for Mecklenburg-Vorpommern, Sachsen, Sachsen-Anhalt and

204 Saarland have made use of their option and extended the period of protection for specific municipalities. Further, even if the landlord terminates the letting contract on the basis of a legitimate interest the tenant is protected under German tenancy law. In consequence, a court may allow for an appropriate deadline (with a maximum delay of one year) for the tenant to vacate the apartment even though the letting contract was effectively terminated by the landlord. Statutory restrictions in selling residential space If let residential space that is converted into condominium property, or is intended for such conversion, is to be sold to third parties, the German Civil Code (Bürgerliches Gesetzbuch) grants the tenant a statutory pre-emptive purchase right, that is, the tenant is entitled to purchase the space on the same terms as the buyer. However, no pre-emptive right exists if the unit was already condominium property when let or if the unit is sold to landlord s family members, or members of his household requirement for energy certificates and energy conservation measures. Starting 1 January 2009 for sales or new letting of residential units, potential buyers and tenants must be given an energy certificate upon request that discloses the property s energy efficiency. In undertaking modernization measures, additions or extensions, an energy certificate must be prepared if an engineering assessment of the entire building s energy consumption is performed in the course of the modernization that allows the certificate to be prepared at a reasonable cost. The energy certificate is generally valid for ten years. For buildings completed no later than 1965, the owner must already have had an energy certificate available starting 1 July The Energy Savings Ordinance (Energieeinsparverordnung) of 24 July 2007, as amended on 29 April 2009, also requires structural alterations for energy conservation. Failure to comply with these rules can be penalized as an administrative offense. A further amendment of the Energy Savings Ordinance was due on 9 January 2012 according to European Law, however has been delayed. This further amendment has been published on 21 November 2013 and took effect as from 1 May The further amendment requires inter alia additional structural alterations for energy conservation, which will have to be implemented by 2015 regarding heating facilities that are older than 30 years and by 1 January 2016 regarding buildings. Further the energy certificate must be handed over to the potential buyer or tenant prior to an entry into a new purchase or lease agreement. Furthermore, if a seller or landlord advertises the property via commercial media, the energy performance indicator of the respective property s existing energy certificate must be stated in the advertisement. The withholding of that kind of energy information may be penalised as an administrative offence

205 Commercial Leases The legal relationship between commercial tenants and their landlords is more balanced than the relation between residential tenants and their landlord. The aforementioned strict statutory provisions aiming at protecting residential tenants are basically not applicable to commercial tenants. However, there are strong tendencies of courts in their decisions to construe the law in a way to apply similar rules to commercial leases, especially if these are based on general terms and conditions. The most relevant areas affected by such court decisions are refurbishment, maintenance and ancillary costs. In contrast to residential leases, commercial leases are mostly entered into for a fixed period, usually for several years. During fixed lease terms, neither the tenant nor the landlord is entitled to terminate the lease agreement unless for good cause. Fixed lease terms are advantageous for both. The tenant can rely on being entitled to use the rented space for a fixed period and the landlord has a secured steady cash flow. However, lease agreements with a fixed lease term need to comply with the statutory requirement of written form. Although a lease agreement which does not meet the requisite written form standards is not void, it is regarded as lease with an indefinite term and thus can be terminated any time respecting notice periods in accordance with statutory law (e.g. office space: notice period six to nine months depending on when the termination notice is served) by either party. Therefore, it is essential for landlords to ensure that commercial leases with a fixed lease term comply with the requirement of written form in order to avoid a shortfall of payment. There is a trend in the case law of the German Federal Supreme Court (Bundesgerichtshof) to the effect that restrictions originally developed for residential tenancy law are increasingly being applied to lease agreements for commercial properties. This may result in provisions contained in commercial lease agreements no longer being valid in the future and thus increasing costs to be borne by the landlord. Current Developments in Tenancy Law The German Federal Government as well as several German states have presented draft bills that - partly because of necessities resulting from the Energy Concept which shall facilitate, inter alia, a reduction of the German primary energy need (Primärenergiebedarf) in 2050 by 80 % (compared to 1990) - came into effect in May Main amendments resulting therefrom are that (i) tenants shall have to endure - and be excluded from rent reduction for three months because of - maintenance measures (Erhaltungsmaßnahmen) and modernization measures (Modernisierungsmaßnahmen), in particular energetic modernization measures, unless such measures would constitute an unreasonable hardship; (ii) following the announcement of modernization measures, tenants are entitled to a special termination right (außerordentliche Kündigung); (iii) except for certain types of measures that are not directly linked to the leased premises and unless this would constitute an unreasonable hardship for the tenant, landlords

206 shall be entitled to allocate cost for such modernization measures to tenants of residential units by way of an increase of the annual rent in the amount of 11 % of the cost accrued (less the cost accrued for maintenance measures anyway); (iv) German federal state governments are authorized to limit rent increasement up to locally prevailing comparative rent level to 15 % in three years (capping limit) for specific municipalities; (v) as alternative to the classic eviction procedure, the so-called,,berliner Räumung, offering the landlord the cost effective opportunity to limit the eviction procedure to the procurance of possession, shall be implemented; (vi) eviction procedures shall furthermore no longer be tediously delayed because of a right of possession of a third person that is not covered by the executory title (Vollstreckungstitel); a further title against such third person shall be obtainable by way of an injunction (einstweiliger Rechtsschutz); (vii) the existing restriction of termination of lease agreements for a period of three years shall be extended to the case that in the course of a continuing lease the leased premises have been transformed into condominium and have subsequently been sold to a partnership or to more than one purchaser. Furthermore, the Tenancy Law Amendment Act (Mietrechtsänderungsgesetz) includes provisions according to which the costs resulting from heat-contracting (Wärmelieferung) can be charged to tenants as part of the service charges under certain conditions. These provisions have become effective as of 1 July Further statutory limitation on the rent for new lease agreements (so-called Mietpreisbremse) have been introduced by another German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) adopted on 21 April According to the German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz), which came into effect in June 2015, the limit shall apply to any newly agreed rent at a maximum of ten per cent above the relevant locally prevailing comparative rent level (ortsübliche Vergleichsmiete), unless the rent level agreed with the previous tenant was higher. It shall, however, neither apply to commercial lease agreements nor to the first lease agreements relating to new or fully modernised buildings. The German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) authorises the German federal state governments to implement such limitation (and thus a limitation would be at the discretion of each federal state) for specific regions which are subject to restrictions in the affordable housing sector and will be designated by them in ordinances. The ordinances may be enacted until the year All federal states (Bundesländer) except for Mecklenburg-Vorpommern, Sachsen, Sachsen-Anhalt and Saarland have already implemented or have announced the implementation of respective ordinances. In addition, the German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) contains provisions regarding the payment of real estate agents. Previously, the tenant had to pay the agent s commission even if the landlord hired the real estate agent. The German Tenancy Law Amendment Act (Mietrechtsnovellierungsgesetz) requires the landlord to pay the commission if the landlord hires the agent

207 In Germany, affordable housing continues to be a political topic receiving a high level of attention. The German Federal Ministry of Justice (Bundesjustizministerium) has presented another draft bill (Zweites Mietrechtsnovellierungsgesetz) on 12 April 2016 amending the calculation of lettable spaces and the regulation regarding modernisation measures. This topic and further regulatory implementations could further affect the ability of the Group to freely agree on rental fees in new lease agreements to the extent described. Tightened rent restrictions might impair the ability of the GCP Group to increase rents, which in turn could adversely affect the business, net assets, cash flows, financial condition and results of operations of the GCP Group. Limitation for the Use of the Properties Easements in the Land Register On some of the properties owned by the Group, easements (Grunddienstbarkeiten) are registered with the land register. Probably, properties to be acquired in the course of development projects will often be encumbered with such easements. An easement requires the owner of the charged property in rem to refrain from taking action (for example, not to build on specific parts of the property) or to forbear action to be taken (for example, to grant transmission rights, electricity, water, and gas). The content of the obligation can be enforced by the relevant thirdparty. Since registered easements are attached to the property itself, they can be enforced against the current and subsequent owner of the charged property as well as against legal successors. Public easements Some of the properties owned by the Group are also encumbered with public easements (Baulasten). A public easement requires the owner of the charged property vis-à-vis the public authority to take action (for example, to create a certain number of parking slots), refrain from taking action (for example, not to build on specific parts of the property) or forbear action to be taken (for example, laying pipes or cables by third parties). The content of the obligation can be enforced by means of an administrative order. Some of the investment properties are subject to unification public easements (Vereinigungsbaulasten). These public easements create a single construction property (öffentlich-rechtliches Baugrundstück) out of the affected properties which continue to be independent properties under civil law. Many provisions of public building law, such as the requirements of minimum distances between buildings, apply to the construction property as if the plot boundaries did not exist. Probably, properties to be acquired in the course of development projects will often be encumbered with public easements

208 Since public easements attach to the property itself, they can be enforced against the owner of the charged property and against third parties. The public easement is also effective against legal successors (that is, buyers of the charged properties) and can only be suspended by a waiver of the competent authority. The restrictions resulting from the public easement may affect the value of the charged property. Restrictions in connection with monument protection In case buildings are listed as protected monuments, certain restrictions set forth in the various monument protection acts of the federal states (Bundesländer) are applicable. Although the federal states monument protection acts differ in detail, the basic provisions are identical. Protected monuments must not be demolished, reconstituted, refitted or amended without a permit being issued by the competent authority. In the permit, the authority usually imposes certain requirements as to how to carry out the construction measures envisaged by the developer. These requirements might restrict the measures possible, cause additional costs and take additional time and, therefore, need to be taken into consideration before deciding on a development and in the course of such development. Theoretically and as very last resort, the competent authority could even expropriate the owner of a protected monument if the building cannot be protected otherwise. However, the owner is entitled to financial compensation in the case of an expropriation. Restrictions in connection with the Building Permit Owners of buildings that have been erected in compliance with applicable laws and regulations and have received a building permit (Baugenehmigung) in principle enjoy constitutional protection of property with respect to such buildings. Nevertheless, as an exception to this general rule, the competent authority may, under certain circumstances, demand alterations to buildings on grounds of safety (e.g., fire safety) or health risks from a property. While mere non-compliance with prevailing regulations generally does not warrant such orders, the occurrence of concrete safety or health risks with respect to users of the building or the general public allows the competent authority to demand immediate action from the owner. Relevant risks in this regard include fire risks, traffic risks, risks of collapse and health risks from injurious building materials such as asbestos. The protection of existing buildings does not cover any alterations to such buildings or changes in the type of use. A change of use may require a construction permit if the intended use differs from the use classified in the development plan (Zweckentfremdung) or the intended use is subject to special regulations. Thus, for example, the conversion of residential space into office or retail space or vice versa may require a construction permit

209 Restrictions in connection with special urban planning laws Cities and municipalities are entitled to enact urban planning law to remediate or avoid undesired urban development. By such urban planning laws, areas can inter alia be classified as urban refurbishment areas (Sanierungsgebiet) or urban preservation areas (Erhaltungsgebiet). In case a site is situated in an urban refurbishment area, a vast number of measures regarding the site or the building are subject to a permit being used by the competent authority. A permit is especially required for (i) the sale of the property, (ii) the conclusion of lease agreements with a lease term of more than one year, (iii) the registration of rights encumbering the site, (iv) the registration of public easements and (v) the division of the site. In urban preservation areas, the erection, demolition and amendment of buildings as well as any changes of their use and the creation of condominium rights may, subject to local statutory law (Erhaltungssatzung), require a permit being issued by the competent authority. In addition, the city or municipality can pass a resolution which classifies an area as a conversion area (Umlegungsgebiet). Such resolutions are passed if there are (too many) sites which cannot be properly used due to their size and/or location and, as a consequence, obstruct the city s/municipality s urban development intentions. In the conversion process, sites or parts of sites are exchanged. If the exchanged (parts of) sites do not have equal values, financial compensations are paid. From the passing of the resolution on conversion to the completion of the conversion process, a permit being issued by the competent authority is required for (i) the sale, (ii) the registration of rights encumbering the site and (iii) any building measures unless they are not subject to a building permit and do not increase the site s value. Restrictions due to copyrights in architectural services Some of the Group s properties may be works of architectural significance and therefore possibly also subject to copyrights, especially with regard to the respective architect s services. Structural changes in such instances may be subject to the designer s or architect s consent. Liability for Contamination of the soil and buildings Liability for residual pollution (Altlasten) and contamination of the soil (schädliche Bodenveränderungen), including water pollution caused by such residual pollution or contamination, as well as for the contamination of buildings with asbestos and other harmful materials, such as PCB, DDT, PCP or Lindane, may arise from rules and regulations under both public law and civil law. Liability under public law for residual pollution cannot be excluded through agreements under civil law. Liability under civil law may, however, generally be limited or excluded by way of agreement. In the course of developments the developer will be responsible for the disposal of pollution, usually, however, shifting this responsibility to a general contractor to

210 a great extent. To the extent that liability is not assumed by the seller of a property or other third party, e.g. a pre-seller or a general contractor, or cannot be enforced against this third party, the Group remains liable as owner of the acquired property or as developer as the case may be. Responsibility under public law for residual pollution and soil contamination Pursuant to the Federal Soil Protection Act (Bundesbodenschutzgesetz), the parties responsible for remediation measures with regard to residual pollution and contamination of the soil include the party that caused the contamination, its universal legal successor (Gesamtrechtsnachfolger), the owner of the contaminated real property and each previous owner of the contaminated property (if such former owner transferred the property after the entering into force of the Federal Soil Protection Act (Bundesbodenschutzgesetz) on 1 March 1999 and knew or should have known about the contamination), the person with actual control over the property, and, in specific circumstances, the person or entity responsible under general principles of commercial or corporate law for the legal entity (juristische Person) owning the site. With regard to these potentially liable parties, there is no general ranking as to which of the parties is primarily liable. It is within the discretion of the relevant authority to decide which party shall be held liable. The party most likely to be held liable is the current owner of the contaminated site, because it is legally entitled to carry out the required remedial measures. Furthermore, the liability of the entities and persons who can be held liable by the authorities for remediation does not require a showing of negligence or intent on the part of the liable parties. The Federal Soil Protection Act (Bundesbodenschutzgesetz) authorizes the local authority to require risk inspections, investigations, remedial measures, and other necessary measures for the protection against contamination of the soil or residual pollution. The Federal Soil Protection Act (Bundesbodenschutzgesetz) contains a default statutory indemnification obligation on the part of the responsible parties that, irrespective of an official order, allocates liability among the parties in accordance with their respective contribution to the cause of the contamination. This allocation can be modified or waived by express contractual agreement. Further, pursuant to the German Environment Contamination Act (Umweltschadensgesetz) authorities may at their discretion require risk inspections, investigations, remedial measures, and other necessary measures for the protection against any environment contamination which were caused after 30 April The holder of a real property may be held responsible, any potential party responsible may be held liable and there is no general ranking as to which of the parties is primarily liable

211 Asbestos German law distinguishes between two types of asbestos: (i) friable asbestos and (ii) other types of asbestos, each resulting in different legal consequences. Friable asbestos can release asbestos fibres into building air due to aging and external force. Friable asbestos is generally found in construction materials that provide fire safety, noise abatement, moisture protection, heat insulation, and thermal protection. Other types of asbestos are involved if the material containing asbestos is firm and no asbestos fibres can escape into the air, thus not posing a risk to human health. Under the rules of the asbestos guidelines (Asbest-Richtlinien) of the German federal states, the standard for determining a remediation obligation is the presence of any threat to health in any specific case. Therefore, except in the event of structural alterations, there is generally no obligation to remove non-friable asbestos under the asbestos guidelines because of the lack of fibre formation. As to friable asbestos, the asbestos guidelines prescribe criteria for assessing the urgency of taking remedial action in case of contamination. This is determined according to three levels of urgency: urgency level I requires immediate remediation of the structure; urgency level II requires reassessments at intervals of no more than two years; and urgency level III requires a reassessment at intervals of no more than five years. Remediation measures under the asbestos guidelines include demolition, removal, or coating of the asbestos products, and separation of the asbestos products from the respective space to ensure that fibres do not become airborne. In the event of asbestos contamination, the tenant can assert a commensurate right of rent abatement. German courts have decided that the presence of a defect for purposes of warranty requirements under tenant law can be presumed if the onset of a health threat cannot be excluded. Accordingly, the courts have permitted rent abatements even in cases involving urgency levels II or III, which, under the asbestos guidelines, merely require that the level of risk be monitored. Tenants may also claim compensatory damages if the defect was present at the time of contract formation or if the landlord is in default with its obligation to remedy the defect. Finally, tenants also have the right to remedy the defect on their own and require that their reasonable expenses be reimbursed under certain conditions. Polychlorinated Biphenyl (PCB), Dichlorodiphenyltrichloroethane (DDT), Pentachlorophenol (PCP) and Lindane PCB is widely spread in the environment today. Since PCB may cause damage to embryos and is suspected to have carcinogenic effects and affect human health, its production was prohibited in Germany in However, PCB may still exist in buildings (for example, in wood

212 preservatives, synthetic materials, insulations or joints). PCP was used as a fungicide against mould. Based on construction law or emissions protection law in conjunction with the Guidelines on the Assessment and Remediation of PCB containing Construction Material or Elements in Buildings (PCB-Guidelines), the owner of a building may be obliged to remedy PCB sources. In particular, remediation measures may become necessary if the PCB concentration in rooms which are designed for human use exceeds 300 nanograms per cubic meter of air. Remediation measures include the elimination or sealing of PCB-containing construction elements. DDT and Lindane are synthetic pesticides, which were also used in wood preservatives. DDT is suspected to cause cancer and to be genotoxic, while Lindane is suspected to harm the nervous system, especially in case of occupational exposure, and to also possibly cause cancer. As regards DDT, PCP and Lindane, their existence in buildings may entitle the tenant under certain conditions to reduce rent or claim damages. Moreover, the remediation of rooms or buildings where DDT, PCP or Lindane concentrations exceed certain thresholds may be required. Guidelines dealing with DDT, PCP and Lindane exist in several federal states. For instance, the Senate of Berlin recommends the remediation of rooms intended to be used permanently for residential purposes if the DDT concentration in wood or dust exceeds 5 milligrams per kilogram, or if the Lindane concentration in wood or dust exceeds 2 milligrams per kilogram. With regard to PCP, the Senate of Berlin recommends the remediation of rooms intended to be used permanently for residential purposes if the PCP concentration in wood will exceed 50 milligrams per kilogram, or if in dust it will exceed 5 milligrams per kilogram and further conditions are met. Another guideline issued by several German federal states recommends the remediation of rooms used permanently for residential purposes if the PCP concentration in fresh dust exceeds 1 milligram per kilogram, or if in old dust it exceeds 5 milligrams per kilogram and further conditions are met. Legionella-Tests According to the German Ordinance on drinking water (Trinkwasserverordnung 2001) as amended on 2 August 2013, owners of drinking water facilities located in properties with more than one residential unit are obliged to check regularly, at least triennially, if the water is polluted by Legionella (bacteria). The competent authorities are entitled to require additional checks. The Legionella tests have to be carried out by accredited laboratories. If the thresholds mentioned at the German Ordinance on drinking water are exceeded, the owner of the drinking water facility has to restore target conditions. Protection of Groundwater and Maintenance of Sewage Systems Pursuant to the German Federal Water Management Act (Wasserhaushaltsgesetz), all sewage systems must be constructed, operated and maintained according to the generally accepted Rules of Technology (annerkannte Regeln der Technik). Property owners are required to check, among other things, for the sewage system s condition, operability, maintenance and the amount

213 and quality of wastewater and the substances contained therein. In the case of deficiencies, property owners must repair the sewage system. The German Federal Water Management Act (Wasserhaushaltsgesetz) authorizes the German Federal Government (Bundesregierung), with approval of the Second Chamber of the German Parliament (Bundesrat), to enact an ordinance specifying the abovementioned obligations concerning sewage systems. On 3 January 2012, the German Federal Government (Bundesregierung) announced that no set date can currently be foreseen for the enactment of such an ordinance. Until an ordinance by the German Federal Government (Bundesregierung) is enacted, the federal state governments may enact their own ordinances regarding the aforementioned obligations. Required testing intervals under such ordinances vary from state to state and sometimes between different zones within one state. Restitution Claims German Act on Unsettled Property Issues in Eastern Germany (Gesetz zur Regelung offener Vermögensfragen) According to the German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen), persons who were expropriated of property within the former German Democratic Republic ( GDR ) can claim restitution or compensation under certain conditions, in particular if the property was seized without compensation or less compensation than citizen of the GDR were entitled to. The German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen) is also applicable to persons who lost property due to racist, political, religious or ideological reasons during 1933 and Dispossessions between 1945 and 1949 are, however, considered irrevocable and no restitution is granted under the German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen). Applications for restitution of real property generally had to be filed by 31 December However, the Jewish Claims Conference filed a general claim in 1992 due to the difficulty of specifying individual claims prior to the 31 December 1992 deadline. This general claim lists numerous former owners of real properties and their respective heirs who may be entitled to restitution or compensation under the German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen). It is not clear, however, how much real property could be affected by the general claim. If specific claims are brought forward concerning real property, the German Act on Unsettled Property Issues (Gesetz zur Regelung offener Vermögensfragen) requires that current owners of such real property become subject to restrictions on material changes to, and transfer of, the real property. Since the processing of claims may take up to several years, such restrictions may be in

214 effect for that duration. If specific claims are successful, the owner(s) of the relevant real property may be forced to transfer the real property to the claimant. The person who holds title to the real property immediately before the restitution is, under certain circumstances, entitled to compensation for the loss of the real property from the compensation fund. Further, the person who holds title to the real property immediately before the restitution is entitled to claim compensation from the former/new owner (or its successor), to whom the real property is returned, if he invested in the real property and if these investments lead to an improvement of the real property which will be with the new/former owner. German Act on the adjustment of property law (Sachenrechtsbereinigungsgesetz) As the Group s properties are partially located in the former GDR, the German Act on the adjustment of Property Law (Sachenrechtsbereinigungsgesetz) is applicable which provides for specific claims, inter alia if a real property was developed by the user during the term of the GDR, so that the ownership of the land and the building could fall apart in accordance with the GDR s statutory law. According to the German Act on the adjustment of Property Law (Sachenrechtsbereinigungsgesetz), the user is entitled (i) to acquire such real property at a purchase price equivalent to half of the market value or (ii) to be granted a hereditary building right with a hereditary ground rent equivalent to half of the usual amount. Claims under the German Act on the adjustment of Property Law (Sachenrechtsbereinigungsgesetz) were generally subject to a limitation of ten years after the German Act on the Modernization of Contractual Law (Gesetz zur Modernisierung des Schuldrechts) became effective on 1 January 2002, i.e. became generally time-barred on 31 December Social Law Framework A portion of the Group s tenants receive social benefits, including financial support for accommodation costs as part of unemployment compensation (Arbeitslosengeld 2), basic social care for retired persons (Grundsicherung im Alter) or social welfare (Sozialhilfe), as well as accommodation allowances (Wohngeld). Social benefits are based on the German Basic Constitutional Law (Grundgesetz), particularly on the fundamental rights of protection of human dignity, of marriage and family, and on the principle of the welfare state. Persons who have not yet reached the statutory retirement age and are fit for work, that is, not permanently disabled, may receive social benefits according to the Second Book of the Social Security Act (Sozialgesetzbuch II) if they are not able to make their living from their own means. These social benefits include financial support for accommodation costs. Such financial support is also granted to persons who have already reached the retirement age but whose income, including the retirement pension and personal fortune, are not sufficient to enable them to make

215 their living. In Berlin, such financial support accommodation costs are under the responsibility of Berlin. This support is usually paid in the amount of the rent actually incurred but only up to the rates deemed appropriate by Berlin. Currently, in Berlin the appropriate rates for rent and heating start at 405 for a single-person household. In general, the support is paid to the tenant. However, if it is uncertain that the tenant will use the financial support to pay the rent, the competent authority may transfer the money directly to the landlord. Pursuant to the Twelfth Book of the Social Security Act (Sozialgesetzbuch XII), financial support for accommodation costs may also be paid to other persons in need, for example, to persons who are diseased over a substantial period of time. According to the Act on Accommodation Allowances (Wohngeldgesetz), everybody who does not receive financial support for accommodation costs as part of unemployment compensation, basic social care for retired persons, social welfare or according to specific provisions for asylum seekers, may be entitled to accommodation allowances. The right to such allowances depends on the number of persons living in the household, their income and the costs of rent. Since 1 January 2011, heating cost do no longer form part of the calculation basis of the accommodation allowances. German Tax Law on Property Purchases Purchasers of properties located in Germany are required to bear certain taxes and public charges. Amongst others, purchasers of properties are obliged to pay Real Estate Transfer Tax (Grunderwerbsteuer). Real Estate Transfer Tax amounts to a certain percentage of the value of the property (generally correlating with the purchase price). The precise percentage is fixed by the respective German federal state in which the property is located and currently varies from 4.5 % to 6.5 %. Further amendments have been announced regarding share-deals. Access for Foreign Investors to German Real Estate In contrast to some other jurisdictions there are no property-specific restrictions for foreign investors to acquire property in Germany. Restrictions in connection with subsidized housing Subsidized housing generally triggers restrictions on the maximum amount of rent permitted by law and often limits the group of possible tenants to those holding a housing eligibility certificate (Wohnberechtigungsschein). German legislation regarding subsidized residential units has been significantly amended as from 2001, replacing the former Controlled Tenancies Law (Wohnungsbindungsgesetz) and the

216 concept of cost covering rent with the Residential Space Subsidy Law (Wohnraumförderungsgesetz) and the concept of maximum rent. Under the cost covering rent concept, which is still applicable for residential units subsidized before 31 December 2001 (in exceptional cases before 31 December 2002), the landlord is only allowed to charge the amount of rent necessary for covering all of the costs for the property including financing costs. Under the new concept of maximum rent pursuant to the Residential Space Subsidy Law (Wohnraumförderungsgesetz), which is generally applicable for residential units subsidized after 31 December 2001, the landlord is entitled to charge the maximum rent which has been set forth by the competent authorities and which reflects the market value. The market value and therefore the maximum rent is subject to future changes and may be adjusted in correlation with market developments. Inter alia the following statutory provisions generally apply to subsidized housing: First and Second Housing Laws (Erstes und Zweites Wohnungsbaugesetz), the 1970 Rent Ordinance for New Construction (Neubaumietverordnung), the Controlled Tenancies Law (Wohnungsbindungsgesetz), the Second Calculation Ordinance (II. Berechnungsverordnung), the Residential Space Subsidy Law (Wohnraumförderungsgesetz), First, Second and Third Subsidy Programs (Erster, Zweiter, Dritter Förderweg) and the respective German federal state s statutory provisions, as e.g. the Maintenance and Modernization Subsidy (Instandhaltungs- und Modernisierungsförderung) of Berlin and the Law on Social Housing in Berlin (Wohnraumgesetz Berlin). Further, subsidies may have been granted under the Law on Pre-existing Debt (Altschuldenhilfegesetz), applicable for municipalities and municipally owned entities which acquired properties located in the former GDR after the reunification. Under the aforementioned statutory provisions, please note especially that provisions on rent control (Mietpreisbindung) at present value and provisions regarding the ending of the attribute government funded (öffentlich gefördert) apply. Subsidies for maintenance and modernization of housing granted on the basis of directives of Berlin also contain restrictions on the maximum rent and scope of eligible tenants. However, such restrictions are generally not resulting from statutory provisions but from contractual obligations, i. e. agreements entered into between the respective landlord and the City of Berlin. Regarding statutory restrictions, in some cases, sales of subsidized residential units are restricted as they require the competent authorities approval. Furthermore, subsidies may have to be repaid to the authorities in the event that condominium rights will be created for subsidized residential units. In any case, the respective owner of subsidized residential units is obliged to comply with various information obligations vis-à-vis authorities who have granted such subsidies. One year after the ending of the attribute government funded (öffentlich gefördert), the landlord is entitled to increase the rent for the subsidized unit up to market rent. The restrictions set forth under Section 558 German Civil Code (BGB) apply. If the subsidies are repaid early, an

217 extension period of up to ten years applies, however, limited to the initial government funded period. During such extension period, the limitations on the maximum amount of rent permitted have to be complied with, i.e. the landlord may only claim cost cover rent or market value rent. Regarding eligible tenants, the landlord is generally free to rent to any tenant after the subsidy has been repaid. Restrictions in connection with investment funding Under the Investment Allowance Act of 1999 (Investitionszulagengesetz 1999), investment funding could be granted for the purchase, modernization, refurbishment or maintenance of certain apartment buildings within the territory of the former German Democratic Republic. The granting of investment funding is not coupled with occupancy rights, rent control or comparable restrictions. The recipient of the funding is, however, obligated to rent out the subsidized rental units for residential housing purposes only, for a period of five years upon completion of the modernization works. In cases of non-compliance, the funding can be reclaimed. Restrictions in connection with private subsidies Private subsidies, especially so-called work loans (Werkdarlehen), which are granted in order to create affordable housing units for the employees of a company, generally trigger restrictions in favour of the lender. Such restrictions often translate into limitations of the group of possible tenants to those appointed by the lender

218 GENERAL INFORMATION ON THE COMPANY AND THE GROUP Formation, Incorporation, Registered Office, Commercial Name, Financial Year Grand City Properties S.A. (the Company and together with its subsidiaries the GCP Group or the Group ) was incorporated on 16 December 2011, as a public limited liability company (société anonyme) pursuant to, and governed by, the laws of the Grand Duchy of Luxembourg for an unlimited duration under the legal and commercial name Grand City Properties S.A.. The Company is registered with the Luxembourg Register of Trade and Companies (Registre de Commerce et des Sociétés Luxembourg) (the RCSL ) under number B The articles of association of the Company (the Articles of Association ) were published in the official gazette of the Grand Duchy of Luxembourg, Mémorial C, Recueil des Sociétés et Associations (the Mémorial ), number 287 on 2 February The Articles of Association were lastly amended on 9 August 2016 and published in the Recueil Electronique des Sociétés et Associations (the RESA ) under depot number L The Company has its registered office at 24, Avenue Victor Hugo, L-1750 Luxembourg, Grand Duchy of Luxembourg. The telephone number of the Company s registered office is and its fax number is Until the commencement of trading on the regulated market of Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange which is expected to take place on 8 May 2017, the Shares of the Company are included for trading in the open market (Freiverkehr) of the Frankfurt Stock Exchange in the Scale segment. Neither the open market (Freiverkehr) of the Frankfurt Stock Exchange nor the Scale segment are regulated markets mentioned in the list issued by the European Commission pursuant to Directive 2004/39/EC of 21 April 2004 on markets in financial instruments ( MIFID ) and Directive 2014/65/EU of 15 May 2014 on markets in financial instruments ( MIFID II ). The financial year of the Company is the calendar year. Corporate Purpose As provided for in Article 3 of the Articles of Association the purpose of the Company is the acquisition, sale, administration, and renting of any real estate property, both in the Grand Duchy of Luxembourg and abroad. It may further acquire through contribution, firm purchases or options, patents, service marks, trademarks licenses, know-how and other industrial, commercial or intellectual property rights and generally hold, license the right to use it, sublicense, sell or dispose of the same, into whole or in part, for such consideration as the Company may think fit, and to subcontract the management

219 and development of those rights, trademarks and licenses and to obtain and make any registration required in this respect. The Company can also take whatever action necessary to protect rights derived from patents, trademarks, service marks, licenses, know-how and other industrial, commercial or intellectual property rights, licenses, sublicenses and similar rights against infringement by third party. The Company can furthermore provide or cause to provide know how, development consulting advice and operating services, promotion, representation and all operations of such nature. The Company may make any transactions pertaining directly or indirectly to the taking of participating interests in any enterprises in whatever form, as well as the administration, the management, the control and the development of such participating interests. It may participate in the creation, development, management and control of any company or enterprise. The Company may borrow in any form whatever. The Company may grant the companies of the group or to its shareholders, any support, loans, advances or guarantees, within the limits of the law of 10 August 1915 on commercial companies as amended (the Luxembourg Company Law ). Within the limits of its activity, the Company can grant mortgage, contract loans, with or without guarantee, and stand security for other persons or companies, within the limits of the concerning legal dispositions. The Company may take any measure to safeguard its rights and make any transactions whatsoever which are directly or indirectly connected with its purposes and which are liable to promote its development or extension. Group Structure The Company is the holding company of the GCP Group, which consists of more than 500 companies in Luxembourg, Cyprus, Germany, the Netherlands and Denmark, of which more than 200 are German companies. Its primary role within the GCP Group is to function as a management and finance holding company. The business (with respect to the Group s property portfolio) is conducted primarily by the subsidiaries of the GCP Group

220 The chart below shows the current structure of the GCP Group in a simplified form. Grand City Properties S.A. Grand City Property Ltd. (1) Cypriot and Luxembourg Sub-holding Companies (2), (3) German Sub-holding Companies (2), (4) Cypriot Sub-holding Companies (2) German Property Companies (5), (6) Luxembourg Property Companies (5), (7) German Property Companies (5), (8) Danish Property Companies (5) The entities referred to in the footnotes below are those which individually (directly or indirectly) hold properties accounting for at least 2 % of the market value of the GCP Group s total investment property as of 31 December Over 78 % of the Group s investment property portfolio is held by German Property Companies. (1) Grand City Properties S.A. holds 94.8 % in Grandcity Property Ltd. (2) Companies held 94 % and above by Grandcity Property Ltd. (3) Bunavento Limited, Gutburg Holding Limited, Sedoy Investments Ltd., Carmiliana Ltd., Satemol Ltd., Pesoria Ltd., Sparol Ltd., Bafitek Ltd., Oyster I HoldCo S.á r.l. (4) GCP Holdings GmbH, GCP Real Estate Holdings GmbH (5) All companies are controlled. (6) AssetCo Halle GmbH, Cato zweite Immobilienbesitz und -verwaltungs GmbH, Bonny 35 GmbH (7) Gutburg Immobilien S.A. (8) Cerise Hollyhock Property GmbH, Brown Grodaldo Property GmbH Information on Material Subsidiaries and Shareholdings The following table provides an overview on certain financial data as of 31 December 2016 of the material subsidiaries and shareholdings of the GCP Group, as well as key company information relating to these equity interests. The calculation of the shareholdings includes shares held directly by the Company, indirectly through a direct or indirect subsidiary of the Company included in the Company s consolidated financial statements or by a third party acting for the account of such companies. All shares in affiliated companies have been fully paid in. The financial data for the year ended 31 December 2016 have been taken from the financial statements, prepared in accordance with IFRS, or the accounting systems as of 31 December 2016 of the respective subsidiary. No material change occurred subsequent to this date. The field of activity of the respective Company is indicated via a footnote

221 Name of subsidiary / registered office Proportion of ownership interest / voting power held Issued capital Reserves *** Book value of the shares Payables to the Company Receiva bles from the Compa ny Profit / loss Dividends realized by the Company in fiscal year 2016 % THOU SAND THOU- SAND THOU- SAND THOU- SAND THOU SAND THOU- SAND THOU- SAND Grandcity Property Ltd. / Larnaca, Cyprus** , ,720,669-78,584 0 Pesoria Ltd. / Larnaca, Cyprus** Bunavento Ltd./ Larnaca, Cyprus** Bafitek Ltd. / Larnaca, Cyprus** Sparol Ltd./ Larnaca, Cyprus** Gutburg Holdings Ltd. / Larnaca, Cyprus** , ,200 0 GCP Real Estate Holdings GmbH / Berlin, Germany** , ,370 0 MBG Portfoliogesellschaft GmbH / Berlin, Germany** ,898 36, Brown Grodaldo Grundstücks GmbH / Berlin, Germany* ,358 35, ,551 0 Cerise Hollyhock Grundstücks GmbH / Berlin, Germany* ,563 15, ,481 0 Cato zweite Immobilienbesitz und - verwaltungs GmbH / Berlin, Germany* , ,921 0 AssetCo Halle GmbH / Berlin, Germany* ,786 2, ,707 0 Bonny 35 GmbH / Berlin, Germany* ,946 1, ,745 0 Gutburg Immobilien S.A. / Luxembourg, Luxembourg** 100 5,437 1,343 97, ,648 0 * Field of activity is the investment in and holding of real estate properties. ** Field of activity is the holding of shares in other companies. *** Reserves of the subsidiary based on IFRS on an individual level as of 31 December

222 Publications, Paying Agent In accordance with Article 8 of the Luxembourg Company Law and the provisions of the Luxembourg law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings (the RCSL Law ), the Company s publications are published in the RESA. This Prospectus and supplements to the Prospectus, if any, will be published pursuant to Article 16 of the Luxembourg law of 10 July 2005 on prospectuses for securities, as amended (the Prospectus Law ) in electronic form on the website of the Luxembourg Stock Exchange ( In addition, printed copies of the Prospectus are available upon request and free of charge from the Company. The paying agent is quirin Bank AG with mailing address at Kurfürstendamm 119, Berlin, Germany

223 DESCRIPTION OF SHARE CAPITAL Set forth below is a description of the Shares of the Company, summaries of certain provisions of the Articles of Association and certain requirements of the Luxembourg Company Law in effect on the date hereof. Because this is a summary, it does not purport to be complete and is thus qualified in its entirety by reference to the full Articles of Association and applicable provisions of the Luxembourg Company Law. General The Company s Articles of Association provide for one class of Shares. The Shares are issued under Luxembourg law and are subject to the provisions of the Articles of Association, the Luxembourg law and all other applicable laws. Subscribed Share Capital As of the date of this Prospectus, the Company has a subscribed share capital of 15,378, divided into 153,788,883 fully-paid ordinary bearer shares having a par value of 0.10 each. Development of Subscribed Share Capital At the date of incorporation of the Company the share capital of the Company amounted to 500, divided into 5,000,000 ordinary Shares with a par value of 0.10 each. On 12 April 2012 the extraordinary general meeting of the Company s shareholders resolved to increase the share capital from 500, by an amount of 4,500, to 5,000, through the creation and issuance of 45,000,000 new ordinary Shares with a par value of 0.10 each against contribution in cash. The issue price per Share was The Board of Directors resolved on 4, 12 and 19 July 2012 to increase the share capital from 5,000, by an amount of 550, to 5,550, through the creation and issuance of 5,500,000 new ordinary Shares with a par value of 0.10 each against contribution in cash by way of utilization of the authorized capital. The issue price per Share was The Board of Directors decided on 18, 19 and 21 February 2013 to further increase the share capital from 5,550, by an amount of 800, to 6,350, through the creation and issuance of 8,000,000 new ordinary Shares with a par value of 0.10 each against a contribution in cash by way of utilization of the authorized capital. The issue price per Share was

224 Following conversions of holders of the then outstanding convertible bonds ( Convertible Bonds ) the Board of Directors in accordance with the conditions of the Convertible Bonds resolved on several occasions on the increase of the share capital by the creation and issuance of a total of 24,925,000 new Shares with a par value of 0.10 each by way of utilization of the authorized capital. The share capital of the Company was increased pursuant to such resolutions from 6,350, by an aggregate amount of 2,492,500 to 8,842,500. The conversion price as defined by the conditions of the Convertible Bonds was 4.00 per Share. On 4 December 2013 the Board of Directors decided to further increase the Company s share capital from of 8,842,500 by 2,700,000 to 11,542,500 by issuing 27,000,000 new ordinary Shares with a par value of 0.10 against a contribution in cash by way of utilization of the authorized capital. The issue price was 6.50 per Share. The Board of Directors resolved on 11 September 2015 to increase the Company s share capital from 12,649, by 950, to 13,599, by issuing 9,500,000 new ordinary Shares with a par value of 0.10 against a contribution in cash by way of utilization of the authorized capital. The issue price was per Share. On 24 February 2014 and on 19 June 2014 the Company had issued convertible bonds due 2019 ( Series C Bonds ). Following conversions of holders of the Series C Bonds the Board of Directors resolved on several occasions on the increase of the share capital by the creation and issuance of a total of 28,863,883 new Shares with a par value of 0.10 each by way of utilization of the authorized capital. The share capital of the Company was increased pursuant to such resolutions by an aggregate amount of 2,886, to its current amount of 15,378, The initial conversion price as defined by the conditions of the Series C Bonds was per Share and was adjusted on 25 June 2015 to per Share. Authorized Capital The Company has an authorized capital (including the subscribed capital of 15,378,888.30) of 40,000,000 (the Authorized Capital ). During a period of five years from the date of publication of the resolution of the general meeting of the Company s shareholders of 9 August 2016 approving the Authorized Capital in the in the RESA, the Board of Directors is authorized to render effective an increase of capital as a whole at once, by successive portions or by continuous issues of new Shares, options and any financial instruments granting the right to the holder to subscribe for Shares, to be paid up in cash, by contribution in kind, by conversion of shareholder s claims, or following approval of the annual general meeting of the Company s shareholders, by incorporation of profits or reserves into capital and to determine the place and the date of the issue or of the successive issues, the terms and conditions of subscription and

225 payment of these additional Shares and to suppress or limit the preferential subscription right of the shareholders with respect to the issue of supplementary Shares against payment in cash or by contribution in kind. The notarial deed of the extraordinary general meeting of the Company s shareholders was published in the RESA, under depot number L on 23 August This authorization may be renewed once or several times, each time for a period not exceeding five years and the amount of the Authorized Capital of the Company may be increased or reduced by a resolution of the general meeting of the Company s shareholders adopted in the manner required for an amendment of the Articles of Association. Unless such rights are limited or suppressed by a general meeting of the Company s shareholders or the Board of Directors, existing shareholders will have preferential subscription rights, within the limits of the Authorized Capital, to subscribe for any new Shares to be paid for in cash in proportion to the number of Shares held by them in the Company s share capital. The Board of Directors shall determine the period of time during which such preferential subscription rights may be exercised; such period may not to be less than fourteen days from the publication of the offer in the RESA and in one newspaper published in Luxembourg. Subject to the provisions of the Luxembourg Company Law, the general meeting of the Company s shareholders called (i) to resolve upon an increase of the Company s issued Share capital or (ii) to resolve upon an authorization granted to the Board of Directors to increase the Company s issued Share capital, may limit or suppress the preferential subscription right of the existing shareholders or authorize the Board of Directors to do so. Convertible Bonds ( Series F Bonds ) On 24 February 2016 the Company has issued unsubordinated, unsecured convertible bonds with a denomination of 100,000 each in the aggregate principal amount of 450 million ( Series F Bonds ). The final maturity date is 2 March The Series F Bonds carry an interest rate of 0.25 % per annum which is subject to certain adjustment mechanisms. Subject to adjustment provisions, the conversion price for the Series F Bonds was fixed at The Series F Bonds are convertible into approximately million shares, representing up to approximately 10.8 % of the fully diluted share capital of the Company as of the date of this Prospectus (subject to any adjustment of the conversion price pursuant to the conditions of the Series F Bonds). The conversion rights under the Series F Bonds may be exercised at the option of the bondholders from 12 April For more details on the Convertible Bonds and the respective terms and conditions, see Material Contracts - Finance Agreements - Convertible Bonds

226 Employee Stock Option Plan On 17 March 2015 the Board of Directors of the Company resolved to set up a management incentive program ( MIP ) based on the recommendations from the advisory board of the Company. The object of the MIP is to incentivise key management personnel of certain subsidiaries of the Company as well as the members of the Board of Directors as well as the CEO. Persons eligible to the MIP are members of the Board of Directors, the CEO and employees and directors of subsidiaries of the Group. Under the MIP, the beneficiaries are entitled to receive options entitling the holder upon exercise of the option to subscribe for Shares for an exercise price of The exercise of the granted options is subject to vesting provisions as outlined below. The Company or the relevant subsidiary respectively, may at its discretion, instead of granting Shares, pay to the beneficiary the fair market value of the Shares. Applicable taxes shall be borne by the respective beneficiary. The Board of Directors may issue Shares under the MIP by using the authorization of the annual general meeting dated 25 June On this date the annual general meeting of the Company has resolved to authorise the Board of Directors to issue up to 1,000,000 new Shares to be paid up by incorporation of profits or reserves into capital in order to ensure the fulfilment of obligations to deliver Shares under a management incentive scheme, such as the MIP. As of 31 December ,000 options are outstanding under the MIP. The main terms of the MIP differ for each of the groups of beneficiaries and are as follows: Members of the Board of Directors Each member of the Board of Directors may be granted a fixed number of options (between 2,000 and 3,000) for each fiscal year and a variable number of options (between 250 and 2,000) depending on the financial parameters as set out in the annual consolidated financial statements of the Company and as agreed with the members of the Board of Directors. Under the MIP each member of the Board of Directors shall receive a minimum amount of options the value of which equals to 800,000 or 200,000 less the amount payable as a bonus in the event the Company achieves an investment grade rating. Such bonus amounts to options relating to 10,000 Shares. The options are subject to a vesting period of four years and three months and may be exercised within 30 days upon the end of a vesting period or the end of the term of office. Mr. Refael Zamir was granted up to 65,000 options under the MIP as of the date of this Prospectus. Options originally granted to Mrs. Simone Runge Brandner and Mr. Daniel Malkin have been mutually settled (see Management, Bodies and Senior Management - Members of the Board of Directors - Remuneration and Benefits of the Members of the Board of Directors / Shareholdings of the Members of the Board of Directors ). CEO

227 The CEO may be granted a fixed number of 18,000 options per year. The options are subject to a vesting period of two years, commencing January In the event of early termination the number of options is reduced to 6,000 per year. Mr. Christian G. Windfuhr was granted 54,000 options under the MIP as of the date of this Prospectus (see Management, Bodies and Senior Management - Senior Management - Remuneration and Benefits / Shareholdings ). Employees and directors of subsidiaries The employees or directors of subsidiaries eligible to the MIP are selected by the advisory board of the Company. Each beneficiary may be granted a fixed number of options (5,000, 10,000 or 30,000). The options are subject to a vesting period of four years and may be exercised within 30 days upon the end of a vesting period or the end of the employment or term of office. In the event the respective employment or office ends prior to the lapse of the vesting period the respective beneficiary is entitled to a pro rata portion of the Shares. Shareholders Rights Holders of the Shares of the Company have the right to vote for the election of Directors and on all other matters requiring shareholder action. Holders of the Shares are entitled to one vote per Share and to receive dividends, if any, as may be declared from time to time by the Board of Directors and decided by the general meeting of the Company s shareholders in its discretion out of funds legally available therefore. Upon liquidation of the Company, Shares are entitled to receive pro rata all or substantially all assets remaining available for distribution to shareholders after payment of all liabilities. The Articles of Association of the Company provide for a single class of Shares with equal rights. All or any of the rights attached to the Shares may from time to time be varied by resolution of an extraordinary general meeting of the Company s shareholders adopted in the manner required for the amendment of the Articles of Association, as described below in the section Amendment of the Company s Articles of Association. Any provisions of the Articles of Association may be amended by resolution of the shareholders at an extraordinary general meeting. Repurchase of the Shares The Company may repurchase its own Shares subject to the following conditions: (i) the respect of the principle of equal treatment of all shareholders which are in the same position and the Luxembourg Market Abuse Law. In this context, the acquisition offer must

228 be made on the same terms and conditions to all the shareholders who are in the same position, except for acquisitions which were unanimously decided by a general meeting of the Company s shareholders at which all the shareholders were present or represented. Also, listed companies such as the Company may repurchase their own shares on the stock exchange without an acquisition offer having to be made to the shareholders; (ii) (iii) (iv) the prior authorization of the general meeting of the Company s shareholders is obtained. This authorization must set forth the terms and conditions of the proposed repurchase, including the maximum number of Shares to be repurchased, the duration of the period for which the authorization is given which may not exceed five years and, in the case of repurchase for consideration, the minimum and maximum consideration per Share. The Board of Directors supervises the repurchases to ensure that these conditions are respected; such share repurchase, including any Shares previously acquired and held by the Company and Shares held by a person acting for the Company s account, may not reduce the net assets of the Company to a level below the aggregate of the issued share capital and the reserves that the Company must maintain pursuant to Luxembourg law and the Company s Articles of Association; and only fully paid up Shares may be repurchased by the Company. The condition in paragraph (ii) does not apply if: - the acquisition of its own Shares is required to prevent imminent and severe danger to the Company. In such case, the Board of Directors must inform the next following general meeting of the Company s shareholders of the reasons and aim of such acquisitions, the number and nominal value of the Shares acquired, the fraction of the share capital represented by the Shares repurchased and the consideration for such Shares; or - the Shares are acquired by the Company or by a person acting for the Company s account in view of a distribution of Shares to the employees of the Company or a company with which the Company is in a relationship of control pursuant to Article 309 of the Luxembourg Company Law (if any). The distribution of any such Shares must take place within twelve months from the date of their acquisition. The conditions set out above in paragraph (i), (ii) and (iv) do not apply to: (a) (b) Shares acquired pursuant to a decision to reduce the share capital of the Company or in the case of redemption of redeemable Shares of the Company; Shares acquired as a result of a universal transfer of assets;

229 (c) (d) (e) (f) fully paid-up Shares acquired free of charge or acquired by banks and other financial institutions pursuant to a purchase commission contract; Shares acquired by reason of a legal obligation or a court order for the protection of minority shareholders; Shares acquired from a shareholder in the event of failure to pay them up; and fully paid-up Shares acquired pursuant an allotment by court order for the payment of a debt owed to the Company by the owner of Shares. The Company must dispose of or cancel any Shares qualified under (b) through (f) above within a maximum period of three years after their acquisition, unless the nominal value of such Shares including Shares which the Company may have acquired through a person acting in its own name, but on behalf of the Company s name, does not exceed 10 % of the subscribed Share capital. Any Shares acquired in contravention of the conditions set out above must be disposed or cancelled within a period of one year after the acquisition. The Company currently does not hold any of its own Shares directly or through a person acting in its own name but on the Company s behalf. The Company does not intend to repurchase any Shares as of the date of this Prospectus. Reduction of Capital The Company may reduce its capital subject to Luxembourg law and the following conditions: (i) (ii) the general shareholders meeting resolving under the conditions necessary for an amendment of the Articles of Association decides to reduce the capital; and if the reduction of capital results in the capital being reduced below the legally prescribed minimum, the general meeting of the Company s shareholders must at the same time resolve to increase the capital up to the required level. The general shareholders meeting of the Company may also resolve to cancel Shares repurchased and held by the Company or held by a person acting for the Company s account. Form and Transfer of the Shares The Shares are issued in bearer form. The Company recognizes only one holder per Share. If a Share is owned by several persons they must name a unique proxy to present the Share in

230 relation to the Company. The Company is entitled to suspend the exercise of all rights attached to a Share held by several owners until one person has been designated as the sole owner of the Share. According to article 43 of the Luxembourg Company Law, an owner of Shares in bearer form may at any time request, at his/her expense, the conversion of bearer Shares into Shares in registered form. The Shares of the Company are exclusively represented by several bearer certificates in global form deposited with Clearstream Banking AG, Eschborn ( Clearstream ). The bearer Shares of the Company may be transferred in accordance with customary procedures for the transfer of bearer securities in book entry form. As long as the Shares are represented by bearer certificates in global form deposited with Clearstream, ownership of interests in Shares included in the book-entry custody and settlement systems operated by Clearstream ( Book-Entry Interests ) will be limited to persons that hold interests through admitted participants of Clearstream. Investors in Shares will hold interests in these securities through their accounts with these admitted participants. Book-Entry Interests will be shown on, and transfers thereof will be made only through records maintained in book-entry form by Clearstream and admitted participants. General Meetings of the Company s Shareholders The holding of a general meeting of the Company s shareholders is subject to the provisions of the Luxembourg Company Law, the Company s Articles of Association and, once the Shares are admitted to trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse), the provisions of the law of 24 May 2011 on the exercise of certain rights of shareholders in general meetings of listed companies (the Shareholder Rights Law ). Below is a summary of the applicable provisions. Any properly constituted general meeting of the Company s shareholders represents all of the shareholders of the Company. The record date ( Record Date ) for each general meeting of the Company s shareholders is the fourteenth day prior to the date of that general meeting of the Company s shareholders at midnight. Any shareholder who holds one or more Share(s) of the Company on the Record Date shall be admitted to the relevant general meeting of the Company s shareholders. In case of Shares held in dematerialised form through the operator of a securities settlement system or a professional depositary or sub-depositary designated by such depositary, a holder of such Shares wishing to attend a general meeting of the Company s shareholders should receive

231 from such operator or depositary or sub-depositary a certificate certifying the number of Shares recorded in the relevant account on the Record Date. A general meeting of the Company s shareholders may be convened by the Board of Directors at any time, to be held at such place and on such date as specified in the notice of such meeting. The Board of Directors must convene a general meeting of the Company s shareholders upon written request of one or several shareholders representing at least 10 % of the Company s subscribed Share capital with an indication of the agenda. The a general meeting of the Company s shareholders must be convened and shall be held within a period of one month from receipt of such request. If a general meeting of the Company s shareholders is not held in due time, the competent Luxembourg court may order that a general meeting of the Company s shareholders be convened within a given period, or authorize either the shareholders who have requested it or their representatives to convene such meeting. The convening notice for any general meeting of the Company s shareholders must contain the agenda of the meeting, the place, the date and the time of the meeting, the description of the procedures that shareholders must comply with in order to be able to participate and cast their votes in the meeting, which includes, the rights available to shareholders to put items on the agenda and to table draft resolutions and, where applicable, the deadline by which those rights are to be exercised and the mail or electronic address to which shareholders may address their requests, the procedure for voting by proxy and, where applicable, the procedures for participating in the meeting from a remote location and to cast votes by correspondence or electronic means. The convening notice must further include the Record Date, the manner in which shareholders must register to be admitted and the homepage and the mail and electronic address at which the complete text of any documents to be made available to shareholders and any draft resolutions to be adopted can be obtained. Subject to stricter requirements of applicable law, such notice shall take the form of an announcement published thirty days before the meeting, at least in the RESA, in one Luxembourg newspaper and in any other media which can easily and on a non-discriminatory basis be accessed within the European Economic Area ( EEA ). If all shareholders are present or represented at a general meeting of the Company s shareholders and state that they have been informed of the agenda of the meeting, the general meeting of the Company s shareholders may be held without prior notice. The Board of Directors may adjourn any general meeting of the Company s shareholders already commenced, including any general meeting of the Company s shareholders convened in order to resolve on an amendment of the Company s Articles of Association, for a period of four weeks. The Board of Directors must adjourn any general meeting of the Company s shareholders already commenced if so required by one or several shareholders representing in the aggregate at least 10 % of the Company s issued Share capital. For the avoidance of doubt, once a meeting has

232 been adjourned as set forth above, the Board of Directors shall not be required to adjourn such meeting a second time provided that, in the case of an amendment of the Articles of Association, the required quorum is fulfilled. No such shareholder or group of shareholders may request more than one adjournment of a particular general meeting of the Company s shareholders. Upon an adjournment of a general meeting of the Company s shareholders that has already commenced, any resolution already adopted in such meeting will be cancelled. One or several shareholders, representing in the aggregate at least 5 % of the Company s issued Share capital, may request the addition of one or several items to the agenda of any general meeting of the Company s shareholders and table draft resolution(s) in this respect. Such request and draft resolution(s) must be in writing and sent to the Company by letter or electronic mail to the address indicated in the convening notice and received by the Company not later than twentytwo days prior to the date of the general meeting of the Company s shareholders. In case such request entails a modification of the agenda of the relevant meeting, the Company will make available a revised agenda at least fifteen days prior to the general meeting of the Company s shareholders. The annual general meeting of the Company s shareholders shall be held in Luxembourg, at the registered office of the Company or at such other place as may be specified in the notice of such meeting, at a.m. local time on the last Wednesday of June. If such day is a legal holiday, the annual general meeting of the Company s shareholders must be held on the next following business day. The Board of Directors shall convene the annual general meeting of the Company s shareholders within a period of six months after the end of the Company s financial year. Other general meetings of the Company s shareholders are held at such places and times as may be specified in the respective notices of the meeting. Voting at Shareholders Meetings Each Share is entitled to one vote at all general meetings of the Company s shareholders. The rights of a shareholder to participate in a general meeting of the Company s shareholders and to vote in respect of any of his Shares are not subject to any requirement that his Shares be deposited with, or transferred to, or registered in the name of, another natural or legal person before the general meeting of the Company s shareholders. The rights of a shareholder to sell or otherwise transfer his Shares during the period between the Record Date and the general meeting of the Company s shareholders are not subject to any restriction to which they are not subject at other times

233 The rights of a shareholder to participate in a general meeting of the Company s shareholders and to vote in respect of his Shares shall be determined with respect to the Shares held by that shareholder on the Record Date. A shareholder must indicate to the Company, not later than on the Record Date, his intention to participate in the general meeting of the Company s shareholders. The Company then records the name or corporate denomination of the shareholder and address or registered office, the number of Shares held by him on the Record Date and a description of the documents showing proof of shareholding on that date. Every shareholder has the right to appoint any other natural or legal person as a proxy holder to attend and vote at a general meeting of the Company s shareholders in his name. Such proxy holder shall have the same right to speak and ask questions in the general meeting of the Company s shareholders as the shareholder thus represented would be entitled. The appointment of a proxy holder by a shareholder shall be made in writing. A shareholder may only appoint one person to act for him as a proxy holder in relation to any general meeting. However, if a shareholder has Shares held in more than one securities account, he may appoint a separate proxy holder in respect of the Shares held in each securities account in relation to any general meeting of the Company s shareholders. A proxy holder shall cast votes in accordance with the instructions issued by the shareholder. The proxy holder shall keep a record of the voting instructions for a minimum of one year from the date of the last carried out voting instructions. A person acting as a proxy holder may hold a proxy from more than one shareholder and can cast votes for a certain shareholder differently from votes cast for another shareholder. The Company shall establish for each resolution at least the number of Shares for which votes have been validly cast, the proportion of Share capital represented by those votes, the total number of votes validly cast as well as the number of votes cast in favour of and against each resolution and, where applicable, the number of abstentions. Within fifteen days following the general meeting of the Company s shareholders, the Company will publish on its website the voting results. Unless a higher majority is required by the Luxembourg Company Law or the Company s Articles of Association (including in particular an amendment of the Company s Articles of Association in which case the resolution will be passed as described below in the section Amendment of the Company s Articles of Association ), resolutions at a general meeting of the Company s shareholders duly convened will be passed by simple majority of the votes validly cast, and no quorum shall be required

234 Amendment of the Company s Articles of Association An amendment of the Company s Articles of Association will be passed by a majority of two thirds of the votes validly cast in an extraordinary general meeting of the Company s shareholders in front of a Luxembourg notary, attended by a quorum of at least 50 % of the issued Share capital and subject to the conditions of the Luxembourg Company Law. In case such quorum is not reached, a second meeting may be convened, in which case no quorum is required, but which must still approve the amendment with a majority of two thirds of the votes validly cast. Abstentions and nil votes will not be taken into account for the calculation of the majority. The convening notice for a second meeting shall be published, subject to stricter requirements of applicable law, seventeen days before the meeting. Such convening notice shall reproduce the agenda and indicate the date and the results of the previous meeting. Shareholder Actions in relation to the Company According to Article 154 of the Luxembourg Company Law, one or several shareholders of the Company representing at least 10 % of the Share capital of the Company or 10 % of the votes attached to all existing securities may, either individually or jointly, ask the Board of Directors questions in writing in relation to one or more acts of management of the Company and of any company controlled by the Company according to article 309 of the Luxembourg Company Law. A copy of the answer must be provided to the person in charge of the statutory audit of the annual accounts of the Company. In the absence of an answer within a period of one month, such shareholder(s) may apply to the judge presiding the chamber of the district court (Tribunal d Arrondissement) dealing with commercial matters and sitting as in urgency matters to appoint one or more experts instructed to submit a report on the act(s) of management targeted in the written question(s). In addition, every shareholder of the Company has the right to ask questions related to items on the agenda of the general meeting of the Company s shareholders in accordance with Article 7 of the Shareholder Rights Law. Each shareholder, regardless of the number of Shares held by him or her, may appeal a resolution of the general meeting of shareholders in accordance with Luxembourg law, if the resolution is, among others: (i) (ii) in conflict with the statutory law, provisions of the Articles of Association or the proceedings for taking resolutions; or made to the sole benefit of the majority shareholder and not in the Company s best interest (abus de majorité). The appeal shall be filed with the competent district court (Tribunal d Arrondissement). The statute of limitation to file an appeal is five years or thirty years as of the day of passing of the

235 resolution, the duration of such period depending on, among others, the nature of the rule that has been breached. The plaintiff should show a legal interest in appealing against the resolution. If the court finds in favour of the appealing shareholder, then the resolution will be nullified. As regards the Company, the competent courts are the courts of Luxembourg, Grand-Duchy of Luxembourg. An appeal may be made in French, Luxembourgish or German and can be made by an attorney qualified to practice in the Grand-Duchy of Luxembourg. An appeal may be subject to court fees. Issuance of Additional Shares and Preferential Subscription Rights The Company may issue additional Shares pursuant to a resolution of the general meeting of the Company s shareholders adopted in the manner provided for amendments of articles (see Amendment of the Company s Articles of Association ) or pursuant to a resolution of the Board of Directors increasing the Share capital of the Company within the limits and under the conditions of the Authorized Capital. In the resolution of the general meeting of the Company s shareholders or of the Board of Directors, the price and the further conditions of the issuance of such additional Shares will be specified, subject to applicable law and the Company s Articles of Association. Shares issued for cash shall be offered on a pre-emptive basis to, each existing shareholder in proportion to the aggregate nominal amount of its Shares, save as mentioned below. The right of each shareholder to subscribe is transferable throughout the subscription period. Preferential subscription rights of the shareholders of the Company may at any time be limited or excluded either by a resolution passed by the general meeting of the Company s shareholders or by the Board of Directors in case of a capital increase under the authorized Share capital of the Company, or by the Board of Directors if the board was previously authorized by a general meeting of the Company s shareholders adopting such resolution under the conditions for an amendment of the Company s Articles of Association. Dividends and Distributions Dividends and interim dividends may be paid out in accordance with the general provisions of Luxembourg law and the Company s Articles of Association. Distributions that have not been claimed within ten years as from the date on which they have become available shall lapse in favour of the Company. In the event of the dissolution of the Company, the net liquidation proceeds shall be distributed by the liquidator(s)

236 Other than the right to dividends or in the event of dissolution of the Company, the Shares do not carry any other right to share in the Company s profits. The Company has not issued any other securities which would carry the right to a share in the Company s profits. Winding-up of the Company A general meeting of the Company s shareholders may at any time resolve to liquidate the Company according to the following process: First, an extraordinary general meeting of the Company s shareholders is convened by the Board of Directors to be held in front of a Luxembourg notary, at which at least half of the share capital must be present or represented. The decision to dissolve the Company and to appoint one or more liquidator(s) is approved if adopted by at least two thirds of the votes validly cast. In case the quorum is not reached, a second meeting may be convened in which no quorum is required, but which must still approve the resolution with two thirds of the votes validly cast; abstention and nil votes will not be taken into account for the calculation of the majority. The liquidator(s), appointed by the general meeting of shareholders in the absence of any agreement to the contrary, will assume control of the affairs of the Company and all powers of the Board of Directors will cease. The duty of the liquidator(s) will be to realize the assets of the Company in order to settle or make provision for its outstanding liabilities and distribute the surplus to the shareholders in accordance with the Company s Articles of Association. As soon as the Company s affairs are fully wound up, the liquidator(s) will prepare a report on the liquidation, which will provide details of the conduct of the liquidation and the employment of the corporate assets and call a general meeting of the Company s shareholders at which the report shall be presented and an explanation given of it. Such second general meeting of the Company s shareholders will review the liquidators report and the accounts and supporting documents, appoint one or more auditor(s) to the liquidation who shall examine such documents and determine the date of a further and final general meeting of the Company s shareholders which, after the auditor(s) has(-ve) issued its/their report, shall in particular decide on the termination of the liquidation. Finally, a third general meeting of the Company s shareholders will be held to resolve in particular upon the approval of the reports of the liquidator and the auditor to the liquidation, the place where the corporate books shall be kept for five years and closure of the liquidation proceedings. The notice on the closure of the liquidation (published in the RESA) also contains information concerning the place where the corporate books are deposited and kept during a period of five years and an indication of the measures taken for the deposit in escrow of the sums and assets due to creditors or to shareholders which it has not been possible to deliver to them, if any

237 Takeover Bids Any voluntary bid for the takeover of the Company and any mandatory bid will be subject to the Luxembourg law dated 19 May 2006 on public takeovers, as amended (the Luxembourg Takeover Law ), which has implemented the Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 concerning takeover bids (the Takeover Directive ) into Luxembourg law. A natural or legal person acquiring, alone or with persons acting in concert with it, control over the Company by holding 33 1/3 % of the voting rights is required to make a mandatory takeover bid to all the holders of Shares in the Company. As far as the competent authority is concerned, the Luxembourg Takeover Law states that if the target company s securities are not admitted to trading on a regulated market in the Member State in which the company has its registered office, the competent authority to supervise the bid shall be the authority of the Member State responsible for the regulated market on which the company s securities are admitted to trading. As the Shares shall be admitted to trading on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and not on a regulated market in Luxembourg that is, if the Company is the target, the Bundesanstalt für Finanzdienstleistungsaufsicht ( BaFin ). Matters relating to the consideration offered in the case of a bid, in particular the price, and matters relating to the bid procedure, in particular the information on the bidder s decision to make a bid, the content of the offer document and the disclosure of the bid shall be governed by the law of the Member State responsible for the regulated market on which the company s securities are admitted to trading therefore, if the Company is the target, the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG) would be applicable. In matters relating to the information to be provided to the employees of the target company and in matters relating to company law and any derogation from the obligation to launch a bid, as well as the conditions under which the board of the target company may undertake any action which might result in the frustration of the bid, the applicable rules and the competent authority shall be those of the Member State where the target company has its registered office therefore if the Company is the target the Luxembourg rules would be applicable and the competent authority would be the CSSF

238 Squeeze-Out and Sell-Out Rights Squeeze-Out Rights in Connection with Takeover Bids If a mandatory or voluntary offer is made to all of the holders of securities carrying voting rights in a company and if, after such offer, the offeror holds 95 % of the securities carrying voting rights of the respective company and 95 % of the voting rights, the offeror is entitled to squeeze-out the minority shareholders, if any, according to the provisions of the Luxembourg Takeover Law. The price offered for such securities must be a fair price". It shall take the same form as the consideration offered in the bid or shall be in cash, whereas cash shall be offered at least as an alternative. Following a voluntary bid, the consideration offered in the bid would be considered a fair price" for the purpose of the squeeze-out proceedings, if 90 % of the shares of a company carrying voting rights have been acquired for the offered consideration. Following a mandatory bid, the consideration offered in the bid is deemed to be fair. The CSSF will ensure that a fair price is guaranteed. The squeeze-out must be exercised by the bidder no later than three months following the expiration of the offer. Sell-Out Rights in Connection with Takeover Bids Under the Luxembourg Takeover Law, when a mandatory or voluntary offer is made to all of the holders of securities carrying voting rights in a company and if, after such offer, the offeror holds more than 90 % of the securities carrying voting rights and more than 90 % of the voting rights, the minority shareholders may require that the offeror purchase the remaining securities of the same class. Such right must be exercised no later than three months following the expiration of the offer. The price shall be determined in the same manner as described above in respect to the squeeze-out procedure. Luxembourg Squeeze-Out and Sell-Out Law The law of 21 July 2012 on mandatory squeeze-out and sell-out of securities of companies currently admitted or previously admitted to trading on a regulated market or having been offered to the public (the Luxembourg Squeeze-Out and Sell-Out Law ) governs the squeeze-out and sell-out of minority shareholders of a company that has its registered seat in Luxembourg by a majority shareholder. The Luxembourg Squeeze-Out and Sell-Out Law applies if all or part of a company s securities (i) are currently admitted to trading on a regulated market in one or more EU Member States, (ii) are no longer traded, but were admitted to trading on a regulated market and the delisting became effective earlier than five years ago or (iii) were the subject of a public offer which triggered the obligation to publish a prospectus in accordance with the Prospectus Directive or, if there is no obligation to publish according to the Prospectus Directive, where the

239 offer started during the previous five years. The Luxembourg Squeeze-Out and Sell-Out Law does not apply during and for a certain grace period after a public takeover, which is or has been carried out pursuant to the Takeover Directive. A majority shareholder, i.e., any natural or legal person holding alone or together with other persons acting in concert, directly or indirectly, securities representing not less than 95 % of the capital carrying voting rights and 95 % of the voting rights of a company may require all the holders of the remaining securities to sell him their securities. The squeeze-out must be exercised at a fair price. The majority shareholder is obligated to appoint a qualified independent expert who will draw up a report in order to determine the fair price per security to be paid to the minority shareholders. If the minority shareholders oppose the proposed fair price within one month of its publication, the CSSF can ask the respective company to propose five other experts and will appoint one amongst them to draw up a second report. In this case, the CSSF will take the final decision on the fair price as set out in the second report delivered to it. As long as a squeeze-out procedure is taking place, no sell-out procedure may be carried out. Each minority shareholder may request the majority shareholder to buy its securities at a fair price within three months after the public announcement of a company that it has obtained a notification of a majority shareholder pursuant to article 3 (4) of the Luxembourg Squeeze-Out and Sell-Out Law. A minority shareholder, that wants to be bought-out, must inform the majority shareholder by way of registered letter about its decision with a copy of the letter to be sent to the CSSF and to the respective company. The majority shareholder will have to appoint a qualified independent expert, who will draw up a report in order to determine the fair price per security to be paid to the minority shareholder. Within one month of the notification of the exercise of the right of mandatory sell-out by the minority shareholder(s), the majority shareholder must communicate the proposed price together with the report to the CSSF and effect a publication and communication to the respective company. The minority shareholder(s) that exercised the right of mandatory sell-out, as well as any other minority shareholder that wishes to represent his/her securities to the mandatory sell-out of the given company may oppose within one month of the publication of the proposed fair price. In this case, the CSSF can ask the respective company to propose five other experts and will appoint one amongst them to draw up a second report. The CSSF will take the final decision on the fair price as set out in the second report delivered to it. The majority shareholder can exercise the squeeze-out right until the publication by the CSSF of its final decision on the fair price. Should the majority shareholder choose to do so, the sell-out procedure is rendered baseless. Provisions Preventing a Change of Control The Articles of Association do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of the Company

240 Manager s Transactions, Insider Dealing and Market Manipulation The new European legal regime under the Market Abuse Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, repealing Directive 2003/6/EC on insider dealing and market manipulation, entered into force on 3 July 2016 (the MAR ) and is directly applicable in Germany and Luxembourg. On 30 June 2016 certain provisions of the German Securities Trading Act (Wertpapierhandelsgesetz, the WpHG ) were revised or amended to align German market abuse rules with the MAR and to transpose the Market Abuse Directive 2014/57/EU (the MAD ) and the Commission Implementing Directive (EU) 2015/2392 into national law. On 31 December 2016, the Luxembourg law of 23 December 2016 on market abuse (the Market Abuse Law ) entered into force and aligned the Luxembourg market abuse rules with the MAR, transposed the MAD and the Commission Implementing Directive (EU) 2015/2392 into national law. The MAR applies to financial instruments admitted to trading on a regulated market, MTF or OTF, or for which a request for admission to trading on a regulated market or MTF has been made, derivatives (including CDS and CFDs) based on such financial instruments and behaviour or transactions relating to the auctioning of emission allowances or other products based thereon. Spot commodity contracts in general, related derivatives and behaviour in relation to benchmarks fall only into the scope in connection with market manipulation. Permitted trading of an entity s own shares under buy-back programmes and the trading for the stabilization of securities fall outside the scope. The prohibitions and requirements under the MAR apply also to actions and omissions committed in a third country outside the EU. The BaFin is mainly competent to investigate market abuse actions carried out both within the territory of Germany and abroad, if these actions relate to instruments admitted to trading on a regulated market, MTF or OTF in Germany, which are auctioned on an auction platform or for which a request for admission to trading on a German regulated market or MTF has been made thus in general BaFin will be the competent authority in relation to the Company and the Shares which are traded on the regulated market of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and the sub-segment of the regulated market with additional post-admission obligations (Prime Standard). However, the CSSF is competent in relation to managers transactions according to article 19 (2) of the MAR. Managers Transactions The MAR includes specific notification requirements for certain managers transactions. Pursuant to Article 19 of the MAR, persons discharging managerial responsibilities, i.e., persons within an issuer who are a member of the administrative, management or supervisory body of that issuer, or a senior executive who is not a member of the aforementioned bodies, but who has

241 regular access to inside information relating directly or indirectly to that issuer and power to take managerial decisions affecting the future developments and business prospects of that issuer, as well as persons closely associated with them, shall notify the issuer and the competent authority of every transaction conducted on their own account relating to shares or other debt instruments of the issuer or to derivatives or other financial instruments linked thereto once a total amount of 5,000 has been reached within a calendar year. The persons closely associated with persons discharging managerial responsibilities include spouses or any person considered to be equivalent to a spouse in accordance with national law, dependent children and other relatives who have lived in the same household for at least one year at the time of the transaction. Legal entities in which the aforementioned persons perform management functions, which are controlled by such a person, which are formed for the benefit of such persons or whose financial interests largely conform to those of such persons, are also subject to the disclosure requirements. Insider Dealing The MAR prohibits insider dealings. Pursuant to Article 14 of the MAR, a person shall not (i) engage or attempt to engage in an insider dealing, (ii) recommend that another person engage in insider dealing or induce another person to engage in insider dealing, or (iii) unlawfully disclose inside information. Article 8 of the MAR defines an insider as any person who possesses inside information as a result of (i) being a member of the administrative, management or supervisory bodies of the issuer; (ii) having a holding in the capital of the issuer; (iii) having access to the information through the exercise of an employment, profession or duties; or (iv) being involved in criminal activities; or (v) any person who possesses inside information under circumstances other than those aforementioned where that person knows or ought to know that it is inside information. For the purposes of the MAR, insider dealing arises where the insider uses inside information by (i) acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that inside information relates; or (ii) cancelling or amending an order concerning a financial instrument to which the inside information relates, where the order was placed before the person concerned possessed the inside information. Recommending that another person engage in insider dealing, or inducing another person to engage in insider dealing arises where the insider (i) recommends, on the basis of the inside information, that another person acquire or dispose of financial instruments to which that inside information relates, or induces that person to make such an acquisition or disposal; or (ii) recommends, on the basis of the inside information, that another person cancel or amend an order concerning a financial instrument to which that inside information relates, or induces that person to make such a cancellation or amendment, and (iii) the person using the

242 recommendation or inducement knows or ought to know that it is based upon inside information. Unlawful disclosure of inside information arises where the insider discloses the inside information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession or duties. Such unlawful disclosure of inside information includes also the onward disclosure of aforementioned recommendations or inducements where the person disclosing the recommendation or inducement knows or ought to know that it was based on inside information. The MAR contains a list of actions which are considered to be legitimate behaviour and are, therefore, explicitly exempted from the aforementioned prohibition of insider dealings. These exemptions particularly include the situation where, with respect to an acquisition or disposal, a legal person (i) has established, implemented and maintained adequate and effective internal arrangements and procedures that effectively ensure that neither the natural person who made the decision on its behalf to acquire or dispose of financial instruments to which the information relates, nor another natural person who may have had an influence on that decision, was in possession of the inside information; and (ii) has not encouraged, made a recommendation to, induced or otherwise influenced the natural person who, on behalf of the legal person, acquired or disposed of financial instruments to which the information relates. Also the situation where the person has obtained the inside information in the conduct of a public takeover or merger with a company and uses that inside information solely for the purpose of proceeding with that merger or public takeover shall be exempted, provided that at the point of approval of the merger or acceptance of the offer by the shareholders of that company, any inside information has been made public or has otherwise ceased to constitute inside information. However, an infringement of the prohibition of insider dealing may still be deemed to have occurred if the competent authority establishes that there was an illegitimate reason for the orders to trade, transactions or behaviours concerned. Market Manipulation Pursuant to Article 15 of MAR, no person shall engage in or attempt to engage in a market manipulation. For the purposes of the MAR, market manipulation includes, among others, the following activities: (i) entering into a transaction, placing an order to trade or any other behaviour which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument; or secures, or is likely to secure, the price of one or several financial instruments at an abnormal or artificial level, unless the person entering into a transaction, placing an order to trade or engaging in any other behaviour establishes that such transaction, order or behaviour have been carried out for legitimate reasons, and conform with certain accepted market practice as expressively specified in the MAR;

243 (ii) (iii) entering into a transaction, placing an order to trade or any other activity or behaviour which affects or is likely to affect the price of one or several financial instruments, which employs a fictitious device or any other form of deception or contrivance, or disseminating information through the media, including the internet, or by any other means, which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument or secures, or is likely to secure, the price of one or several financial instruments at an abnormal or artificial level, including the dissemination of rumours, where the person who made the dissemination knew, or ought to have known, that the information was false or misleading. Where the person concerned is a legal person, the above shall apply accordingly to those natural persons who participate in the decision to carry out activities for the account of the legal person concerned. Sanctions In case of infringement of the provisions enumerated in art. 30 (1) (a) of the MAR, the administrative sanctions under the WpHG include, among others, an order to cease certain conduct, the disgorgement of the profits gained, a public warning indicating the responsible person and the withdrawal or suspension of the authorisation of person supervised by the BaFin. The BaFin may also impose administrative pecuniary sanctions up to 15,000,000 or, in case of legal entities, 15 % of the total revenues gained in the previous financial year or up to three times the amount of the profits gained or losses avoided because of the infringement. In addition, criminal offences are sanctioned with an imprisonment of up to five years and/or a fine. In the case of breaches in relation to notification requirements for certain managers transactions the CSSF may impose administrative pecuniary sanctions of up to a maximum amount of 500,000 in the case of a physical person and in the case of legal persons a maximum amount of 1,000,000. Notification of the Acquisition or Disposal of Major Shareholdings Upon admission of the Shares to trading on the regulated market of Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and the sub-segment of the regulated market with additional postadmission obligations (Prime Standard), the Company and the shareholders of the Company will become subject to the Luxembourg law of 11 January 2008 on transparency requirements for issuers of securities, as amended (the Luxembourg Transparency Law ) which implemented Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004, as amended (the Transparency Directive ) into Luxembourg law

244 Where a shareholder acquires or disposes of Shares, such shareholder shall notify the Company in accordance with the Luxembourg Transparency Law of the proportion of voting rights he holds in the Company as a result of the acquisition or disposal where that proportion reaches, exceeds or falls below the thresholds of 5 %, 10 %, 15 %, 20 %, 25 %, 33 1 / 3 %, 50 % and 66 2 / 3 %. A person must also notify the Company of the proportion of his or her voting rights if that proportion reaches, exceeds or falls below the above-mentioned thresholds as a result of events changing the breakdown of voting rights. The notification to the Company shall be effected as soon as possible, but no later than six trading days following an acquisition or disposal or four trading days following an information that an even changing the breakdown of voting rights has occurred. The voting rights shall be calculated on the basis of all the Shares to which voting rights are attached even if the exercise thereof is suspended. For the purposes of calculating the percentage of a shareholder s voting rights in the Company, the following will have to be taken into account: - voting rights held by a third party with whom that person or entity has concluded an agreement and which obliges them to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards the management of the Company; - voting rights held by a third party under an agreement concluded with that person or entity providing for the temporary transfer for consideration of the voting rights in question; - voting rights attaching to Shares which are lodged as collateral with that person or entity, provided the person or entity controls the voting rights and declares its intention to exercise them; - voting rights attaching to Shares in which a person or entity holds an interest for the duration of the life of such person or entity; - voting rights which are held, or may be exercised within the meaning of the four foregoing points, by an undertaking controlled by that person or entity; - voting rights attaching to Shares deposited with that person or entity which the person or entity can exercise at its discretion in the absence of specific instructions from the shareholders; - voting rights held by a third party in its own name on behalf of that person or entity; and - voting rights which that person or entity may exercise as a proxy where the person or entity can exercise the voting rights in its sole discretion

245 The shareholder will have to file the aforementioned notification also with the CSSF at the same time. In case such shareholder does not provide the notice on time, the voting rights attaching to the fraction of Shares exceeding the relevant threshold are suspended until such notification is made. When receiving a shareholder ownership notification, the Company will also have to publish such notification without undue delay and at the latest within three trading days from receipt of the notification and file it with the competent authority, in particular with the CSSF and store it with the OAM operated by the Luxembourg Stock Exchange. The same publication and filing requirements (OAM and CSSF) apply in Luxembourg whenever the Company acquires or disposes of its own Shares, either through itself or through a person acting in its own name but on the Company s behalf and such acquisition or disposal reaches, exceeds or falls below the thresholds of 5 % or 10 % of the voting rights, respectively. The publication in such context must occur as soon as possible but not later than four trading days after reaching, exceeding or falling below the mentioned thresholds. Additionally, the Company is obliged to publish the total number of voting rights and capital at the end of each calendar month during which an increase or decrease of such total number has occurred. Such publication shall also be filed with the OAM and the CSSF. For further details, shareholders shall refer to the provisions of the Luxembourg Transparency Law and the Grand Ducal regulation of 11 January 2009 relating to the transparency requirements for issuers of securities

246 MANAGEMENT, BODIES AND SENIOR MANAGEMENT Management Structure The management of the Company is administered and managed by a board of directors ( Board of Directors ; each member of the Board of Directors, a Director ). The Board of Directors is vested with the broadest powers to perform all acts of administration and disposition in the Company s interest. All powers not expressly reserved by the Luxembourg Company Law or by the Articles of Association to the general meeting of the Company s shareholders fall within the competence of the Board of Directors. The daily management of the Company as well as the representation of the Company in relation to this management may be delegated to one or more directors, officers, managers or other agents, associate or not, acting alone or jointly (the Daily Manager ). The nomination, revocation and powers of the Daily Manager shall be determined by the Board of Directors. On 25 November 2013 the Board of Directors appointed Mr Christian G. Windfuhr as Daily Manager of the Company (for further details see Senior Management ). The Board of Directors shall choose amongst the Directors a chairperson and may choose one vice-chairperson. It may also choose a secretary who need not be a member of the Board of Directors. The chairperson of the Board of Directors shall have a casting vote. The shareholders shall determine the number and remuneration of the Directors and the term of their office. The Directors of the Company shall be elected by the general meeting of the Company s shareholders for a term not exceeding six years and shall be eligible for re-election upon the expiry of that term. The Directors may be dismissed with or without any cause at any time and at the sole discretion of the general meeting of the Company s shareholders. In the event of a vacancy in the office of a Director because of death, retirement or otherwise, the remaining Directors may co-opt, by a majority vote, a Director to fill such vacancy until the next general meeting of the Company s shareholders (co-optation). Members of the Board of Directors The following table sets out information with respect to each of the members of the Board of Directors, the date of their appointment and their positions within the Company at the date of the Prospectus

247 First Name Position Appointed Latest Appointment / Term of office Mr. Refael Zamir Director and 10 September 29 June 2016 for a term ending on the Chairperson 2013 date of the annual general meeting of the Company s shareholders 2018 Mrs. Simone Director 7 December 29 June 2016 for a term ending on the Runge-Brandner 2012 date of the annual general meeting of the Company s shareholders 2018 Mr. Daniel Director 16 December 29 June 2016 for a term ending on the Malkin 2011 date of the annual general meeting of the Company s shareholders 2018 The business address of the Directors is at 24, Avenue Victor Hugo, L-1750 Luxembourg. Mr. Refael Zamir was born in 1980 in Kfar saba, Israel. He is the finance director of the Company. Mr. Zamir is member of the Board of Directors of the Company since 2013 and since 2017 Chairman of the Board of Directors. Mr. Refael Zamir studied business management and accounting. Since 2007 he holds the Bachelor of Arts in finance and business administration and since 2009 the Master of Business Administration with specialization in finance and accounting. In February 2009 Mr. Refael Zamir obtained a degree as Certified Public Accountant (CPA). From 2006 until 2008 Mr. Refael Zamir worked at the accounting firm BDO where he performed auditing projects for holding and financial as well as governmental companies. From 2008 until 2012 Mr. Refael Zamir worked as manager at the accounting firm of Ernst & Young. Inter alia Mr. Refael Zamir worked in auditing and due diligence projects for international public and private companies, in particular in the finance and real estate sector. He gained broad experience in preparing financial statements for public companies applying IFRS as well as US GAAP. In the beginning of 2013 Mr. Refael Zamir joined the GCP Group and worked as Financial Officer before he became member of the Board of Directors of the Company in September Mrs. Simone Runge-Brandner was born in 1976 in Friedberg, Germany. She is member of the Board of Directors since After finalising her apprenticeship in Banking in 1997 and first years of experience in real estate financing at Helaba, Landesbank HessenThüringen, Frankfurt/Main, Germany, Mrs. Runge-Brandner worked from 2000 until 2006 as credit manager (Handlungsbevollmächtigte) and later as relationship manager Europe (Vice President) and general manager (Prokurist) at DekaBank, Frankfurt/Main, Germany. Within DekaBank she was responsible for building up and extending the European real estate financing business within DekaBank for national and international investors with focus on project development finances and on financing real estate fund vehicles investing into the European market. In parallel to her work

248 at Helaba and DekaBank, Mrs. Runge-Brandner obtained in 1999 a certified degree in banking issues by the Chamber of Commerce Studies in Frankfurt/Main, Germany and in 2004 her diploma in international business administration issued by the University of Applied Science (Fachhochschule) Darmstadt, Germany. In 2007 Mrs. Runge-Brandner joined UBS Deutschland AG in Frankfurt/Main, Germany. While being located in Frankfurt, Germany and London, United Kingdom, and being part of the Investmentbank, she worked as originator and deal manager (Director) to build up the Frankfurt office for Real Estate Financing of UBS. In 2009 Mrs. Runge- Brandner founded the SIMRES GmbH in Frankfurt/Main, Germany. Since then Mrs. Runge- Brandner worked in various positions, inter alia as Managing Director of SIMRES Real Estate S.à r.l. within the SIMRES Group. Mr. Daniel Malkin was born in 1976 in Tel Aviv, Israel. He is member of the Board of Directors of the Company since Mr. Daniel Malkin studied business administration and international relations at the Hebrew University of Jerusalem, from 1999 until From 2001 until 2003 he studied business administration and obtained his bachelor s degree in business administration majoring in finance and human resources. From 2003 until 2006 Mr. Daniel Malkin worked as investment and fund manager at Excellence Nessuah Ltd. Investment House. From 2006 until 2009 he worked as assistant to the CEO of Grand City Hotels GmbH, Berlin, Germany, responsible for the real estate finance, and Managing Director of Grand City Properties Management GmbH, Berlin, Germany. In 2009 Mr. Daniel Malkin co-founded the SIMRES GmbH in Frankfurt/Main, Germany and worked until 2012 in various positions within the SIMRES Group; since September 2012 he is Managing Director of SIMRES Real Estate S.à r.l. He served as board member at Falcon Fund Management Luxembourg between May 2011 and July In addition, Mr. Daniel Malkin was the Managing Director (Conducting Person) of Falcon Fund Management, Luxembourg until December There are no family relationships between any of the members of the Board of Directors and/or members of the Senior Management. To the knowledge of the Company, the members of the Board of Directors have not been convicted of a fraudulent offence in the past five years, nor have they been prohibited by a court ruling or by an enforceable ruling of an administrative authority from exercising an occupation, a profession, a trade or a line of trade. To the knowledge of the Company, no bankruptcies, receiverships, insolvency proceedings or any similar proceedings have been opened against any of the members of the Board of Directors within the past five years. To the knowledge of the Company, no member of the Board of Directors was subject to official public incriminations and/or sanctions by statutory or regulatory authorities (including designated professional bodies) nor has any member of the Board of Directors been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer for the previous five years

249 Other Mandates of the Members of the Board of Directors Within the previous five years the members of the Board of Directors have been members of the administrative, management or supervisory bodies or partners of entities not relating to the Group as follows: Name of Director Position Entity Until Mr. Refael Zamir Mr. Refael Zamir has not been member of administrative, management or supervisory bodies or partner of entities outside the Group in the previous five years. Mrs. Simone Runge-Brandner Managing Director SIMRES Real Estate S.à r.l., Luxembourg ongoing Managing Director / Liquidator SIMRES GmbH, Frankfurt/Main 2014 Mr. Daniel Malkin Managing Director SIMRES Real Estate S.à r.l., Luxembourg ongoing Independent Director Della S.à r.l., Luxembourg ongoing Independent Director OVG Hamburg 1 S.à r.l., Luxembourg ongoing Independent Director Falcon Fund SICAV, Luxembourg 2017 Independent Director Falcon Invest SICAV, Luxembourg 2017 Independent Director Swiss World Invest SICAV, Luxembourg 2017 Managing Director Falcon Fund Management (Luxembourg) S.A., Luxembourg

250 Member of the Supervisory Board Falcon Fund Management (Luxembourg) S.A., Luxembourg 2012 There are no arrangements or understandings with major shareholders, customers, suppliers or others with respect to which any member of the Board of Directors was selected. Conflict of Interests of the Members of the Board of Directors The members of the Board of Directors have no potential conflicts of interest between any duties to the Company and their private interest or other duties. The ongoing mandates of the members of the Board of Directors do not lead to any potential conflict of interests of the respective members of the Board of Directors as the relevant entities are neither shareholders of the Company nor do they have any business relationships with the Company or the Group. Remuneration and benefits of the Members of the Board of Directors In the financial year 2016, the members of the Board of Directors were compensated as follows: Mr. Refael Zamir Ms. Simone Runge- Brandner Mr. Daniel Malkin Fixed Remuneration 202,813 78,000 78,000 Fix and variable share incentive* 132,813* - - Other** - 115, ,000 * Value of 10,875 options on a pro rata basis for the fiscal year 2016 granted under the management incentive program, for details see Description of Share Capital - Employee Stock Option Plan. ** Compensation for cancellation of options granted under the management incentive program. There are no service contracts between members of the Board of Directors on the one side and the Company or any member of the Group on the other side providing for benefits upon termination of employment. No amounts were set aside to provide pension retirement or similar benefits to the members of the Board of Directors

251 Shareholdings of the Members of Board of Directors As of the date of this Prospectus, the members of the Board of Directors do not hold any shares in the Company. Mr. Refael Zamir is entitled to up to 65,000 option rights to receive shares in the Company under the MIP which are subject to vesting provisions as well as - partly for up to 30,000 option rights - the achievement of certain financial parameters in the Company s annual financial statements (see Description of Share Capital - Employee Stock Option Plan ). The options granted to Mr. Refael Zamir are exercisable as follows: Number of option rights granted Exercise price* Period during which the options may be exercised Up to 30, day period commencing on the publication of financial statement as of and for the fiscal year ending on 31 December 2018 Date on which the options expire 30 days after publication of financial statement as of and for the fiscal year ending on 31 December , July July July 2020 * The exercise price is a one-time payment as a consideration for all shares per tranche. Senior Management On 25 November 2013 the Board of Directors resolved to delegate the daily management of the Company to Mr. Christian Windfuhr to act as Daily Manager (administrateur-délégué) of the Company, under the endorsed denomination (Zusatzbezeichnung) Chief Executive Officer (CEO), with immediate effect, with individual power of signature in accordance with the Articles of Association of the Company. His business address is at 24, Avenue Victor Hugo, L-1750 Luxembourg. Mr. Windfuhr s appointment and his service contracts with the Group end on 31 December Christian G. Windfuhr was born on 6 April 1945 in Großhansdorf, Germany. He is an internationally seasoned real-estate and hotel expert with experience in Europe, the USA, South Africa, Middle East, and Asia. He is Chief Executive Officer of the Company. Mr. Windfuhr graduated from the School of Hotel Administration at Cornell University in After five years with Kempinski and Southern Sun Hotels in Germany and South Africa, Mr. Windfuhr joined Holiday Inn International in Asia/Pacific for some 12 years, where ultimately he held the position of Vice President Operations & Development. In 1990 Windfuhr was appointed to the Board of Directors of TUI heading up their hotel activities consisting of five independently operating resort hotel and club companies with almost 50,000 rooms. As president and CEO of Mövenpick Hotels & Resorts ( ), he achieved the financial turnaround of the company, drove international expansion, and re-structured the company into a stock listed company under Swiss law. From 2000 until 2005 Windfuhr was CEO of Maritim Hotels, a privately owned hotel company in Germany which at the time operated some 12,000 rooms in 44 hotels of which eight were

252 outside Germany. Before joining Grand City Holland B.V. Mr. Windfuhr served for two years as an Executive Director for the Corinthia Hotels Group based in Malta. Until November 2013 Mr. Windfuhr was member of the Advisory Board and the Audit Committee of the Company. By resolution of the Board of Directors dated 25 November 2013 Mr. Windfuhr was appointed as Chief Executive Officer and daily manager of the Company. There are no family relationships between Mr. Windfuhr and members of the Board of Directors. To the knowledge of the Company, Mr. Windfuhr has not been convicted of a fraudulent offence in the past five years, nor have they been prohibited by a court ruling or by an enforceable ruling of an administrative authority from exercising an occupation, a profession, a trade or a line of trade. To the knowledge of the Company, no bankruptcies, receiverships, insolvency proceedings or any similar proceedings have been opened against Mr. Windfuhr within the past five years. To the knowledge of the Company, Mr. Windfuhr was not subject to official public incriminations and/or sanctions by statutory or regulatory authorities (including designated professional bodies) nor has he been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer for the previous five years. Other Mandates Within the previous five years Mr Christian Windfuhr has been Chief Executive Officer of Grand City Holland B.V. His mandate ended on 31 December There are no arrangements or understandings with major shareholders, customers, suppliers or others with respect to the selection of Mr. Christian G. Windfuhr. Conflicts of Interests Mr. Christian G. Windfuhr does not have potential conflicts of interest between any duties to the Company and his private interest or other duties. Remuneration and Benefits The service contracts between the Group and Mr. Christian G. Windfuhr do not provide benefits upon termination of employment. The total compensation of Mr. Christian G. Windfuhr for the financial year 2016, based on employer s costs, amounted to 208,872. In addition Mr. Windfuhr were granted 18,000 options for shares under the management incentive program with a value of 306,000 (see Description of Share Capital - Employee Stock Option Plan )

253 No amounts were set aside to provide pension retirement or similar benefits to Mr. Christian G. Windfuhr. Shareholdings As of the date of this Prospectus, Mr. Christian G. Windfuhr does not hold Shares of the Company. Mr. Windfuhr is entitled to 54,000 option rights to receive shares in the Company under the MIP which are subject to vesting provisions (see Description of Share Capital - Employee Stock Option Plan ). The options are exercisable as follows: Number of option rights granted Exercise price* Period during which the options may be exercised Date on which the options expire 36, January January , January January 2018 * The exercise price is a one-time payment as a consideration for all shares per tranche. 31 January January 2018 Advisory Board The Board of Directors of the Company has established an advisory board by a resolution adopted on 23 April The task of the advisory board is 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 Company Law or the Articles of Association of the Company, but applies rules which have been adopted by the Board of Directors. However, the Company considers the advisory board to be an important source of guidance for the Board of Directors when making strategic decisions, raising capital and in fostering contact with the business community, governmental authorities, financial institutions, analysts, and investors. The current members of the advisory board are as follows: Name Mr Yakir Gabay Mr Andrew Wallis Mr Claudio Jarczyk Mr Markus J. Leininger Position Chairman of the Advisory Board Vice-Chairman of the Advisory Board Member Member

254 Audit Committee By resolution adopted on 14 May 2013, the Board of Directors established an audit committee. The members of the audit committee are the independent directors Ms Simone Runge-Brandner and Mr Daniel Malkin. The audit committee operates on the basis that the Board of Directors decides on the composition, tasks and term of the audit committee as well as the appointment and dismissal of its members. The audit committee of the Company has no statutory powers under Luxembourg Company Law or the Articles of Association of the Company, but applies rules which have been adopted by the Board of Directors. The Company considers the establishment of the audit committee an important element in ensuring that the Group s accounting processes and the preparation of its financial statements are adequate. 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. The audit committee shall provide guidance to the Board of Directors on the auditing of the annual financial statements of the Company and, in particular, shall monitor the independence of the auditor, the additional services rendered by the auditor, the issuing of the audit mandate to the auditor, the determination of auditing focal points and the fee agreement with the auditor. Risk Committee By resolution adopted on 12 November 2014, the Board of Directors established a risk committee. The members of the Risk Committee are Ms Simone Runge-Brandner, Mr Daniel Malkin, Mr Andrew Wallis and Mr Refael Zamir. The Board of Directors decides on the composition, tasks and term of the Risk Committee as well as the appointment and dismissal of its members. The Risk Committee was established for assisting and providing expert advice to the Board of Directors in fulfilling its oversight responsibilities, relating to the different types of risks, recommend a risk management structure including its organization and its process as well as assess and monitor effectiveness of the risk management. The Risk Committee provides advice on actions of compliance, in particular by reviewing the Company s procedures for detecting risk, the effectiveness of the Company s risk management and internal control system and by assessing the scope and effectiveness of the systems established by the management to identify, assess and monitor risks. Remuneration Committee The Company has not established a remuneration committee

255 Corporate Governance The Company is not subject to any compulsory corporate governance code of conduct or respective statutory legal provisions. Section 161 of the German Stock Corporation Act (AktG) does not apply because the Company is a joint stock corporation under the laws of the Grand Duchy of Luxembourg (société anonyme, S.A.) and not a German Stock Corporation (Aktiengesellschaft, AG). The Ten Principles of Corporate Governance of the Luxembourg Stock Exchange do not apply because the Shares of the Company are not listed on a regulated market operated by the Luxembourg Stock Exchange. Nevertheless, the Company intends to voluntarily comply with the Ten Principles of Corporate Governance of the Luxembourg Stock Exchange in the future and is currently evaluating the necessary measures to implement the principles and recommendations of the Ten Principles of Corporate Governance of the Luxembourg Stock Exchange

256 SHAREHOLDER STRUCTURE The table below sets forth the information known to the Company with respect to the shareholders and the shareholder structure of the Company as of the date of this Prospectus. The shareholdings may have changed since the date on which the Company obtained knowledge of the shareholding. Shareholder Direct ownership of the Company in % Edolaxia Group Limited* FMR LLC Merrill Lynch International 2.57 Odey Asset Management 2.26 Other Freefloat Total 100 * Edolaxia Group Limited is a subsidiary of Aroundtown Property Holdings plc, a publicly listed company the shares of which are included for trading on the Alternext segment of Euronext Paris stock exchange. Aroundtown is controlled though its major shareholder Avisco Group plc holding approximately 50% of the shares in Aroundtown. Avisco Group plc is controlled by Mr. Yakir Gabay. Edolaxia Group Limited holds % of the voting rights in the Company. Edolaxia Group Limited is a subsidiary of Aroundtown. Aroundtown is controlled though its major shareholder Avisco Group plc holding approximately 50% of the shares in Aroundtown. Avisco Group plc is controlled by Mr. Yakir Gabay. Thus, Mr. Gabay currently controls % of the voting rights in the Company. If there was low shareholder attendance at the general meeting of the Company s shareholders, Mr. Gabay could through Edolaxia Group Limited adopt and implement or prevent the adoption of resolutions by the general meeting of the Company s shareholders which require a simple majority or even higher majorities solely through the exercise of his own votes. Furthermore, Mr. Gabay could through Edolaxia Group Limited prevent a general meeting of the Company s shareholders from adopting resolutions which require a qualified majority of the votes cast. There are no arrangements known to the Company involving Edolaxia Group Limited or other shareholders the operation of which may at a subsequent date result in a change of control of the Company. All shares of the Company provide for the same voting rights

257 RELATED PARTY TRANSACTIONS Overview Discussed below are the material transactions and legal relationships that have existed between companies of the Group, on the one hand, and related parties and companies, on the other hand, in the financial years 2016, 2015, and 2014, as well as in 2017 until the date of this Prospectus. Parties are related if one party has the ability to affect the financing and operating policies of the other party (definition in accordance with IAS 24). Business relations among companies of the Group are not discussed here. Companies and persons deemed to be related to the Company under the revised accounting standard IAS 24 are: - companies of the Group that are controlled by the Company, in which the Company holds an investment interest that provides the Company with significance influence, or in whose joint management the Company participates; - companies associated with the Company for purposes of IAS 28 that are not consolidated by the Company, and joint ventures in which the Company is a partner company; - members of the board of directors of the Company and their direct family members, as well as companies controlled by members of the Board of Directors of the Company or their direct family members, or in which such persons exert material influence, or in which they directly or indirectly hold a substantial share of voting rights; and - the shareholders of the Company whose shareholdings grant them a significant influencing power over the Company, and all companies and enterprises in which such shareholders can exert a controlling influence and/or in which these shareholders hold more than 50.0 % of the voting rights. Business Relationships and transactions between the Company and Shareholders of the Company Loan Agreements A total balance amount of 81 thousands and 54 thousands in the financial year ended on 31 December 2014 and on 31 December 2015 respectively, reflect several smaller loans which the Group received from a shareholder. The Group recorded interest expenses in the amount of

258 thousands and 14 thousands for the year ended on 31 December 2014 and 31 December 2015 respectively. No security was provided in respect of the loans received. Apart from these agreements there have been no loan agreements between members of the Group on the one hand and shareholders of the Company on the other hand in the financial years 2016, 2015, and 2014, as well as in 2017 until the date of this Prospectus. Lease Agreements In the financial year ended on 31 December 2016 the Group recognized revenue from rental and other operation income from lease agreements with CMLB Management GmbH and Primecity Asset Management GmbH, both entities are indirect subsidiaries of Aroundtown, in the amount of 179 thousands. For the current financial year until the date of this Prospectus the Group recognized revenue from rental and other operation income from the aforementioned lease agreements in the amount of 152 thousands. Apart from these agreements there have been no lease agreements between the Group on the one hand and shareholders of the Company on the other hand in the financial years 2016, 2015, and 2014, as well as in 2017 until the date of this Prospectus. Dividends The Company paid dividends to its existing shareholders for the financial years 2016, 2015, and 2014 as follows: In 2017 no distribution of profits or reserves were made until the date of this Prospectus; the Board of Directors intends to propose to the shareholders annual general meeting which is expected to be held in June 2017 a distribution of a cash dividend for the fiscal year 2016 according to its dividend policy. For the fiscal year 2015, the shareholders annual general meeting has resolved on 29 June 2016 upon the distribution of a cash dividend in the amount of 0.25 per share For the fiscal year 2014, the shareholders annual general meeting has resolved on 24 June 2015 upon the distribution of a cash dividend in the amount of 0.20 per share. Business Relationships and transactions between the Company and Companies of the Group There are various business relationships between the Company and companies of the Group. Such business relationships refer to a broad variety of services, in particular with regard to

259 property management services conducted by GrandCity for and on behalf of the respective property companies Any of the business relationships and transactions between the Company and companies of the Group in the ordinary course of business is conducted at arms length and within market standards which would apply to transactions with third parties vice versa. Business Relationships and transactions between the Company and members of the Board of Directors and the Senior Management The members of the Board of Directors received from the Group for their services under their service contracts remuneration as indicated in section Management, Bodies and Senior Management - Members of the Board of Directors - Remuneration and benefits of the Members of the Board of Directors. The member of the Senior Management, Mr. Christian G. Windfuhr, received from the Group for his services under his service contracts with the Group remuneration as indicated in section Management, Bodies and Senior Management - Senior Management - Remuneration and benefits

260 TAXATION IN THE GRAND DUCHY OF LUXEMBOURG The following is an overview discussion of certain material Luxembourg tax consequences with respect to the Company and its Shares. This overview does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular holder of Shares, and does not purport to include tax considerations that arise from rules of general application or that are generally assumed to be known to holders of Shares. It is not intended to be, nor should it be construed to be, legal or tax advice. This discussion is based on Luxembourg laws and regulations as they stand on the date of this Prospectus and is subject to any change in law or regulations or changes in interpretation or application thereof that may take effect after such date. Prospective investors in the Shares should therefore consult their own professional advisers as to the effects of state, local or foreign laws and regulations, including Luxembourg tax law and regulations, to which they may be subject. Please be aware that the residence concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present section to a tax, duty, levy impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only. Also, please note that a reference to Luxembourg income tax encompasses corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds pour l emploi), as well as personal income tax (impôt sur le revenu) generally. Investors may further be subject to net wealth tax (impôt sur la fortune) as well as other duties, levies or taxes. Corporate income tax, municipal business tax as well as the solidarity surcharge (which are collectively referred to as Luxembourg corporation taxes) invariably apply to most corporate taxpayers resident of Luxembourg for tax purposes. Individual tax payers are generally subject to personal income tax and the solidarity surcharge. Under certain circumstances, where an individual taxpayer acts in the course of the management of a professional or business undertaking, municipal business tax may apply as well. Taxation of the Company Corporate Income Tax The Company is liable for Luxembourg corporation taxes. The aggregate maximum applicable rate, including corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal) and a contribution to the employment fund, is % for a company established in Luxembourg City. Liability for such corporation taxes extends to the Company s worldwide profits including capital gains, subject to the provisions of any relevant double taxation treaty and the tax exemptions for qualifying participations provided by the Article 166 of the Luxembourg income tax law or the Grand-ducal decree dated 21 December The

261 taxable income of the Company is computed by application of the Luxembourg income tax law of 4 December 1967, as amended (loi concernant l impôt sur le revenu), as commented and currently applied by the Luxembourg tax authorities. The Company is a fully taxable Luxembourg resident and should therefore, from a Luxembourg tax perspective, be able to benefit from double taxation treaties and European directives on income tax matters. Net Wealth Tax The Company is fully subject to the annual net wealth tax charge (impôt sur la fortune) which amounts to 0.5 % of the net asset value of the Company on a net asset value up and including 500,000,000. In case the net asset value of the Company exceeds 500,000,000, any amount in excess of said threshold will be subject to net wealth tax at a rate of 0.05 %. Certain assets (such as qualifying participations) might be excluded from the net asset value for the purposes of the net wealth tax computation, provided that the provisions of paragraph 60 of the valuation law of 16 October 1934, as amended (BewG) are met. The Company is subject to the fixed minimum net wealth tax of 4,815 if the sum of fixed financial assets, receivables on related entities, transferable securities and cash at bank exceeds 90 % of its balance sheet and 350,000. If the Company should not fall within the scope of the 4,815 minimum net wealth tax, a progressive minimum net wealth tax will be applicable ranging from 535 to 32,100, depending on the Company s total gross assets. Taxation of Investors This tax disclosure is limited to the tax consequences to investors owning Shares. This discussion therefore is limited to taxation issues in respect of the holding and selling of these Shares. Withholding Tax A 15 % withholding tax will be due in Luxembourg on distribution paid by the Company to its shareholders unless the domestic withholding tax exemption regime or a withholding tax reduction or exemption under a double tax treaty concluded by Luxembourg applies. Liquidation proceeds will not be subject to withholding taxes. Should any withholding taxes be payable on amounts paid by the Company, the Company assumes responsibility for the withholding of Luxembourg taxes at the source

262 Non-resident Shareholders A shareholder will not become resident, nor be deemed to be resident, in Luxembourg solely by virtue of the acquisition, the holding and/or disposing of Shares or the execution, performance, delivery and/or enforcement of his/her rights thereunder. Capital gains realized by a shareholder of the Company who is not a resident of Luxembourg for tax purposes and who has no permanent establishment or permanent representative to which the Shares are attributable are not taxable in Luxembourg, except if the Shares are part of a substantial participation of more than 10 % in the Company and provided these Shares are sold within six months of their acquisition or, under certain conditions, the individual shareholder has been a Luxembourg resident for more than 15 years and has become a non-resident less than 5 years after the sale disposal or redemption of the Shares and provided that no double taxation treaty denies Luxembourg the right to tax. Non-resident corporate shareholders which have a permanent establishment or a permanent representative in Luxembourg, to which the Shares are attributable, must include any income received, as well as any gain realized on the sale, disposal or redemption of Shares, in their taxable income for Luxembourg assessment purposes. The same inclusion applies to individuals, acting in the course of the management of a professional or business undertaking, who have a permanent establishment or a permanent representative in Luxembourg, to which the Shares are attributable. Luxembourg-resident Shareholders Luxembourg-resident Individuals Any dividends and other payments derived from the Shares received by resident individuals who act in the course of either their private wealth or their professional/business activity, are subject to income tax at the progressive ordinary rates on half of the amounts received, the other half being tax exempt pursuant to the provisions of Article 115 paragraph 15a of the Luxembourg income tax law. For the year 2017 the top marginal rate including solidarity surcharge is at %. A gain realized upon the sale, disposal or redemption of Shares by Luxembourg resident individual shareholders acting in the course of the management of their private wealth is not subject to Luxembourg income tax, provided this sale, disposal or redemption took place more than 6 months after the Shares were acquired or the disposal of the Shares did not precede the acquisition and provided the Shares do not represent a substantial participation. A participation is deemed to be substantial where a resident individual shareholder holds or has held, either alone or together with his/her spouse or partner and/or minor children, directly or

263 indirectly at any time within the 5 years preceding the disposal, more than 10 % of the share capital of the company whose shares are being disposed of. A shareholder is also deemed to alienate a substantial participation if he acquired free of charge, within the 5 years preceding the transfer, a participation that constituted a substantial participation in the hands of the alienator (or the alienators in case of successive transfers free of charge within the same 5-year period). Capital gains realized on a substantial participation more than 6 months after the acquisition thereof are taxed according to the half-global rate method (i.e. the average rate applicable to the total income is calculated according to progressive income tax rates and half of the average rate is applied to the capital gains realized on the substantial participation). A disposal may include a sale, an exchange, a contribution or any other kind of alienation of the participation. Capital gains realized on the disposal of the Shares by resident individual shareholders, who act in the course of their professional/business activity, are subject to income tax at ordinary rates. Taxable gains are defined as being the difference between the price for which the Offer Shares have been disposed of and the lower of their cost or book value. Luxembourg-resident Companies Luxembourg resident corporate shareholders will be subject to corporation taxes at the rate of % for entities having their registered office in Luxembourg-City on dividend distributions made by the Company and the gains received upon disposal of the Shares unless a tax exemption pursuant to the provisions of the Article 166 of the Luxembourg income tax law or the Grand-ducal decree dated 21 December 2001 applies or unless the shareholders benefit from a special tax regime such as undertakings for collective investment subject to the law of 17 December 2010, as amended, specialized investment funds subject to the law of 13 February 2007, as amended, investment companies in risk capital subject to the law of 15 June 2004, as amended, or family wealth management companies subject to the law of 11 May 2007, as amended, or reserved alternative investment funds subject to the law of 23 July Net Wealth Tax Non-resident and resident individual shareholders are exempt from net wealth tax on the Shares in Luxembourg. Non-resident Shareholders The mere holding of the shares in Luxembourg custody accounts does not create a permanent establishment or a permanent representative in Luxembourg. Absent any permanent establishment or a permanent representative in Luxembourg, non-resident corporate shareholders will not be subject to net wealth tax in Luxembourg as a result of them holding Shares

264 Non-resident shareholders who have a permanent establishment or a permanent representative in Luxembourg to which the Shares are attributable are subject to Luxembourg net wealth tax on the Shares, unless the conditions provided for by paragraph 60 of the valuation law of 16 October 1934, as amended (BewG) are met. Luxembourg-resident Shareholders Shares held by Luxembourg resident corporate shareholders, will be subject to an annual net wealth tax charge (impôt sur la fortune) of 0.5 % (of 0.05 % applicable to the net wealth exceeding 500,000,000) except if: i. the conditions provided for by the valuation law of 16 October 1934, as amended (BewG) are met; or ii. the Luxembourg resident company benefits from a special tax regime such as undertakings for collective investment subject to the law of 17 December 2010, as amended, specialized investment funds subject to the law of 13 February 2007, as amended, investment companies in risk capital subject to the law of 15 June 2004, as amended, or family wealth management companies subject to the law of 11 May 2007, as amended, a professional pension institution governed by the amended law of 13 July 2005 or a reserved alternative investment fund vehicle governed by the law of 23 July Luxembourg resident corporate shareholders are subject to the fixed minimum net wealth tax of 4,815 if the sum of fixed financial assets, receivables on related entities, transferable securities and cash at bank exceeds 90 % of their balance sheet and 350,000. If the Luxembourg resident corporate shareholders should not fall within the scope of the 4,815 minimum net wealth tax, a progressive minimum net wealth tax will be applicable ranging from 535 to 32,100, depending on the their total gross assets. Other Tax Consequences Stamp Taxes and Transfer Taxes There is no Luxembourg registration tax, stamp duty or any other similar tax or duty payable in Luxembourg by the holders of Shares as a consequence of the issuance of the Shares, nor will any of these taxes be payable as a consequence of a subsequent transfer, repurchase or redemption of the Shares

265 Gift Taxes No estate or inheritance tax is levied on the transfer of Shares upon death of a holder of Shares in cases where the deceased was not a resident of Luxembourg for inheritance tax purposes and no gift tax is levied upon a gift of Shares if the gift is not passed before a Luxembourg notary or recorded in a deed registered in Luxembourg. Where a holder of Shares is a resident for tax purposes of Luxembourg at the time of his death, the Shares are included in its taxable estate for inheritance tax or estate tax purposes. VAT If the activities of the Company do not exceed a mere holding activity, the Company should not be able to register for value added tax, (VAT), purposes in Luxembourg and any VAT suffered by the Company will, in principle, be final and irrecoverable. In case the Company provides services that are subject to VAT, it would have to register for VAT purposes in Luxembourg and it will be allowed to recover all or only a portion of the VAT incurred on its costs

266 TAXATION IN THE FEDERAL REPUBLIC OF GERMANY The following sections describe a number of key German taxation principles that may be relevant to purchasing, holding or transferring the Shares. The information provided does not constitute a comprehensive or definitive explanation of all possible aspects of taxation in this area. This summary is based on applicable German tax law as of the date of the Prospectus, including the double taxation treaties that Germany has concluded with other countries. It should be noted that the legal situation may change, including, in certain cases, with retroactive effect. Persons interested in purchasing Shares should seek advice from their own tax counsel regarding the tax implications of purchasing, holding, disposing, donating and bequeathing Shares, and the regulations on reclaiming previously withheld withholding tax (Kapitalertragsteuer). Due consideration to a shareholder s specific tax-related circumstances can only be given within the scope of an individual tax consultation. Shareholders of the Company are subject to taxation in connection with the holding of Shares (see Taxation of Dividends ), the disposal of Shares (see Taxation of Capital Gains ) and the gratuitous transfer of Shares (see Inheritance and Gift Tax ). Taxation of Dividends In the case of dividends paid by a non-german corporation, German withholding tax is generally withheld regardless of whether and to what extent the dividend is exempt from tax at the level of a German tax resident shareholder if the shares are kept in custody with a German Disbursing Agent (as defined herein). However, no German withholding tax should be imposed on such dividends that are paid to German tax resident corporations, non-german shareholders or, subject to certain prerequisites, if the dividends are business income of a domestic business. The withholding tax amounts to 25 % on the amount of the distribution. A solidarity surcharge of 5.5 % is also levied on the withholding tax amount, resulting in a total withholding of % (plus church tax, if any). If shares - as it is the case with the Shares - are held in collective safe custody (Sammelverwahrung) with a central securities depository (Wertpapiersammelbank) pursuant to 5 German Act on Securities Accounts (Depotgesetz) and are entrusted to such central securities depository for collective safe custody in Germany, which is tax resident in Germany, the withholding tax is withheld and discharged for the account of the German tax resident shareholders by the domestic branch of the domestic or foreign credit or financial services institution (inländisches Kredit- oder Finanzdienstleistungsinstitut), by the domestic securities trading company (inländisches Wertpapierhandelsunternehmen) or the domestic securities trading bank (inländische Wertpapierhandelsbank) which keeps and administers the shares and disburses or credits the dividends (hereinafter referred to jointly or separately as German

267 Disbursing Agent ). The Company assumes no responsibility for the withholding of German taxes at the source. If and to the extent funds from the tax contribution account (steuerliches Einlagekonto) are declared to be used for the distribution, the dividend payment is generally not taxable and, therefore, not subject to withholding tax, however provided that the Company applies for a special assessment procedure with the German tax authorities and subject to further prerequisites. Such dividends from the tax contribution account accordingly reduce the acquisition costs of the Shares, which may result in a greater amount of taxable capital gain upon the respective shareholder s sale of the Shares. To the extent that dividends from the tax contribution account exceed the acquisition costs of the Shares, a capital gain is recognized by the shareholder, which may be subject to tax in accordance with the provisions outlined below. Shareholders Tax Resident in Germany Shares Held as Private Assets In principle, the tax liability applicable to dividend payments to individual shareholders who are German tax residents and who hold shares as part of their private assets is generally satisfied by withholding a flat tax (Abgeltungsteuer) of 25 % plus a solidarity surcharge of 5.5 % thereon, resulting in a total tax rate of % (plus church tax, if any) as described above (see Taxation of Dividends ). Income-related expenses incurred in connection with private investment income are not tax deductible. The only deduction that may be made is an annual lump sum deduction amount of 801 ( 1,602 for jointly assessed married couples and registered partners) on all private capital income (Einkünfte aus Kapitalvermögen). Shareholders may apply for the whole amount of their capital income, including dividends, to be taxed at the income tax rate based on their personal circumstances instead of the flat-rate withholding tax if this results in a lower tax liability. In such cases, it is also impossible to deduct any income-related expenses other than the lump sum deduction amount. Furthermore, dividend income may generally be offset by losses from other income. Shareholders may be liable for church tax, which is generally deducted by way of withholding by the German Disbursing Agent for dividends received after 31 December 2014, unless the shareholder has filed a blocking notice (Sperrvermerk) with the German Federal Central Tax Office. Where church tax is not levied by way of withholding, it is determined by means of an income tax assessment. Individual shareholders who privately hold, directly or indirectly, an interest of at least 25 % in the Company, and shareholders who privately hold, directly or indirectly, at least 1 % in the Company and work for the Company, and thereby is able to exert a significant influence on the companies economic activity, may in principle request an exemption from the flat-rate withholding tax. In this case, 60 % of the dividends paid to the shareholder are subject to income tax according to the

268 applicable rate plus solidarity surcharge (plus church tax, if any) thereon. Expenses incurred in connection with dividend income are then generally 60 % tax-deductible. The levied withholding tax is offset against the income tax and any excess withholding tax is refunded. Dividend payments that are made using funds from the tax contribution account (steuerliches Einlagekonto) are generally, subject to certain prerequisites, not taxable. Tax withheld in Luxembourg (15 % of the dividends, see "Taxation in the Grand Duchy of Luxembourg - Taxation of Investors - Withholding Tax") can generally be credited against the German tax liability on the Luxembourg dividends received by the German tax resident individual. Shares Held as Business Assets of Corporations In principle, dividends paid to corporations that are German tax residents are generally subject to corporate tax (and solidarity surcharge thereon) at a rate of %. However, dividends received are effectively 95 % exempt from corporate tax (and solidarity surcharge thereon), if the corporation holds a direct participation of at least 10 % in the share capital of the Company at the beginning of the calendar year in which the dividends are paid. The acquisition of a participation of at least 10 % in the course of a calendar year is deemed to have occurred at the beginning of such calendar year for the purpose of this rule. Participations in the share capital of the Company which a corporate shareholder holds through a partnership, including co-entrepreneurships (Mitunternehmerschaften), are attributable to such corporate shareholder only on a pro rata basis at the ratio of the interest share of the corporate shareholder in the assets of relevant partnership. However, 5 % of the tax-exempt dividends are treated as non-deductible business expenses and are subject to tax. Business expenses actually incurred in connection with dividend income from a tax perspective are generally tax-deductible. For trade tax purposes, dividends are only exempt as described above if the entity that is receiving the dividends held a stake of at least 10 % in the share capital of the Company at the beginning of the assessment period. Otherwise, the dividends will be fully subject to trade tax. No withholding tax should be imposed on dividends to corporations that are German tax residents by the German Disbursing Agent, subject to certain prerequisites. The same applies to the solidarity surcharge, which is levied in addition to the corporate income tax. Dividend payments that are made using funds from the tax contribution account (steuerliches Einlagekonto) are generally, subject to certain prerequisites, not taxable. Tax withheld in Luxembourg (15 % of the dividends, see "Taxation in the Grand Duchy of Luxembourg - Taxation of Investors - Withholding Tax"), if any, can generally be credited against the German tax liability on the Luxembourg dividends received by the German tax resident Corporation

269 Shares Held as Business Assets of Sole Proprietors In principle, only 60 % of the dividends paid to individuals who are German tax residents and who hold shares as part of their business assets are subject to income tax according to the applicable rate. A solidarity surcharge of 5.5 % of this amount also applies as well as church tax, if any. Subject to certain prerequisites, no withholding tax should be imposed on to sole proprietors that are German tax residents by the German Disbursing Agent. To the extent withholding tax is levied, such withholding tax is offset against the personal income tax due and any excess amount is refunded. The same applies to the solidarity surcharge and church tax, if any. Business expenses incurred in connection with dividend income from a tax perspective are generally only 60 % tax-deductible. The dividends are also subject to trade tax, which is fully or partly credited towards the individual s income tax by a lump-sum method. The dividends are exempt from trade tax, provided that the shareholder held at least 10 % of the Company s share capital at the beginning of the relevant assessment period. Dividend payments that are made using funds from the tax contribution account (steuerliches Einlagekonto) are generally, subject to certain prerequisites, not taxable. Tax withheld in Luxembourg (15 % of the dividends, see "Taxation in the Grand Duchy of Luxembourg - Taxation of Investors - Withholding Tax") can generally be credited against the German tax liability on the Luxembourg dividends received by the German tax resident individual. Shares Held as Business Assets of a Commercial Partnership Income tax or corporate income tax (in each case including solidarity surcharge and church tax, if any) is not levied at the level of the partnership (Mitunternehmerschaft) but rather at the level of the respective partner. The level of taxation for each partner depends on whether the partner is a corporation or an individual. If the partner is a corporation, the dividends contained in its profit share are taxed in accordance with the principles applicable to corporations (see Shares Held as Business Assets of Corporations ). If the partner is an individual and the shares are held as business assets of the partnership, dividends contained in their profit share are taxed in accordance with the principles applicable to sole proprietors (see Shares Held as Business Assets of Sole Proprietors ). Subject to certain conditions, an individual partner may request that its personal income tax may be lowered for earnings not withdrawn from the partnership. If the partnership is liable for trade tax, it is levied at the level of the partnership. If an individual holds an interest in the partnership, the proportionate trade tax may be credited fully or partly towards the individual s income tax by means of a lump-sum method. The dividends are exempt from trade tax, provided that the partnership held at least 10 % of the Company s share capital at the beginning of the relevant assessment period. Dividend payments that are made using funds from the tax contribution account (steuerliches Einlagekonto) are generally, subject to certain prerequisites, not taxable

270 Tax withheld in Luxembourg (15 % of the dividends, see "Taxation in the Grand Duchy of Luxembourg - Taxation of Investors - Withholding Tax"), can generally be credited against the individual partners' personal German tax liability on the share of Luxembourg dividends. Shares Held as Part of the Assets of Certain Companies in the Financial and Insurance Sector The tax exemption applicable to dividends does not apply to dividends paid to certain companies in the financial and insurance sector. Dividends from shares that are part of the trading books of banks and financial services institutions in the meaning of the German Banking Act (Kreditwesengesetz), as well as dividends from shares that are acquired by certain financial enterprises with the aim of generating a shortterm proprietary trading profit, are fully liable for corporate income tax (plus solidarity surcharge). If the stake held at the beginning of the relevant assessment period is 10 % or higher, subject to certain conditions, the dividends can be fully exempted from trade tax. Dividends from shares that are classified as investments in the case of life insurers, health insurers and pension funds are fully subject to corporate income tax and trade tax. Tax withheld in Luxembourg (15 % of the dividends, see: "Taxation in the Grand Duchy of Luxembourg - Taxation of Investors - Withholding Tax"), if any, can generally be credited against the German tax liability on the Luxembourg dividends received by the German tax resident Corporation. Shareholders Tax Resident outside Germany Dividends paid to shareholders who are not German tax residents (individuals and corporations) should, absent a German limited tax liability, in principle not be subject to German taxation. However, if the Shares are held as part of business assets in Germany (that is, via a permanent establishment or as part of business assets for which a permanent representative in Germany has been appointed), the provisions outlined above with respect to the taxation of shareholders that are German tax residents holding the Shares as business assets principally apply accordingly. No withholding tax should be imposed on to corporations that are German tax residents by a German Disbursing Agent. If the imposition of withholding tax was not refrained from by a German Disbursing Agent, the withholding tax amounts should be credited towards the shareholder s income tax or corporate income tax liability or refunded in the amount of any excess paid

271 Taxation of Capital Gains Shareholders Tax Resident in Germany Shares Held as Private Assets Capital gains are classified as income from capital investments and are subject to income tax (plus solidarity surcharge and church tax, if any) irrespective of how long the shares have been held. If the shares are held in custody or administered by a German Disbursing Agent, the tax on the capital gains will in general be discharged for the account of the seller by the German Disbursing Agent imposing the withholding tax on investment income at the rate of 25 % (plus 5.5 % solidarity surcharge, resulting in a total withholding of %, and church tax, if any). The taxable capital gain is calculated by deducting the acquisition costs of the Shares and the expenses directly related to the disposal from the proceeds of the disposal. A shareholder s income tax and solidarity surcharge liability is generally satisfied through the withholding of the withholding tax. Shareholders may, however, request that a tax assessment be carried out on their income from capital investments if this results in a lower tax liability. Investment income may be reduced only by a lump sum deduction amount of 801 ( 1,602 for jointly assessed married couples and registered partners); it is not possible to further deduct income related expenses actually incurred except for expenses incurred directly in connection with the disposal for the purposes of calculating a capital gain or loss from the disposal of shares. Capital gains generated by the disposal of shares can be offset against any type of losses while capital losses incurred from the disposal of shares can only be offset against capital gains from the disposal of shares. Shareholders may be liable for church tax, which is generally deducted by way of withholding by the German Disbursing Agent for capital gains received after 31 December 2014, unless the shareholder has filed a blocking notice (Sperrvermerk) with the Federal Central Tax Office. Where church tax is not levied by way of withholding, it is determined by means of an income tax assessment. If the shareholder making the disposal - or, in the event of a sale of shares acquired without consideration, its legal predecessor - held a direct or indirect stake of at least 1 % in the Company s share capital at any time in the five years preceding the disposal, any capital gains realized are deemed to be trading income such that any withholding tax levied on the capital gains does not satisfy the tax liability. The capital gains are 60 % taxable at the individual income tax rate of the shareholder (plus 5.5 % solidarity surcharge thereon, and church tax, if any), and, correspondingly, 60 % of any capital loss is recognized for income tax purposes. The withholding

272 tax and solidarity and church tax, if any, surcharge withheld are credited towards the shareholders tax liability or refunded in the amount of any excess paid on their tax assessment. Shares Held as Business Assets of Corporations Gains from the disposal of shares held by incorporated entities that are German tax residents are generally not subject to withholding tax and are in principle exempt from corporate income tax and trade tax. However, 5 % of the capital gains are deemed non-deductible business expenses and are thus subject to corporate income tax (plus solidarity surcharge thereon) and to trade tax. Consequently, capital gains are generally 95 % exempt from tax. As a rule, losses on disposals and other profit reductions in connection with the shares sold may not be deducted as business expenses. Shares Held as Business Assets of a Sole Proprietor Gains from the disposal of shares held by individuals are not subject to withholding tax if the disposal proceeds are part of the business income of a business based in Germany and the shareholder declares this fact to the German Disbursing Agent on the designated official form. If withholding tax including solidarity surcharge was levied, this does not satisfy the tax liability. Instead, the amounts withheld are credited towards the seller s income tax (plus solidarity surcharge) liability or refunded in the amount of any excess paid. 60 % of the gains from the disposal of the shares are subject to income tax (plus solidarity surcharge and church tax, if any) at the individual tax rate of the shareholder and - if the shares are held as part of commercial business assets in Germany - to trade tax. The trade tax is (partially) credited to the shareholder s personal income tax by means of a lump-sum method. Generally, only 60 % of the losses on disposals and business expenses commercially linked to the shares sold may be deducted. Shares Held as Business Assets of a Commercial Partnership Income tax or corporate income tax is not levied at the level of the partnership (Mitunternehmerschaft) but at the level of the respective partner. If shares are held as business assets of the partnership, taxation is determined as if the partner held a direct interest in the Company, according to the rules outlined above depending on whether the partner is a corporation (see Taxation of Capital Gains - Shareholders Tax Resident in Germany - Shares Held as Business Assets of Corporations ) or an individual (see Taxation of Capital Gains - Shareholders Tax Resident in Germany - Shares Held as Business Assets of a Sole Proprietor ). Upon request and subject to further conditions, a partner that is an individual may, subject to certain conditions, have its personal income tax lowered for earnings not withdrawn from the partnership

273 Trade tax, however, is assessed and levied at the level of the partnership considering the trade tax rules applicable to the partners holding the interest in the relevant partnership. In case the partner is an individual, the trade tax paid by the partnership is generally credited on a pro-rata basis as a lump-sum against the individual partners personal income tax liability. Shares Held as Part of Assets of Certain Companies in the Financial and Insurance Sector Capital gains realized by certain companies in the financial and insurance sector are, as an exception to the aforementioned rules, fully taxable. This applies to gains from the disposal of shares in the trading books of banks and financial services companies in the meaning of the German Banking Act (Kreditwesengesetz), to gains from the disposal of shares that were acquired by financial enterprises with the aim of generating a short-term proprietary trading profit, as well as to gains from the disposal of shares held as investments by life insurers, health insurers and pension funds. In turn, capital losses are generally fully tax deductible. Shareholders Tax Resident outside Germany Gains from the disposal of shares held by shareholders that are not German tax residents (individuals and corporations) should generally not be subject to German taxation. Gains from the disposal of shares held as part of German business assets (that is, via a permanent establishment or as part of business assets for which a permanent representative in Germany has been appointed) by non-resident shareholders are taxed in Germany principally according to the same provisions that apply to the taxation of shareholders that are German tax residents holding the shares as business assets (see Taxation of Capital Gains above). If the Company Qualified as a Corporate Investment Company The above mentioned income tax treatment assumes that the Company does not qualify as a corporate investment company (Kapital-Investitionsgesellschaft) within the meaning of the German Investment Tax Act (Investmentsteuergesetz). However, if the Company qualified as a corporate investment company, any distributions on the Shares received by German resident shareholders would generally be taxed as income in the form of dividends (see Taxation of Dividends above) provided that, in the case of Shares held as business assets, potential benefits under the German dividend and capital gains exemption rules (see Taxation of Dividends - Shareholders Tax Resident in Germany - Shares Held as Business Assets of Corporations/Shares Held as Business Assets of Sole Proprietors/Shares Held as Business Assets of a Commercial Partnership and Taxation of Capital Gains - Shareholders Tax Resident in Germany - Shares Held as Business Assets of Corporations/Shares Held as Business Assets of Sole Proprietors/Shares Held as Business Assets of a Commercial Partnership ) would only be

274 available if the relevant shareholder is able to evidence that the Company is tax resident in a member state of the European Economic Area where it is subject to the income taxation of corporations without benefitting from a personal tax exemption. As of 1 January 2018 changes to the German Investment Tax Act become effective introducing a new taxation regime for (retail) investment funds, whereas the semi-transparent taxation regime for special investment funds basically continues to apply (general treatment of the unit holder, as if he would hold the fund s assets directly with certain exemptions), if the relevant requirements are fulfilled. If the company would not qualify as special investment fund the unit holders would be subject to taxation on (i) distributions, (ii) pre-determined tax bases (Vorabpauschalen) and (iii) capital gains from the sale of investment fund units. Special partial tax exemptions would be available on such income received from the fund depending on the investment strategy of the fund and the individual tax status of the unit holder (e.g. private, business or corporate investor). German CFC Rules German resident investors (individuals or corporate shareholders) collectively holding 50 % or more of the shares or voting rights in the Company may become subject to the German CFC rules (Hinzurechungsbesteuerung) pursuant to the German Foreign Tax Act (Außensteuergesetz) to the extent that the income of the Company qualifies as (low taxed) passive income (Zwischeneinkünfte) for German CFC rules purposes. Irrespective of the 50 % threshold each German resident shareholder that holds at least 1 % of the shares or voting rights in the Company may become subject to the German CFC rules to the extent that the income of the Company qualifies as passive capital investment income (Zwischeneinkünfte mit Kapitalanlagecharakter) provided that gross earnings, on which the passive capital investment income are based on, make up more than 10 % of the entire gross earnings of all passive income of the Company in the respective fiscal year. However, in either of the above situations German CFC rules may not result in an income attribution for German tax purposes to the extent that the German resident investor is able to evidence to the German tax authorities that the Company carries out an actual business in Luxembourg. The publication of the Anti Tax Avoidance Directive (ATAD) by the EU in 2016 will lead to a revision of the CFC Rules also in Germany. The new provisions need to become effective in the beginning of Specific proposals for the new CFC Rules cannot be determined at this time

275 Inheritance and Gift Tax The transfer of shares to another person upon death or as a gift is generally subject to German inheritance or gift tax in the following circumstances: (vii) the place of residence, customary place of abode, place of management or registered office of the testator, the donor, the heir, the done or another acquirer is, at the time of the asset transfer, in Germany, or such person, as a German national, has not spent more than five consecutive years outside Germany without having a place of residence in Germany (this term is extended to ten years for German expatriates with U.S. residence); or (viii) the testator s or donor s shares were part of business assets for which there was a place of business in Germany or for which a permanent representative was appointed. The small number of double taxation treaties regarding inheritance and gift tax that Germany has concluded to date generally provide for German inheritance or gift tax only to be levied in the cases under (i) and, subject to certain restrictions, in the cases under (ii). Special arrangements apply to certain German nationals and former German nationals living outside Germany. Other Taxes No German capital transfer tax, value added tax, stamp duty or similar taxes are levied on the purchase or disposal of shares or other forms of share transfer. However, an entrepreneur can opt to pay VAT on the sale of shares, despite being generally exempt from value-added tax, if the shares are sold to another entrepreneur for the entrepreneur s business. Wealth tax is currently not levied in Germany. The Proposed Financial Transaction Tax The European Commission has published a proposal for a Directive for a common Financial Transaction Tax ( FTT ) in certain participating Member States. The proposed FTT has very broad scope and could apply to certain dealings in financial instruments (including secondary market transactions). The FTT could apply to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in financial instruments where at least one party is a financial institution, and either (i) at least one party is established or deemed to be established in a participating Member State or (ii) the financial instruments are issued in a participating Member State

276 According to a press announcement of the EU Council, ten participating Member States, including Germany, currently intend to work on the introduction of an FTT based on a progressive implementation of such tax. The progressive implementation shall first focus on the taxation of shares and certain derivatives only. As to the further implementation of any FTT there is currently no detailed plan or timetable available. Nevertheless, the proposed Directive remains subject to negotiation between the participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear

277 Condensed Valuation Report The valuation of the subject portfolio as specified below has been prepared by Jones Lang LaSalle SE ( JLL ) in accordance with the International Standards for the Valuation of Real Estate for Investment Purposes (International Valuation Standards), the Valuation Standards of the Royal Institution of Chartered Surveyors (as per the Red Book) and the International Financial Reporting Standards (IFRS). The calculation of the fair value as at valuation date has been carried out by JLL for properties of Grand City Properties S.A. ( client ). The subject portfolio consists of a total of 77,150 residential units, 5,013 commercial units, 1,606 nursing home units, 12,772 garages, 7,651 external parking spaces and 1,771 miscellaneous units (e.g. cellars, storages, antennas). The total lettable area amounts to approx. 5,292,570 sqm. The properties within the subject portfolio are mainly located in North Rhine-Westphalia, Greater Berlin and Dresden/Leipzig/Halle. Client Grand City Properties S.A. 24, Avenue Victor Hugo L 1750 Luxembourg Valuer Jones Lang LaSalle SE Rahel-Hirsch-Straße Berlin Dates of Valuation and Date of Valuation Report 3 May 2017 Jones Lang LaSalle SE International Real Estate Consultants Frankfurt/Main Local Court Frankfurt/Main, HRB no Certified according to ISO 9001 CEO Germany: Timo Tschammler D-1

278 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE Summary of Valuation Results JLL is of the opinion that the aggregate of the individual Market Values, based on the information provided by the client and subject to the assumptions and comments detailed in section 3, of the freehold and leasehold properties in the Grand City Properties S.A. portfolio as at the effective dates of valuation, and , is as follows: 4,907,900,000 (FOUR BILLION, NINE HUNDRED SEVEN MILLION, NINE HUNDRED THOUSAND EUROS) Market value of properties as of : 4,011,100,000 Market value of properties as of : 896,800,000 The above figure represents the aggregate of the individual property market values and is understood as the value without regard to auxiliary purchase costs (legal costs, agent s fees and where applicable land transfer tax) normally incurred by the purchaser. No allowance has been made for any expenses of realisation or for taxation and it does not reflect any addition or reduction on the sale of the portfolio as a whole which may arise in the event of a disposal. The following table shows aggregated key property data for the portfolio (including undeveloped sites and leasehold properties): Total lettable area: 5,292,570 m2 Average market value per m2 of lettable area: 927/m2 Current net rental income per annum: 312,422,485 No asset of the subject portfolio has a negative Market Value. The following table shows the distribution of the Market Value between freehold and leasehold assets as of and Typ Market Value Total Units Freehold 4,432,400,000 95,194 Leasehold 475,500,000 10,769 Total 4,907,900, ,963 The valuation figures contained in this condensed valuation report differ by approx. 61m (equal to approx. 1.26%) higher to the equivalent figures contained in the client s consolidated financial statements for the fiscal year ended 31 December 2016 mainly due to revaluation and minor differences refer to accounting policies (fair value versus cost method) and/or rounding differences. D-2

279 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE Table of Contents 1. Brief and Scope of Instruction Instruction & Purpose of Valuation Report Addressees Purpose & Publication Assignment of Rights to Third Parties Status of Valuer and Conflicts of Interest Scope of Work Subject of Valuation Valuation Definitions Plausibility Check Socioeconomic Factors and Location Quality DCF Calculation Database Dates of Valuation Site Inspections Taxation and Costs Value Added Tax Currency Rounding Legal Terms Portfolio Overview Regional Distribution General Overview Analysis Areas by Building Age Net Rental Income Public Subsidies Vacancy Rate Leasehold Properties Portfolio Breakdown Assumptions Assumptions and Sources of Information Title / Legal Restrictions / Building and Other Encumbrances Contamination and Soil Conditions Condition and Structural Inspections, Deleterious Materials Building Law Town and Traffic Planning Protection of Historic Structures Technical Equipment, Plant & Machinery Areas Leases and Tenancy Information Taxes, Fees and Charges Insurance Policies Information Valuation Parameters Market Rents Rent Adjustment Rent Loss (Vacancy) D-3

280 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 4.4 Maintenance Costs Capital Expenditures Management Costs (Non-Transferable) Operating Costs (Non-Transferable) Other Costs Inflation Discount Rate and Capitalisation Rate (Cap Rate) Transaction Costs Valuation Results Market Value Assets Held for Sale (not part of the portfolio analysis) Auxiliary Purchase Costs Glossary Conclusion D-4

281 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 1. Brief and Scope of Instruction 1.1 Instruction & Purpose of Valuation Report In accordance with the engagement letter by the client, JLL has examined the properties of the client and carried out a valuation to determine the Market Value at valuation date of freehold and leasehold interests (as appropriate) in each of the properties. We understand that this valuation report is required, to confirm the Market Value of the real estate assets at valuation date for Grand City Properties S.A. This condensed valuation report covers all material assumptions of all relevant valuations. 1.2 Addressees The valuation report is addressed to and may be relied upon only by: Grand City Properties S.A., 24, Avenue Victor Hugo, L 1750 Luxembourg KPMG Luxembourg, Société coopérative, 39, Avenue John F. Kennedy, L 1855 Luxembourg The valuation report is intended solely for the addressees and may be used only for the purpose specified here. 1.3 Purpose & Publication We understand that this valuation report is required for inclusion in a prospectus in accordance with the Luxembourg Law of 10 July 2005 on prospectuses for securities as amended (Loi relative aux prospectus pour valeurs mobilières telle que modifiée), the European Prospectus Regulation (EU Prospektverordnung) and with ESMA update of CESR recommendations (paragraph ) of 20 March 2013 (ESMA/2013/319) regarding the admission to trading of the shares of Grand City Properties S.A. on the regulated market of the Frankfurt Stock exchange with simultaneous admission to the sub-segment of the regulated market with further post-admission obligations (Prime Standard). Further, approval of the Prospectus will be notified to German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). A public offering is excluded. No new shares will be issued. The Valuation Report complies with the legal requirements, in particular the European Commission Regulation (EC) No 809/2004 of 29 April 2004 (as amended) and paragraphs 128 to 130 of the European Securities and Market Authority (ESMA) update of the Committee of European Securities Regulators (CESR) recommendations for the consistent implication of (EC) no. 809/2004 dated 20 March JLL acknowledges and agrees that this report will appear in unchanged and signed form in the securities prospectus. Before this report, or any part thereof, is reproduced or referred to in any other document, circular or statement and before its contents (other than as contemplated in this prospectus), or any part thereof, are otherwise disclosed verbally or otherwise to a third party, JLL s prior written approval as to the form and context of such publication or disclosure must be obtained. D-5

282 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE For the avoidance of doubt, such an approval is required whether or not JLL is referred to by name and whether or not the contents of our report are combined with other additional information. Such approval shall not be unreasonably withheld. Notwithstanding the foregoing, the contents and data contained in the report may be cited and summarised elsewhere in the prospectus and the offering circular. 1.4 Assignment of Rights to Third Parties The addressees of the valuation report are not entitled to assign their rights either in whole or in part to third parties. 1.5 Status of Valuer and Conflicts of Interest We confirm that JLL has undertaken the valuation acting as external valuer, as defined by the RICS Red Book, qualified for the purpose of the valuation. Furthermore, we confirm that JLL has acted as an independent valuer according to the definition of ESMA guidelines (ESMA - European Securities and Markets Authority) update of the CESR recommendations - The consistent Implementation of Commission Regulation (EC) No 809/2004 Implementing the Prospectus Directive, dated 20 March 2013). Finally, we confirm that JLL is not aware of any actual or potential conflict of interest that may have influenced its status as external or independent valuer. 1.6 Scope of Work The scope of work has been carried out for the market valuation, including the following processes: Analysis and evaluation of the provided property information (e.g. property database, rent roll, land register extracts, leasehold agreements, etc.) Inspection (interior/exterior) of all valuation clusters Market and locational analysis of all the properties Determination of the Market Value based on the individual housing units. 1.7 Subject of Valuation In accordance with the engagement letter, the subject of the valuation is part of the Grand City Properties S.A. portfolio. The subject portfolio consists of a total of 77,150 residential units, 5,013 commercial units, 1,606 nursing home units, 12,772 garages, 7,651 external parking spaces and 1,771 miscellaneous units (e.g. cellars, storages, antennas). The total lettable area amounts to 5,292,570 sqm. The properties within the subject portfolio are mainly located in North Rhine-Westphalia, Greater Berlin and Dresden/Leipzig/Halle. According to the information provided by the client, the subject properties are owned (majority fully, minor partially) by the client or its entitled subsidiaries. D-6

283 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 1.8 Valuation Definitions Market Value Our valuation has been prepared in accordance with the RICS Valuation Professional Standards (current edition) published by the Royal Institution of Chartered Surveyors (RICS) as well as the standards contained within the TEGoVA European Valuation Standards, and in accordance with IVSC International Valuation Standard 1 (IVS 1), the International Accounting Standards (IAS), International Financing Reporting Standards (IFRS) as well as the current guidelines of the European Securities and Markets Authority (ESMA) on the basis of Market Value. This is included in the General Principles Adopted in the Preparation of Valuations and Reports of JLL. This is an internationally accepted basis of valuation. The Market Value is defined as: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. The above definition concurs with that of Market Value defined by the RICS Valuation Professional Standards (current Edition) published by the Royal Institution of Chartered Surveyors and is also generally consistent with the definition of Market Value as adopted by the International Accounting Standards Board (IASB). 1.9 Plausibility Check The database provided to us was checked to identify obvious errors and logical inconsistencies in order to avoid using incorrect or incomplete data in the valuation. This involves a review of the accuracy and completeness of the database, in particular addresses, the number of economic units, building parts and administrative units, property types and average space per property type and similar. The client was notified of the inconsistencies identified, which were subsequently removed. Further verification of the data supplied to us was performed after the property inspections. In the case of missing or implausible information, JLL implements a Q&A process with the client Socioeconomic Factors and Location Quality For the estimate of the property values as well as the sustainability of the property investment, particular importance was placed on the micro location, the current condition of the properties and the discernable tenant satisfaction. Key factors taken into account by JLL in the calculation of value and stability of value were the acceptance of the location within the municipality (attractiveness of micro location) as well the quality of the property. Socioeconomic factors such as purchasing power, unemployment and population growth were also recognised in the calculation of value. D-7

284 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 1.11 DCF Calculation The calculation of the Market Value for the majority of the properties has been based on the Discounted Cash Flow (DCF) method. This is an internationally recognised method, based on transparent, dynamic and explicit valuation parameters to determine the Market Value. Initially all future cash flows (both revenues and costs) for residential properties are explicitly determined for a tenyear detailed planning period. At the end of this period, a terminal value is calculated, by effectively capitalising all future projected net cash flows generated by the property. The assumptions made for the model reflect comparable analysis and decisions that would have been made by investors active in the market as at the effective date of valuation. The cash flows for the relevant year of the detailed planning period are calculated as follows: The potential rental income at full occupancy is reduced by the loss of rent due to vacancy and rent collection loss. The resulting amount reflects the current rental income. For non-subsidised housing and following the end of public funding for subsidised housing, rents have been adjusted with due regard to the relevant legislation ( 558 of German Building Code, Sec. 3). This legislation states that the rent may not be increased by more than 15% or 20% (cap limit) within a three-year period and may not exceed local comparable rents. For commercial properties the rental development is in accordance to the regulations of the lease contracts (e.g. steps, indexations). After deduction of the non-transferable costs (maintenance costs, management costs, other costs, ground rents and non-recoverable operating costs), the net cash flow is determined before taxes and debt service. The respective cash flows of the individual periods are then discounted to the date of valuation by the pre-determined discount rate. The calculation of the terminal value after Year 10 is carried out as follows: In general, a stabilised cash flow (stabilised rental income less stabilised expenses) can normally be achieved by the end of Year 10. As no period-overlapping changes are expected in the cash flow after this point, the net operating income at Year 10 serves as the basis for the forecasted future cash flows. By means of the property-specific capitalisation rate, the net operating income (NOI) is capitalised into perpetuity. The capitalised terminal value, like the cash flows of the detailed planning period, is likewise discounted to the date of valuation. The result of the DCF method mirrors the economic view that would be taken by the majority of active market participants as at the effective date of valuation and reflects the Market Value Database JLL was provided with several rent rolls by the client, for each valuation date, containing information on the individual properties such as address, number of units, lettable area, vacancy and rental income. D-8

285 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE Furthermore, JLL was fully/partially provided with the following documents by the client: Land register extracts Cadastral information/ site plans Exemplary of residential and commercial lease agreements Condominium declaration and its partition plan Table of Co-ownership shares Leasehold agreements Information related to public land charges Information related to contaminated land Information related to monument protection Subsidy agreements with detailed information regarding the status of subsidies of rentcontrolled properties that are still subsidised Detailed information about maintenance and modernization costs. Floor plans and technical information We have not been provided with further information. If we receive additional or updated information, we receive the right to adjust the valuation accordingly. Property specific information, which is required for the valuation process but could not be provided, was derived where possible by JLL based on research results, our own data collection as well as our experience with comparable properties, and considered in the subject valuation. JLL assumed that the information the client has provided in respect to the subject portfolio and its valuation dates is correct and comprehensive and that the accuracy of all such documents has been confirmed by the client Dates of Valuation The dates of valuation are and JLL has not been engaged to update the JLL valuations for the purpose of the Prospectus, has no obligation so to do and has not updated the JLL valuations after these valuation dates. The client confirmed to JLL that no material changes to the physical attributes of the properties, or the nature of their location, that might have occurred between the valuation dates and the publication of this valuation report have been occurred Site Inspections The property units of the subject portfolio have been fully inspected together with an authorised representative of the client in an appropriate period as part of the previous valuation instructions. A full inspection of the property comprises an adequate sample of internal units and/or any specific components of the building. The external inspection comprises an adequate assessment of the ex- D-9

286 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE terior and the micro location. For update valuation purposes the properties will be generally inspected once during a period of two years after the last inspection has taken place or if necessary in individual coordination with the client. The following table shows the breakdown of the inspections/ re-inspections per year: Year of Inspection Units* Net Rental Income (Share) , % , % , % , % Total 83, % * including residential units, commercial units and nursery home units Approx. 96.3% of the property units have been inspected within the last 24 months. In respect of those properties that were not re-inspected within the last 24 months, the client confirmed that it is not aware of any material changes to the physical attributes of the properties, or the nature of their location, that might have occurred since the last inspection Taxation and Costs We have not made any adjustments to reflect any taxation liability that may arise on disposal (e.g. valuation gains) nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise upon disposals Value Added Tax The Market Values and market rents listed in this valuation report do not include the relevant value added tax at the prevailing rate Currency The currency referred to in the valuation report is Euros ( ) Rounding Due to the calculation basis, marginal differences can occur in the rounding of the numbers (, %, etc.) Legal Terms German law applies. The place of performance and jurisdiction is Frankfurt/Main. D-10

287 2. Portfolio Overview Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 2.1 Regional Distribution The properties within the subject portfolio are mainly located in North Rhine-Westphalia, Greater Berlin and Dresden/Leipzig/Halle. The distribution of the core areas of the properties in Germany are depicted in red in the following map: D-11

288 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 2.2 General Overview The portfolio consists of 77,150 residential units, 5,013 commercial units*, 1,606 nursing home units, 12,772 garages, 7,651 external parking spaces and 1,771 miscellaneous units (e.g. cellars, storages, antennas). The total lettable area amounts to approx. 5,292,570 sqm. 7,651 1,771 12,772 1,606 5,013 77,150 Residential Commercial Nursing Home Units Garages External Parking Spaces Micellanous *Commercial units To determine the number of existing commercial units, JLL assumes the client s allocation. The allocation including the number of commercial units depending on the type of use and size of the units and may not necessarily be connected to the actual internal structure of the buildings. Changes to the allocation are possible and JLL cannot objectively verify the allocation and therefore excludes any and all forms of responsibility and liability for this depiction. D-12

289 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE The portfolio includes 5,292,570 m2 lettable area, of which 4,731,016 m2 (89.4%) are available in residential-used properties, 446,036 m2 (8.4%) in commercial-used properties and 115,518 m2 (2.2%) in nursery homes. 8.4% 2.2% 89.4% Residential-used properties Commercial-used properties Nursery homes 2.3 Analysis Areas by Building Age The units within the Grand City Properties S.A. portfolio have been classified in different construction year categories. 0.8% 7.2% 4.8% 10.2% 8.1% 16.0% 41.0% before to to to to to 1999 after 1999 D-13

290 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 2.4 Net Rental Income The current net rental income for the portfolio at the dates of valuation amounts annually to approx. 312,422,485. The majority of the net rental income originates from residential-used properties with a total annual amount of approx. 262,087,390. The current net rental income of nursery homes amounts annually to approx. 13,347,805 and the net rental income of commercial-used properties amounts annually to approx. 36,987,291. The classification of the type of usage of each property (residential, commercial) is determined by the main use of the respective property. 2.5 Public Subsidies Within the portfolio, approx. 336,396 sqm (6.4%) of the residential space are subject to public subsidies and thereby, rent-controlled. According to the information provided by the client, all subsidy regulations are set to expire within the next years (until ). 2.6 Vacancy Rate Based on the total lettable area, the average vacancy rate for the entire portfolio is approx. 9.4%. According to the provided rent rolls, 9.9% of the lettable area in residential-used properties is vacant. Additionally, 5.0% of the lettable area in commercial- used properties (including nursery homes) is vacant. 2.7 Leasehold Properties In the portfolio, the annual leasehold-related contractual ground rent is in the amount of approx. 2,836,687 and comprises approx. of 10,769 total units and a total lettable area of approx. 514,040 sqm. 2.8 Portfolio Breakdown The following table shows the regional breakdown of the subject portfolio: Region / Main cities Market Value (in Mio. EUR) Lettable Area (in k sqm) Net Rental Income p.a. (in Mio. EUR) Number of units Market Value per sqm (in EUR) NRW 1,601 1, , Greater Berlin ,260 1,747 Dresden/Leipzig/Halle 887 1, , Mannheim/KL/Frankfurt/Mainz ,986 1,161 Nuremberg/Fuerth/Munich ,480 1,689 Bremen/Hamburg , Others 896 1, , Total 4,908 5, , D-14

291 3. Assumptions Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 3.1 Assumptions and Sources of Information An assumption is defined in the Glossary to the Red Book to be a supposition taken to be true ( assumption ). Assumptions are: Facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, needs not be verified by a valuer as part of the valuation process. In undertaking our valuation, we have made a number of assumptions and have relied on certain sources of information. Where appropriate, we have let the client confirm that our assumptions are correct to the best of their knowledge. In the event that any of these assumptions prove to be incorrect, then our valuation would require to be reviewed. 3.2 Title / Legal Restrictions / Building and Other Encumbrances The available information regarding title, legal restrictions, building and other encumbrances has been mainly made available to JLL by the client. A random sampling of the information based on the documents provided by the client was carried out. No discrepancies or points of concern were identified. Title entries registered in Section II of the sampled land registers were considered to have either no or only a minimal influence on value, if at all. Furthermore, any potential encumbrances and restrictions from Section II of the valued properties are duly registered in the land registers. We have made the assumption that copies of all relevant documents for the properties have been made available to us and that they are complete, correct and up to date - and that such documents have been verified by the client. Moreover, based on the above assumption and a random sampling of the available information, we have not identified any points of concern and have made the assumption that the properties have good and marketable freehold or leasehold titles in each case and that the properties are free from any depreciating rights of way or easements, restrictive covenants, disputes or onerous or unusual outgoings. As is normal valuation practise, we have also assumed that the properties are free from mortgages, charges or other financially relevant encumbrances. Furthermore, no account has been taken in our valuation of any goodwill that may arise from the present occupation of the properties. 3.3 Contamination and Soil Conditions We have not undertaken nor been instructed to conduct a formal environmental assessment; therefore, we have not carried out any investigation into past uses, either of the properties or any adjacent land to establish whether there is any potential for contamination from such uses or sites. D-15

292 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE We have assumed that there are no abnormal ground conditions or contamination, which are sufficient to affect value or adversely affect the present or future occupation or development of the properties. Should suspicion regarding contamination arise in the future, environmental assessment reports need to be acquired and in the case where contamination is detected, the valuation would have to be appropriately adjusted. We have also made the assumption that there are no archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the properties. 3.4 Condition and Structural Inspections, Deleterious Materials We have not undertaken nor been instructed to conduct a formal condition or structural survey; however, where building deficiencies were identified during the internal or external inspections, they were subsequently reflected in the valuation. The results of the inspections are based exclusively on visual examinations, with no guarantee as to the completeness of the information presented. Unless otherwise informed by the client, we have made the assumption that the properties are free from any mildew, infestation, adverse toxic chemical treatments and structural or design defects. We have not investigated whether high-alumina cement, calcium-chloride additive or any other deleterious materials have been used in the construction or in any alterations of any of the properties. For the purposes of this valuation, unless otherwise informed by the client, we have made the assumption that any such investigation would not reveal the presence of such materials. No mining, geological or other investigations have been undertaken to certify that the foundations of the properties are free from any defects. Unless otherwise informed by the client, we have made the assumption that the load-bearing qualities of the sites of the properties are sufficient to support the buildings constructed thereon. 3.5 Building Law We have made the assumption that the buildings have been constructed in full compliance with valid local planning and building regulations, that all necessary certifications have been obtained and that there are no outstanding statutory notices as to their construction, use or occupation. Furthermore, we have made the assumption that the existing uses of the properties are duly authorised or established, and that no adverse planning conditions or restrictions apply. 3.6 Town and Traffic Planning We have made the assumption that the existing uses of the properties are duly authorised or established, and that no adverse planning conditions or restrictions apply. According to the client, no information is available regarding the relevant impact of public planning projects (town or traffic planning) on the value of the properties. 3.7 Protection of Historic Structures JLL was partially provided with information by the client, if buildings of the portfolio are listed buildings. D-16

293 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 3.8 Technical Equipment, Plant & Machinery During our inspections, no tests have been carried out pertaining to the electrical, electronic, heating, plant and machinery equipment or any other services, nor have the drains been tested. Unless otherwise informed by the client, we have made the assumption that all services to the properties are in good functioning condition. No allowance has been made in this valuation for any items of plant or machinery that do not form part of the service installations of the properties. We have specifically excluded all items of plant, machinery and equipment installed wholly or primarily in connection with the businesses of the occupants. The technical equipment of the properties such as passenger and goods lifts and other means of transportation, heating systems and further technical installations have been considered as integral components of the properties. We have excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. 3.9 Areas We have not measured the properties, but have applied floor areas provided by the company. We have assumed that these areas have been measured and calculated in accordance with the current market practice where the properties are located Leases and Tenancy Information Information regarding rental units, contractual rents, lease terms, rental terms and where applicable, publicly subsidised units was made available to JLL by the client. A random sampling of the information was verified based on documents provided by the client. No abnormalities were detected. We have made the assumption that copies of all relevant documents for the properties have been made available to us and that they are complete, correct and up to date and that such documents have been verified by the client. For the purpose of the valuation, we have not undertaken investigations into the financial strength of the tenants. Unless we have become aware by general knowledge or we have been specifically advised to the contrary, we have made the assumption that the tenants are financially in a position to meet their current obligations. Unless otherwise advised, we have also made the assumption that there are no material arrears of rent or service charges, breaches of covenants or current or anticipated tenant disputes Taxes, Fees and Charges No information has been made available to JLL regarding taxes, fees and charges. We have made the assumption that all public taxes, fees, charges, etc. which could have an influence on the value, have been levied and if applicable, had been paid at the time of this valuation. D-17

294 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 3.12 Insurance Policies At the date of the valuation, JLL was not aware of whether or to what extend insurance policies existed to limit the risks resulting from business activities (e.g. property insurance, liability insurance and construction insurance). As neither supporting nor contrary information was made available by the client or known by JLL, we have made the assumption that potential claims are covered with regard to the insurance level and type by valid insurance policies Information We have based our valuation assumptions on reliable sources of information (random analysis of the available property documents). Should our assumptions prove to be incorrect, the property values could be influenced and the valuation would have to be adjusted accordingly by JLL. D-18

295 4. Valuation Parameters Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 4.1 Market Rents JLL has used the following sources for obtaining information on market rents: New letting rents (based on provided rent roll by the client) Internal JLL database Offered rents e.g. from the online real estate portal IDN Immodaten on street level Qualified Rent index (qualifizierter Mietspiegel) for respective cities/municipalities (if available). Market Rent Residential The market rents were determined in 3-steps by JLL. In the first step, the current rental income per m2, a list of new private housing lettings from the past two years (as provided by the client) as well as the researched, quality-differentiated market rents per m2 were assigned and compared. In the second step, with consideration to the current vacancy rate and depending on the three respective rental levels per m2 (current rent, new letting rents and the researched market rent per m2), the preliminary market rent per m2 is determined. In the third and last step as part of the individual evaluation, the preliminary market rent per m2 undergoes on an individual assessment basis a more precise review with regard to the existing micro-location quality and the property condition and if necessary, is adjusted according to expert knowledge. Market Rent Commercial In the scope of the valuations, achievable market rents were derived for each type of usage. The estimate of market rents is made on the basis of comprehensive research, using internal and external resources. We have focused on rental evidence within the same submarkets (if available). In arriving at our opinion of the estimated market rental value, we included facts such as the location, the size, the condition and the fit-out of the respective units. In addition, the rent for nursing homes needs to be borne by the "InvestCost" share of the total income. On the basis of assumed invest costs and an assumed average annual occupancy rate, the annual income share for rent and furnishing is derived. After deduction of a standard assumption for replacement of furniture etc., a sustainable rent for the building under consideration of operational numbers is calculated. 4.2 Rent Adjustment Non-Rent Controlled Properties The rental growth forecast applied in the Valuation was developed separately for the various types of use within the real estate market (residential, commercial, garage, parking spaces and miscellaneous) by means of a detailed analysis of the current rental situation, the regional markets and the location of the property in this market. D-19

296 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE For non-rent controlled residential properties, a growth rate was assumed, depending on the location rating and beginning in the second year. The weighted average for non-rent controlled residential units is 1.31% p.a. The valuation assumptions relating to the macroeconomic parameters (e.g. purchasing power) were considered on an administrative district or independent municipality level. Rent Controlled Properties The growth of rental costs (up to 31 December 2001) or the rents for subsidised social housing (after 1 January 2002) generally progresses more moderately than the development of rents for non-rent controlled housing, as the increase in rental costs usually requires proof from the landlord regarding a change in the cost situation with regard to the property (calculation of profitability) or because a rent increase for subsidised social housing effective from 1 January 2002 may not exceed the maximum permissible rent determined by the subsidy regulation ( Förderzusage ). A growth rate starting in the second year for rent-controlled properties was assumed. The weighted average for rent controlled residential units is 0.30% p.a. Commercial Buildings The rent escalation analysis is based on the individual clauses agreed within the lease contracts, whereby the rental income is most commonly linked to growth in the Consumer Price Index [CPI]. 4.3 Rent Loss (Vacancy) Rental loss reflects the share of the gross rental income that could have potentially been generated, if vacant units within any property had been rented out. JLL has calculated with a stabilised vacancy rate for each property depending on the current local market situation, property condition, level of rent adjustment (net rent to market rent) and vacancy rate. 4.4 Maintenance Costs On-going Maintenance Costs On-going maintenance costs are non-transferable costs that are incurred during the expected useful life of a property for the preservation of the defined use of the buildings and structures (with the exception of commercial tenants), in order to remove damage caused by wear & tear, age, weather and environmental influences and to comply with legal requirements, to maintain the quality and yield capacity of the property. The on-going maintenance costs have been calculated as a per m2-figure relating to the total lettable area. In the Valuation, the maintenance costs for residential and commercial units range from 0.50 to 12.00/m2 p.a. and have been calculated depending on the age and condition of the respective property. D-20

297 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE Maintenance Costs associated with Tenant Turnover Costs for the refurbishment of units associated with tenant turnover are incurred in order to successfully re-let a vacant flat. These costs include decorative repairs as well as renovation costs, marketing costs and non-recoverable operating costs. Based on our experience of similar properties or portfolios, JLL assumed an average annual tenant turnover of 9.1%. The weighted average for refurbishment costs for residential units is 44.14/m2, which becomes vacant as a result of tenant turnover. Tenant improvements for commercial properties are incurred when a new rental contract is signed. These costs are assumed by the landlord in the process of contractual negotiations. We have taken tenant improvements depending on the condition, use and type of property into account in our valuation. 4.5 Capital Expenditures No in-depth technical review (Technical Due Diligence) of the properties was instructed nor carried out for this valuation. For some properties, JLL considered adequate capital expenditure within the next years, based on the information provided by the client as at the date of valuation and with reference to the results from the on-site inspections. 4.6 Management Costs (Non-Transferable) Management costs incurred in the management of residential leases, encompassing all necessary labour and equipment as well as for the legal and optional audit of annual financial statements (with exception of commercial tenants) are normally non-transferable. JLL has considered management costs in the valuation depending on location, tenancy as well as property type and condition. The weighted average for residential units amounts to 257 p.a. For commercial units, the potential rental income was applied at 1.00% to 4.00% p.a. 4.7 Operating Costs (Non-Transferable) The German Regulations on Operating Costs (Betriebskostenverordnung - BetrKV) define transferable operating costs for residential properties. For vacant rental space, certain types of costs, such as minimum heating costs, caretaker or security costs, as well as electricity and cleaning costs, which are generally transferable, cannot be transferred. The German Mieterbund (tenant alliance) provides benchmarks for operating costs for Eastern and Western Germany. Results from the current edition of this analysis state, that operating costs for residential units range from 3.13/m2/month in the eastern parts to 3.28/m2/month in Western Germany. About 40 80% of these costs still accrue if a unit is vacant and thus were taken into account. Vacancy occurs within the detailed planning period as a result of tenant fluctuation. For these vacant areas, the scheduled non-transferable costs were not taken into consideration, as these costs are already considered in the maintenance costs associated with tenant turnover. D-21

298 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 4.8 Other Costs Other costs refer to and reflect the risk of a reduction in income as a result of uncollectable arrears of rent. They also serve to cover the costs of legal action to collect payments, cancel a rental contract or clear premises. Arrears of rent, due deposit payments and due property management costs must also be taken into account under this heading. The amount of such costs depends on the local market situation, type and condition of the property, tenancy situation, quality of tenants and quality of lease agreements. These costs are calculated as percentage of the current rental income. A percentage of mainly 1.00% of the current rental income of residential properties was used in the valuation. 4.9 Inflation Residential Buildings All costs, calculated on a per square metre or per unit basis, have been indexed with the average rate of inflation over the last 10 years according to the German Statistical Office. In average the inflation increased between 1.31% to 1.36% per annum within the last 10 years depending on the respective valuation date. The indexation of other costs such as management costs, vacancy costs and costs for ground lease is calculated by applying the above indexation figure. Commercial Buildings General inflation is based on the forecast of Oxford Economics. Inflation was added to all costs included within the cash flow. The average long-term inflation forecast is 1.91% per annum. This applies also to the non-recoverable ancillary costs as well as to tenant improvements Discount Rate and Capitalisation Rate (Cap Rate) Discount Rate The Discount Rate reflects the opportunity and risk aspects of the market yield demanded by investors, and consists of an interest rate for a risk-free investment as well as a premium to account for specific investment risks associated with real estate investments. The risk-free interest rate reflects the rate that can be achieved in the investment market for a riskfree investment. JLL uses the risk-free interest rate referring to the average interest rate of the past 120 months of a 10-year bond, issued by the European Central Bank. A property-specific, weighted risk premium, which is based on a rating (market, location, property and cash flow) is applied to the risk-free interest rate in order to derive a risk-adjusted discount rate, which reflects the opportunities and risks of the properties in the market. Normal discount rates for German properties generally range between 3.50% to 9.50%, depending on market conditions, the micro-location quality, property type and use, property condition and cash flow security. The weighted discount rate for the subject portfolio stands at 5.9%, which, based on our experience, is comparable to similar transactions on the market. D-22

299 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE Capitalisation Rate The Capitalisation Rate (the Cap Rate ) is used to capitalise the stabilised Net Operating Income at Year 10 into perpetuity, as it is assumed that properties are kept in stock after the detailed 10-year planning period. The Cap Rate is based on each property s individual discount rate. For the determination of the terminal value, which is based on the NOI at year 10, an individual growth rate (positive or negative) of future cash flows has been calculated. According to normal practice, the growth rate of a stabilised cash flow has then been deducted from the discount rate in order to determine the cap rate. The weighted capitalisation rate for the subject portfolio stands at 4.9%, which based on our experience is comparable to similar transactions on the market Transaction Costs The valuation considers auxiliary purchase costs as a percentage of the Market Value. These costs include the legal fees for sale, the tax and land register fees and the broker s commission, if applicable. The following assumptions regarding purchaser s costs were considered for the purchase in the valuation: Legal Fees for Sale / Broker s Commission 1.0% - 3.5% In the portfolio the tax on acquisition varies between 3.5% and 6.5% depending on Federal State. The current tax on acquisitions are depicted in the following table: Federal State Tax on acquisition Baden-Wuerttemberg 5.0% Bavaria 3.5% Berlin 6.0% Brandenburg 6.5% Bremen 5.0% Hamburg 4.5% Hesse 6.0% Lower - Saxony 5.0% Mecklenburg-Western Pomerania 5.0% North Rhine-Westphalia 6.5% Rhineland-Palatinate 5.0% Saarland 6.5% Saxony 3.5% Saxony-Anhalt 5.0% Schleswig-Holstein 6.5% Thuringia 6.5% D-23

300 5. Valuation Results 5.1 Market Value Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE JLL is of the opinion that the aggregate of the individual Market Values, based on the information provided by the client and subject to the assumptions and comments detailed in section 3, of the freehold and leasehold properties in the Grand City Properties S.A. portfolio as at the effective dates of valuation, and , is as follows: 4,907,900,000 (FOUR BILLION, NINE HUNDRED SEVEN MILLION, NINE HUNDRED THOUSAND EUROS) Market value of properties as of : 4,011,100,000 Market value of properties as of : 896,800,000 The above figure represents the aggregate of the individual property market values and is understood as the value without regard to auxiliary purchase costs (legal costs, agent s fees and where applicable land transfer tax) normally incurred by the purchaser. No allowance has been made for any expenses of realisation or for taxation and it does not reflect any addition or reduction on the sale of the portfolio as a whole which may arise in the event of a disposal. The following table shows aggregated key property data for the portfolio (including undeveloped sites and leasehold properties): Total lettable area: 5,292,570 m2 Average market value per m2 of lettable area: 927/m2 Current net rental income per annum: 312,422,485 No asset of the subject portfolio has a negative Market Value. The following table shows the distribution of the Market Value between freehold and leasehold assets as of and Typ Market Value Total Units Freehold 4,432,400,000 95,194 Leasehold 475,500,000 10,769 Total 4,907,900, ,963 The valuation figures contained in this condensed valuation report differ by approx. 61m (equal to approx. 1.26%) higher to the equivalent figures contained in the client s consolidated financial statements for the fiscal year ended 31 December 2016 mainly due to revaluation and minor differences refer to accounting policies (fair value versus cost method) and/or rounding differences. D-24

301 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 5.2 Assets Held for Sale (not part of the portfolio analysis) According to the information provided by the client, the portfolio comprises assets held for sale with 3,085 residential units, 44 commercial units, 319 garages, 1,103 external parking spaces and 34 miscellaneous units. The aggregated Market Value of the assets held for sale is 145,600, Auxiliary Purchase Costs The Net Capital Value (=Market Value) is determined by deducting auxiliary purchase costs of approx. 370,200,000 (approx. 8%) from the Gross Capital Value. The above figures in 5.1 and 5.2 represents the aggregate of the individual property Market Values and is understood as the value without regard to purchase costs, such as legal costs and agent s fees and where applicable, land transfer tax, normally incurred by the purchaser. D-25

302 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 6. Glossary Net Rental Income The Net Rental Income is the income a property effectively generates as at the valuation date, taking into account the existing vacancies. Gross Rental Income The Gross Rental Income is the annual income generated by a property assuming full occupancy. It is determined by assuming the letting of vacant spaces at market rents and adding this figure to the net rents generated by a property. Gross Capital Value The sum of the remaining cash flows for years 1 to 10 and the Net Proceeds from Sale for year 10 discounted to the valuation date will produce the gross capital value. Net Capital Value The gross capital value reduced by the auxiliary purchase costs will produce the Net Capital Value (Market Value). Net Operating Income The net operating income is calculated by subtracting all non-recoverable operating expenses from the net rental income. D-26

303 Valuation Report Grand City Properties S.A. Jones Lang LaSalle SE 7. Conclusion Finally, and in accordance with our standard practice, we must state that this valuation report was prepared by JLL, Berlin, dated 3 May 2017 and has been authorised only for use by the addressees listed under Section 1.2 of this valuation report. The client guarantees that all valuations, reports, plans, drafts, renderings, tables and calculations arising within the scope of each valuation instruction will only be used for those purposes specified in the contract and will not be published without the express prior consent of the advisor in each individual case. Neither the total report nor any reference to the report may be published in any document, circular letter or paper, without our previous written consent regarding the form as well as the connection in which it will be published. Berlin, 3 May 2017 Jones Lang LaSalle SE ppa. Ralf Kemper MRICS Regional Director, Head of Valuation & Transaction Advisory ppa. Roman Heidrich MRICS National Director Team Leader Residential Valuation Berlin ppa. Ulrich Wilms MRICS, CIS HypZert National Director Team Leader Commercial Valuation Berlin i. A. Marian Hoffmann Principal Consultant Residential Valuation Berlin i. A. Tobias Jessen MRICS Principal Consultant Commercial Valuation Berlin D-27

304 FINANCIAL INFORMATION Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2016 (IFRS)... F-1 Consolidated Statement of Comprehensive Income... F-2 Consolidated Statement of Financial Position... F-4 Consolidated Statement of Changes in Equity... F-6 Consolidated Statement of Cash Flows... F-8 Notes to the Consolidated Financial Statements for the year ended December 31, F-10 Report of the Réviseur d Entreprises agréé (Auditors Report)... F-64 Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2015 (IFRS)... F-66 Consolidated Statement of Comprehensive Income... F-67 Consolidated Statement of Financial Position... F-68 Consolidated Statement of Changes in Equity... F-70 Consolidated Statement of Cash Flows... F-72 Notes to the Consolidated Financial Statements for the Year Ended December 31, F-74 Report of the Réviseur d Entreprises agréé (Auditors Report)... F-117 Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2014 (IFRS)... F-118 Consolidated Statement of Comprehensive Income... F-119 Consolidated Statement of Financial Position... F-121 Consolidated Statement of Changes in Equity... F-123 Consolidated Statement of Cash Flows... F-124 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2014 F-126 Report of the Réviseur d Entreprises agréé (Auditors Report)... F-161 F-0

305 Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2016 (IFRS) F-1

306 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, Note Revenue 5 442, ,497 Capital gains, property revaluations and other income 6 598, ,131 Share of profit from investments in equity accounted investees Property operating expenses 7 (204,108) (151,552) Cost of buildings sold (4,971) - Administrative and other expenses 8 (9,550) (7,153) Operating profit 822, ,923 Finance expenses 9a (36,319) (25,830) Other financial results 9b (11,121) (73) Profit before tax 775, ,020 Current tax expenses 10 (26,799) (22,776) Deferred tax expenses 10 (95,518) (43,674) Tax and deferred tax expenses (122,317) (66,450) Profit for the year 653, ,570 Other comprehensive income for the year, net of tax - - Total comprehensive income for the year 653, ,570 The notes on pages 10 to 64 form an integral part of these consolidated financial statements. F-2

307 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED) Profit attributable to: For the year ended December 31, Note Owners of the Company 544, ,933 Perpetual notes investors 19D 20,272 14,517 Non-controlling interests 88,013 35,120 Profit for the year 653, ,570 Net earnings per share attributable to the owners of the Company (in euro) Basic earnings per share Diluted earnings per share F-3 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements.

308 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at December 31, Note 000 Assets Equipment and intangible assets 14 15,833 9,493 Investment property 15 4,768,487 3,845,979 Advanced payments for investment property transactions 54,877 (*) 18,983 Investment in equity-accounted investees ,785 - Other non-current assets ,520 (*) 176,407 Deferred tax assets 10C 14,529 10,837 Non-current assets 5,126,031 4,061,699 Cash and cash equivalents 448, ,001 Traded securities at fair value through profit and loss 181, ,924 Inventories - trading property 18 27,270 11,877 Trade and other receivables , ,402 Assets held for sale ,494 - Current assets 1,027, ,204 Total assets 6,153,733 4,688,903 (*) Reclassified. /1 F-4 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements.

309 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) Equity As at December 31, Note Share capital 19 15,379 14,097 Share premium 670, ,910 Capital reserves 43,460 29,283 Retained earnings 1,472, ,599 Equity attributable to the owners of the Company 2,201,005 1,551,889 Equity attributable to Perpetual notes investors 667, ,146 Equity attributable to the owners of the Company and Perpetual notes investors 2,868,398 2,030,035 Non-controlling interests 196, ,260 Total Equity 3,065,064 2,172,295 Liabilities Loans and borrowings , ,224 Convertible bond , ,576 Straight Bonds 21 1,050,078 1,045,413 Derivative financial instruments 16 11,536 6,995 Other non-current liabilities 23 38,262 32,709 Deferred tax liabilities 10C 325, ,374 Non-current liabilities 2,750,344 2,239,291 Current portion of long term loans 21 18,406 19,998 Loan redemption 21 10,830 34,678 Trade and other payables , ,358 Tax payable 15,843 13,389 Provisions for other liabilities and charges 24 14,185 18,894 Liabilities held for sale 26 27,558 - Current liabilities 338, ,317 Total liabilities 3,088,669 2,516,608 Total equity and liabilities 6,153,733 4,688,903 The Board of Directors of Grand City Properties S.A. authorized these consolidated financial statements to be issued on March 20, 2017 Simone Runge-Brandner Director Refael Zamir Director, CFO Daniel Malkin Director The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements. F-5

310 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to the owners of the Company 000 Share capital Share Premium Equity portion of convertible bond Capital reserves Retained earnings Total Equity attributable to Perpetual notes investors Equity attributable to owners of the Company and Perpetual notes investors Noncontrolling interests Total equity Balance as at December 31, , ,910 7,131 22, ,599 1,551, ,146 2,030, ,260 2,172,295 Profit for the year , ,820 20, ,092 88, ,105 Other comprehensive income for the year Total comprehensive income for the year , ,820 20, ,092 88, ,105 Issuance of shares related to conversion of convertible bond C 1, ,575 (7,131) , , ,726 Equity component of convertible bond F , ,284-20,284-20,284 Issuance of Perpetual notes , , ,725 Amount attributed to Perpetual notes investors (18,750) (18,750) - (18,750) Equity settled share based payment ,024-1,024-1,024-1,024 Dividend distribution - (38,447) (38,447) - (38,447) - (38,447) Non-controlling interests arising from initially consolidated companies and other transactions ,709 1,709-1,709 (33,607) (31,898) Balance as at December 31, , ,038 20,284 23,176 1,472,128 2,201, ,393 2,868, ,666 3,065,064 F-6 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements.

311 Attributable to the owners of the Company 000 Share capital Share Premium Equity portion of convertible bond Capital reserves Retained earnings Total Equity attributable to Perpetual notes investors Equity attributable to owners of the Company and Perpetual notes investors Noncontrolling interests Total equity Balance as at December 31, , ,171 7,841 14, , , ,914 90,736 1,041,650 Profit for the year , ,933 14, ,450 35, ,570 Other comprehensive income for the year Total comprehensive income for the year , ,933 14, ,450 35, ,570 Issuance of ordinary shares , , , ,776 Issuance of shares related to conversion of convertible bond C 1, ,277 (710) , , ,829 Issuance of Perpetual notes , , ,146 Amount attributed to Perpetual notes investors (14,517) (14,517) - (14,517) Issuance of financial instrument ,017-7,017-7,017-7,017 Equity settled share based payment Dividend distribution - (24,333) (24,333) - (24,333) - (24,333) Non-controlling interests arising from initially consolidated companies and other transactions ,404 16,404 Balance as at December 31, , ,910 7,131 22, ,599 1,551, ,146 2,030, ,260 2,172,295 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements. F-7

312 CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31, Note Cash flows from operating activities: Profit for the year 653, ,570 Adjustments for the profit: Depreciation and amortization 1,695 1,729 Profit from business combination, capital gain and other income 6 (36,294) (86,700) Change in fair value of investment property 15 (561,986) (224,431) Share of profit from investments in equity accounted investees 13 (541) - Finance expenses and other financial results 9 47,440 25,903 Tax and deferred tax expenses ,317 66,450 Equity settled share-based payment 20 1, , ,274 Changes in: Inventories - trading property 2,421 (943) Trade and other receivables (5,908) (24,825) Trade and other payables 2,510 20,234 Provisions for other liabilities and charges (5,549) 4, , ,246 Tax paid (18,941) (18,798) Net cash provided by operating activities 201, ,448 Cash flows from investing activities Acquisition of equipment and intangible assets, net 14 (3,304) (3,680) Investments and acquisitions of investment property, capex and advances paid, net (476,195) (406,475) Acquisition of investees and loans, net of cash acquired (246,376) (540,043) Disposal of subsidiaries, net of cash disposed 135,736 94,121 Proceeds (investment) from (in) trade securities and other financial assets, net 32,955 (358,971) Net cash used in investing activities (557,184) (1,215,048) F-8 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements.

313 /2 Cash flows from financing activities For the year ended December 31, Note Proceeds from issuance of ordinary shares and financial instrument, net ,793 Amortizations of loans from financial institutions (11,586) (11,572) Proceeds (repayments) from (of) loans from financial institutions, net 54,295 (62,694) Proceeds from Convertible bond, net ,764 - Proceeds from Straight bonds, net ,396 Proceeds from Perpetual notes investors, net , ,146 Acquisition of straight bond CHF 21 (2,476) - Transactions with non-controlling interests (1,281) 598 Dividend distributed to the shareholders (38,447) (24,333) Interest and other financial expenses, net (45,871) (32,864) Net cash provided by financing activities 570,397 1,023,470 Net increase in cash and cash equivalents 214,506 (34,130) Assets held for sale cash 26 (1,634) - Cash and cash equivalents at January 1 236, ,131 Cash and cash equivalents at December , ,001 The notes on pages F-10 to F-63 form an integral part of these consolidated financial statements. F-9

314 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, GENERAL (A) INCORPORATION AND PRINCIPAL ACTIVITIES Grand City Properties S.A. ( the Company ) was incorporated in Luxembourg on December 16, 2011 as a private company with limited liability. Its registered office is at 24, Avenue Victor Hugo, L-1750 Luxembourg. The consolidated financial statements for the year ended December 31, 2016 consist of the financial statements of the Company and its subsidiaries ( the Group or GCP ). GCP is a specialist in residential real estate, value-add opportunities in densely populated areas in Germany (B) LISTING ON THE FRANKFURT STOCK EXCHANGE On May 28, 2012 the Company was listed on the Frankfurt Stock Exchange in the Entry Standard market segment. As of the report date the issued share capital consists 153,788,883 shares with a par value of euro 0.10 per share. F-10

315 (C) CAPITAL AND BOND INCREASES For information regarding capital and bond increases, please see notes 19 and 21, respectively. (D) GROUP RATING On December , S&P assigned its A-2 short-term corporate credit rating of the company. The BBB+ long-term corporate credit rating with stable outlook kept unchanged. On November , S&P revised its long term corporate credit rating of the Company to BBB+ from BBB with stable outlook. In addition, S&P has revised the ratings of senior unsecured debt rating of the Company to BBB+ from BBB and on its subordinated hybrid perpetual notes to BBB- from BB+. On June , S&P revised its outlook on the Company to positive from stable. In addition, S&P has affirmed their BBB long-term corporate credit rating on the Company, as well as their BBB issue rating on the Company s unsecured debt and BB+ issue rating on the company s Perpetual notes. On February 9, 2015, Moody s Investors Services ( Moody s ) has assigned a firsttime long-term issuer rating of Baa2 to the Group, with a stable outlook. In November 2016 Moody s has changed the outlook to positive from stable. Moody s state that the positive outlook reflects the company s improving leverage and management s commitment to maintain it at lower levels than previously anticipated. In addition, Moody s has rated the Perpetual notes as Ba1. (E) DEFINITIONS In these consolidated financial statements: The Company The Group GCP ltd Subsidiaries Associates Investees Grand City Properties S.A. The Company and its investees Grandcity Property Limited 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 IAS 28) and that are not subsidiaries. The Company's investment therein is included in the consolidated financial statements of the Company using equity method of accounting Subsidiaries, jointly controlled entities and associates Related parties As defined in IAS 24 F-11

316 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. BASIS OF PREPARATION (A) STATEMENT OF COMPLIANCE These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS). 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, 2015 have been reclassified to enhance comparability with 2016 figures and are marked as reclassified. The consolidated financial statements were authorized to be issued by the Board of Directors on March 20, (B) 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: / Traded securities at fair value through profit or loss; / Investment properties are measured at fair value; / Investment in equity-accounted investees; / Derivative financial instruments; / Assets and liabilities classified as held for sale; / Deferred tax liability on fair value gain on investment property. (C) USE OF ESTIMATES AND JUDGMENTS The preparation of consolidated financial statements in accordance with IFRS 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 deviate from such estimates. The estimates and underlying assumptions are revised 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. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are described below: / Fair value of investment property The Group uses external valuation reports issued by independent professionally qualified valuers to determine the fair value of its investment properties. Changes in their fair value are recognized in the consolidated statement of comprehensive income. 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. F-12

317 (C) USE OF ESTIMATES AND JUDGMENTS (CONTINUED) / 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 an asset is not recoverable. If facts and circumstances indicate that investment in associates may be impaired, the estimated future undiscounted cash flows associated with these associates would be compared to their carrying amounts to determine if a write down to fair value is necessary. / Tax and deferred tax expenses 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 and deferred tax provisions in the period in which such determination is made. / Impairment of intangible asset Intangible assets are initially recorded at acquisition cost and are amortized on a straight line basis over their useful economic life. Intangible assets that are acquired through a business combination are initially recorded at fair value at the date of acquisition. Intangible assets with an indefinite useful life are reviewed for impairment at least once per year. The impairment test is performed using the discounted cash flows expected to be generated through the use of the intangible assets, using a discount rate that reflects the current market estimations and the risks associated with the asset. When it is impractical to estimate the recoverable amount of an asset, the Group estimates the recoverable amount of the cash generating unit in which the asset belongs to. / Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of the Group on which the goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash generating units using a suitable discount rate in order to calculate present value. / 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 counsel. These estimates are based on the legal counsel s 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 courts, the results could differ from these estimates. / Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. / Fair value hierarchy Please see note 15(b) and 27(v). (D) FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in euro which is also the functional currency of the Group, and rounded to the nearest thousand (euro 000), except when otherwise indicated. F-13

318 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF CONSOLIDATION The Group s consolidated financial statements comprise the financial statements of the parent company Grand City Properties S.A. and the financial statements of its subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intra-group balances and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are 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. The Group has considered the impact of the amendment to IFRS 10 Investment Entities, and has determined that it does not meet the definition of an Investment entity. 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. CHANGES IN THE GROUP S OWNERSHIP INTERESTS IN EXISTING SUBSID- IARIES Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. 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 of a subsidiary, the 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. 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 IAS 39 Financial Instruments: Recognition and Measurement. Accounting for business combinations under IFRS 3 only applies if it is considered that a business has been acquired. The Group may invest in subsidiaries that hold properties but do not constitute a business. Those transactions are therefore treated as asset acquisitions rather than business combinations. The Group allocates the cost between the individual identifiable assets and liabilities in the Group based on their relative fair values at the date of acquisitions. F-14

319 (B) BUSINESS COMBINATIONS Acquisitions of businesses are accounted for using the acquisition method, i.e. when control is transferred to the Group. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of 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. Goodwill is initially measured as the excess of the sum of the consideration transferred, the fair value of any non controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non controlling interests in the acquiree and the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognized immediately in the consolidated income statement as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation may be initially measured either at fair value or at the non controlling interests proportionate share of the recognized amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction by transaction basis. Other types of non controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. 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. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in consolidated income statements. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. 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 (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. F-15

320 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (C) 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 income statement 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. 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. When necessary, 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. F-16

321 (D) REVENUE RECOGNITION Revenue is recognized in the consolidated statement of comprehensive income when it can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably. / Rental and operating income Rental operating income from investment properties are recognized as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental operating income, over the term of the lease. Operating income also includes service charges to third parties and payments for utilities if the costs and the amount of the income can be reliably determined. The revenue is recognized once the service is provided. / Sale of properties Revenue from the sale of properties in the course of ordinary activities is measured as the fair value of the consideration received or receivable. Revenue is recognized when significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of the properties can be reliably estimated. / Other Other income is used to represent income resulting in the release of provisions, tax repayments, cancellation of debts and others. (E) FINANCE INCOME AND EXPENSES Finance income comprises interest income on funds invested. Finance expenses comprise interest expense on loans and borrowings, bonds and loans from third parties. (F) OTHER FINANCIAL RESULTS Other financial results represent changes in the time value of provisions, changes in the fair value of traded securities, profit or losses on derivative financial instruments, borrowing and redemption costs, loan arrangement fees and other onetime payments. Financial expenses are recognized as they accrue in the statement of comprehensive income, using the effective interest method. (G) DEFERRED TAX, INCOME TAX AND PROPERTY TAXES Tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. German property taxation includes taxes on the holding of real estate property and construction. F-17

322 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (H) CURRENT TAX Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Tax expenses also include real estate tax expenses. (I) DEFERRED TAX Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for: / temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; / temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. The Company estimates such utilization of the deferred tax assets to be taken in place within the period of 1-5 years from the balance sheet date. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are realized or the liabilities are settled (liabilities method), based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. F-18

323 (J) EQUIPMENT AND INTANGIBLE ASSETS Equipment is measured at cost less accumulated depreciation and impairment losses. Depreciation is recognized in profit or loss using the straight line method over the useful lives of each part of an item of equipment. The annual depreciation rates used for the current and comparative periods are as follows: Furniture, fixtures and % office equipment 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 comprehensive income. 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. Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization, and any accumulated impairment losses. F-19

324 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (K) DEFERRED INCOME Deferred income represents income which relates to future periods. I. PREPAYMENTS Payments received in advance on development contracts for which no revenue has been recognized yet, are recorded as prepayments for clients as at the reporting date and carried under liabilities. II. TENANCY DEPOSITS Tenancy deposits are paid to ensure the apartment is returned in good condition. The tenancy deposits can also be used if a loss of rent occurs. (L) INVESTMENT PROPERTY An investment property is property comprising buildings held by the owner to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or for sale in the ordinary course of business. Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial recognition, investment property is measured at fair value which reflects market conditions at the end of the reporting period. Gains or losses arising from changes in the fair values of investment property are included in profit or loss when they arise. Investment property is derecognized on disposal or when the investment property ceases to be used and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in statement of comprehensive income in the period of the disposal. The Group determines the fair value of investment property on the basis of valuations by independent valuers who hold recognized and relevant professional qualifications and have the necessary knowledge and experience. (M) ASSETS HELD FOR SALE Non-current assets or disposal groups, comprising assets and liabilities are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition 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. 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. F-20

325 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (N) FINANCIAL INSTRUMENTS 1. NON-DERIVATIVE FINANCIAL AS- SETS: The Group initially recognizes loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognized initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables. a) Traded securities at fair value through profit or loss Traded securities are classified as at fair value through profit or loss if it is classified as held-for trading or is designated as such on initial recognition. Traded securities are designated as at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group s documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as incurred. Traded securities at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognized in profit or loss. Traded securities designated as at fair value through profit or loss comprise equity securities that otherwise would have been classified as available-for-sale. b) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents, and trade and other receivables. c) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. 2. NON-DERIVATIVE FINANCIAL LIA- BILITIES Non-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method. 3. SHARE CAPITAL Ordinary shares 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. F-21

326 (N) FINANCIAL INSTRUMENTS (CONTINUED) 4. COMPOUND FINANCIAL INSTRU- MENTS Compound financial instruments issued by the Group comprise convertible notes denominated in euro that can be converted to share capital at the option of the holder, when the number of shares to be issued is fixed. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition. Interest related to the financial liability is recognized in profit or loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognized. 5. DERIVATIVE FINANCIAL INSTRU- MENTS Derivative financial instruments are initially accounted for at cost and subsequently measured at fair value. Fair value is calculated using the current values, discounted cash flow analysis or option valuation methods. Derivatives are recorded as assets when their fair value is positive and as liabilities when their fair value is negative. The adjustments on the fair value of derivatives held at fair value are transferred to the consolidated income statement. 6. BORROWINGS Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method. 7. TRADE PAYABLES Trade payables are initially measured at fair value. 8. PERPETUAL NOTES The capital raised is recognized in equity following a deduction for the costs of raising the capital. The interest payments to be made to the Perpetual notes holders are recognized directly in equity after a deduction of deferred taxes. (O) DE-RECOGNITION OF FINANCIAL ASSETS AND LIABILITIES (I) FINANCIAL ASSETS A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: / the rights to receive cash flows from the asset have expired; / the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass through arrangement; or / The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets. (II) FINANCIAL LIABILITIES A financial liability is derecognized 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 a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated income statement. F-22

327 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (P) IMPAIRMENT OF ASSETS Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). (Q) OFFSETTING FINANCIAL INSTRUMENTS Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only 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 asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position. (R) 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 income statement. 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. (S) OPERATING SEGMENTS The Group meets the definition of operating in two operating segments. An operating segment is a component of the Group that meets the following three criteria: / Is engaged in business activities from which it 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 to make decisions about resources to be allocated to the segment and assess its performance; and / For which separate financial information is available. The main operating segment is rental income relates to owned investment properties. The second operating segment relates to services charges to third parties (e.g. property management). The results from this segment is minor and does not meet the threshold to show as a separate reporting segment, therefore only one reporting segment is presented. F-23

328 (T) COMPARATIVES Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period. (U) EARNINGS PER SHARE Earnings per share are calculated by dividing the net profit attributable to owners of the Company by the weighted number of Ordinary shares outstanding during the period. Basic earnings per share only include shares that were actually outstanding during the period. Potential Ordinary shares (convertible securities such as convertible debentures, warrants and employee options) 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 of earnings of investees is included based on the earnings per share of the investees multiplied by the number of shares held by the Company. (V) 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. (W) LEASED ASSETS Assets held by the Group under leases which transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Determining whether an arrangement contains a lease at inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met: / The fulfillment of the arrangement is dependent on the use of a specific asset or assets; and / The arrangement contains a right to use the asset(s). At inception or on reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company s incremental borrowing rate. F-24

329 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (X) TRADING PROPERTY (INVENTORIES) Inventories are trading properties acquired with the clear intention that they are to be sold in the ordinary course of business. Trading properties considered as inventories are shown at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Trading properties are purchased and sold on a portfolio basis. Each separately identifiable portfolio of trading properties is held by a Group subsidiary entity established and/ or acquired for the purpose of holding the respective trading property portfolio. Trading properties are recognized in the statement of financial position only when full control is obtained. Trading properties are de-recognized in the consolidated financial statements only when full control is transferred outside of the Group. Cost of trading properties is determined on the basis of specific identification of the individual costs of the trading property including acquisition costs such as transfer taxes, legal and due diligence fees. (Y) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED The following new and revised standards and interpretations are in issue and have been endorsed by the EU but are not yet effective for these consolidated financial statements. (I) IFRS 9 FINANCIAL INSTRU- MENTS (2009, 2010) IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and to add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. (II) IFRS 15 REVENUE FROM CON- TRACTS WITH CUSTOMERS IFRS 15 establishes a five step approach to accounting for revenue from contracts with customers. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The following new and revised standards and interpretations are in issue but have not yet been endorsed by the EU and are hence not yet effective for these financial statements. (III) IAS 7 DISCLOSURE INITIATIVE AMENDMENTS TO IAS 7 The amendment to IAS 7 Statement of Cash Flows are part of the IASB s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. (IV) IFRS 16 LEASES IFRS 16 introduces a single, on balance sheet approach to lease accounting for lessees with optional exemptions for short-term leases and leases of low value items. (V) IFRS 2 CLASSIFICATIONS AND MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS The Group has considered the above new standards, interpretations and amendments to published standards and will continue to evaluate the impact on the Group s consolidated financial statements. At this time, the impact of the above publications is not expected to be material to the Group s consolidated financial statements. F-25

330 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES (A) ACQUISITIONS The Group generally seeks for properties (through share or asset deals) with embedded upside potential. In case that the fair value of the total identifiable net assets exceeds the purchase price, the excess amount is recognized in the consolidated statement of comprehensive income as a profit from a bargain purchase. During the reporting period the Group through its subsidiaries obtained control of several companies through share deal acquisitions. The significant transactions are as follows: 1. PORTFOLIO 1 At the end of April 2016, the Group obtained control of several companies, which hold real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 65,401 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 21,815 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 4,411 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 10,400 thousand and euro 924 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: 000 Investment property 136,372 Working capital, net 456 Cash and Cash equivalents 1, ,449 Bank loans 31,345 Other liabilities, net 15,477 46,822 Total identifiable net assets 91,627 Non-controlling interests arising from initial consolidation 4,411 Consideration paid regarding acquisition 65,401 Profit arising from business combination (bargain purchase) 21,815 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 5,682 thousand, and the Group s net profit would have increased by euro 160 thousand. F-26

331 2. PORTFOLIO 2 At the end of June 2016, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 94.9 percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 46,455 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 2,297 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 1,905 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 2,807 thousand and euro 1,298 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: 000 Investment property 51,168 Cash and Cash equivalents 24 51,192 Other liabilities, net 535 Total identifiable net assets 50,657 Non-controlling interests arising from initial consolidation 1,905 Consideration paid regarding acquisition 46,455 Profit arising from business combination (bargain purchase) 2,297 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 2,666 thousands, and the Group s net profit would have increased by euro 1,168 thousand. F-27

332 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES 3. PORTFOLIO 3 At the end of September 2016, the Group obtained control of several companies, which hold real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 99,678 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 8,520 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income and goodwill of euro 1,628 thousand. The Group recognized non-controlling interests at the amount of euro 7,224 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 3,924 thousand and euro 1,579 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: 000 Investment property 140,077 Working capital, net 108 Cash and Cash equivalents ,512 Bank loans 21,000 Other liabilities, net 5,718 26,718 Total identifiable net assets 113,794 Non-controlling interests arising from initial consolidation 7,224 Consideration paid regarding acquisition 99,678 Profit arising from business combination (bargain purchase) 8,520 Goodwill recognized 1,628 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 11,697 thousand, and the Group s net profit would have decreased by euro 575 thousand. F-28

333 4. PORTFOLIO 4 During the year 2016, the Group obtained control of several companies, which hold real estate properties mainly in Germany by acquiring percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 34,517 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 8,671 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income and goodwill of euro 3,509 thousand. The Group recognized non-controlling interests at the amount of euro 7,265 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and loss in amount of euro 4,255 thousand and euro 680 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: 000 Investment property 86,653 Cash and Cash equivalents ,433 Working capital, net 559 Bank loans 21,709 Other liabilities, net 18,221 40,489 Total identifiable net assets 46,944 Non-controlling interests arising from initial consolidation 7,265 Consideration paid regarding acquisition 34,517 Profit arising from business combination (bargain purchase) 8,671 Goodwill recognized 3,509 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 2,378 thousand, and the Group s net profit would have increased by euro 347 thousand. (B) DISPOSALS During the reporting period, the Group sold several non-core properties (through share deals) for a total consideration of euro 137 million. The Group recorded capital gain in amount of euro 3 million as part of the consolidated statement of comprehensive income. 000 Investment property 144,940 Working capital, net 592 Cash and Cash equivalents 1, ,567 Other liabilities, net 3,588 Total net assets disposed 142,979 Non-controlling interests disposed 3,101 Consideration received regarding the disposals 136,771 Profit arising from the disposals 3,107 F-29

334 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. REVENUE Year ended December 31, Rental and operating income 435, ,497 Revenue from sales of buildings (a) 7, , ,497 (a) Of which euro 5 million refers to cost of building sold in 2016 (see also note 18). 6. CAPITAL GAINS, PROPERTY REVALUATIONS AND OTHER INCOME Year ended December 31, Change in fair value in investment property (see note 15) 561, ,431 Profit arising from business combinations (Bargain Purchase) (*) 33,187 85,763 Capital gains and other income 3, , ,131 (*) net of additional cost related to previous year s business combinations in the amount of euro 8 million. 7. PROPERTY OPERATING EXPENSES Year ended December 31, 2016 (*) Purchased services (149,357) (112,051) Maintenance and refurbishment (27,004) (21,202) Personnel expenses (18,380) (12,119) Depreciation and amortization (1,351) (1,382) Other operating costs (8,016) (4,798) (204,108) (151,552) (*) reclassified. F-30

335 8. ADMINISTRATIVE & OTHER EXPENSES Year ended December 31, Personnel expenses (2,629) (2,084) Audit and accounting costs (*) (1,849) (1,630) Legal and professional consultancy fees (2,296) (1,500) Depreciation and amortization (344) (347) Marketing and other expenses (2,432) (1,592) (9,550) (7,153) (*) Out of which euro 1,233 thousand (2015: euro 1,096 thousand) and euro 556 thousand (2015: euro 449 thousand) related to audit and audit-related fees provided by KPMG audit firms and other audit firms, respectively, and euro 40 thousand (2015: euro 75 thousand) and euro 20 thousand (2015: euro 10 thousand) related to tax and consultancy services provided by KPMG audit firms and other audit firms, respectively. 9. NET FINANCE EXPENSES a. Finance expenses Year ended December 31, Finance expenses from financial institutions and third parties, net (14,947) (10,496) Finance expenses from straight and convertible bonds, net (21,372) (15,320) Other finance expenses - (14) (36,319) (25,830) b. Other financial results Changes in fair value of financial assets and liabilities, net (5,704) 2,816 Finance-related costs (5,417) (2,889) (11,121) (73) F-31

336 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. TAXATION A. 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 29.22% (2015: 29.22%). The corporation tax rate will be decreased to 27.08% in 2017 and to 26.01% in 2018 and on. The change in the corporation tax rate does not have a significant effect on current and deferred tax assets and liabilities. The German subsidiaries with 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, 2016 (2015: the same), plus an annual solidarity surcharge of 5.5% on the amount of federal corporate taxes payable (aggregated tax rate: %). German property taxation includes taxes on the holding of real estate property. The Cypriot subsidiaries are subject to taxation under the laws of Cyprus. The corporation tax rate for Cypriot companies is 12.5% (2015: 12.5%). Under certain conditions interest income of the Cypriot companies may be subject to defense contribution at the rate of 30% (2015: 30%). In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defense contribution at the rate of 17% for 2014 and thereafter. Subsidiaries in other jurisdictions are subject to corporate tax rate of up to 25%. B. TAXES INCLUDED IN CONSOLI- DATED STATEMENT OF COMPRE- HENSIVE INCOME DEFERRED TAX LIABILITIES Year ended December 31, Corporation tax (12,858) (11,912) Deferred tax, see also (c) below (95,518) (43,674) Property tax (13,941) (10,864) Charge for the year (122,317) (66,450) C. MOVEMENT ON THE DEFERRED TAXATION ACCOUNT IS AS FOLLOWS: Fair value gains on investment property Other deferred tax 000 Total Balance as at December 31, ,322 3, ,003 Charged to: Consolidated statement of comprehensive income 43,422-43,422 Deferred tax arising from initial consolidation 62,497-62,497 Deferred tax disposed from deconsolidation (7,548) - (7,548) Balance as at December 31, ,693 3, ,374 Charged to: Consolidated statement of comprehensive income 98, ,216 Deferred tax arising from initial consolidation 21,584-21,584 Deferred tax disposed from deconsolidation (31,655) - (31,655) Transfer to Liabilities held for sale (2,537) - (2,537) Balance as at December 31, ,072 3, ,982 F-32

337 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. TAXATION (CONTINUED) /Bremen DEFERRED TAX ASSETS Derivative financial instruments, net Deferred taxes loss carried forward, net Other deferred tax Total 000 Balance as at December 31, ,411-11,193 Charged to: Consolidated statement of comprehensive income (570) (87) 405 (252) Deferred tax arising from initial consolidation 401 (505) - (104) Balance as at December 31, , ,837 Charged to: Consolidated statement of comprehensive income 1,442 2,256-3,698 Deferred tax disposed from deconsolidation (6) - - (6) Transfer to Assets held for sale (405) - Balance as at December 31, ,049 12,480-14,529 The Group contains immaterial carried forward losses on which no deferred tax assets were recognized. F-33

338 D. RECONCILIATION OF EFFECTIVE TAX RATE Year ended December 31, Profit before tax 775, ,020 Statutory tax rate 29.22% 29.22% Tax computed at the statutory tax rate 226, ,418 Decrease in taxes on income resulting from the following factors: Group's share of earnings from companies accounted for at equity (158) - Effect on tax rates in foreign jurisdictions (at %) (84,630) (50,223) Effect on tax rates in foreign jurisdictions (at 12.5%) (28,032) (8,496) Others (including property tax) 8,559 (9,249) Tax and deferred tax expenses 122,317 66,450 F-34

339 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. NET EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS OF THE COMPANY A. BASIC EARNINGS PER SHARE The calculation of basic earnings per share as of December 31, 2016 is based on the profit attributable to ordinary shareholders of euro 544,820 thousand (2015: euro 343,933 thousand), and a weighted average number of ordinary shares outstanding of 152,836 thousand (2015: 126,932 thousand), calculated as follows: 1. PROFIT ATTRIBUTED TO ORDINARY SHAREHOLDERS (BASIC) Year ended December 31, Profit for the year, attributable to the owners of the Company 544, , WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES (BASIC) Year ended December 31, In thousands of shares Issued ordinary shares on January 1 140, ,541 Capital increase - 2,994 Effect of exercise of convertible bond Series C 11,865 5,397 Weighted average number of ordinary shares as at December 31, 152, ,932 Basic earnings per share (euro) F-35

340 B. DILUTED EARNINGS PER SHARE The calculation of diluted earnings per share at December 31, 2016 is based on profit attributable to ordinary shareholders of euro 545,768 thousand (2015: euro 344,346 thousand), and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 168,020 thousand (2015: 146,725 thousand), calculated as follows: 1.PROFIT ATTRIBUTED TO ORDINARY SHAREHOLDERS (DILUTED) Year ended December 31, Profit for the year, attributable to the owners of the Company (basic) 544, ,933 Interest expense on convertible bonds, net of tax Profit for the year, attributable to the owners of the Company (diluted) 545, , WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES (DILUTED) Year ended December 31, In thousands of shares Issued ordinary shares on January 1 140, ,541 Capital increase - 2,994 Effect of exercise of convertible bond Series C 12,839 25,168 Effect of exercise of convertible bond Series F 13,896 - Effect of warrants Effect of equity settle share based payment Weighted average number of ordinary shares as at December 31, 168, ,725 Diluted earnings per share (euro) OTHER NON-CURRENT ASSETS As at December 31, 2016 (*) Tenancy deposit (a) 26,463 19,289 Investment in other long term assets 125, ,129 Finance lease asset 2,995 2,989 (*) reclassified. 154, ,407 (a) Tenancy deposits mainly include 1-3 months net rent from the tenants which is paid at the beginning of the lease. The deposits are considered as a security payment by the tenant and the Group can use those funds mainly if the tenant has unpaid debts or causes damages to the property. Past experience shows that the majority of the leases are long term and therefore the deposits are presented as long term assets. F-36

341 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. INVESTMENT IN EQUITY- ACCOUNTED INVESTEES During the reported period, the Group obtained significant influence on several companies which are accounted for using the equity method. In addition, the Group ceased the consolidation of several subsidiaries and started accounting for the investees using the equity method. As at December 31, Balance as of January Additions, net 117,244 - Share of profit from associates Balance as of December ,785 - F-37

342 14. EQUIPMENT AND INTANGIBLE ASSETS Furniture, fixtures and office equipment Goodwill, softwares and other intangible assets (*) 000 Total Cost Balance as at January 1, ,709 6,029 8,738 Additions 3, ,680 Equipment and intangible assets arising from initial consolidation Balance as at December 31, ,309 6,135 12,444 Additions 2, ,304 Equipment and intangible assets arising from initial consolidation, net 65 5,137 5,202 Deconsolidation (82) (389) (471) Balance as at December 31, ,229 11,250 20,479 Depreciation/Amortization Balance as at January 1, ,222 Depreciation/Amortization for the year 1, ,729 Balance as at December 31, , ,951 Depreciation/Amortization for the year 1, ,695 Balance as at December 31, ,422 1,224 4,646 Carrying amounts Balance as at December 31, ,807 10,026 15,833 Balance as at December 31, ,238 5,255 9,493 (*) reclassified F-38

343 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. INVESTMENT PROPERTY A. COMPOSITION As at December 31, Balance as of January 1 3,845,979 2,179,982 Acquisitions of investment property during the year 440, ,912 Investment property arising from initial consolidation 414,270 1,138,494 Disposal of investment property due to loss of control (347,971) (101,720) Transfer to Inventories - trading property - (5,120) Transfer to Assets held for sale (note 26) (146,078) - Fair value adjustment (see note 6) 561, ,431 Balance as at December 31 4,768,487 3,845,979 B. MEASUREMENT OF FAIR VALUE (I) FAIR VALUE HIERARCHY The fair value of the properties of the group is determined at least once a year by external, independent and certified valuators. The prime valuator of the portfolio is Jones Lang LaSalle GmbH (JLL) and is considered as one of the market leading valuators in the European real estate market. The fair value of the properties was prepared in accordance with the RICS Valuation- Professional Standards (current edition) published by the Royal Institution of Chartered Surveyors (RICS) as well as the standards contained within the TEGoVA European Valuations Standards, and in accordance with IVSC International Valuation Standard (IVS), the International Accounting Standard (IAS), International Financial Reporting Standards (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 JLL. Therefore the valuation is based on internationally recognized standards. The company and the valuators confirm that there is no actual or potential conflict of interest that may have influenced the valuators status as external and independent valuator. The valuation fee is determined on the scope of complexity of the valuation report. The range of the discount rates applied to the net annual rentals to determine the fair value of property is between 4.75%-7.5% (2015: 5%-7.5%). All the investment properties in the group in total fair value amount of euro 4,768,487 (2015: 3,845,979) thousand have been categorized as a Level 3 fair value based on the inputs to the valuation technique used. (II) LEVEL 3 FAIR VALUE The table in part A above shows reconciliation from the opening balances to the closing balances for Level 3 fair values. VALUATION TECHNIQUE AND SIGNIFICANT UNOBSERVABLE INPUTS Valuation technique Discounted cash flows: The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs such as rent-free period and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms. Significant unobservable inputs / Assumed market rental growth weighted average 1.4% (2015: 1.5%); / Void periods -average 2-4 months after the end of each lease (2015: the same); / Assumed future occupancy rate in the range of 93% to 100%. Occupancy rate is as of December 2016, 92.1% (2015: 87.5%); / Risk adjusted discount rates in the range of 4.75%-7.5%. Weighted average 5.94% (2015: 6.19%). Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase (decrease) if: / Expected market rental growth is higher (lower); / Void periods were shorter (longer); / The occupancy rates were higher (lower); / The risk-adjusted discount rate is lower (higher). F-39

344 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. DERIVATIVE FINANCIAL INSTRUMENTS Year ended December 31, Year of maturity 000 Liabilities Non-current portion ,536 6,995 The Group uses interest rate swaps, collars, caps and floors ( hedging instruments ) to manage its exposure to interest rate movements on its bank borrowings. All of the Group s derivatives financial instruments are linked to the bank loans maturity (see note 21A). The calculation of the fair value of hedging instruments is based on discounted cash flows of future anticipated interest payments in place compared with the discounted cash flows of anticipated interest payments at market interest rates based on the hedging instrument agreement at the reporting date. F-40

345 17. TRADE AND OTHER RECEIVABLES Year ended December 31, Operating costs prepayments 145, ,662 Rent and other receivables (a) 54,941 48,329 Prepaid expenses 2,396 1,120 Other short term assets 17,231 49, , ,402 (a) Of which euro 21.5 million refers to rent receivables (2015: euro 19.9 million) The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above. 18. INVENTORIES - TRADING PROPERTY Year ended December 31, Inventories - trading property 27,270 11,877 27,270 11,877 a. During 2016, the Group has sold approximately 17 units which were presented as inventory trading property for gross proceeds at the amount of euro 7 million. See also note 5. F-41

346 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. EQUITY A. SHARE CAPITAL As at December 31, Number of shares euro in thousands Number of shares euro in thousands Authorized Ordinary shares of euro 0.10 each 400,000,000 40, ,000,000 20,000 Issued and fully paid Balance as of January 1, 140,970,655 14, ,541,449 11,854 Issuance of new ordinary shares - - 9,808, Exercise of convertible bond Series C 12,818,228 1,282 12,620,565 1,262 Balance on December 31, 153,788,883 15, ,970,655 14,097 B. AUTHORIZED CAPITAL On August 9, 2016 at the Extraordinary General Meeting of the Company, it was decided to increase its existing authorized share capital from its present amount of Euro 20,000,000 to Euro 40,000,000. C. ISSUED CA- PITAL DURING (1) On September 10, 2015 the Company received gross proceeds of euro 151 million from a capital increase against a cash contribution. A total of 9.5 million new ordinary shares were placed at an issue price of euro 15.9 as part of a private placement to institutional investors. (2) On September 29, 2015 the Company received gross proceeds of euro 5 million from capital increase against a cash contribution. A total of thousand new shares were placed at an issue price of euro (3) On September 29, 2015 the Company received gross proceeds of euro 7 million from a placement of a financial instrument a 1.1 million call options convertible to the Company s shares (in ratio of 1:1) for an additional price of euro per option and exercisable in the period between March 2016 to August (4) Since the initial placement of Convertible bond series C and until December 31, 2016, a total amount of million bonds were converted into shares. According to the convertible bond s terms, a total of 28.5 million shares were issued (12.8 million shares were issued in See also Note 21B). F-42

347 D. ISSUANCE OF PERPETUAL NOTES (1) On February 13, 2015, the Company successfully placed euro 150 million in aggregate principal amounts of Perpetual notes. These notes were issued at a price of 96.3% of the principal amount. These Perpetual notes are of unlimited duration and can only be called back by the Company on certain contractually fixed dates or occasions. Up until the first call date in February 2022, the Perpetual notes shall bear a coupon rate of 3.75% p.a. In case the Company does not exercise its call right at that point, the coupon rate applied until the next call date (February 2027) shall correspond to the five-year swap rate plus a margin of basis points p.a. The mark-up will increase by 25 basis points (to basis points p.a.) as of February 2027 and by another 75 basis points (to basis points p.a.) as of February (2) On March 3, 2015, Company placed a tap issue of euro 250 million in aggregate principal amounts of the Perpetual notes. These notes were issued at a price of 97.04% of the principal amount. The total aggregated principal amount of the notes at the end of the reporting period was euro 400 million. (3) On July , the Company completed a successful tap up of its 3.75% Perpetual notes by euro 100 million. The new notes have the same terms and conditions as the existing ones and increased the nominal amount of the outstanding 3.75% Perpetual notes to euro million 500. (4) On September , the Company successfully placed euro 200 million in aggregate principal amounts of Perpetual notes. These notes were issued at a price of 95.27% of the principal amount. These Perpetual notes are of unlimited duration and can only be called back by the Company on certain contractually fixed dates or occasions. Up until the first call date in January 2023, the Perpetual notes shall bear a coupon rate of 2.75% p.a. In case the Company does not exercise its call right at that point, the coupon rate applied until the next call date (January 2028) shall correspond to the five-year swap rate plus a margin of basis points p.a. The mark-up will increase by 25 basis points (to basis points p.a.) as of January 2028 and by another 75 basis points (to basis points p.a.) as of January (5) These Perpetual notes are presented in the consolidated statement of financial position as equity attributable to its holders, which is part of the total equity of the Group. The coupon is deferrable until payment resolution of a dividend to the shareholders. The deferred amounts shall not bear interest. Due to dividend distribution, an amount of euro 16.5 million payable to the Perpetual notes holders has been reclassified and presented in Trade and other payables. E. SHARE PREMIUM The share premium derives directly from the capital increases which were affected since the date of incorporation and exercise conversions of bonds into shares. F. CAPITAL RESERVES The capital reserves include shareholders loan that have been converted to equity and therefore can be distributed at any time, and proceeds from financial instruments and share-based payments reserves which temporarily cannot be distributed. G. RESOLUTION OF DIVIDEND DISTRIBUTION On June , the shareholders annual meeting resolved upon the distribution of cash dividend in the amount of euro 0.25 per share (ex date and payment date were on June 30, 2016 and on July 1, 2016, respectively). On June , the shareholders annual meeting resolved upon the distribution of cash dividend in the amount of euro 0.2 per share (ex date and payment date were on June 25, 2015 and on July 3, 2015, respectively). F-43

348 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. SHARE BASED PAYMENT AGREEMENTS A. DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENTS On December 31, 2016 and 2015, the Group had the following share-based payment arrangements: (I) INCENTIVE SHARE PLAN The annual general meeting has approved to authorize the Board of Directors to issue up to one million shares for an incentive plan for the board of directors, key management and senior employee s. The incentive plan has a four years vesting period with milestones to enhance management s long term commitment to GCP s strategic targets. Strategic targets are long term like-for-like occupancy and rent increase, operational efficiency, increase in adjusted EBITDA per share, FFO per share EPS and NAV per share. Management is incentivized for keeping conservative financial ratios, with the strategic target to further improve the Group s rating to A-. The key terms and conditions related to program are as follows: Incentive granted to Board of Directors, key management and senior employees Number of instruments in thousands Weighted vesting period Contractual life of the incentive October 1, 2014 July 1, years 4 years B. RECONCILIATION OF OUTSTANDING SHARE OPTIONS The number and weighted-average of share options under the share incentive program and replacement awards were as follows: Year ended December 31, Number of shares Number of shares In thousands of shares Outstanding on January Granted during the year Outstanding on December During the reporting period, the total amount recognized as share-based payment was euro 1,024 thousand (2015: euro 753 thousand). It was presented as administrative and other expenses in the consolidated statement of comprehensive income and as share-based payment reserve in the consolidated statement of changes in equity. F-44

349 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. LOANS AND BORROWINGS A. COMPOSITION Long - term liabilities Weighted average interest rate Year ended December 31, Maturity date Loans and borrowings (*) 2% , ,224 Total long term loans 896, ,224 Straight and convertible Bonds Convertible bond Series C (B) 1.5% - 122,576 Straight bond series D (C) 2% , ,032 Straight bond series E (D) 1.5% , ,517 Staright bond CHF (E) 4.75% ,447 49,864 Convertible bond Series F (F) 0.25% ,909 Total Straight and convertible Bonds 1,477,987 1,167,989 Short - term liabilities Loan redemption 2% ,830 34,678 Loans and borrowings 2% ,406 19,998 Total Short - term loans 29,236 54,676 (*) approx. Euro 2.1 Billion (2015: euro 1.8 Billion) of investment properties are encumbered. F-45

350 B. CONVERTIBLE BOND SERIES C On February 24, 2014, the Company issued euro 150 million (nominal value) bonds, convertible into ordinary shares of the Company and bear a coupon of 1.50% p.a., payable semi-annually in arrears (hereafter Convertible bond series C ). The initial conversion price was fixed at euro The bonds were issued at 100% of their principle amount and will be redeemed at maturity at % of their principle amount. On June 19, 2014, the Company successfully completed with the tap up placement of additional euro 125 million (nominal value) of Convertible bond series C, for a consideration that reflected % of their principal amount. The total aggregated principal amount of the Convertible bond series C increased to euro 275 million (nominal value). On June 25, 2015, as a result of the resolved dividend distribution (see note 19G) and in accordance with the terms and conditions of the bond, the Company adjusted the conversion price for the Convertible bond series C to be euro per share. On January 11, 2016 the Company has resolved to exercise its right to redeem the outstanding euro 275 million 1.5 per cent Convertible bond C (hereafter Convertible bond ) in accordance with the terms and conditions of the Convertible bond. As of the resolution day, the principle amount of the Convertible bond which has been converted and/or redeemed is euro 151,800,000. As of February 1, 2016 the principal amount of the Convertible bond which has been converted into share capital of the Company was euro 274,800,000 which represents per cent of the aggregate principal amount of the Convertible bond and results a decrease of debt in the same amount. As a result, the equity of the company increase by euro 123 million. The outstanding Convertible bond in the amount of Euro 200,000 has been redeemed at its principal amount and accrued interest. Year ended December 31, Balance at the beginning of the year 125, ,451 Expenses (income) for the year (3,063) 583 Expenses paid - (3,433) Conversion to ordinary shares and redemption (122,620) (118,918) Carrying amount of liability at the end of the year - 125,683 Non-current portion of Convertible bond series C - 122,576 Accrued interest - - Total convertible bond series C - 122,576 Deferred income - 3,107 F-46

351 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. LOANS AND BORROWINGS (CONTINUED) C. STRAIGHT BOND SERIES D On October 29, 2014, the Company successfully completed the placement EUR 500 million, in aggregate principal amount of new fixed-rate secured bonds, due 2021 with a coupon of 2 per cent and a price of % of their principal amount (the Series D Bonds ). The offer was over-subscribed. Starting that day, Series D bond is traded on the Irish stock exchange, on its regulated market. Year ended December 31, Balance at the beginning of the year 480, ,107 Issuance costs during the year - (610) Expenses for the year 13,347 13,261 Financial expenses paid (10,000) (10,000) Carrying amount of liability at the end of the year 484, ,758 Non-current portion of bond series D 482, ,032 Accrued interest 1,726 1,726 Total bond series D 484, ,758 F-47

352 D. STRAIGHT BOND SERIES E On April 17, 2015, the Company successfully placed euro 400 million in aggregate principal amount of series E straight bonds. The new bond series was placed of an issue price of 96.76% of the principal amount and mature after 10 years. It bears a coupon of 1.5% p.a., payable semi-annually in arrears starting from October On September 18, 2015, the Company successfully completed with the tap up placement of additional euro 150 million (nominal value) of straight bond series E, for a consideration that reflected 89.21% of their principal amount. The total aggregated principal amount of the straight bond series E increased to euro 550 million (nominal value). Year ended December 31, Balance at the beginning of the year 518,213 - Proceeds from issuance of bond series E (5,500 notes at euro 100,000 par value) - 520,860 Issuance costs (497) (5,854) Net proceeds during the year (497) 515,006 Expenses for the year 11,482 6,342 Financial expenses paid (8,250) (3,135) Carrying amount of liability at the end of the year 520, ,213 Non-current portion of bond series E 519, ,517 Accrued interest 1,696 1,696 Total bond series E 520, ,213 F-48

353 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. LOANS AND BORROWINGS (CONTINUED) E. STRAIGHT BOND CHF In July 2015 the Group acquired a subsidiary (through business combination) which placed on July 8, 2013 a Swiss Franc (CHF) 55 million straight bond maturing in July The bond bears a coupon of 4.75% p.a., payable annually in arrears starting from July The bond is listed on the SIX Swiss Exchange. Year ended December 31, Balance as at the beginning of the year / at the business combination (July 2, 2015) 51,029 54,582 Finance expense (income) for the year, net 3,418 (1,058) Expenses paid (2,405) (2,495) Held in treasury (2,476) - Carrying amount of liability at the end of the year 49,566 51,029 Non-current portion of straight bond 48,447 49,864 Accrued interest 1,119 1,165 Total bond 49,566 51,029 F. CONVERTIBLE BOND SERIES F On February 24, 2016 the Company successfully completed the placement of euro 450 million bonds series F, convertible into ordinary shares of the Company and bear a coupon of 0.25% p.a. payable semi-annually in arrears. The bonds were issued at 100% of their principal amount and will be redeemed at maturity of 6 years at par value. The initial conversion price was set at euro Year ended December 31, Balance at the beginning of the year - - Proceeds from issuance of Convertible bond series F (4,500 notes at euro 100,000 par value) 450,000 - Issuance costs (5,236) - Net proceeds during the year 444,764 - Amount classified as equity component (20,284) Expenses for the year 4,366 - Expenses paid (563) - Carrying amount of liability at the end of the year 428,283 - Non-current portion of Convertible bond series F 427,909 - Accrued interest Total convertible bond series F 428,283 - F-49

354 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. LOANS AND BORROWINGS (CONTINUED) G. (1) SECURITY, NEGATIVE PLEDGE (a) For Gutburg Immobilien S.A. (hereafter Gutburg ), a wholly-owned subsidiary of the Company, and its subsidiaries (hereafter Gutburg Group ), a negative pledge, default including cross default and change of control. (2) COVENANTS (AS DEFINED IN THE TERMS AND CONDITIONS OF THE BONDS) 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 if, immediately after giving effect to the incurrence of such additional Indebtedness and the application of the net proceeds of such incurrence: (a) The sum of: (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% of the sum of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at the Last Reporting Date; (ii) 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) The sum of: (i) the Consolidated Secured Indebtedness (excluding the Series B Bonds, the Series C Bonds and the Series D Bonds and less Cash and Cash Equivalents) as at the Last Reporting Date; and (ii) the Net Secured Indebtedness (excluding the Series B Bonds, the Series C Bonds and the Series D Bonds and less Cash and Cash Equivalents) incurred since the Last Reporting Date shall not exceed 45% of the sum of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at the Last Reporting Date; (ii) 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); (c) The Company undertakes that, on each Reporting Date, the Consolidated Coverage Ratio will be at least 2.0; (d) 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% 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; and (e) The Company and GCP ltd. will not open, maintain or hold any interest, in each case directly or indirectly, in any account whatsoever with any bank or financial institution except for the charged accounts, unless the Issuer or GCP ltd., respectively, grant a first-ranking security interest, satisfactory to the Trustee, over the respective account in favor of the Trustee, for the benefit of the Trustee and the Bondholders. For Gutburg s CHF bond: (f) All current and future financial liabilities of the Gutburg Group in total (excluding the bond) is not more than 75% of the total market value of the investment properties; (g) The total equity of the Gutburg Group which is adjusted for deferred taxes, subordinated instruments as well as interest rate swaps related to senior loans is more than 17.5% of all the assets; (h) The payment of dividends, repayment of capital or a similar benefit to shareholders and/or participants (hereafter - Distribution ) which in total is not more than 50% of the profit of the year which is adjusted for market value changes of the investment properties, market value changes of interest rate swaps related to secured loans, deferred taxes expenses as well as expenses for refurbishments and investments; and (i) The adjusted equity ratio of the Gutburg Group must not fall below 22.5% because of a Distribution. F-50

355 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22. TRADE AND OTHER PAYABLES As at December 31, Trade and other payables 85,027 40,869 Prepayments received from tenants 132, ,645 Deferred income 8,665 5,545 Other liabilities 25,224 25, , , OTHER LONG TERM LIABILITIES As at December 31, Tenancy deposits 28,937 21,370 Finance lease liability 2,982 2,989 Loan from associate undertakings (see note 25) - 54 Deferred income - 3,107 Others 6,343 5,189 38,262 32,709 F-51

356 24. PROVISIONS FOR OTHER LIABILITIES AND CHARGES 000 Balance as at January 1, ,967 Movement during the year 5,927 Balance as at December 31, ,894 Movement during the year (4,709) Balance as at December 31, ,185 F-52

357 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25. RELATED PARTY TRANSACTIONS The transactions and balances with related parties are as follows: (i) Loans from associated undertakings (see note 23) Year ended December 31, Other associate undertakings (ii) Interest on loans from related parties Year ended December 31, Interest on loans from related party during the year (iii) Rental and operating income from related party Year ended December Rental and operating income from related party during the year There were no transactions between the group and its key management during the year (except as described in note 20). F-53

358 26. DISPOSAL GROUP HELD FOR SALE In fourth quarter 2016, the Group management committed to a plan to sell few properties, some of them through sale of subsidiaries. Accordingly, assets and liabilities which are included in the disposal group are presented as a disposal group held for sale. Efforts to sell the disposal group have started and a sale is expected within twelve months. No impairment loss was recognized on reclassification of the disposal group as held for sale. The major classes of assets and liabilities comprising the disposal group classified as held for sale are as follows: As at December 31, Assets classified as held for sale Investment property 146,078 - Cash and cash equivalents 1,634 - Other assets 2,782 - Total assets classified as held for sale 150,494 - Liabilities classified as held for sale Loans and borrowings 11,597 - Other liabilities 15,961 - Total liabilities classified as held for sale 27,558 - F-54

359 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT FINANCIAL RISK FACTORS The Group is exposed to the following major risks from its use of financial instruments: / Credit risk / Liquidity risk / Market risk The Group is not exposed to currency risk except for Swiss Franc (CHF) 55 million straight bond maturing in July 2018 as all other investments and financing arrangements are in euro. The Board of Directors has overall responsibility for the establishment and oversight of the Company s risk management framework. 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. (I) CREDIT RISK Credit risk arises because of a failure of counter parties discharging their obligations which could result in a reduction of the amount of future cash inflows from financial assets at the reporting date. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and the Group monitors the ageing profile of its receivables on a continuous basis. (a) Rent and other receivables The Group s exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance to a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. F-55

360 (b) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was as follows: Carrying amount Rent and other receivables (see note 17) 54,941 48,329 Traded securities at fair value through profit and loss 181, , , ,253 The maximum exposure to credit risk for the end of the reporting period derived by the tenants and trade securities risk profile. i. Impairment losses The aging of rent receivables at the end of the reporting period that were not impaired was as follows: Year ended December 31, Neither past due and past due 1 30 days 9,128 8,013 Past due days 7,999 9,024 Past due above 90 days 4,345 2,860 21,472 19,897 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. ii. Cash and cash equivalents The Group held cash and cash equivalents of euro 448,873 thousand as of December 31, 2016 (2015: euro 236,001 thousand), which represents its maximum credit exposure on these assets. There are no restrictions on the Cash and cash equivalents balances of the Group. F-56

361 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (II) 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 committed credit facilities. The following are the remaining contractual maturities at the end of the reporting period and at the end of 2015 of financial liabilities, including estimated interest payments, the impact of derivatives and excluding the impact of netting agreements: As at December 31, 2016 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 Non-derivative financial liabilities Bank loans 937,410 1,064,841 5,397 38,617 68,838 61, ,137 Straight bonds 1,050,078 1,226,184-20,571 71,988 18,250 1,115,375 Convertible bond F 427, ,888-1,025 1,025 1, ,813 Trade payables 85,027 85,027 63,231 21, Total 2,500,424 2,831,940 68,628 82, ,851 81,127 2,458, As at December 31, 2015 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 Non-derivative financial liabilities Bank loans 846, ,980 41,754 30,286 70,835 55, ,393 Straight bonds 1,045,413 1,246,119-20,651 20,651 71,192 1,133,625 Convertible bond C 122, , , Trade payables 40,869 40,869 6,811 34, Total 2,055,758 2,357,864 49,489 85, , ,904 1,879, F-57

362 (III) MARKET RISK a. Profile At the end of the reporting period the interest rate profile of the Group s interest-bearing financial instruments as reported to the management of the Group was as follows: Hedge instruments Nominal amount, as at December 31, Swap 277, ,937 Cap, collar 368, ,463 Total hedge instruments 645, ,401 Fixed interest rate 1,754,433 1,403,080 Variable rate instruments Variable 68,272 72,409 Total interest-bearing financial instruments 2,468,296 2,014,889 b. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the end of the reporting period would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Profit or loss Equity 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease December 31, 2016 Variable, Cap, collar rate instruments (3,028) - (3,028) - Cash flow sensitivity (3,028) - (3,028) - December 31, 2015 Variable, Cap, collar rate instruments (4,324) 585 (4,324) 585 Cash flow sensitivity (4,324) 585 (4,324) 585 (IV) 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. F-58

363 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (V) ACCOUNTING CLASSIFICATIONS AND FAIR VALUES Fair value hierarchy The table below analyzes financial instruments carried at fair value, by the levels in the fair value hierarchy. The different levels have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liabilities that are not based on observable market data (unobservable inputs). 1. Financial assets and liabilities measured at fair value: Level 1 Level 2 Level 3 Total 000 December 31, 2016 Traded securities at fair value through profit or loss 181, ,397 Total assets 181, ,397 Derivative financial instruments - 11,536-11,536 Total liabilities - 11,536-11,536 December 31, 2015 Traded securities at fair value through profit or loss 152, ,924 Total assets 152, ,924 Derivative financial instruments - 6,995-6,995 Total liabilities - 6,995-6,995 (a) The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each reporting date. (b) All of the Group s derivative financial instruments are linked to the bank loan maturities. The calculation of the fair value of hedging instruments is based on discounted cash flows of future anticipated interest payments in place compared with the discounted cash flows of anticipated interest payments at market interest rates based on the hedging instrument agreement at the reporting date. F-59

364 2. Financial assets and liabilities not measured at fair value: Level 1 Level 2 Level 3 Total 000 December 31, 2016 Trade and other receivables - 219, ,668 Total assets - 219, ,668 Loans and borrowings (*) - 925, ,813 Convertible bond - 427, ,909 Straight Bonds - 1,050,078-1,050,078 Tax payables - 15,843-15,843 Trade and other payables - 251, ,503 Total liabilities - 2,671,146-2,671,146 December 31, 2015 Trade and other receivables - 226, ,402 Total assets - 226, ,402 Loans and borrowings (*) - 846, ,900 Convertible bond - 122, ,576 Straight Bonds - 1,045,413-1,045,413 Tax payables - 13,389-13,389 Trade and other payables - 190, ,358 Total liabilities - 2,218,636-2,218,636 (*) including short term bank loan and loan redemption. F-60

365 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (VI) 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 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. Capital management The Group manages its capital to ensure that it will be able to continue as a going concern while increasing the return to owners through striving to keep a low debt to equity ratio. The management closely monitors Loan to Value ratio (LTV), which is calculated, on an entity level or portfolio level, where applicable, in order to ensure that it remains within its quantitative banking covenants and maintain a strong credit rating. The Group seeks to preserve its conservative capital structure with an LTV to remain at a target below 45%. As at December 31, 2016 and 2015 the LTV ratio was 34.7% and 42.1%, respectively, and the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreements. LTV covenant ratio may vary between the subsidiaries of the Group. The Company regularly reviews compliance with Luxembourg and local regulations regarding restrictions on minimum capital. During the years covered by these consolidated financial statements, the Company complied with all externally imposed capital requirements. F-61

366 28. OPERATING LEASE The Group entered into long term rent agreements as a lessor of its investment property. The future minimum rent income which will be received is as follows: As at December 31, Less than a year 40,487 23,512 Between one to five years 115,133 49,137 More than five years 101,034 21, ,654 93, COMMITMENTS The Group does not have significant commitments as at December 31, 2016 and CONTINGENT ASSETS AND LIABILITIES The Group does not have significant contingent assets and liabilities as at December 31, 2016 and EVENTS AFTER THE REPORTING PERIOD There were no material events after the reporting period. F-62

367 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 32. GROUP SIGNIFICANT HOLDINGS The details of the significant holdings in the Group are as follows: December 31, NAME Place of incorporation Principal activities 2016 Holding % 2015 Holding % Subsidiaries held directly by the Company Grandcity Property Ltd Cyprus Holding of investments 94.8% 94.8% December 31, NAME Place of incorporation Principal activities 2016 Holding % 2015 Holding % Significant subsidiaries held directly under Grandcity Property Ltd. Pesoria Limited Cyprus Holding of investments 100% 100% Bunavento Limited Cyprus Holding of investments 100% 100% Bafitek Limited Cyprus Holding of investments 100% 100% Sparol Limited Cyprus Holding of investments 100% 100% Gutburg holdings Limited Cyprus Holding of investments 100% 100% GCP Real Estate Holdings GmbH Germany Holding of investments 100% 100% MBG Portfoliogesellschaft GmbH Germany Holding of investments 94.8% 100% Brown Grodaldo Grundstücks GmbH Germany Investing in real estate properties 94.9% 94.8% Cerise Hollyhock Grundstücks GmbH Germany Investing in real estate properties 100% 94.9% Cato zweite Immobilienbesitz und -verwaltungs GmbH Germany Investing in real estate properties 94% 94% AssetCo Halle GmbH & Co KG Germany Investing in real estate properties 94% 94% Bonny 35. GmbH Germany Investing in real estate properties 94.9% 94.9% Gutburg Immobilien S.A Luxembourg Holding of investments 100% 100% (a) Details of the most significant Group entities referring to investing in real estate properties in Germany and their mother companies. (b) The holding percentage in each entity equals to the voting rights the holder has in it. (c) There are no restrictions on the ability of the Group to access or use the assets of its subsidiaries to settle the liabilities of the Group. F-63

368 REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ (INDEPENDENT AUDITOR) To the Shareholders of Grand City Properties S.A. 24, Avenue Victor Hugo L-1750 Luxembourg REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS We have audited the accompanying consolidated financial statements of Grand City Properties S.A., which comprise the consolidated statement of financial position as at December 31, 2016, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. BOARD OF DIRECTORS RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting 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. RESPONSIBILITY OF THE RÉVISEUR D ENTREPRISES AGRÉÉ Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgement of the Réviseur d Entreprises agréé, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d Entreprises agréé considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Grand City Properties S.A. as of December 31, 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. F-64

369 OTHER INFORMATION The Board of Directors is responsible for the other information. The other information comprises the information included in the Board of Directors report and the Corporate Governance Statement but does not include the consolidated financial statements and our report of réviseur d entreprises 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. 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. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS The Board of Directors Report, is consistent with the consolidated financial statements and has been prepared in accordance with the applicable legal requirements. The information required by Article 68bis 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 and included in the Corporate Governance Statement is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements. Luxembourg, March 21, 2017 KPMG Luxembourg Société coopérative Cabinet de révision agréé J. de Souza F-65

370 Audited Consolidated Financial Statements of Grand City Properties S.A. for the fiscal year ended December 31, 2015 (IFRS) F-66

371 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, Note Revenue 5 333, ,512 Capital gains, property revaluations and other income 6 311, ,969 Share of profit from investments in equity accounted investees - 94 Property operating expenses 7 (151,552) (100,175) Cost of buildings sold 5 - (14,425) Administrative & other expenses 8 (7,153) (5,650) Operating profit 485, ,325 Finance expenses 9a (25,830) (22,040) Other financial results 9b (73) (32,664) Net finance expenses (25,903) (54,704) Profit before tax 460, ,621 Current tax expenses 10 (22,776) (13,863) Deferred tax expenses 10 (43,674) (29,924) Tax and deferred tax expenses (66,450) (43,787) Profit for the year 393, ,834 Other comprehensive income for the year, net of tax - - Total comprehensive income for the year 393, ,834 Profit attributable to: For the year ended December 31, Note Owners of the Company 343, ,575 Hybrid capital investors 18D 14,517 - Non controlling interests 35,120 38,259 Profit for the year 393, ,834 Net earnings per share attributable to the owners of the Company (in euro) Basic earnings per share Diluted earnings per share CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements. F-67

372 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets For the year ended December 31, Note Equipment and intangible assets 13 9,493 7,516 Investment property 14 3,845,979 2,179,982 Other non-current assets ,390 (*)28,552 Deferred tax assets 10C 10,837 11,193 Non-current assets 4,061,699 2,227,243 Cash and cash equivalents 236, ,131 Traded securities at fair value through profit and loss 152,924 2,165 Inventories trading property 17 11,877 5,814 Trade and other receivables , ,705 Current assets 627, ,815 Total assets 4,688,903 2,629,058 (*) Reclassified. CONSOLIDATED STATEMENT OF FINANCIAL POSITION The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements. F-68

373 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) Equity For the year ended December 31, Note Share capital 18 14,097 11,854 Share premium 582, ,171 Other reserves 29,283 22,223 Retained earnings 925, ,666 Equity attributable to the owners of the Company 1,551, ,914 Equity attributable to Hybrid capital investors 478,146 - Equity attributable to the owners of the Company and Hybrid capital investors 2,030, ,914 Non-controlling interests 142,260 90,736 Total equity 2,172,295 1,041,650 Liabilities Loans and borrowings , ,217 Convertible bond , ,451 Straight Bonds 20 1,045, ,381 Derivative financial instruments 15 6,995 9,282 Other long term liabilities 22 32,709 29,808 Deferred tax liabilities 10C 239, ,003 Non-current liabilities 2,239,291 1,434,142 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Current portion of long term loans 20 19,998 5,792 Loan redemption 20 34,678 - Trade and other payables , ,837 Tax payable 13,389 5,670 Provisions for other liabilities and charges 23 18,894 12,967 Current liabilities 277, ,266 Total liabilities 2,516,608 1,587,408 Total equity and liabilities 4,688,903 2,629,058 The Board of Directors of Grand City Properties S.A. authorized these consolidated financial statements to be issued on March 17, 2016 Simone Runge-Brandner Director Refael Zamir Director, CFO Daniel Malkin Director F-69 The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements.

374 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to the owners of the Company 000 Share capital Share Premium Equity portion of convertible bond Other reserves Retained earnings Total Equity attributable to Hybrid capital investors Equity attributable to owners of the Company and Hybrid capital investors Noncontrolling interests Total equity CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Balance as at December 31, , ,171 7,841 14, , , ,914 90,736 1,041,650 Profit for the year , ,933 14, ,450 35, ,570 Other comprehensive income for the year Total comprehensive income for the year , ,933 14, ,450 35, ,570 Issuance of ordinary shares , , , ,776 Issuance of shares related to conversion of convertible bond 1, ,277 (710) , , ,829 Issuance of Hybrid capital notes , , ,146 Amount due to hybrid capital notes holders classified as liability (14,517) (14,517) - (14,517) Issuance of financial instrument ,017-7,017-7,017-7,017 Equity settled share based payment Dividend distribution - (24,333) (24,333) - (24,333) - (24,333) Non-controlling interests arising from initially consolidated companies and other transactions ,404 16,404 Balance as at December 31, , ,910 7,131 22, ,599 1,551, ,146 2,030, ,260 2,172,295 F-70 The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements.

375 Attributable to the owners of the Company 000 Share capital Share Premium Equity portion of convertible bond Other reserves Retained earnings Total Equity attributable to Hybrid capital investors Equity attributable to owners of the Company and Hybrid capital investors Noncontrolling interests Total equity Balance as at December 31, , ,029-14, , , ,924 63, ,925 Profit for the year , , ,575 38, ,834 Other comprehensive income for the year Total comprehensive income for the year , , ,575 38, ,834 Equity portion of convertible bond - - 7, ,841-7,841-7,841 Issuance of shares related to conversion of convertible bond , ,453-30,453-30,453 Equity settled share based payment Transactions with non-controlling interests ,950 1,950-1,950 (13,600) (11,650) Change in noncontrolling interests due to acquisitions and disposals of subsidiaries ,076 3,076 Balance as at December 31, , ,171 7,841 14, , , ,914 90,736 1,041,650 The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements. F-71

376 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31, Note Cash flows from operating activities: Profit for the year 393, ,834 Adjustments for the profit: Depreciation and amortization 1, Share of profit from investments in equity accounted investees - (94) Profit from business combination, other income and sale of investments 6 (86,700) (39,097) Change in fair value of investment property 14 (224,431) (191,871) Net finance expenses 9 25,903 54,704 Tax and deferred tax expenses 10 66,450 43,787 Equity settled share-based payment , ,337 Changes in: Inventories - trading property (943) 14,134 Trade and other receivables (24,825) (39,030) Trade and other payables 20,234 31,359 Provisions for other liabilities and charges 4,506 5, , ,675 Tax paid (18,798) (10,791) Net cash provided by operating activities 157, ,884 Cash flows from investing activities Acquisition of equipment and intangible assets, net (3,680) (1,847) Capex, investments and acquisitions of investment property and advances paid, net 14 (406,475) (349,944) Acquisition of subsidiaries and shareholder loans, net of cash acquired (540,043) (*) (177,641) Disposal of subsidiaries, net of cash disposed 94,121 (*)139,080 Investment in trade securities and financial assets (358,971) 62,449 Net cash used in investing activities (1,215,048) (327,903) (*) Reclassified. CONSOLIDATED STATEMENT OF CASH FLOWS The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements. F-72

377 CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) For the year ended December 31, Note CONSOLIDATED STATEMENT OF CASH FLOWS Cash flows from financing activities Proceeds from issuance of ordinary shares and financial instrument, net ,793 - Amortizations of loans from financial institutions (11,572) (6,209) Repayments of loans from financial institutions, net (62,694) (132,994) Proceeds from Convertible bond, net ,672 Proceeds from Straight bonds, net , ,674 Proceeds from Hybrid capital notes, net ,146 - Transactions with non-controlling interests 598 (11,648) Dividend distributed to the shareholders (24,333) - Interest and other financial expenses, net (32,864) (29,887) Net cash provided by financing activities 1,023, ,608 Net increase in cash and cash equivalents (34,130) 137,589 Cash and cash equivalents at January 1 270, ,542 Cash and cash equivalents at December , ,131 F-73 The notes on pages F-74 to F-116 form an integral part of these consolidated financial statements.

378 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 (D) GROUP RATING 1. GENERAL (A) INCORPORATION AND PRINCIPAL ACTIVITIES Grand City Properties S.A. ( the Company ) was incorporated in Luxembourg on December 16, 2011 as a private company with limited liability. Its registered office is at 24, Avenue Victor Hugo, L-1750 Luxembourg. The consolidated financial statements for the year ended December 31, 2015 consist of the financial statements of the Company and its subsidiaries ( the Group or GCP ). The Group s vision is buying, redeveloping, turning around and optimizing real estate properties in Germany. (B) LISTING ON THE FRANKFURT STOCK EXCHANGE On May 28, 2012 the Company was listed on the Frankfurt Stock Exchange in the Entry Standard market segment. As of the report date the issued share capital consists 153,788,883 shares with a par value of euro 0.10 per share. (C) CAPITAL AND BOND INCREASES For information regarding capital and bond increases, please see notes 18 and 20, respectively. In November 2014, Standard & Poor s Rating Services upgraded the Company s rating as an issuer, its Series B straight bonds, Series C convertible bonds and Series D straight bonds, to BBB- investment grade rating, with a stable outlook. The stable outlook reflects the current liquidity position of the Group and the estimation of cash production capacity from its current operations, among other factors. On February 9, 2015, Moody s Investors Services ( Moody s ) has assigned a first-time long-term issuer rating of Baa2 to the Group, with a stable outlook. Moody s state that the Group s rating is based on moderate leverage, financial strength metrics stronger than those of similarly rated peers and good liquidity profile. The rating is supported by the Group s prudent financial policies and the healthy debt maturity profile. During the first quarter of 2015, S&P and Moody s rated the Hybrid capital notes as BB and Ba1, respectively, both with a stable outlook. On July , S&P raised the Company s rating on its longterm corporate credit rating to BBB from BBB-. The rating of the Company s senior unsecured and subordinated hybrid debt instruments improved by one notch as well to BBB for its senior secured debt and BB+ for its hybrid notes. (E) DEFINITIONS In these consolidated financial statements: The Company The Group GCP ltd Subsidiaries Associates Investees Grand City Properties S.A. The Company and its investees Grandcity Property Limited 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 IAS 28) and that are not subsidiaries. The Company's investment therein is included in the consolidated financial statements of the Company using equity method of accounting Subsidiaries, jointly controlled entities and associates Related parties As defined in IAS 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-74

379 2. BASIS OF PREPARATION (A) STATEMENT OF COMPLIANCE (C) USE OF ESTIMATES AND JUDGMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS). Certain profit or loss, balance sheet and cash flow s items related to the year ended December 31, 2014 have been reclassified to enhance comparability with 2015 figures and are marked as reclassified. The consolidated financial statements were authorized to be issued by the Board of Directors on March 17, (B) 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: Traded securities at fair value through profit or loss; Investment properties are measured at fair value; Derivative financial instruments; Deferred tax liability on fair value gain on investment property. The preparation of consolidated financial statements in accordance with IFRS 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 deviate from such estimates. The estimates and underlying assumptions are revised 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. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are described below: FAIR VALUE OF INVESTMENT PROPERTY The Group uses external valuation reports issued by independent professionally qualified valuers to determine the fair value of its investment properties. Changes in their fair value are recognized in consolidated statement of comprehensive income. 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. 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 an asset is not recoverable. If facts and circumstances indicate that investment in associates may be impaired, the estimated future undiscounted cash flows associated with these associates would be compared to their carrying amounts to determine if a write down to fair value is necessary. F-75

380 TAX AND DEFERRED TAX EXPENSES 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 and deferred tax provisions in the period in which such determination is made. IMPAIRMENT OF INTANGIBLE ASSET Intangible assets are initially recorded at acquisition cost and are amortized on a straight line basis over their useful economic life. Intangible assets that are acquired through a business combination are initially recorded at fair value at the date of acquisition. Intangible assets with an indefinite useful life are reviewed for impairment at least once per year. The impairment test is performed using the discounted cash flows expected to be generated through the use of the intangible assets, using a discount rate that reflects the current market estimations and the risks associated with the asset. When it is impractical to estimate the recoverable amount of an asset, the Group estimates the recoverable amount of the cash generating unit in which the asset belongs to. IMPAIRMENT OF GOODWILL Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of the Group on which the goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash generating units using a suitable discount rate in order to calculate present value. 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 counsel. These estimates are based on the legal counsel s 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 courts, the results could differ from these estimates. PROVISIONS Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. FAIR VALUE HIERARCHY Please see note 14(b) and 25(v). (D) FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in euro which is also the functional currency of the Group, and rounded to the nearest thousand (euro 000), except when otherwise indicated. F-76

381 3. SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF CONSOLIDATION The Group s consolidated financial statements comprise the financial statements of the parent company Grand City Properties S.A. and the financial statements of its subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intra-group balances and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are 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. The Group has considered the impact of the amendment to IFRS 10 Investment Entities, and has determined that it does not meet the definition of an Investment entity. 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. CHANGES IN THE GROUP S OWNERSHIP INTERESTS IN EXISTING SUBSIDIARIES Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. 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 of a subsidiary, the 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. 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 IAS 39 Financial Instruments: Recognition and Measurement. Accounting for business combinations under IFRS 3 only applies if it is considered that a business has been acquired. The Group may invest in subsidiaries that hold properties but do not constitute a business. Those transactions are therefore treated as asset acquisitions rather than business combinations. The Group allocates the cost between the individual identifiable assets and liabilities in the Group based on their relative fair values at the date of acquisitions. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-77

382 (B) BUSINESS COMBINATIONS Acquisitions of businesses are accounted for using the acquisition method, i.e. when control is transferred to the Group. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of 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. Goodwill is initially measured as the excess of the sum of the consideration transferred, the fair value of any non controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non controlling interests in the acquiree and the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognized immediately in the consolidated income statement as a bargain purchase gain. Non controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation may be initially measured either at fair value or at the non controlling interests proportionate share of the recognized amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction by transaction basis. Other types of non controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. 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. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in consolidated income statements. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. 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 (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. F-78

383 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) 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 income statement 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. 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. When necessary, 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. (D) REVENUE RECOGNITION Revenue is recognized in the consolidated statement of comprehensive income when it can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably. RENTAL AND OPERATING INCOME Rental operating income from investment properties are recognized as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental operating income, over the term of the lease. Operating income also includes service charges to third parties and payments for utilities if the costs and the amount of the income can be reliably determined. The revenue is recognized once the service is provided. SALE OF BUILDINGS Revenue from the sale of buildings in the course of ordinary activities is measured as the fair value of the consideration received or receivable. Revenue is recognized when significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of the buildings can be reliably estimated. OTHER Other income is used to represent income resulting in the release of provisions, tax repayments, cancellation of debts and others. (E) NET FINANCE EXPENSES FINANCE INCOME AND EXPENSES Finance income comprises interest income on funds invested. Finance expenses comprise interest expense on loans and borrowings, bonds and loans from third parties. OTHER FINANCIAL RESULTS Other financial results represent changes in the time value of provisions, changes in the fair value of traded securities, profit or losses on derivative financial instruments, borrowing and redemption costs, loan arrangement fees and other one-time payments. Net finance expenses are recognized as they accrue in the statement of comprehensive income, using the effective interest method. F-79

384 (F) DEFERRED TAX, INCOME TAX AND PROPERTY TAXES Tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. German property taxation includes taxes on the holding of real estate property and construction. (G) CURRENT TAX Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. (H) DEFERRED TAX Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for: temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. The Company estimates such utilization of the deferred tax assets to be taken in place within the period of 1-5 years from the balance sheet date. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are realized or the liabilities are settled (liabilities method), based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. F-80

385 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (I) EQUIPMENT AND INTANGIBLE ASSETS Equipment is measured at cost less accumulated depreciation and impairment losses. Depreciation is recognized in profit or loss using the straight line method over the useful lives of each part of an item of equipment. The annual depreciation rates used for the current and comparative periods are as follows: % Furniture, fixtures and office equipment Depreciation methods, useful lives and residual values are reassessed at the reporting date. (J) DEFERRED INCOME Deferred income represents income which relates to future periods. i. PREPAYMENTS Payments received in advance on development contracts for which no revenue has been recognized yet, are recorded as prepayments for clients as at the reporting date and carried under liabilities. ii. TENANCY DEPOSITS Tenancy deposits are paid to ensure the apartment is returned in good condition. The tenancy deposits can also be used if a loss of rent occurs. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 income statement. 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. Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization, and any accumulated impairment losses. (K) INVESTMENT PROPERTY An investment property is property comprising buildings held by the owner to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or for sale in the ordinary course of business. Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial recognition, investment property is measured at fair value which reflects market conditions at the end of the reporting period. Gains or losses arising from changes in the fair values of investment property are included in profit or loss when they arise. Investment property is derecognized on disposal or when the investment property ceases to be used and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of the disposal. The Group determines the fair value of investment property on the basis of valuations by independent valuers who hold recognized and relevant professional qualifications and have the necessary knowledge and experience. F-81

386 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (L) FINANCIAL INSTRUMENTS 1. NON-DERIVATIVE FINANCIAL ASSETS: The Group initially recognizes loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognized initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables. a) Traded securities at fair value through profit or loss Traded securities are classified as at fair value through profit or loss if it is classified as held-for trading or is designated as such on initial recognition. Traded securities are designated as at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group s documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as incurred. Traded securities at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognized in profit or loss. Traded securities designated as at fair value through profit or loss comprise equity securities that otherwise would have been classified as available-for-sale. b) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents, and trade and other receivables. c) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. 2. NON-DERIVATIVE FINANCIAL LIABILITIES Non-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method. 3. SHARE CAPITAL Ordinary shares 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. 4. COMPOUND FINANCIAL INSTRUMENTS Compound financial instruments issued by the Group comprise convertible notes denominated in euro that can be converted to share capital at the option of the holder, when the number of shares to be issued is fixed. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition. Interest related to the financial liability is recognized in profit or loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognized. 5. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are initially accounted for at cost and subsequently measured at fair value. Fair value is calculated using the current values, discounted cash flow analysis or option valuation methods. Derivatives are recorded as assets when their fair value is positive and as liabilities when their fair value is negative. The adjustments on the fair value of derivatives held at fair value are transferred to the consolidated income statement. F-82

387 6. BORROWINGS Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method. 7. TRADE PAYABLES Trade payables are initially measured at fair value. 8. HYBRID CAPITAL NOTES The capital raised is recognize in equity following a deduction for the costs of raising the capital. The interest payments to be made to the Hybrid capital notes holders are recognized directly in equity after a deduction of deferred taxes. (M) DE-RECOGNITION OF FINANCIAL ASSETS AND LIABILITIES (I) FINANCIAL ASSETS A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when: the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass through arrangement; or The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets. (N) IMPAIRMENT OF ASSETS Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). (O) OFFSETTING FINANCIAL INSTRUMENTS Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only 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 asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position. (II) FINANCIAL LIABILITIES A financial liability is derecognized 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 a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated income statement. F-83

388 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (P) 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 income statement. 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. (Q) OPERATING SEGMENTS (T) 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. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Group meets the definition of operating in two operating segments. An operating segment is a component of the Group that meets the following three criteria: Is engaged in business activities from which it 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 to make decisions about resources to be allocated to the segment and assess its performance; and For which separate financial information is available. The main operating segment is rental income relates to owned investment properties. The second operating segment relates to services charges to third parties (e.g. property management) The results from this segment is minor and does not meet the threshold to show as a separate reporting segment, therefore only one reporting segment is presented. (R) COMPARATIVES Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period. (S) EARNINGS PER SHARE Earnings per share are calculated by dividing the net profit attributable to owners of the Company by the weighted number of Ordinary shares outstanding during the period. Basic earnings per share only include shares that were actually outstanding during the period. Potential Ordinary shares (convertible securities such as convertible debentures, warrants and employee options) 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 of earnings of investees is included based on the earnings per share of the investees multiplied by the number of shares held by the Company. (U) LEASED ASSETS Assets held by the Group under leases which transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Determining whether an arrangement contains a lease at inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met: The fulfillment of the arrangement is dependent on the use of a specific asset or assets; and The arrangement contains a right to use the asset(s). At inception or on reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company s incremental borrowing rate. F-84

389 (W) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after January 1, 2015, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to early adopt these standards. (V) TRADING PROPERTY (INVENTORIES) Inventories are trading properties acquired with the clear intention that they are to be sold in the ordinary course of business. Trading properties considered as inventories are shown at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Trading properties are purchased and sold on a portfolio basis. Each separately identifiable portfolio of trading properties is held by a Group subsidiary entity established and/or acquired for the purpose of holding the respective trading property portfolio. Trading properties are recognized in the balance sheet only when full control is obtained. Trading properties are de-recognized in the consolidated financial statements only when full control is transferred outside of the Group. Cost of trading properties is determined on the basis of specific identification of the individual costs of the trading property including acquisition costs such as transfer taxes, legal and due diligence fees. (I) IFRS 9 FINANCIAL INSTRUMENTS (2009, 2010) IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and to add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. (II) IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IF- RIC 13 Customers Loyalty Programs. IFRS 15 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Group has considered the above new standards, interpretations and amendments to published standards and will continue to evaluate the impact on the Group s consolidated financial statements. At this time, the impact of the above publications is not expected to be material to the Group s consolidated financial statements. F-85

390 4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES (A) ACQUISITIONS The Group generally seeks for properties (through share or asset deals) which are undermanaged and with embedded upside potential. In case that the fair value of the total identifiable net assets exceeds the purchase price, the excess amount is recognized in the consolidated comprehensive income statement as a profit from a bargain purchase. During the reporting period the Group through its subsidiaries obtained control of several companies through acquisitions. The significant transactions are as follows: 1. PORTFOLIO 1 At the beginning of 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 94 percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 1,804 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 19,665 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 1,370 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 13,077 thousand and euro 6,966 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: PORTFOLIO 2 At the end of March 2015, the Group obtained control of two companies, which holds real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loan by GCP ltd for the amount of euro 32,457 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 1,522 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interest at the amount of euro 1,417 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 2,926 thousand and euro 993 thousand, respectively. Identifiable assets and liabilities acquired as of the date of the transaction are as follows: 000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Investment property 102,670 Cash and Cash equivalents ,934 Working capital, net (1,541) Bank loans (76,081) Other liabilities, net (2,473) (80,095) Total identifiable net assets 22,839 Non-controlling interests arising from initial consolidation (1,370) Consideration paid regarding acquisition (1,804) Profit arising from business combination (bargain purchase) 19,665 Investment property 36,049 Working capital, net 15 Cash and Cash equivalents 12 36,076 Other liabilities, net (680) (680) Total identifiable net assets 35,396 Non-controlling interests arising from initial consolidation (1,417) Consideration paid regarding acquisition (32,457) Profit arising from business combination (bargain purchase) 1,522 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 26 thousand, and the Group s net profit would have increased by euro 20 thousand. F-86

391 3. PORTFOLIO 3 At the end of March 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loan for the amount of euro 84,540 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 3,151 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interest at the amount of euro 205 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 7,754 thousand and euro 2,934 thousand, respectively. The result of initial consolidation is as follows: 000 Investment property 87,100 Working capital, net 1,190 Cash and Cash equivalents ,777 Other liabilities, net (881) (881) Total identifiable net assets 87,896 Non-controlling interests arising from initial consolidation (205) Consideration paid regarding acquisition (84,540) Profit arising from business combination (bargain purchase) 3,151 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 3,004 thousand, and the Group s net profit would have decreased by euro 460 thousand. 4. PORTFOLIO 4 At the end of March 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 94.9 percent of the shares, voting interests and shareholders loan for the amount of euro 26,756 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 7,332 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 360 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 7,811 thousand and euro 3,565 thousand, respectively. The result of initial consolidation is as follows: 000 Investment property 111,100 Cash and Cash equivalents 1, ,184 Working capital, net (867) Bank loans (60,910) Other liabilities, net (15,959) (77,736) Total identifiable net assets 34,448 Non-controlling interests arising from initial consolidation (360) Consideration paid regarding acquisition (26,756) Profit arising from business combination (bargain purchase) 7,332 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 2,626 thousand, and the Group s net profit would have decreased by euro 1,981 thousand. F-87

392 4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONTINUED) 5. PORTFOLIO 5 6. PORTFOLIO 6 At the end of May 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 94.9 percent of the shares, voting interests and shareholders loan for the amount of euro 76,314 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 5,290 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized negative non-controlling interest at the amount of euro 541 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 4,754 thousand and euro 1,714 thousand, respectively. The result of initial consolidation is as follows: 000 At the end of June 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loan for the amount of euro 31,163 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 6,369 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interest at the amount of euro 1,096 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and loss in amount of euro 1,826 thousand and euro 7 thousand, respectively. The result of initial consolidation is as follows: 000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Investment property 82,530 Working capital, net 414 Cash and Cash equivalents ,104 Other liabilities, net (2,041) (2,041) Total identifiable net assets 81,063 Non-controlling interests arising from initial consolidation 541 Consideration paid regarding acquisition (76,314) Profit arising from business combination (bargain purchase) 5,290 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 3,013 thousand, and the Group s net profit would have decreased by euro 998 thousand. Investment property 39,740 Working capital, net 385 Cash and Cash equivalents ,704 Other liabilities, net (2,076) (2,076) Total identifiable net assets 38,628 Non-controlling interests arising from initial consolidation (1,096) Consideration paid regarding acquisition (31,163) Profit arising from business combination (bargain purchase) 6,369 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 1,459 thousand, and the Group s net profit would have increased by euro 340 thousand. F-88

393 7. PORTFOLIO 7 8. PORTFOLIO 8 At the beginning of July 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 100 percent of the shares, voting interests and shareholders loan for the amount of euro 99,126 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 2,934 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 2,946 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 18,504 thousand and euro 5,128 thousand, respectively. The result of initial consolidation is as follows: 000 Investment property 339,450 Cash and Cash equivalents 4, ,398 Bank loans (147,094) Bond (52,077) Working capital, net (812) Other liabilities, net (39,409) (239,392) Total identifiable net assets 105,006 Non-controlling interests arising from initial consolidation (2,946) Consideration paid regarding acquisition (99,126) Profit arising from business combination (bargain purchase) 2,934 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 18,517 thousand, and the Group s net profit would have decreased by euro 1,699 thousand. At the end of August 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 85.7 percent of the shares, voting interests and shareholders loan for the amount of euro 32,876 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 7,282 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 3,185 thousand. From the date in which the Group has obtained control, until the end of the reporting period, the Group recorded revenue and profit in amount of euro 3,182 thousand and euro 1,420 thousand, respectively. The result of initial consolidation is as follows: 000 Investment property 79,881 Working capital, net 232 Cash and Cash equivalents 5,507 85,620 Other liabilities, net (3,184) Bank loans (39,093) (42,277) Total identifiable net assets 43,343 Non-controlling interests arising from initial consolidation (3,185) Consideration paid regarding acquisition (32,876) Profit arising from business combination (bargain purchase) 7,282 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 5,542 thousand, and the Group s net profit would have increased by euro 493 thousand. F-89

394 4. ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONTINUED) 10. PORTFOLIO PORTFOLIO 9 At the end of December 2015, the Group obtained control of a company, which holds real estate properties in Germany by acquiring 94.9 percent of the shares, voting interests and shareholders loan for the amount of euro 139,817 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 27,555 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interest at the amount of euro 2,297 thousand. During 2015, the Group obtained control of several companies, which hold real estate properties in Germany by acquiring percent of the shares, voting interests and shareholders loans for the amount of euro 32,744 thousand. As a result of the business combination, the Group recorded profit arising from business combination (due to a bargain purchase) of euro 4,663 thousand in Capital gains, property revaluations and other income in the consolidated statement of comprehensive income. The Group recognized non-controlling interests at the amount of euro 5,527 thousand. The result of initial consolidation is as follows: 000 Investment property 84,805 Working capital, net 2,143 Cash and Cash equivalents 2,308 89,256 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The result of initial consolidation is as follows: 000 Investment property 175,169 Cash and Cash equivalents 2, ,376 Working capital, net (48) Other liabilities, net (7,659) (7,707) Total identifiable net assets 169,669 Non-controlling interests arising from initial consolidation (2,297) Consideration paid regarding acquisition (139,817) Profit arising from business combination (bargain purchase) 27,555 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 12,784 thousand, and the Group s net profit would have increased by euro 5,325 thousand. Bank loans (36,319) Other liabilities, net (10,003) (46,322) Total identifiable net assets 42,934 Non-controlling interests arising from initial consolidation (5,527) Consideration paid regarding acquisition (32,744) Profit arising from business combination (bargain purchase) 4,663 If the purchase was carried out at the beginning of the reporting period, the Group s revenues would have increased by euro 5,325 thousand, and the Group s net profit would have decreased by euro 930 thousand. (B) DISPOSALS During the reporting period, the Group sold several non-core properties (through share deals) for a total consideration of euro 94 million. The Group recorded capital gain in amount of euro 1 million as part of the consolidated statement of comprehensive income. F-90

395 5. REVENUE Year ended December Rental and operating income 333, ,837 Revenue from sales of buildings - (*)14, , ,512 (*) Of which euro 14.4 million refers to cost of building sold in 2014 (see also note 17). 6. CAPITAL GAINS, PROPERTY REVALUATIONS AND OTHER INCOME Year ended December Change in fair value in investment property (see note 14) 224, ,871 Profit arising from business combinations (Bargain Purchase see note 4) 85,763 35,472 Capital gains and other income 937 3, , ,969 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. PROPERTY OPERATING EXPENSES Year ended December Purchased services (114,449) (73,838) Maintenance and refurbishment (21,202) (14,761) Personnel expenses (12,119) (7,376) Depreciation and amortization (1,382) (*) (572) Other operating costs (2,400) (*) (3,628) (151,552) (100,175) (*) reclassified. F-91

396 8. ADMINISTRATIVE & OTHER EXPENSES 9. NET FINANCE EXPENSES Year ended December Personnel expenses (2,084) (1,772) Audit and accounting costs (*) (1,630) (1,230) Legal and professional consultancy fees (1,500) (1,121) Depreciation and amortization (347) (331) Marketing and other expenses (1,592) (1,196) (7,153) (5,650) (*) Out of which euro 1,096 thousand and euro 449 thousand related to audit and audit-related fees provided by KPMG audit firms and other audit firms, respectively, and euro 75 thousand and euro 10 thousand related to tax and consultancy services provided by KPMG audit firms and other audit firms, respectively. a. Finance expenses Year ended December Finance expenses from financial institutions and third parties, net (10,496) (7,842) Finance expenses from straight and convertible bonds, net (15,320) (14,180) Other finance expenses (14) (18) b. Other financial results (25,830) (22,040) Changes in fair value of financial assets and liabilities, net (a) 2,816 (26,211) Finance-related costs (2,889) (6,453) (73) (32,664) (a) In 2014, mainly reflect early redemption fee of bond series B during 2014 (see also note 20 (B)(b)). F-92

397 10. TAXATION A. 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 29.22% (2014: 29.22%). The German subsidiaries are subject to taxation under the laws of Germany. Income taxes are calculated using a federal corporate tax of 15.0% for December 31, 2015 (2014: the same), plus an annual solidarity surcharge of 5.5% on the amount of federal corporate taxes payable (aggregated tax rate: %). The Cyprus subsidiaries are subject to taxation under the laws of Cyprus. The corporation tax rate for Cyprus companies is 12.5% (2014: 12.5%). Under certain conditions interest income of the Cyprus companies may be subject to defence contribution at the rate of 30% (2014: 30%). In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17% for 2014 and thereafter. B. TAXES INCLUDED IN CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December Corporation tax (11,912) (6,144) Deferred tax, see also (c) below (43,674) (29,924) Property tax (10,864) (7,719) Charge for the year (66,450) (43,787) The Netherlands subsidiary is subject to taxation under the laws of the Netherlands. The corporation tax rate for Netherlands companies is 25% and 20% for profit before tax above euro 200 thousands and below euro 200 thousands respectively (2014: the same). German property taxation includes taxes on the holding of real estate property. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-93

398 C. MOVEMENT ON THE DEFERRED TAXATION ACCOUNT IS AS FOLLOWS: DEFERRED TAX LIABILITIES Fair value gains on investment property Other deferred tax 000 Total Balance as at December 31, ,169-80,169 Charged to: Consolidated statement of comprehensive income 34,153 1,270 35,423 Deferred tax arising from initial consolidation 36,284-36,284 Deconsolidation (10,873) - (10,873) Transfer to deferred tax assets (2,411) 2,411 - Balance as at December 31, ,322 3, ,003 Charged to: Consolidated statement of comprehensive income 43,422-43,422 Deferred tax arising from initial consolidation 62,497-62,497 Deconsolidation (7,548) - (7,548) Balance as at December 31, ,693 3, ,374 F-94

399 10. TAXATION (CONTINUED) DEFERRED TAX ASSETS Derivative financial instruments, net Deferred taxes loss carried forward, net Other deferred tax Total 000 Balance as at December 31, , ,491 Charged to: - Consolidated statement of comprehensive income (999) 6,498-5,499 Deferred tax arising from initial consolidation 13 3,190-3,203 Balance as at December 31, ,411-11,193 Charged to: Consolidated statement of comprehensive income (570) (87) 405 (252) Deconsolidation 401 (505) - (104) Balance as at December 31, , ,837 The Group contains immaterial carried forward losses on which no deferred tax assets were recognized. D. RECONCILIATION OF EFFECTIVE TAX RATE Year ended December NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 000 Profit before tax 460, ,621 Statutory tax rate 29.22% 29.22% Tax computed at the statutory tax rate 134,418 84,043 Decrease in taxes on income resulting from the following factors: Group's share of earnings from companies accounted for at equity - (15) Effect on tax rates in foreign jurisdictions (at %) (50,223) (36,097) Effect on tax rates in foreign jurisdictions (at 12.5%) (8,496) (1,575) Others (including property tax) (9,249) (2,569) Tax and deferred tax expenses 66,450 43,787 F-95

400 11. NET EARNINGS PER SHARE ATTRIBUTABLE TO THE OWNERS OF THE COMPANY A. BASIC EARNINGS PER SHARE The calculation of basic earnings per share as of December 31, 2015 is based on the profit attributable to ordinary shareholders of euro 343,933 thousand (2014: euro 205,575 thousand), and a weighted average number of ordinary shares outstanding of 126,932 thousand (2014: 115,577 thousand), calculated as follows: 1. PROFIT ATTRIBUTED TO ORDINARY SHAREHOLDERS (BASIC) Year ended December Profit for the year, attributable to the owners of the Company 343, ,575 B. DILUTED EARNINGS PER SHARE The calculation of diluted earnings per share at December 31, 2015 is based on profit attributable to ordinary shareholders of euro 344,346 thousand (2014: euro 207,420 thousand), and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 146,725 thousand (2014: 135,400 thousand), calculated as follows: 1.PROFIT ATTRIBUTED TO ORDINARY SHAREHOLDERS (DILUTED) Year ended December Profit for the year, attributable to the owners of the Company (basic) 343, ,575 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES (BASIC) Year ended December Issued ordinary shares on January 1 118, ,425 Capital increase 2,994 Effect of exercise of convertible bond Series C 5, Weighted average number of ordinary shares as at December 31, 126, ,577 Basic earnings per share (euro) Interest expense on convertible bonds, net of tax 413 1,845 Profit for the year, attributable to the owners of the Company (diluted) 344, , WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES (DILUTED) Year ended December Issued ordinary shares on January 1 118, ,425 Capital increase 2,994 - Effect of exercise of convertible bond Series C 25,168 19,971 Effect of warrants 22 - Effect of equity settle share based payment - 4 Weighted average number of ordinary shares as at December 31, 146, ,400 Diluted earnings per share (euro) F-96

401 12. OTHER NON-CURRENT ASSETS Year ended December Tenancy deposit (a) 36,617 13,118 Advanced payment for investment property 1,655 (*) 5,475 Investment in other long term assets 154,129 (*) 6,967 Finance lease asset 2,989 2, ,390 28,552 (a) Tenancy deposits mainly include 1-3 months net rent from the tenants which is paid at the beginning of the lease. The deposits are considered as a security payment by the tenant and the Group can use those funds mainly if the tenant has unpaid debts or causes damages to the property. Past experience shows that the majority of the leases are long term and therefore the deposits are presented as long term assets. (*) Reclassified. 13. EQUIPMENT AND INTANGIBLE ASSETS Furniture, fixtures and office equipment Goodwill Computer software Total 000 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Cost Balance as at January 1, ,188 2, ,702 Additions 1, ,788 Equipment and intangible assets arising from initial consolidation 353 1,904-2,257 Deconsolidation (9) - - (9) Balance as at December 31, ,709 4,604 1,425 8,738 Additions 3, ,680 Equipment and intangible assets arising from initial consolidation, net Balance as at December 31, ,309 4,604 1,531 12,444 Depreciation/Amortization Balance as at January 1, Depreciation/Amortization for the year Balance as at December 31, ,222 Depreciation/Amortization for the year 1, ,729 Balance as at December 31, , ,951 Carrying amounts Balance as at December 31, ,238 4, ,493 Balance as at December 31, ,020 4, ,516 F-97

402 14. INVESTMENT PROPERTY A. COMPOSITION B. MEASUREMENT OF FAIR VALUE Year ended December Balance as of January 1 2,179,982 1,368,281 Acquisitions of investment property during the year 409, ,293 Investment property arising from initial consolidation 1,138, ,543 Disposal of investment property due to loss of control (101,720) (170,006) Transfer to Inventories - trading property (5,120) - Fair value adjustment (see note 6) 224, ,871 Balance as at December 31 3,845,979 2,179,982 (I) FAIR VALUE HIERARCHY The fair value of investment property was determined by external, independent property valuers, having appropriate recognized professional qualifications and recent experience in the location and category of the property being valued. The independent valuers provide the fair value of the Group s investment property portfolio at least once a year. The range of the discount rates applied to the net annual rentals to determine the fair value of property is between 5%-7.5% (2014: 6.00%-7.25% ). All the investment properties in the group in total fair value amount of euro 3,845,979 (2014: 2,179,982) thousand has been categorized as a Level 3 fair value based on the inputs to the valuation technique used. (II) LEVEL 3 FAIR VALUE The table in part A above shows reconciliation from the opening balances to the closing balances for Level 3 fair values. VALUATION TECHNIQUE AND SIGNIFICANT UNOBSERVABLE INPUTS Valuation technique Discounted cash flows: The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs such as rent-free period and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms. Significant unobservable inputs Assumed market rental growth weighted average 1.5% (2014: 1.2%); Void periods -average 2-4 months after the end of each lease (2014: the same); Assumed future occupancy rate in the range of 93% to 100%. Occupancy rate is as of December 2015, 87.5% (2014: 86.7%); Risk adjusted discount rates in the range of 5%-7.5%. Weighted average 6.19% (2014: 6.7%). Increase / decrease of one per cent in discount rate would lead to decrease / increase the Investment property fair value by euro 49,556,038 thousand and euro 35,551,070 thousand, respectively. Inter-relationship between key unobservable inputs and fair value measurement The estimated fair value would increase (decrease) if: Expected market rental growth is higher (lower); Void periods were shorter (longer); The occupancy rates were higher (lower); The risk-adjusted discount rate is lower (higher). F-98

403 15. DERIVATIVE FINANCIAL INSTRUMENTS Year ended December Year of maturity 000 Liabilities Non-current portion ,995 9,282 The Group uses interest rate swaps, collars, caps and floors ( hedging instruments ) to manage its exposure to interest rate movements on its bank borrowings. All of the Group s derivatives financial instruments are linked to the bank loans maturity (see note 21A). The calculation of the fair value of hedging instruments is based on discounted cash flows of future anticipated interest payments in place compared with the discounted cash flows of anticipated interest payments at market interest rates based on the hedging instrument agreement at the reporting date. 16. TRADE AND OTHER RECEIVABLES Year ended December NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Operating costs prepayments 127,662 80,172 Rent and other receivables (a) 48,329 28,623 Prepaid expenses 1, Other short term assets 49,291 14, , ,705 (a) Of which euro 19.9 million refers to rent receivables (2014: euro 14.1 million) The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above. F-99

404 17. INVENTORIES - TRADING PROPERTY Year ended December a. During 2014, the Group has sold approximately 210 units (16 thousand square meters) which were presented as inventory trading property for gross proceeds at the amount of euro 14.7 million. See also note 5. Inventories - trading property 11,877 5,814 11,877 5,814 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. EQUITY A. SHARE CAPITAL Authorized Number of shares As at December 31, euro in thousands Number of shares euro in thousands Ordinary shares of euro 0.10 each 200,000,000 20, ,000,000 20,000 Issued and fully paid Balance as of January 1, 118,541,449 11, ,425,000 11,542.5 Issuance of new ordinary shares 9,808, Exercise of convertible bond Series C 12,620,565 1,262 3,116, Balance on December 31, 140,970,655 14, ,541,449 11,854 F-100

405 18. EQUITY (CONTINUED) B. AUTHORIZED CAPITAL Under its Memorandum of association the Shareholders set the authorized share capital at 200,000,000 ordinary shares of nominal value of euro 0.10 each. C. ISSUED CAPITAL DURING THE REPORTING PERIOD (1) On September 10, 2015 the Company received gross proceeds of euro 151 million from a capital increase against a cash contribution. A total of 9.5 million new ordinary shares were placed at an issue price of euro 15.9 as part of a private placement to institutional investors. (2) On September 29, 2015 the Company received gross proceeds of euro 5 million from capital increase against a cash contribution. A total of thousand new shares were placed at an issue price of euro (3) On September 29, 2015 the Company received gross proceeds of euro 7 million from a placement of a financial instrument a 1.1 million call options convertible to the Company s shares (in ratio of 1:1) for an additional price of euro per option and exercisable in the period between March 2016 to August (4) During 2015, a total amount of euro million of convertible bonds Series C were converted to shares, according to the convertible bond s terms. A total of 12.6 million shares were issued. See also note 29a. D. ISSUANCE OF HYBRID CAPITAL NOTES (1) On February 13, 2015, the Company successfully placed euro 150 million in aggregate principal amounts of Hybrid capital notes. These notes were issued at a price of 96.3% of the principal amount. These Hybrid capital notes are of unlimited duration and can only be called back by the Company only on certain contractually fixed dates or occasions. Up until the first call date in February 2022, the Hybrid capital notes shall bear a coupon rate of 3.75% p.a. In case the Company does not exercise its call right at that point, the coupon rate applied until the next call date (February 2027) shall correspond to the five-year swap rate plus a margin of basis points p.a. The mark-up will increase by 25 basis points (to basis points p.a.) as of February 2027 and by another 75 basis points (to basis points p.a.) as of February (2) On March 3, 2015, the Company placed a tap issue of euro 250 million in aggregate principal amounts of the Hybrid capital notes. These notes were issued at a price of 97.04% of the principal amount. (3) On July , the Company completed a successful tap up of its 3.75% Hybrid capital notes by euro 100 million. The new notes have the same terms and conditions as the existing ones and increased the nominal amount of the outstanding 3.75% Hybrid capital notes to euro 500 million (4) These Hybrid capital notes are presented in the consolidated statement of financial position as equity attributable to its Hybrid capital investors, which is part of the total equity of the Group. The coupon is deferrable until resolution of a dividend to the shareholders. The deferred amounts shall not bear interest. Due to dividend distribution, an amount of euro 14.5 million payable to the Hybrid capital notes holders has been reclassified and presented in Trade and other payables. E. SHARE PREMIUM The share premium derives directly from the capital increases which were affected since the date of incorporation and exercise conversions of bonds into shares. F. OTHER RESERVES The other reserves include shareholders loan that were converted to equity and therefore can be distributed at any time, as well as share-based payment reserve, financial instrument and an equity component of Convertible bond C, which temporally cannot be distributed. G. RESOLUTION OF DIVIDEND DISTRIBUTION On June , the shareholders annual meeting resolved upon the distribution of cash dividend in the amount of euro 0.2 per share (ex date and payment date were on June 25, 2015 and on July 3, 2015, respectively). F-101

406 19. SHARE BASED PAYMENT AGREEMENTS A. DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENTS On December 31, 2015 and 2014, the Group had the following share-based payment arrangements: (I) INCENTIVE SHARE PLAN The annual general meeting has approved to authorize the board of Directors to issue up to one million shares for an incentive plan for the board of directors, key management and senior employee s. The incentive plan has 4 years vesting period with specific milestones to enhance management long term commitment to GCP strategic targets. Main strategic targets are long term improvement in operational and financial targets such as Like for Like vacancy reduction and like-for-like rent increase, operational efficiency, increase in adjusted EBIDTA per share, FFO per share and EPS. Management will be incentivized for keeping conservative financial ratios, with the strategic target to further improve the Group s rating. The key terms and conditions related to program are as follows: Incentive granted to Board of Directors, key management and senior employees Number of instruments in thousands Vesting period Contractual life of the incentive On October 1, years 4 years B. RECONCILIATION OF OUTSTANDING SHARE OPTIONS The number and weighted-average exercise prices of share options under the share incentive program and replacement awards were as follows: Year ended December Number of shares Number of shares Outstanding on January Granted during the year Outstanding on December During the reporting period, the total amount recognized as share-based payment was euro 753 thousand. It was presented as administrative and other expenses in the consolidated statement of comprehensive income and as sharebased payment reserve in the consolidated statement of changes in equity. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-102

407 20. LOANS AND BORROWINGS A. COMPOSITION Year ended December NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Long - term liabilities Weighted average interest rate Maturity date 000 Bank loans (*) 2.2% , ,830 Other loans 3% Total long term loans 792, ,217 Straight and convertible Bonds Convertible bond (C) 1.5% , ,451 Series D bond (D) 2% , ,381 Series E bond (E) 1.5% ,517 - Staright bond CHF (F) 4.75% ,864 - Total Straight and convertible Bonds 1,167, ,832 Short - term liabilities Loan redemption 2.2% ,678 - Bank loans 2.2% ,998 5,792 Total Short - term loans 54,676 5,792 (*) approx. Euro 1.8B of investment properties are encumbered. F-103

408 B. BOND SERIES B On June 3, 2013 the Company issued in a private placement euro 100 million unsubordinated straight bonds maturing in June 2020, bearing a coupon of 6.25% p.a. payable semi-annually in arrears ( Series B bond ). On July 24, 2013, the Company successfully increased the Series B bond issued in June by additional euro 100 million (nominal value). On April 15, 2014, the Company successfully completed with the placement of additional euro 150 million (nominal value) of Series B bond, for a consideration that reflects % of their principal amount. The total aggregate principal amount of the series B bond was thereby increased to euro 350 million (nominal value). Morgan Stanley acted as the sole underwriter. During the fourth quarter of 2014, the Company redeemed the whole outstanding amount of Series B bonds (see also (b) below). Year ended December Balance at the beginning of the year - 195,681 Proceeds from issuance of bond during the year (200,000 notes at euro 1,000 par value) - - Proceeds from issuance of bond during the year (150,000 notes at euro 1,000 par value) (a) - 160,875 Issuance costs - (2,291) Net proceeds during the year - 158,584 Financial expenses for the year - 12,337 Financial expenses paid - (16,602) Redemption of bond Series B (b) - (350,000) Carrying amount of liability at the end of the year - - Non-current portion of bond series B - - Accrued interest - - Total bond series B - - a. This amount includes additional euro 10,875 thousand (reflects 7.25% of the par value), allocated as deferred income and presented in other long term liabilities account balance. As at December , due to the redemption of Series B bonds (see (b) below) the Company has realized all the deferred income. b. During the fourth quarter of 2014, the Company resolved to redeem the outstanding euro 350 million Series B bonds in two phases; first, the Company redeemed an outstanding amount of euro 331,833 thousand, at 109.5% of their principle amount (together with accrued and unpaid interest to that date). Second, the Company exercised its rights to redeem the outstanding amount of euro 18,167 thousand, at their principle amount (together with the accrued and unpaid interest to that date). C. CONVERTIBLE BOND SERIES C On February 24, 2014, the Company issued euro 150 million (nominal value) bonds, convertible into ordinary shares of the Company and bear a coupon of 1.50% p.a. payable semi-annually in arrears ( Convertible bond series C ). The initial conversion price was fixed at euro The bonds were issued at 100% of their principle amount and will be redeemed at maturity at % of their principle amount. On June 19, 2014, the Company successfully completed the tap up placement of additional euro 125 million (nominal value) of Convertible bond series C, for consideration that reflects % of their principal amount. The total aggregate principal amount of the Convertible bond series C increased to euro 275 million (nominal value). During December 2014, a total amount of euro 30 million of convertible bonds Series C were converted to shares, according to the convertible bond s terms. A total of 3.1 million shares were issued. During 2015, a total amount of million of convertible bonds Series C were converted to shares, according to the convertible bond s terms. A total of 12.6 million shares were issued. See also note 29a. F-104

409 20. LOANS AND BORROWINGS (CONTINUED) Year ended December Balance at the beginning of the year 247,451 - Proceeds from issuance of convertible bond series C (1,500 notes at euro 100,000 par value) - 150,000 Proceeds from tap up issuance of convertible bond series C (1,250 notes at euro 100,000 par value) (a) - 139,063 Total issuance costs - (4,391) Net proceeds during the year - 284,672 Amount initially classified as equity (a) (b) - (7,995) Financial expenses for the year 583 2,538 Financial expenses paid (3,433) (1,464) Conversion to ordinary shares (118,918) (30,300) Carrying amount of liability at the end of the year 125, ,451 Non-current portion of Convertible bond series C 122, ,451 Accrued interest - 1,297 Total convertible bond series C 122, ,748 Deferred income 3,107 5,703 (a) This amount includes additional euro 14 million that were received as part of the bond placement (reflects 11.25% of the par value), out of which euro 7.3 million were allocated as an equity component according to external economic valuer. The residual amount of euro 6.7 million was allocated as a deferred income and presented in other long term liabilities account balance. (b) The equity component referring to the first placement of convertible bond series C is euro 0.6 million. D. BOND SERIES D On October 29, 2014, the Company successfully completed the placement EUR 500 million, in aggregate principal amount of new fixed-rate secured bonds, due 2021 with a coupon of 2 per cent and a price of % of their principal amount (the Series D Bonds ). The offer was over-subscribed. Starting that day, Series D bond is traded on the Irish stock exchange, on its regulated market. Year ended December Balance at the beginning of the year 478,107 - Proceeds from issuance of bond during the year (500,000 notes at euro 100,000 par value) - 477,820 Issuance costs (610) (1,971) Net proceeds during the year (610) 475,849 Expenses for the year 13,261 2,258 Financial expenses paid (10,000) - Carrying amount of liability at the end of the year 480, ,107 Non-current portion of bond series D 479, ,381 Accrued interest 1,726 1,726 Total bond series D 480, ,107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-105

410 20. LOANS AND BORROWINGS (CONTINUED) F. STRAIGHT BOND CHF In July 2015 the Group acquired a subsidiary (through business combination) which placed on July 8, 2013 a Swiss Franc (CHF) 55 million straight bond maturing in July The bond bears a coupon of 4.75% p.a., payable annually in arrears starting from July The bond is listed on the SIX Swiss Exchange. Year ended December E. BOND SERIES E On April 17, 2015, the Company successfully placed euro 400 million in aggregate principal amount of series E straight bonds. The new bond series was placed of an issue price of 96.76% of the principal amount and mature after 10 years. It bears a coupon of 1.5% p.a., payable semi-annually in arrears starting from October On September 18, 2015, the Company successfully completed with the tap up placement of additional euro 150 million (nominal value) of straight bond series E, for a consideration that reflected 89.21% of their principal amount. The total aggregated principal amount of the straight bond series E increased to euro 550 million (nominal value). 000 Balance as at the business combination (July 2, 2015) 54,582 - Finance income for the year, net (1,058) - Expenses paid (2,495) Carrying amount of liability at the end of the year 51,029 - Non-current portion of straight bond 49,864 - Accrued interest 1,165 - Total bond 51,029 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December Proceeds from issuance of bond series E (550,000 notes at euro 100,000 par value) 520,860 - Issuance costs (5,854) - Net proceeds during the year 515,006 - Expenses for the year 6,342 Financial expenses paid (3,135) - Carrying amount of liability at the end of the year 518,213 - Non-current portion of bond series E 516,517 - Accrued interest 1,696 - Total bond series E 518,213 - G. (1) SECURITY, NEGATIVE PLEDGE (a) A first ranking charge, governed by Cyprus law, over all ordinary shares held by the Company in GCP ltd.; (b) A first-ranking account pledge, governed by Luxembourg law, over each bank account held by the Company; (c) First-ranking account pledges, governed by Luxembourg law, over each bank account held by GCP ltd.; and (d) First-ranking charges, governed by Cypriot law, over each bank account held by GCP ltd. (e) For Gutburg Immobilien S.A. (hereafter Gutburg ), a wholly-owned subsidiary of the Company, and its subsidiaries (hereafter Gutburg Group ), a negative pledge, default including cross default and change of control. F-106

411 (2) COVENANTS (AS DEFINED IN THE TERMS AND CONDITIONS OF THE BONDS) 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 if, immediately after giving effect to the incurrence of such additional Indebtedness and the application of the net proceeds of such incurrence: (a) The sum of: (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% of the sum of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at the Last Reporting Date; (ii) 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) The sum of: (i) the Consolidated Secured Indebtedness (excluding the Series B Bonds, the Series C Bonds and the Series D Bonds and less Cash and Cash Equivalents) as at the Last Reporting Date; and (ii) the Net Secured Indebtedness (excluding the Series B Bonds, the Series C Bonds and the Series D Bonds and less Cash and Cash Equivalents) incurred since the Last Reporting Date shall not exceed 45% of the sum of (without duplication): (i) the Total Assets (less Cash and Cash Equivalents) as at the Last Reporting Date; (ii) 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); (c) The Company undertakes that, on each Reporting Date, the Consolidated Coverage Ratio will be at least 2.0; (d) 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% 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; (e) GCP ltd. will not open, maintain or hold any interest, in each case directly or indirectly, in any account whatsoever with any bank or financial institution except for the charged accounts, unless the Issuer or GCP ltd., respectively, grant a first-ranking security interest, satisfactory to the Trustee, over the respective account in favor of the Trustee, for the benefit of the Trustee and the Bondholders; (f) Will not permit any restriction on the ability of any subsidiary of the Company to (i) make or pay dividends or any other distributions on its share capital to the Company or any of the Company s investees or (ii) (a) pay any indebtedness owed to the Company or any of the Company s subsidiaries (b) make loans or advances to the Company or any of the Company s subsidiaries or (c) transfer any of its properties or assets to the Company or any of the Company s subsidiaries; and (g) The total indebtedness incurred by the group in respect of project financing debt shall not exceed the higher of euro 65 million or 25% of the portfolio value. For Gutburg s CHF bond: (h) All current and future financial liabilities of the Gutburg Group in total (excluding the bond) is not more than 75% of the total market value of the investment properties; (i) The total equity of the Gutburg Group which is adjusted for deferred taxes, subordinated instruments as well as interest rate swaps related to senior loans is more than 17.5% of all the assets; (j) The payment of dividends, repayment of capital or a similar benefit to shareholders and/or participants (hereafter - Distribution ) which in total is not more than 50% of the profit of the year which is adjusted for market value changes of the investment properties, market value changes of interest rate swaps related to secured loans, deferred taxes expenses as well as expenses for refurbishments and investments; (k) The adjusted equity ratio of the Gutburg Group must not fall below 22.5% because of a Distribution. F-107

412 21. TRADE AND OTHER PAYABLES Year ended December Trade and other payables 40,869 28,730 Prepayments received from tenants 118,645 75,249 Deferred income 5,545 2,816 Other liabilities 25,299 22, , , OTHER LONG TERM LIABILITIES Year ended December Tenancy deposits 21,370 13,270 Finance lease liability 2,989 2,991 Loan from associate undertakings (see note 24) Deferred income 3,107 5,703 Others 5,189 7,763 32,709 29, PROVISIONS FOR OTHER LIABILITIES AND CHARGES 000 Balance as at January 1, ,059 Movement during the year 7,908 Balance as at December 31, ,967 Movement during the year 5,927 Balance as at December 31, , RELATED PARTY TRANSACTIONS The transactions and balances with related parties are as follows: (i) Loans from associated undertakings (see note 22) Year ended December Other associate undertakings (ii) Interest on loans from related parties Year ended December Interest on loans from related party during the year There were no transactions between the group and its key management during the year (except as described in note 19) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F-108

413 25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT FINANCIAL RISK FACTORS The Group is exposed to the following major risks from its use of financial instruments: Credit risk Liquidity risk Market risk The Group is not exposed to currency risk except for Swiss Franc (CHF) 55 million straight bond maturing in July 2018 as all other investments and financing arrangements are in euro. The Board of Directors has overall responsibility for the establishment and oversight of the Company s risk management framework. 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. (I) CREDIT RISK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Credit risk arises because of a failure of counter parties discharging their obligations which could result in a reduction of the amount of future cash inflows from financial assets at the reporting date. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and the Group monitors the ageing profile of its receivables on a continuous basis. (a) Rent and other receivables The Group's exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance to a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. (b) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was as follows: Carrying amount Rent and other receivables (see note 16) 48,329 28,623 Traded securities at fair value through profit and loss 152,924 2, ,253 30,788 The maximum exposure to credit risk for the end of the reporting period derived by the tenants and trade securities risk profile. I. IMPAIRMENT LOSSES The aging of rent receivables at the end of the reporting period that were not impaired was as follows: Year ended December Neither past due and past due 1 30 days 8,013 2,569 Past due days 9,024 5,815 Past due above 90 days 2,860 5,717 (*) 19,897 14,101 (*) Of which euro 4.8 million derives from year end acquisitions. (2014: euro 1.7 million) 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. II. CASH AND CASH EQUIVALENTS The Group held cash and cash equivalents of euro 236,001 thousand as of December 31, 2015 (2014: euro 270,131 thousand), which represents its maximum credit exposure on these assets. There are no restrictions on the Cash and cash equivalents balances of the Group. F-109

414 25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (II) 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 committed credit facilities. The following are the remaining contractual maturities at the end of the reporting period and at the end of 2015 of financial liabilities, including estimated interest payments, the impact of derivatives and excluding the impact of netting agreements: As at December 31, 2015 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Non-derivative financial liabilities Bank loans 846, ,980 41,754 30,286 70,835 55, ,393 Straight bonds 1,045,413 1,246,119-20,651 20,651 71,192 1,133,625 Convertible bond C 122, , , Trade payables 40,869 40,869 6,811 34, Total 2,055,758 2,357,864 49,489 85, , ,904 1,879,018 As at December 31, 2014 Non-derivative financial liabilities Carrying amount Total 000 Contractual cash flows including interest 2 months or less 2-12 months years 2-3 years More than 3 years Bank loans 542, , ,686 36,131 93, ,714 Straight bonds 476, ,000-10,000 10,000 10, ,000 Convertible bond C 240, ,487 1,835 1,835 3,670 3, ,477 Other loans Trade payables 28,730 28,730 4,788 23, Total 1,288,571 1,511,525 7,606 54,476 50, ,061 1,292,191 F-110

415 (III) MARKET RISK a. Profile At the end of the reporting period the interest rate profile of the Group s interest-bearing financial instruments as reported to the management of the Group was as follows: Hedge instruments Nominal amount, as at December Swap 155,937 97,023 Cap, collar 383, ,308 Total hedge instruments 539, ,331 Fixed interest rate 1,403, ,714 Variable rate instruments Variable 72,409 39,796 Total interest-bearing financial instruments 2,014,889 1,259,841 b. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the end of the reporting period would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Profit or loss Equity 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease December 31, 2015 Variable, Cap, collar rate instruments (4,324) 585 (4,324) 585 Cash flow sensitivity (4,324) 585 (4,324) 585 December 31, 2014 Variable, Cap, collar rate instruments (2,578) 216 (2,578) 216 Cash flow sensitivity (2,578) 216 (2,578) 216 (IV) 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. F-111

416 25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (V) ACCOUNTING CLASSIFICATIONS AND FAIR VALUES Fair value hierarchy The table below analyzes financial instruments carried at fair value, by the levels in the fair value hierarchy. The different levels have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liabilities that are not based on observable market data (unobservable inputs). 1. Financial assets and liabilities measured at fair value: Level 1 Level 2 Level 3 Total 000 December 31, 2015 Traded securities at fair value through profit or loss 152, ,924 Total assets 152, ,924 Derivative financial instruments - 6,995-6,995 Total liabilities - 6,995-6,995 December 31, 2014 Traded securities at fair value through profit or loss 2, ,165 Total assets 2, ,165 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Derivative financial instruments - 9,282-9,282 Total liabilities - 9,282-9,282 (a) The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each reporting date. (b) All of the Group s derivative financial instruments are linked to the bank loan maturities. The calculation of the fair value of hedging instruments is based on discounted cash flows of future anticipated interest payments in place compared with the discounted cash flows of anticipated interest payments at market interest rates based on the hedging instrument agreement at the reporting date. (c) As of December 31, 2015 and 2014, the fair value and the carry amount of the financial instruments are the same (except for the convertible bond see also note 29a). F-112

417 2. Financial assets and liabilities not measured at fair value: Level 1 Level 2 Level 3 Total 000 December 31, 2015 Cash and cash equivalents - 236, ,001 Trade and other receivables - 226, ,402 Total assets - 462, ,403 Loans and borrowings (*) - 846, ,900 Convertible bond - 122, ,576 Straight Bonds - 1,045,413-1,045,413 Tax payables - 13,389-13,389 Trade and other payables - 190, ,358 Total liabilities - 2,218,636-2,218,636 December 31, 2014 Cash and cash equivalents - 270, ,131 Trade and other receivables - 123, ,705 Total assets - 393, ,836 Loans and borrowings (*) - 543, ,009 Convertible bond - 240, ,451 Straight Bonds - 476, ,381 Tax payables - 5,670-5,670 Trade and other payables - 128, ,837 Total liabilities - 1,394,348-1,394,348 (*) including short term bank loan and loan redemption. F-113

418 25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (VI) 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 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. Capital management The Group manages its capital to ensure that it will be able to continue as a going concern while increasing the return to owners through striving to keep a low debt to equity ratio. The management closely monitors Loan to Value ratio (LTV), which is calculated, on an entity level or portfolio level, where applicable, in order to ensure that it remains within its quantitative banking covenants and maintain a strong credit rating. The Group seeks to preserve its conservative capital structure with an LTV to remain at a target below 50% and an entity limit of 55%. As at December 31, 2015 and 2014 the LTV ratio was 42.1% and 45.1%, respectively, and the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreements. LTV covenant ratio may vary between the subsidiaries of the Group. The Company regularly reviews compliance with Luxembourg and local regulations regarding restrictions on minimum capital. During the years covered by these consolidated financial statements, the Company complied with all externally imposed capital requirements. F-114

419 26. OPERATING LEASE The Group entered into long term rent agreements as a lessor of its investment property. The future minimum rent income which will be received is as follows: Year ended December COMMITMENTS The Group does not have significant commitments as at December 31, 2015 and CONTINGENT ASSETS AND LIABILITIES Less than a year 23,512 32,631 Between one to five years 49,137 80,869 More than five years 21,306 49,515 93, ,015 The Group does not have significant contingent assets and liabilities as at December 31, 2015 and EVENTS AFTER THE REPORTING PERIOD a. On January 11, 2016 the Company has resolved to exercise its right to redeem the outstanding euro 275 million 1.5 per cent Convertible bond C (hereafter Convertible bond ) in accordance with the terms and conditions of the Convertible bond. As of the resolution day, the principle amount of the Convertible bond which has been converted and/or redeemed is euro 151,800,000. As of February 1, 2016 the principal amount of the Convertible bond which has been converted into share capital of the Company was euro 274,800,000 which represents per cent of the aggregate principal amount of the Convertible bond and results a decrease of debt in the same amount. As a result, the equity of the company increase by euro million.the outstanding Convertible bond in the amount of Euro 200,000 will be redeemed at their principal amount. b. On February 24, 2016 the Company successfully completed the placement of euro 450 million bonds series F, convertible into ordinary shares of the Company and bear a coupon of 0.25% p.a. payable semi-annually in arrears. The bonds were issued at 100% of their principal amount and will be redeemed at maturity of 6 years at par value. The initial conversion price was set at euro F-115

420 30. GROUP SIGNIFICANT HOLDINGS The details of the significant holdings in the Group are as follows: December 31, NAME Place of incorporation Principal activities 2015 Holding % 2014 Holding % Subsidiaries held directly by the Company Grandcity Property Ltd Cyprus Holding of investments 94.8% 94.8% December 31, NAME Place of incorporation Principal activities 2015 Holding % 2014 Holding % NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Significant subsidiaries held directly under Grandcity Property Ltd. Brencere Investments Limited Cyprus Holding of investments 100% 100% Pesoria Limited Cyprus Holding of investments 100% 100% Sedoy Investments Limited Cyprus Holding of investments 100% 100% Bunavento Limited Cyprus Holding of investments 100% - Bafitek Limited Cyprus Holding of investments 100% 100% Sparol Limited Cyprus Holding of investments 100% 100% Gutburg holdings Limited Cyprus Holding of investments 100% - GCP Real Estate Holdings GmbH Germany Holding of investments 100% 100% MBG Portfoliogesellschaft GmbH Germany Holding of investments 100% 100% Brown Grodaldo Grundstücks GmbH Germany Investing in real estate properties 94.8% 94.8% Cerise Hollyhock Grundstücks GmbH Germany Investing in real estate properties 94.9% 94.9% TH Zwei Terra GmbH Germany Investing in real estate properties 94% 94% Cato zweite Immobilienbesitz und -verwaltungs GmbH Germany Investing in real estate properties 94% 94% AssetCo Halle GmbH & Co KG Germany Investing in real estate properties 94% - Bonny 35. GmbH Germany Investing in real estate properties 94.87% - Gutburg Immobilien S.A Luxembourg Holding of investments 100% - (a) Details of the most significant Group entities referring to investing in real estate properties in Germany and their mother companies. (b) The holding percentage in each entity equals to the voting rights the holder has in it. (c) There are no restrictions on the ability of the Group to access or use the assets of its subsidiaries to settle the liabilities of the Group. F-116

421 To the Shareholders of Grand City Properties S.A. 24, Avenue Victor Hugo L-1750 Luxembourg REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS We have audited the accompanying consolidated financial statements of Grand City Properties S.A., which comprise the consolidated statement of financial position as at December 31, 2015 and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. BOARD OF DIRECTORS RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting 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. RESPONSIBILITY OF THE RÉVISEUR D ENTREPRISES AGRÉÉ Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgement of the Réviseur d Entreprises agréé, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d Entreprises agréé considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Grand City Properties S.A. as of December 31, 2015, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS The Board of Directors report, including the corporate governance statement, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements and includes the information required by the law with respect to the Corporate Governance Statement. Luxembourg, March 17, 2016 KPMG Luxembourg Société coopérative Cabinet de révision agréé J. de Souza F-117