B A L Germany : Annual Report for the 2021 financial year including the report of the Supervisory Board as well as the Management Report and the proposal of the Management Board for the appropriation of net profit

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Annual Report

BAL

Executive Summary B-A-L Germany AG

	2017	2018	2019	2020	2021
Units	32	48	67	81	81
Area in m²	840	1,648	2,781	3,749	3,749
Vacancy in %	0	3	8	11	9
Rental income k EUR	55	88	170	262	296
Cashflow k EUR	9	./. 89	./. 192	60	70
EBITA k EUR	N. A.	8.2	17.6	101.6	116.6

Contents
	Introduction by the CEO ...................................................................................................	3
	Supervisory Board Report ................................................................................................	5
1.	Strategic direction .............................................................................................................	6
2.	Business model in detail ...................................................................................................	6
	a. Saxony as regional focus ..........................................................................................	6
	b. Focus on small to medium-sized units ....................................................................	7
	c. Stable rent levels with a positive outlook ...............................................................	7
3.	Operational implementation ............................................................................................	8
	a. Acquisition .................................................................................................................	8
	b. Renovation/modernization .......................................................................................	8
	c.	Letting ........................................................................................................................	8
	d. Management .............................................................................................................	9
4.	Data management system ................................................................................................	9
5.	Corporate entities of the company ...............................................................................	10
6.	Personnel ...........................................................................................................................	11
7.	The real estate market in Saxony ..................................................................................	11
	a. Macroeconomic development in Saxony .............................................................	11
	b. Rental housing market in Saxony ..........................................................................	11
	c. Economic development in the past fiscal year .....................................................	12
	d. Financial performance in the past fiscal year ........................................................	13
8.	Outlook Report .................................................................................................................	14
9.	Opportunities ....................................................................................................................	15
	a. Consolidation of the management market ...........................................................	15
	b. Development of the economic environment .......................................................	15
	c.	Digitalization ............................................................................................................	16
	d. Acquisition and financing .......................................................................................	16
10. Risk Management Report ...............................................................................................	16
	a. Lack of suitable properties for purchase ..............................................................	17
	b. Vacancy rate .............................................................................................................	17
	c. Payment defaults ....................................................................................................	17
	d. High maintenance costs .........................................................................................	18
	e. Difficulty in raising capital ......................................................................................	18
	f.	Political interventions ..............................................................................................	18
	g.	Restrictions due to the pandemic ..........................................................................	19

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Foreword by the Management Board

Dear shareholders and business partners,

A year of consolidation lies behind us. We have responded to the challenging conditions and focused on developing our portfolio. In addition to reducing vacancy rates and administrative costs, we continued the modernization measures of the previous year and completed them at the majority of properties. We have thus successfully completed the eagerly awaited "second wave of refurbishment".

We have not been nervous about rising prices and have focused on disciplined management of our portfolio. Going into debt to buy at the current inflated prices is something we have consciously avoided. We are perceived as a small company. It does not matter if we acquire possibly five or ten more apartments, growth at any price as well as acquisition below the current profitability level is contrary to our core values. Since we are already profitable with the management of our portfolio, we have the patience to wait even two or three years for the next price cycle. Clearly, the priority here is to deploy capital wisely and increase profitability.

As expected, earnings could also be increased further in 2021, and this without an increase in new properties. In addition, we are sufficiently robust to be able to take advantage of opportunities as they arise.

Rental income was again more than 13 % up on the previous year, with an increase of

• 220,000. As we did not acquire any further units at the end of the last financial year or in the course of the current year, the growth stems from vacancy reductions and rent increases.

Although growth makes perfect sense given the size of our company, we are keeping a cool head in the current trend in prices and patiently waiting for opportunities.

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