Graphisoft Park Ingatlanfejleszto Európai Reszvenytársaság : Quarterly Report

GRAPHISOFT PARK SE

Interim Management Report - First Quarter 2024

May 14, 2024

GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

Executive Summary

The 2024 Q1 pro forma net result is 2.13 million euros, which is in line with our expectations and slightly, by 4% exceeds the same period of the previous year. The uncertain economic environment causes a noticeable decrease in demand on the office market; in the case of tenants, the integration of the home office option and the flexible shaping of the function of the existing office areas came to the fore. Looking at the Budapest average, the vacancy rate approached 14% by the end of the first quarter of 2024, and according to expert expectations, it is anticipated to increase further by the end of 2024. Among the tenants of the Graphisoft Park, we see that research and development work with a high degree of creativity and intensive collaboration cannot be without personal presence at least partially, but the flexible use of communal spaces, meeting rooms and hybrid working overall reduces the size of the required rental properties. The effect of this is also reflected in the utilization of Graphisoft Park: during the year 2023, it decreased from an exceptionally high 97-98%to 95% by the end of the year which, however, is still significantly more favorable than the average vacancy in Budapest. Stability is also contributed by the fact that the tenants of Graphisoft Park commit to a longer period compared to the national average, due to the park's unique natural environment, the technological and IT focus, and the possibility of flexible office design. The average lease term in the Park calculated with the starting date of current tenants' earliest lease agreements is 15.2 years.

At the same time, in view of the trends in the office market, as well as the discussions held with certain tenants of Graphisoft Park and with the municipalities in recent years, the Company has concluded that it is reasonable to examine the possibility of developing residential and service units in the southern development area. In an area further away from the central part of the office park, separated from it by a public road, it may be more expedient from a urban design, urban planning and business point of view to create a residential and service function that complements the office park and the adjacent old gas factory villa district; among other things, this would offer housing options for the office park's employees. As the Company announced on May 13, 2024, Graphisoft Park concluded a cooperation agreement with Synergy Construction Hungary Kft. regarding the examination of opportunities. After the conclusion of this examination, expectedly at the end of this year or at the beginning of next year, the partner company will have the opportunity to purchase the area and the project company that owns it under the conditions specified in the Cooperation Agreement.

Dividend payment

In addition to all this, as the Company published on April 29, 2024, based on the resolution of the General Meeting, in May 2024, dividend will be paid corresponding to 90% of the previous year's pro forma result, approximately 7.1 million euros, i.e. 70 euro cents per ordinary share. The Company will pay the dividend to the shareholders in euros, the starting date will be May 21, 2024. Once again, the Company draws the attention of the Shareholders to ask their securities account manager about the process of receiving and crediting dividends received in euros, which may differ for each service provider.

Pro forma results

Our 2024 Q1 "pro forma" results developed favorably: in addition to the slightly reduced utilization, because of the due euro-based indexation, rental revenue exceeded the same period of the previous year by 116 thousand euros, nearly 3%. Most of the other income reflects the results of the construction and renovations of rental properties requested and financed by the tenants. These were reduced in the previous year by the one-off contributions undertaken by the Company related to the decarbonization strategy of the operation. The 17% increase in operating costs in the first quarter shows the effect of

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

inflationary fee increases. In accordance with our previous forecast, depreciation decreased slightly compared to the same period of the previous year due to the depletion of some older assets. At the same time, the financial result is less favorable: although the interest payable on the capital outstanding decreased due to the loan repayments, the interest income realized on free funds fell short in the changed interest environment, compared to the outstanding result of the previous year. Furthermore, due to the weakening forint at the end of the quarter, exchange rate losses occurred on our forint-denominated assets. As a combined effect of all this, in the first quarter of 2024, EBITDA exceeded the same period of the previous year by 209 thousand euros, 5%, and the profit after tax by 82 thousand euros, 4%.

(million euros)	2023 Q1 actual	2024 Q1 actual
Rental revenue	4.20	4.31
Other income (net)	(0.02)	0.12
Operating expense	(0.27)	(0.32)
EBITDA	3.91	4.11
Depreciation	(1.71)	(1.61)
Operating profit	2.20	2.50
Net financial result	(0.14)	(0.36)
Profit before tax	2.06	2.14
Income tax expense	(0.01)	(0.01)
Net profit	2.05	2.13

Forecast

We continue to maintain our previous cautious 2024 forecast, despite the results of the first quarter, which are more favorable than in the same period of the previous year and proportionally exceed the annual forecast; we are doing this in view of the utilization and thus the expected development of rental revenue, and in addition, one-off, larger costs are expected to arise in the rest of the year.

In 2024, due to changes in some lease contracts, we expect a decrease in leased areas, but at the same time, we expect occupancy to remain stable above 90% throughout the year. The downward indexation of rents compensates only a part of the lost income, so overall, by 2024, we expect rental revenue of 16.6 million euros, 1.5% less than this year. Requests for changes to the leased areas are mostly renegotiated when the contracts expire, but in the case of some tenants, an agreement was reached in 2023, even before the expiration date, which affects the 2024 financial year as well. A significant part of the area reductions before the contract expires is compensated by the tenants, which is accounted as one-time income among other income both in 2023 and in 2024. We expect a significant 18% increase in operating costs, due to further increases in service fees, increases in personal payments and new cost elements arising in connection with the goals defined in the ESG strategy. Depreciation is expected to decrease by 300 thousand euros in 2024 due to the depletion of certain assets. At the same time, the financial result is expected to be less favorable than in the previous year: although the interest payable on the decreasing loans outstanding will decrease, due to the changes in the forint interest rate environment, we can no longer count on interest income of the same level as in 2023, and the volatility of the forint may also cause exchange rate losses. Overall, we expect a pro forma after-taxresult of 7.1 million euros for 2024, which is about 10% lower than the outstanding results of 2023 due to one-off factors but exceeds the net result of 2022 by almost 18%.

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

(million euros)	2022 actual	2023 actual	2024 forecast
Rental revenue	15.54	16.85	16.6
Other income (net)	0.64	0.57	0.6
Operating expense	(1.42)	(1.61)	(1.9)
EBITDA	14.76	15.81	15.3
Depreciation	(7.01)	(6.94)	(6.6)
Operating profit	7.75	8.87	8.7
Net financial result	(1.71)	(0.99)	(1.6)
Profit before tax	6.04	7.88	7.1
Income tax expense	(0.02)	(0.02)	(0.0)
Net profit	6.02	7.86	7.1

Property portfolio and fair value of net assets

At the end of 2024 Q1, the independent valuer estimated the fair value of the real estate portfolio at 227 million euros, which represents 1.5 million euro increase compared to the end of 2023. In more detail, the fair value of the completed and delivered properties increased by 1.3 million euros. Although the yield expectation continued to rise due to the general market uncertainty, the effect of this was not reflected in the fair value of properties. The tenant base in the office park is stable and the utilization of the buildings is above average, despite the small vacancy that occurred at the end of the previous year. The fair value1 change of the development lands is minimal (200 thousand euro increase): in the last quarter, there was no significant change in the circumstances that substantially determine the value of the lands. The implementation of the remediation affecting the northern development area is delayed and remains uncertain, and the expected cost of future developments and the expected demand for offices did not change significantly.

Due to the interest levels experienced in the eurozone, the fair value2 of the interest rate swap hedging transactions concluded by the Company to fix the interest rates of its euro-based loans is still favorable, which increase is reflected in equity (net asset value). In the meantime, the Company's outstanding loan portfolio went down to 84 million euros due to continuous repayments. The Company's cash balance at the end of the first quarter of 2024 is 15 million euros, which ensures the long-term safe operation of the company in addition to the dividend payment due in the second quarter, as well as the financing of individual tenant designs, building upgrades and renovations, and forms a reserve for the possible negative effects of the changing economic environment.

Overall, due to the increase in the fair value of the real estate portfolio and, in addition to the decreasing outstanding loans, the increasing cash reserve, the net asset fair value of the Company exceeded the previous yearend's value by 5.4 million euros and reached 164 million euros.

1. The fair value of all development lands was determined as the present value of potential future office development and does not take into account the expected impact of any potential residential development.
2. The fair value of hedges is intended, among other things, to estimate how much more expensive (in the case of a negative fair value, cheaper) a similar loan could be obtained today. In addition to the current market interest rate environment, the fair value is influenced by several external factors (HUF/EUR exchange rate, monetary policy measures or future interest rate expectations). The development of these factors may result in a significant and in some cases unpredictable changes in the direction and degree of change in the fair value.

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

[thousands of EUR]

	Dec 31, 2022	Dec 31, 2023 March 31, 2024
Completed, delivered properties	215,105	211,762	213,078
Development lands	15,760	13,710	13,940
Estimated fair value of the entire property portfolio	230,865	225,472	227,018
Net asset value at estimated fair value	157,577	158,228	163,606
Net asset value at fair value per share (EUR)	15.63	15.69	16.23

Decarbonization strategy

In addition to the transformation of the function of the office spaces, an important aspect and goal is the continuous reduction of the carbon footprint of the buildings, as well as the development and implementation of the Park's decarbonization strategy together with the tenants. The Company's relevant considerations, the main elements and aspects of its strategy and the results already achieved were published in the first ESG report issued in 2023. In January 2024, this report won the Green Frog award founded by Deloitte. This award recognizes companies for which sustainability is part of the business strategy, organizational culture and company operations, and their report comprehensively illustrates this, both in the presentation of the achieved results and in the formulation of objectives and strategies. In the second quarter of 2024, the Company will publish its next ESG report, in which it will report on the results achieved in 2023, the follow-up of the objectives formulated as part of the strategy, and the consideration of some new aspects.

Developments aimed at carbon reduction are the defining elements of our strategy. As part of this, solar panel systems and heat pumps were installed in some buildings in 2023, in accordance with the needs and decarbonization goals of the respective tenants. In addition, it is equally important to implement efficient building operations and encourage conscious energy consumption. After 2022, also in 2023, in cooperation with the tenants, we managed to achieve significant savings in both gas and electricity consumption, which cooperation and intensive relationship we aim to maintain in the future. In addition to improving energy efficiency, our goal is to prioritize the aspects of conscious material use (e.g. lifecycle, quality, recyclability), minimize waste generated during office design and operation, and maintain and develop the green park, environment and biodiversity that gives the Park its unique character.

* * *

Even now, we believe that the unique office park provided by Graphisoft Park, located in a truly green environment, will continue to be in demand by companies employing technology- and knowledge-based, highly qualified employees, and we can expect an occupancy rate of over 90%, which exceeds the Budapest office market. The Company's strategy articulated 28 years ago also works in the light of the "home office" practice that has become common in recent years. Although the way and extent of office use and the distribution of the various functions of the rented areas are undergoing significant changes, research and development activities that require a high degree of creativity and intensive cooperation cannot exist without at least partial personal presence. The target market defined by the Company at the beginning, which are domestic and international enterprises dealing with technological development, proved to be a good choice even during uncertain economic prospects, since the key to success in this field is attracting talent. This is greatly enhanced by the

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

high-quality and environmentally conscious architecture, a uniquely quiet park rich in ancient trees, on the truly green bank of the Danube, surrounded by the monuments of the former Óbuda Gas Works and preserved in a modern way.

Bojár Gábor	Kocsány János
Chairman of Board of Directors	Chief Executive Officer

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

Financial highlights

IFRS, consolidated, thousand EUR

Results:

	Results
	March 31, 2023	March 31, 2024
	3 months ended
Rental revenue	4,195	4,311
Operating expense	(271)	(318)
Other income (net)	(18)	122
EBITDA	3,906	4,115
Depreciation and amortization	(1.706)	(1,613)
Operating profit	2,200	2,502
Net interest expense	(216)	(283)
Other financial result	74	(78)
Profit before tax	2,058	2,141
Income tax expense	(4)	(5)
Pro forma profit after tax (1)	2,054	2,136
Pro forma profit after tax per share (EUR) (2)	0.20	0.21
Valuation difference of investment properties	(531)	1,047
Unrecognized depreciation	1,653	1,555
Profit after tax according to financial statements	3,176	4,738
Profit after tax per share according to financial statements	0.31	0.47
(EUR) (2)

1. "Pro forma" results show profit and loss according to the cost model.
2. Treasury shares possessed by the Company and employee shares are excluded when the earnings per share value is determined (refer to Note 1.3 to the financial statements).

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

IFRS, consolidated, thousand EUR

Asset value:

	December 31,2023	March 31, 2024
Fair value of properties	211,762	213,078
- from this book value (1)	210,186	211,445
Fair value of development lands	13,710	13,940
- from this book value (1)	8,354	8,362
Entire property portfolio at estimated fair value	225,472	227,018
Net asset value at estimated fair value (2)	158,228	163,606
Net asset value at cost (1)	152,157	157,237
Number of ordinary shares outstanding (thousands)	10,083	10,083
Net asset value at fair value per share (euro) (2) (3)	15.69	16.23
Net asset value at book value per share (euro) (1) (3)	15.09	15.59

1. Investment properties and investment properties under construction are fair valued in the financial statements, while development lands and owner-occupied property are stated at cost. Development lands are presented under "Investment properties" and owner-occupied properties under "(Owner-occupied) Property, plant and equipment" in the balance sheet. As a result, instead of accounting depreciation, current period change in fair value is presented in the profit or loss.
2. Estimated net asset fair value contains both development lands and owner-occupied properties on fair value instead of cost.
3. Treasury shares possessed by the Company and employee shares are excluded when the earnings per share value is determined (refer to Note 1.3 to the financial statements).

Net asset value at book value and net asset value at fair value (equity) are disclosed in Note 23 to the financial statements.

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

Detailed Analysis

In this business report, Graphisoft Park presents the progress made toward its goals in the following areas:

• 2024 Q1 results ("pro forma" results and results according to the financial statements),
• Utilization, occupancy,
• Modernization plans,
• Financing,
• Forecast for 2024,
• Real estate portfolio and development potential,
• Further growth opportunities

"Pro forma" results of 2024 Q1

"Pro forma" results of 2024 Q1 changed compared to the same period of 2023 because of the following main factors:

• Rental revenue (2024: 4,311 thousand euros; 2023: 4,195 thousand euros) grew by 116 thousand euros, or 3% compared to the same period of last year. In addition to a slightly lower occupancy rate, the increase was due to the euro-based indexation of rental contracts.
• Operating expense (2024: 318 thousand euros; 2023: 271 thousand euros) increased by 17% compared to the same period of last year, which was primarily caused by an inflation-following increase in certain property- related costs and personal expenses.
• Other income (expense) (2024: 122 thousand euros income; 2023: 18 thousand euros expense) is largely the result of periodical developments and refurbishments of the rental property based on the request and expense of the tenants. However, in 2023, this result was reduced by the costs of the Company's contribution to the reduction of the energy consumption of the leased areas and the decarbonization strategy of the operation.
• Depreciation charge (2024: 1,613 thousand euros; 2023: 1,706 thousand euros) is around 5% lower than in the previous period, mainly due to the depletion of some older assets.
• EBITDA (2024: 4,115 thousand euros; 2023: 3,906 thousand euros) grew by 209 thousand euros, which is 5%,
  while operating profit (2024: 2,502 thousand euros; 2023: 2,200 thousand euros) increased by 302 thousand euros, or 14% compared to the previous year.
• Net interest expense (2024: 283 thousand euros; 2023: 216 thousand euros) increased by 67 thousand euros or 31% compared to prior year. The interest paid was less because of the declining principal amounts due to loan repayments, but at the same time, in the changed interest environment, the interest income realized on free funds decreased significantly compared to the outstanding result of the previous year.
• Other financial result (2024: 78 thousand euros loss; 2023: 74 thousand euros gain) is primarily influenced by the exchange rate differences of our forint-denominated assets.
• The balance of income tax expense (2024: 5 thousand euros; 2023: 4 thousand euros) is minimal as the Group
  - except for Graphisoft Park Engineering & Management Kft. - has "SzIT" status and as such is not subject to corporate income tax and local business tax.
• Overall, net profit (2024: 2,136 thousand euros; 2023: 2,054 thousand euros) is 82 thousand euros, or 4% higher compared to the same period of last year.

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2024

2024 Q1 results according to the financial statements

In 2024 Q1 results according to the financial statements are 2,602 thousand euros higher than the "pro forma" results due to the following two factors: unrecognized depreciation expense of investment properties increased the results by 1,555 thousand euros, while fair value gains further increased the results by 1,047 thousand euros. The economic outlook and the shrinking demand for office space affect the entire office market, but at the same time, the independent valuer slightly increased the fair value of the properties based on Graphisoft Park's higher-than- average occupancy rate and stable tenant base.

In 2023 Q1, results according to the financial statements were 1,122 thousand euros higher than the "pro forma" results: unrecognized depreciation expense of investment properties increased the results by 1,653 thousand euros, while fair value losses decreased the results by 531 thousand euros.

Details of changes in fair values are disclosed in Note 9 (Investment property) to the financial statements.

Utilization, occupancy

Occupancy rate of Graphisoft Park's gross leasable area developed as follows (at the end of each quarter):

Period:	2023Q1	2023Q2	2023Q3	2023Q4	2024Q1
Occupancy of gross leasable area (%):	97%	97%	97%	95%	95%
Gross leasable area (m2):	82,000	82,000	82,000	82,000	82,000

After a small, temporary decrease in 2020 as a result of the COVID crisis, the utilization of Graphisoft Park began to increase in the following year, standing at a stable 97-98% in 2022-2023, even despite high, volatile energy prices and a recessionary environment, that defined the period. At the same time, in the last quarter of 2023, during the renewal of the contracts of several larger tenants, requests to reduce the area arose, thereby reducing the occupancy to 95% by the end of the year. Although in the current economic environment we expect a decrease in occupancy even in the remainder of 2024 (see below under the Section "Forecast for 2024"), this occupancy level still exceeds the Budapest office market average, proving the significant and long-lasting demand for an office park dominated by a green environment as a working place.

Graphisoft Park's tenants make longer commitments than the national average. The Park's unique natural environment and its information technology focus (the "micro Silicon Valley" concept) provide the space in which globally acclaimed companies have settled as tenants and expanded continuously over time. Examples for these companies are Microsoft (from 1998), SAP (from 2005) or Servier (from 2007); and the Park's naming tenant and founder, Graphisoft SE (from 1998), which now operates wholly independently as a software company. It is also important to highlight that smaller tenants stay in the Park for more than 5 years on average and keep extending (average 1-3 years) their leases after expiration. Due to the peculiarities of the Park, we can meet the growth needs of the tenants: start-ups can become tenants of the Park even with a 1 year contract, and later they will also have the opportunity to expand in line with their growth path. The average lease term in the Park calculated with the starting date of current tenants' earliest lease agreements (in certain cases lease agreements concluded with the predecessor of Graphisoft Park Group) is 15.2 years, and in case of existing lease contracts the weighted average lease term to expiry is 2.4 years.

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