Hamborner REIT : Annual Report 2024

CREATING PERSPEC­ TIVES

WITH QUALITY

ANNUAL REPORT 2023

HAMBORNER REIT AG

Annual Report 2023

2

CONTENTS

Editorial

PORTFOLIO QUALITY

Know-how adds value

QUALITY IN PROCESSES

In digital acceleration

QUALITY IN COMMUNICATIONS

Dialogue in the same direction

QUALITY PROPERTIES

Sustainably better

QUALITY GOVERNANCE

Reliability builds trust

OVERVIEW
Profile and performance indicators	3
Key data 2023	4
COMPANY
Report from the Supervisory Board	27
Management Board and	31
Supervisory Board
Sustainability	32
HAMBORNER shares	35
Transparent reporting in accordance	39
with EPRA

05

06

10

14

18

22

MANAGEMENT REPORT
Basic information on the company	44
Economic report	49
Further legal disclosures	60
Report on risks and opportunities	63
Forecast report	70
SEPARATE FINANCIAL STATEMENTS
(IFRS)
Income statement	74
Statement of comprehensive income	74
Statement of financial position	75
Statement of cash flows	76
Statement of changes in equity	76
Notes	77
FURTHER INFORMATION
Responsibility statement	104
Independent audit opinion	105
REIT information	110
List of properties	111
(as at: 31 December 2023)
Glossary	114
Financial calendar /	117
Publication details

Further information

Reference to supplementary content on our company website

Reference to another page in		Return
the annual report		to contents

HAMBORNER REIT AG

Annual Report 2023

3 PROFILE

HAMBORNER REIT AG manages a portfolio of

commercial­ properties spread across Germany. We focus on generating sustainable, predictable long-term rental income. Many years of ­experience, a value-based strategy and a highly qualified, dedicated team form the best possible starting point for consistently continuing our track record of growth going forward.

€91.1 MILLION

INCOME FROM RENTS AND LEASES

€54.7 MILLION

FUNDS FROM OPERATIONS

										Overview
									Profile and Financial indicators │
												Periodical
												Company
												Management report
												Separate financial statements
FINANCIAL INDICATORS												Further information
IN € THOUSAND			2023	2022	2021
From the income statement
Income from rents and leases				91,121		87,077 1		84,360
Net rental income				75,977		72,011		74,627
Operating result				11,117		25,514		31,794
Financial result					-12,306				-12,376		-13,915
EBITDA				67,496		63,531		103,416
EBIT				11,646		25,690		68,175
Funds from operations (FFO)				54,661		50,979		53,120
Period result					-660		13,314		54,260
of which resulting from the sale of investment property			529	176	36,381
From the statement of financial position
Total assets				1,160,801		1,288,425		1,285,787
Non-current assets				1,114,083		1,142,813		1,128,058
Equity				434,118		473,604		497,374
Equity ratio		in %		37.4		36.8		38.7
REIT equity ratio		in %		55.1		59.6		61.0
EPRA Loan to value (LTV)		in %	43.5	39.8 1	37.6
On HAMBORNER shares
Number of shares outstanding				81,343,348		81,343,348		81,343,348
Basic = diluted earnings per share		in €			-0.01		0.16		0.67
Funds from operations (FFO) per share		in €	0.67	0.63	0.65
Stock price per share (Xetra)		in €
Highest share price				7.75		10.31		10.22
Lowest share price				6.07		6.23		8.66
Year-end share price				6.81		6.73		10.02
Dividend per share		in €		0.48		0.47		0.47
Dividend yield in relation to the year-end share		in %		7.0		7.0		4.7
Price / FFO ratio				10.13		10.74		15.34
Market capitalisation			553,948	547,441	815,060
On the HAMBORNER portfolio
Number of properties				67		66		68
Fair value of the property portfolio				1,471,000		1,608,600		1,604,000
EPRA vacancy rate				2.7		1.9		2.0
Weighted remaining term of leases in years			6.4	6.5	6.1
Other data
Net asset value (NAV)				814,929		964,829		984,902
Net asset value per share		in €		10.02		11.86		12.11
EPRA Net Tangible Assets (NTA)				814,629		964,383		984,430
EPRA Net Tangible Assets per share (NTA)		in €		10.01		11.86		12.10
Number of employees including Management Board				49			51		45

1 Previous year adjusted, see section on amendment under IAS 8

HAMBORNER REIT AG

Annual Report 2023

4 KEY DATA 2023

INVESTMENT FOCUS

Focus on German metropolitan regions

Find out more

HAMBURG
NORTHWEST	BERLIN-
	BRANDENBURG
HANOVER
BRAUNSCHWEIG
GÖTTINGEN
WOLFSBURG

PORTFOLIO STRUCTURE

based on fair value

43%	57%
OFFICE	RETAIL
(28 PROPERTIES)	(39 PROPERTIES)

Key data │ Overview

Periodical

Company

Management report

Separate financial statements

Further information

OUR STRENGTHS

֝ A high-yield and diversified real
estate­	portfolio­
֝ Stable cash flow with long-term
predictability­
֝ Strong focus on ESG and future issues
֝ Lean and efficient company structure
֝ Strong internal asset and property
management
֝ Consistently high occupancy rate
֝ Solid balance sheet and financing
structure
֝ Sustainable and attractive

RHINE- RUHR

CENTRAL GERMANY

dividend­

policy­

FRANKFURT

RHINE-MAIN

RHINE-

NECKAR

NUREMBERG

STUTTGART

MUNICH

LEASABLE SPACE

622,932 m2

AVERAGE REMAINING TERM

FOR LEASES

6.4 years

49

EMPLOYEES

HAMBORNER REIT AG

Annual Report 2023

5 EDITORIAL

Although the market environment remains

demanding,­ we are not standing still. We are

­optimising the quality of our portfolio, improving our operating fitness, and getting even closer to our tenants. In other words, we are prudently

strengthening­our position - and thereby the basis­ from which we intend to continue our ­successful growth.

Overview

Periodical

Company Management report Separate financial statements Further information

NEW PROSPECTS

C reating perspectives with quality. The title of our Annual

Report­ encapsulates two distinguishing aspects of our

com­ ­pany. The first is quality, or more precisely, the quality of our property portfolio. It forms the foundations that give our ­business stability, even in a dynamic environment, and it creates the conditions in which we can continue to pursue our objectives and put them into practice even when the operating environment is difficult.

But we do not intend to sit back and rest. Because the quality of a property is not something that can be maintained without a lot of work. It is rather the result of many decisions and continuous ­supervision. Based on this understanding of our role we have worked hard on our portfolio in recent years - on the quality of its architecture and engineering, but also on the quality of its use: in close collaboration with our tenants and partners.

The second aspect that this report examines is "creating perspec- tives". Anyone who wants to create something new, to drive it

forward­ and shape it, needs energy, ideas and a quality that is ­particularly important today: flexibility. Flexibility also means questioning existing structures, abandoning familiar ways of

thinking,­ and maybe leaving one's comfort zone at certain times. ­Disruption like this is demanding for an organisation, but it also creates new perspectives.

We started this process of disruption last year and can already feel the first positive changes. All of us on the team now look at what were everyday processes from new angles, and at the same time we become more open and more focussed. We are using new ­technological opportunities and digital tools that help us to do so.

are an important element of our trajectory for further growth

And we are learning that it is still possible to make progress ­towards our goal even if we have to adapt our original plans.

In this spirit, we continue to advance along the path we have

chosen,­ and are using even difficult market phases to strengthen our own productive potential, without losing sight of our real ­objective: continued growth

Duisburg, 21 February 2024

Niclas Karoff

Sarah Verheyen

HAMBORNER REIT AG

Annual Report 2023

6

PORTFOLIO QUALITY

KNOW-

HOW

ADDS

VALUE

What does good portfolio

­quality mean in dynamic times? Stability for the company, which creates space for further optimisation and growth.

Overview Portfolio quality | Periodical

Company Management report Separate financial statements Further information

HAMBORNER REIT AG

Annual Report 2023

7

At times of change in the operating ­environment for the property sector,

internal­ debate about the further

­development of our portfolio is even more important. This has to take the demands of markets and regulators into account.

KNOWLEDGE TRANSFER - between teams, from different perspectives, for the quality of the portfolio

How would you sum up the 2023 financial year?

KAROFF: Looking back, it was a mixed picture. From an economic perspective, we can be very satisfied overall. Thanks to the great stability of the portfolio, we achieved all our targets in full, both in terms of revenues and earnings. Our tenant structure is stable and the vacancy rate remains very low. This paid off again last year. We exceeded our target for FFO. And thanks to a number of successful new contract signings, we were able to generate additional stability in terms of the portfolio.

But if we can present good figures once again this year, this does not mean that we can escape the general market developments. The mood on the market is still tense and of course important sub- jects, like the changes in interest rates and prices, affect us too. On the other hand it is precisely a phase like this that confirms how stable our portfolio is. Its overall quality, which has been strengthened further by our portfolio optimisation work in recent years, pays off here especially.

That sounds positive.

1. Yes, I think it really is. But what we are not so happy about is the fact that we had to interrupt our growth trajectory. The difficult market environment meant that our acquisitions were limited to just two properties. And even if conditions for sellers were attrac- tive, we held back here too last year. Unfortunately the market did not pick up in the second half of the year in the way we expected at the beginning. We have to accept that a revival in the trans­ action market has been postponed for a while longer.

Overview

Portfolio quality | Periodical

Company

Management report

Separate financial statements

Further information

At the same time, our prudence in terms of deal-making enabled us spend more time on the letting business, and on further internal development, which is just as important. This particularly entailed driving further digitalisation and aligning our operating structures even more precisely with the requirements of tenants and the ­respective property.

How are things looking with the value of the portfolio? Many property companies had to make substantial write­ -downs.

1. In view of the highly dynamic market we also had our portfolio valued externally during the year last year, in addition to our regu- lar year-end remeasurement. Despite the write-downs that this
   necessitated,­both in the retail and the office portfolio, we received positive feedback from the market as a result - not least because this move enabled us to provide additional transparency in a
   particular­ market environment.

We want to dedicate more

attention­ to the further development of our port­ ­olio again this year.

NICLAS KAROFF

HAMBORNER REIT AG

Annual Report 2023

8

What are your thoughts about the market environment?

Where do you fit into this context?

1. The market is still subject to considerable uncertainty. How will interest rates and the macroeconomic environment develop?
   How can the additional regulatory requirements be implemented as efficiently as possible? How much work is involved in the further improvements to sustainability standards for the property port­ folio, and who is going to pay for the ensuing costs going forward? Only time will give us the answers to these and other important questions. And so some uncertainties will remain for the fore­ seeable future.

For us too, I expect the effects to be tangible, but manageable overall. Our aim must be to address the rising complexity within our day-to-day business, inside the company, with efficient and

versatile­ structures and processes. Here we are supported by the experience and great commitment of our team, and in particular by the quality of our property portfolio. The resulting stability is ­reflected in rental income, which rose again in 2023, and also creates freedom for further continued development at HAMBORNER.

Some of the income is reinvested in the portfolio - not least

because of higher sustainability requirements...

1. That's right. And not only since last year. We were early adop- ters as far as sustainability is concerned. Because this is also an
   aspect­ that is relevant to the value and quality of the portfolio.
   Although­ the subject is sometimes overshadowed by other events in the news cycle, we are continuing steadily along the path we have chosen. We drew up a detailed carbon footprint for our port- folio back in 2022, and last year the focus was on developing a
   detailed­ decarbonisation strategy. We thought it was important not just to communicate a single target figure, but at the same time to give an initial indication of the additional costs that will be incurred for implementing the strategy. Since this is an extremely complex

project, which covers the whole portfolio and will take a long time, it is not possible to give a valid estimate of the long-term costs at the present time. But for the short and medium term at least, we feel able to quantify the additional expenses approximately. The measures needed at the level of individual properties will take up a lot of our time in the years ahead. We will benefit here from the relationships and close dialogue that we have with our tenants. ­Because one thing is clear: it will only be possible to achieve our decarbonisation targets with the cooperation of everyone involved.

How will the implementation work in practice?

1. It is essentially based on three pillars: the first is optimising the energy supply in our portfolio properties. The carbon footprint of a building can be significantly improved at comparatively low cost by using more electricity from renewable energy sources. The second pillar is increasing energy efficiency by means of concrete

Overview

Portfolio quality | Periodical

Company

Management report

Separate financial statements

Further information

86%

TENANT RETENTION RATE

improvements to and within the buildings. They include work on the shell, changing the lighting to LEDs, and replacing heating and cooling systems, for example. At the same time we will benefit from the ongoing modernisation and decarbonisation of the power and heating supply in Germany. These developments, which we see as the third pillar of our strategy, generate additional important positive effects in the transition to fully decarbonising our property portfolio.

Where do you currently see the market opportunities and what are the biggest factors of uncertainty?

1. I am confident that attractive acquisition opportunities will emerge for us again in the near future. Thanks to our flexible
   investment­ approach - office and retail, each with their own risk-return profile - we have a correspondingly broad market to choose from. Our focus on the metropolitan regions also gives us

HAMBORNER REIT AG

Annual Report 2023

9

regional flexibility. In the manage to core space, and also in our Core properties, we see good opportunities for optimisation to meet the sustainability requirements.

The uncertainties come from the sluggish economic performance. From today's perspective we assume that the current conditions will initially continue in 2024. This would have consequences for our letting business, particularly in terms of longer lead times for signing new tenancy agreements, and the terms of the leases themselves. In contrast, the expiry dates for our leases have a

balanced­ profile, and last year we again saw a high percentage of tenants electing to renew their lease. In terms of total rental ­income, about 4% of the leases are up for renewal or new tenants in 2024. Looking at the quality of our locations and our consistently high retention rate over years, I think the uncertainty is man­ ageable, at least as far as our letting activities are concerned.

How will HAMBORNER perform in 2024?

1. Notwithstanding the challenges I mentioned earlier, we are fundamentally positive about the year ahead. We are confident that we can keep our rental and lease income at a consistently high level, and successively increase it by means of targeted investment and other indexation effects. On the earnings side we will probably come in below the previous year's level. The reasons are partly the positive non-recurring effects in 2023, but also the additional ex- penditure planned for ESG, digitalisation and internal optimisation projects. The quality of our portfolio will remain a guarantee for dependable earnings, however.

In financial terms, we will be making an early start on the upcoming financing arrangements for the next two years. Here we anticipate in particular that we will be able to profit from the good, ­established relationships with our financing partners.

It will only be

possible­ to achieve our decarbonisation targets with the

cooperation­of everyone involved.

NICLAS KAROFF

In addition, we want to dedicate more attention to the further

­development of our portfolio again this year. In this context we will be reviewing acquisition opportunities and looking for attractive entry conditions. Portfolio development also means being willing to dispose of certain properties, and we will be consistently driving our internal optimisation projects in parallel.

Just as we work continuously on the quality of our portfolio, we will not be letting up on the topic of sustainability. Among other things, our decarbonisation strategy will give us plenty of work to do in this area in 2024.

Overview

Portfolio quality | Periodical

Company

Management report

Separate financial statements

Further information

QUALITY CHECK

Continuous portfolio screening and

development­provide stability in a dynamic environment

Focus on ESG and tomorrow's issues in close cooperation with our tenants

HAMBORNER REIT AG

Annual Report 2023

1 0

QUALITY IN PROCESSES

IN DIGITAL ACCELERA­ TION

Speed is a key success factor in ­business life today, where new

requirements­call for the right ­response in a short timeframe.

Overview

Quality in processes | Periodical

Company

Management report

Separate financial statements

Further information