Climate Change Data

Environmental Metrics

Governance Achievements

• Restructured the company in 2017, including a change of name, amendments to the Articles of Association, a capital increase, and the election of a new Supervisory Board.

Climate Goals & Targets

Environmental Challenges

• Delayed dual listing in South Africa due to turbulence surrounding Steinhoff International Holdings N.V.
• Overall economic risks (potential interest rate rise)
• Market risks (dependence on German real estate market, competition)
• Regulatory risks (changes in legal framework for real estate)
• Company-related and operational risks (purchase and sale of real estate, remediation of contaminated sites, staff, financial and interest rate risks, liquidity, taxation, lack of creditworthiness of contractual parties, rental income)
• Other risks (natural catastrophes, epidemics, wars, terrorist attacks)

Mitigation Strategies

• Working with legal and South African advisors to find a solution for the South African listing.
• Established a risk management and internal surveillance system.
• Continuous monitoring and reassessment of macroeconomic factors.
• Detailed examination of properties before acquisition, engaging external surveyors and building experts.
• Regular assessment of the existing real estate portfolio by experts.
• Selecting creditworthy counterparties for sales business relationships.
• Maintaining adequate cash and cash equivalents, credit lines, and monitoring cash flows.
• Strengthening equity base through capital increases and reviewing favorable bank financing.
• Verifying tenant reputation and creditworthiness before entering into agreements.
• Targeted monitoring and proactive measures to keep the risk of losing rental income low.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: Buschmann & Bretzel GmbH Wirtschaftsprüfung

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Reduced activities in operating business in 2019 compared to the previous year.
• Envisaged portfolio enlargement that did not take place due to refinancing issues.
• Major shareholder change in July 2018 failed to allow The Grounds Group to grow as planned.
• Coronavirus pandemic impeding and delaying planning, approval, financing and sales processes.

Mitigation Strategies

• Further development of the real estate property portfolio.
• Remediation work in 2019 focusing on fire protection to enable quick growth in rent incomes.
• Continuous monitoring and reassessment of macroeconomic risks and making business decisions accordingly.
• Detailed examination of properties prior to acquiring them, engaging external surveyors or building experts.
• Regular assessment of the existing real estate portfolio by recognised experts.
• Selection of external partners for projects with whom it has already confidently worked in the past.
• Regular review of the solvency and operational development of contractual parties.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: Buschmann & Bretzel GmbH Auditing Company

Environmental Metrics

ESG Focus Areas

• Sustainability in the construction sector
• Energy efficiency
• Employee well-being
• Corporate Governance

Environmental Achievements

• Construction of energy-efficient properties based on the “Effizienzhaus 55” (EH55) standard or planned or developed in accordance with the “Effizienzhaus 40” (EH40) standard.
• Developed a comprehensive and innovative energy concept for the Terra Homes project in Erkner that ensures particularly low energy consumption and carbon-neutral heating.
• Installation of a photovoltaic system with a nominal output of 50.40 kWp on the roof of the housing complex in Rauen.

Social Achievements

• Creating liveable neighbourhoods by realising a diverse usage mix for different needs and a healthy environment.
• Construction of a large playground and open-air communal areas in the Maggie project in Berlin.
• Maintaining and increasing employee satisfaction and retaining them at the company in the long term through a positive corporate culture, a safe and pleasant working environment, encouraging employee development and a suitable and fair remuneration structure.

Governance Achievements

• Responsible, long-term corporate governance secures the existence of The Grounds Group and ensures sustainable value creation.
• Dual management structure with Management Board and Supervisory Board.
• Consistent expansion of staff headcount in recent years and experienced employees and managers recruited for the most important areas.

Climate Goals & Targets

Environmental Challenges

• Rising interest rates leading to reluctance among institutional investors to make purchases.
• Reduced number of private buyers who can afford annuity loans.
• Inflation, reduced subsidies, increased caution on the part of financing banks and a continuous wave of new political regulation causing additional uncertainty.
• Increased construction costs as a result of inflation.
• Lower percentage increase in the value of the total portfolio of fixed assets.
• High competition when it comes to purchasing attractive properties.
• Potential for write-downs having to be recognised on fixed assets, resulting in book losses.
• Risk of exceeding budgets for project developments or renovation and maintenance work on existing properties.
• Regulatory risks related to tenancy law, environmental law, and changes in the legal and tax environment for property investments.

Mitigation Strategies

• Becoming more selective when it comes to new investments.
• Focusing on residential property in popular metropolitan regions and urban areas with high growth rates, especially the area surrounding Berlin.
• Monitoring developments on the German property market on an ongoing basis.
• Offering unique selling points and individual use concepts to avoid the negative repercussions of a direct competitive situation.
• Securing properties through off-market transactions.
• Concentrating on Berlin’s affluent commuter belt to avoid being subject to legal regulations in urban areas.
• Investing in additional insulation, installing state-of-the-art low CO2 heating systems and integrating renewable energy to improve the energy efficiency of its buildings.
• Planning and developing projects on the basis of the EH55 standard or in accordance with the EH40 standard.
• Conducting a detailed assessment of acquisitions before purchase with the help of external assessors or building experts.
• Regularly revaluing the existing property portfolio by approved experts.
• Choosing external partners for projects that it has already worked with successfully in the past.
• Regularly reviewing contracting partners’ solvency and operating performance as part of risk management.
• Assessing tenants’ credit ratings before entering into contracts.
• Focusing on properties with tenants who have good or very good credit ratings.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Sustainable Products & Innovation

• Energy-efficient properties based on EH55 and EH40 standards
• Innovative energy concept for Terra Homes project

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Complies with highest energy efficiency and sustainability standards for new builds (Effizienzhaus 55 and 40); developed innovative energy concept for Terra Homes project ensuring low energy consumption and CO2-neutral heating; various measures in existing buildings to bring about CO2 reduction (facade insulation, low-CO2 heating systems, transition to renewables).

Social Achievements

• Seeks to involve stakeholder groups early in urban area project planning to include needs of future users; ensures safe green spaces and public areas are accessible to all; focuses on long-term employee commitment, positive corporate culture, pleasant working atmosphere, secure jobs, employee development, and fair compensation.

Governance Achievements

• Aligns with requirements of the German Corporate Governance Code (GCGC); functioning internal control system including dual control, control loops, and defined signing authorisations; Management Board solely responsible for managing the company, while the Supervisory Board monitors its management.

Climate Goals & Targets

Environmental Challenges

• Significant increase in interest rates; consistently high construction prices; uncertainty among market players due to political developments (German Heating Act); massive decline in transaction volumes and building permits; declining market values leading to significant writedowns; delays at various project locations; cancellation of purchase agreement for project development in Erkner.

Mitigation Strategies

• Secured a new investor (H.I.G. Realty) providing short-term bridge financing and an option to assume majority in the company; bondholders agreed to convert convertible bond into a fixed interest rate bond with term extension, cancelling their option to subscribe to new shares; focusing on selling other project developments; kick-starting sales of condominiums in Berlin area portfolio.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: Buschmann & Bretzel GmbH Wirtschaftsprüfungsgesellschaft

Sustainable Products & Innovation

• Innovative energy concept for Terra Homes project