Alstria office REIT : Annual Report Q4 2023

2023

ANNUAL REPORT

IFRS fiNANCIAL STATEMENTS

KEY FIGURES

FIVE-YEAR OVERVIEW

Revenues and earnings	2023	2022	2021	2020	2019
Revenues (EUR k)	192,026	182,819	183,670	177,063	187,467
Net rental income (EUR k)	163,936	158,946	163,271	154,823	162,904
Consolidated profit for the period	−653,374	−74,614
(EUR k)	209,678	168,489	581,221
FFO (EUR k)1)	87,972	106,562	116,455	108,673	112,572
Earnings per share (EUR)1)	−3.66	−0.42	1.18	0.95	3.27
FFO per share (EUR)1)	0.49	0.60	0.65	0.61	0.63

1. Excluding minorities.

Balance sheet	Dec. 31, 2023 Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Investment property (EUR k)	3,971,253	4,606,848	4,775,801	4,556,181	4,438,597
Total assets (EUR k)	4,237,518	5,163,774	5,234,372	5,090,249	5,029,328
Equity (EUR k)	1,617,547	2,571,400	3,367,083	3,252,442	3,175,555
Liabilities (EUR k)	2,619,971	2,592,374	1,867,290	1,837,806	1,853,773
Net asset value (NAV) per
share (EUR)	9.06	14.42	18.91	18.29	17.88
Net loan-to-value (Net LTV, %)	58.3	43.7	28.8	27.0	27.1

G-REIT figures	Dec. 31, 2023 Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
G-REIT equity ratio (%)	43.0	55.3	69.1	71.1	70.9
Revenues including other income
from investment properties (%)	100	100	100	100	100

EPRA figures1)	2023	2022	2021	2020	2019
EPRA earnings per share (EUR)	0.51	0.63	0.55	0.61	0.61
EPRA cost ratio A (%)2)	23.6	32.1	25.0	26.6	26.1
EPRA cost ratio B (%)3)	18.3	27.0	21.1	22.1	21.7

	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
EPRA NRV per share (EUR)	10.87	16.40	20.86	20.13	19.67
EPRA NTA per share (EUR)	9.10	14.47	18.97	18.34	17.91
EPRA NDV per share (EUR)	10.32	15.69	18.82	17.95	17.61
EPRA net initial yield (%)	4.2	3.5	2.9	3.3	3.3
EPRA 'topped-up' net initial
yield (%)	4.4	3.7	3.4	3.7	3.8
EPRA vacancy rate (%)	8.0	7.2	6.9	7.6	8.1

1. For further information, please refer to EPRA Best Practices Recommendations, www.epra.com.
2. Including vacancy costs.
3. Excluding vacancy costs.

alstria Annual Report 2023

CONTENT
A.	COMBINED MANAGEMENT REPORT	6
I.	ECONOMICS AND STRATEGY	6
II.	FINANCIAL ANALYSIS	12
III.	EXPECTED DEVELOPMENTS	24
IV.	REPORT REGARDING ALSTRIA AG	25
V.	RISK AND OPPORTUNITY REPORT	30
VI.	SUSTAINABILITY REPORT	58
VII.	DISCLOSURES REQUIRED BY TAKEOVER LAW	59
VIII.	ADDITIONAL GROUP DISCLOSURE	63
B.	CONSOLIDATED FINANCIAL STATEMENTS	66
I.	CONSOLIDATED INCOME STATEMENT	66
II.	CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	67
III.	CONSOLIDATED STATEMENT OF FINANCIAL POSITION	68
IV.	CONSOLIDATED STATEMENT OF CASH FLOWS	70
V.	CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	72
VI.	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	73
C.	RESPONSIBILITY STATEMENT	158
D.	INDEPENDENT AUDITOR'S REPORT	159
E.	REPORT OF THE SUPERVISORY BOARD	170
F.	CORPORATE GOVERNANCE STATEMENT	177
G.	REMUNERATION REPORT	194
H.	REIT DISCLOSURES	218
I.	REIT DECLARATION	218
II.	REIT MEMORANDUM	220
I.	FINANCIAL CALENDAR/IMPRINT	222
I.	FINANCIAL CALENDAR	222
II.	CONTACT/IMPRINT	222

Combined Management Report

DETAIL INDEX COMBINED MANAGEMENT REPORT

A.	COMBINED MANAGEMENT REPORT	6
I.	ECONOMICS AND STRATEGY	6
1.	STRATEGY	6
2.	CORPORATE MANAGEMENT	7
3.	ECONOMY AND OFFICE MARKETS	8
4.	PORTFOLIO ANALYSIS	9
II.	FINANCIAL ANALYSIS	12
1.	EARNINGS POSITION	12
2.	FINANCIAL AND ASSET POSITION	17
3.	THE MANAGEMENT BOARD'S OVERALL ASSESSMENT OF THE FINANCIAL YEAR	24
III.	EXPECTED DEVELOPMENTS	24
1.	EXPECTED ECONOMIC DEVELOPMENT	24
2.	DEVELOPMENT OF THE REAL ESTATE MARKET: OUTLOOK FOR 2024	24
3.	OUTLOOK FOR THE ALSTRIA GROUP	24
IV.	REPORT REGARDING ALSTRIA AG	25
1.	EARNINGS POSITION	25
2.	FINANCIAL AND ASSET POSITION	27
3.	ADDITIONAL DISCLOSURE REGARDING ALSTRIA AG	29
V.	RISK AND OPPORTUNITY REPORT	30
1.	RISK REPORT	30
2.	REPORT ON OPPORTUNITIES	55
VI.	SUSTAINABILITY REPORT	58
VII.	DISCLOSURES REQUIRED BY TAKEOVER LAW	59
VIII.	ADDITIONAL GROUP DISCLOSURE	63
1.	CORPORATE GOVERNANCE GROUP DECLARATION PURSUANT TO SECTIONS 289F
	AND 315D HGB ("HANDELSGESETZBUCH": GERMAN COMMERCIAL CODE)	63
2.	EMPLOYEES	63
3.	GROUP AND DEPENDENT-COMPANY REPORT	64
4.	DIVIDEND	64

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A. COMBINED MANAGEMENT REPORT

1. ECONOMICS AND STRATEGY

1. STRATEGY

alstria office REIT-AG (herein referred to as the "Company", "alstria", or "alstria AG") is a German stock corporation in the legal form of a Real Estate Investment Trust (REIT) that invests in office real estate in major German economic centers. The Company has been listed on the Frankfurt Stock Exchange since 2007 (WKN: A0LD2U). As of December 31, 2023, the alstria group consisted of the parent company alstria and 36 direct and indirect subsidiaries (hereinafter "alstria" or the "Group"). Operational decisions are made in the parent company. As of December 31, 2023, alstria's real estate portfolio comprised 106 buildings, with a lettable area of 1.4 million m² and a total value of EUR 4.0 billion. The properties are predominantly located in the major German office markets of Hamburg, Düsseldorf, Frankfurt, Stuttgart and Berlin, which alstria defines as its core markets and in which alstria is represented by local and operating offices. As a fully integrated and long-term oriented company, alstria's 189 employees actively manage the buildings over their entire life cycle.

In 2022, alstria was taken over by Brookfield Corporation, Toronto/Canada, via its subsidiary Alexandrite Lake Lux Holdings S.á r.l., Luxembourg, Grand Duchy of Luxembourg (hereinafter "Alexandrite" or "Acquirer"). According to the most recently published voting rights notification, Brookfield directly and indirectly held 95.4% of the shares of alstria office REIT-AG at the end of 2023, whereby no Brookfield subsidiary exceeded a voting interest of 10%.

The year 2023 was again characterized by the implementation of the investment agreement concluded between alstria and Brookfield at the end of 2021. In particular, this included the new capital structure published in the ad hoc announcement of April 8,2022 as a key milestone. This includes return of capital in the amount of EUR 1 billion and the related take-up of additional debt capital in the amount of EUR 850 million were completed as planned in the financial year 2023.

The Group's business strategy and the growth of the company imply that value-enhancing modernization and repositioning opportunities with potential for sustainable value creation are to be driven forward on the basis of hands-on asset management in order to future-proof the portfolio and continue the ongoing decarbonization process.

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alstria's corporate strategy is based on the following principles:

• Access to capital and a comprehensive operational knowledge based on an integrated business model are fundamental success factors for alstria.
• By concentrating the real estate portfolio on the major German office markets and by focusing on solvent tenants, alstria generates steady income primarily used for reinvesting in the portfolio.
• Continuous investments in the quality of the real estate portfolio secure and increase rental income and property values and improve the portfolio's energy efficiency.
• Depending on the assessment of the market situation, properties are bought or sold. The goal is risk-adjusted corporate growth and achieving a return in line with the market over the real estate cycle.

2. CORPORATE MANAGEMENT

alstria proactively controls the Company based on two key financial performance indicators: revenues and funds from operations (FFO). Revenues mainly comprise rental income derived from the Company's leasing activities. The FFO is derived from real estate management. It excludes valuation effects and other adjustments, such as noncash expenses / income, gain on disposal and expected nonrecurring effects.*

The revenue and FFO forecast published by alstria at the beginning of 2023 was exceeded in the financial year 2023. The Group's revenues amounted to EUR 192 million (forecast: EUR 190 million) and FFO reached almost EUR 88 million in the reporting year (forecast: EUR 79 million). The FFO forecast was already raised from EUR 79 million to EUR 84 million during the course of the year. The improved earnings performance compared to the forecast was due in particular to a more favorable development of property operating costs, as well as higher than expected income from cash deposits.

The company also monitors the development of net LTV**, the REIT equity ratio***, net debt**** to EBITDA and cash and cash equivalents, although these are not the most important performance indicators for the Group's internal management. As per December 31, 2023, the net LTV ratio was 58.3%, compared to 43.7% at the end of the 2022 financial year. The significant increase in the LTV ratio was a result of the company's higher debt and the market-related devaluation of the property portfolio. The REIT equity ratio amounted to 43.0% as at the reporting date, compared to 55.3% in the previous year. The statutory minimum ratio is 45% and must be restored by December 31, 2025 in order to maintain the company's REIT status. The net debt to EBITDA ratio was 16.6 as at December 31, 2023, compared to 14.5 as at December 31, 2022.

• For further details, please refer to page 15f.

• Net debt at the fair value of immovable assets (less shares in joint ventures)
• Ratio of equity to the book value of immovable assets. Minimum requirement in accordance with the G-REIT Act: 45%.
• Total liabilities less cash and cash equivalents and current financial assets.

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The management at the level of the Company primarily focuses on the total operating performance. alstria AG strives for stable results with low volatility.

3. ECONOMY AND OFFICE MARKETS

3.1. Economic development*

With a decline in GDP of -0.3%, the German economy stagnated in the past financial year. This was due on the one hand to the considerable loss of purchasing power among consumers as a result of the massive rise in energy and food prices, and on the other hand to the weak global economic development as a result of the ongoing geopolitical crises. The rise in interest rates as a result of monetary policy tightening also contributed to the weak economic development. Current leading indicators suggest that the economic weakness is likely to persist throughout the winter and a recovery is not expected until spring 2024. The cautious optimism is based in particular on the expected slowdown in inflation and rising real wages. The average annual inflation rate for 2023 was 5.9%.

3.2. Office markets**

3.2.1. Vacancy rate, office lettings and rents

The persistently weak economic development and the economic uncertainty of many corporations had a direct impact on demand for office space, which in the seven major office markets ("Big 7" cities: Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart) was 31% below the previous year's level at just under 2.4 million square meters. The vacancy rate rose to 6.1% over the course of the year (previous year: 5.1%), while prime rents again increased slightly and average rents showed a regionally differentiated trend. Average rents per square meter developed as follows compared to the previous year: Hamburg: EUR 20.60/m² (-2%), Düsseldorf: EUR 21.30 (+8%), Frankfurt: EUR 22.90 (-4%), Stuttgart: EUR 17.30 (-5%), Berlin: EUR 29.20 (-3%), Cologne: EUR 19.60 (+5), Munich: EUR 24.70 (-1%).

3.2.2. Transactions

The weak economic development combined with the sharp rise in interest rates brought the transaction market for German commercial real estate to a virtual standstill. In 2023, the transaction volume in the "Big 7" cities amounted to EUR 7.9 billion. The individual markets developed as follows: Hamburg: EUR 1.3 billion (-71%), Düsseldorf: EUR 0.6 billion (-78%), Frankfurt: EUR 0.7 billion (-84%), Stuttgart: EUR 0.5 billion (-55%), Berlin: EUR 2.7 billion (-65%), Cologne: EUR 0.8 billion (-33%), Munich: EUR 1.4 bn (-66%). The year-on-year decline in the "Big 7" was therefore 69%.

* Source: BMWK- The economic situation in Germany in January 2024.

• Source: Top 7 locations market report Q1-4 2023, German Property Partners. Other sources were used in the previous year, meaning that the market data in the 2022 annual report is only partially comparable.

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4. PORTFOLIO ANALYSIS

4.1. Key metrics of the portfolio and investment locations

alstria owns, manages, and develops office buildings with a total lettable area of 1.4 million m². At the end of 2023, 90.0 % of this was office and storage space and 10.0 % included other types of use (retail, hotel, and other). By focusing on the large and liquid German office markets, the management board believes that alstria can secure its competitive position by efficiently managing substantial sub- portfolios even in economically difficult times. Rather than large buildings, alstria typically prefers

smaller, geographically close properties. alstria's management believes that such a portfolio design

allows the company to spread the operational risk over a larger number of buildings and thus reduce the overall risk of the real estate portfolio. The buildings in the alstria portfolio have an average lettable area of 13,100 m² and an average market value of EUR 37.6 million.

Key metrics	Dec. 31, 2023	Dec. 31, 2022
Number of properties	106	108
Market value (EUR bn)1)	4.0	4.7
Annual contractual rent (EUR m)	199.6	199.7
Valuation yield (%, contractual rent / market value)	5.0	4.3
Lettable area (m²)	1.394.000	1,398,000
EPRA vacancy rate (%)	8.0	7.2
WAULT (weighted average unexpired lease term in years)	5.3	5.5
Average value per m² (EUR)	2.860	3,329
Average rent/m² (EUR / month)3)	14. 61	14.06

1. Including fair value of owner-occupied properties.
2. Average rent for the office space.

Total portfolio by region
(% of market value)	Dec. 31, 2023	Dec. 31, 2022	Change (pp)
Hamburg	33	35	-2
Düsseldorf	26	25	1
Frankfurt	23	22	1
Stuttgart	9	9	-
Berlin	9	9	-

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4.2. Tenants and leases

Public tenants and large national and international companies in particular characterize alstria's

tenant structure. The following table shows the ten largest tenants as of December 31, 2023:

alstria's main tenants
(% of annual rent)	Dec. 31, 2023	Dec. 31, 2022	Change (pp)
City of Hamburg	13	13	0
Bundesanstalt für Immobilienaufgaben	5	5	0
Mercedes-Benz AG	4	6	-2
City of Frankfurt	3	3	0
GMG Generalmietgesellschaft	3	3	0
HOCHTIEF Aktiengesellschaft	2	2	0
Commerzbank Aktiengesellschaft	2	2	0
Hamburger Hochbahn AG	2	2	0
Deutsche Post Immobilien	2	2	0
City of Berlin	2	1	1

Letting metrics1) (m2)	2023	2022	Change
New leases	23,400	43,700	-20,300
Renewals of leases	110,000	63,600	46,400
Total	133,400	107,300	26,100

1. Total leasing volume including option drawings of existing tenants.

Commercial leases usually have a limited term agreed in the respective lease. The following table summarizes the share of expiring leases as a share of the total portfolio over the next three years:

Lease expiry profile
(% of annual rent)	Dec. 31, 2023	Dec. 31, 2022	Change (pp)
2024	8.1	10.6	-2.5
2025	14.2	13.7	0.5
2026	19.0	20.4	-1.4

4.3. Capital expenditure into the existing portfolio

In 2023, EUR 129 million was invested in the existing portfolio. The largest part of this amount, EUR 65 million, was invested in development projects, which significantly improved the quality of the spaces to achieve higher rents for new leases. The development capex remained on a high level in 2023, because alstria still sees the best return opportunities here. The current development portfolio comprises 20 projects with a total lettable area of 154,300 m2.

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