Peach Property : Annual Report 2022 (21. March 2023, 4 MB)

Growing with values.

Annual Report 2022

peachproperty.com

2Annual Report 2022 of Peach Property Group AG

Key Figures

Peach Property Group AG is a real estate investor with its investment focus on residential real estate in Germany. Our tenants are at the center of our activities. With innovative solutions for modern living needs, we offer clear added value. Our portfolio comprises high yielding investment properties, typically in German Tier II cities in the commuter belt of metropolitan areas. In addition, we are developing selected projects to be sold as condominiums. Our services span the entire value chain, from location evaluation and acquisition to active asset management and the letting or sale of our properties. We have our registered office in Zurich; our German headquarters are based in Cologne.

The shares of Peach Property Group AG are listed on the SIX Swiss Exchange.

Peach Property Group (consolidated)

Rental income	in EUR thousands
EPRA like-for-like rental income	in %
Funds from operations I (FFO I)	in EUR thousands
Result before taxes	in EUR thousands
Result after taxes	in EUR thousands
NAV IFRS	in EUR thousands
Equity ratio (IFRS)	in %
Real estate portfolio at market values (incl. right-of-use assets) 1	in EUR thousands
Number of employees
Number of shares (nominal value of CHF 30.00 each)
Share capital	in EUR thousands
Diluted earnings per share	in EUR
Diluted FFO I per share	in EUR
NAV IFRS per share 2	in EUR
EPRA NTA per share 2	in EUR
Share price as of December 31	in CHF
Market capitalization as of December 31 3	in CHF thousands

1. NAV market value based on the independent appraisal of Wüest Partner incl. assets held for sale.
2. Excluding hybrid capital and non-controlling interests.
3. Excluding treasury shares.

Dec 31, 2022

116 497

5.0

19 207

-19 967

-15 031

1 107 822

39.6

2 663 089

233

16 882 373

455 597

-0.97

1.14

60.17

64.88

16.40

276 688

Dec 31, 2021

100 409

4.0

10 208 239 997 186 102

1 081 273

40.1

2 618 742

194

16 882 373

14 510

11.45

0.67

58.50

66.40

63.40

1 069 852

3

Content

Editorial	4
Highlights 2022	7
Business Model	8
Milestones 2012 - 2022	10
Portfolio	13
ESG Summary	23
Insights into the Peach World	26
Investor information	34

Corporate Governance and Remuneration Report	39
Section 1 - Corporate Governance	40
Section 2 - Remuneration Report	58
Report of the statutory auditor on the remuneration report	66
Consolidated financial statements	69
Consolidated statement of income	70
Consolidated statement of comprehensive income	71
Consolidated statement of financial position	72
Consolidated statement of cash flows	74
Consolidated statement of changes in shareholders' equity	76
Notes to the consolidated financial statements	80
Report of the Statutory Auditor on the Consolidated Financial Statements	133
Report by the independent appraisal expert	138
EPRA Reporting	142
Individual financial statements	153
Statement of financial position	154
Statement of income	156
Notes to the financial statements	157
Proposed appropriation of retained earnings	170
Report of the Statutory Auditor on the Financial Statements	171

Contact / Events / Imprint

175

4Annual Report 2022 of Peach Property Group AG

Reto Garzetti	Dr. Thomas Wolfensberger
Chairman of the Board of Directors	Chief Executive Officer

Dear shareholder,

The world is reflecting on a very challenging 2022. The war in Ukraine caused tragic human suffering and brought with it significant challenges for the global economy. Energy prices and inflation reached their highest levels in more than 70 years.

Despite these turbulent factors, Peach Property Group demonstrated its operational robustness. Our business concept and the demand for our highly sought-after product of affordable housing in vibrant metropolitan areas proved extremely resilient against external factors.

Operating profit I (FFO I) in 2022 reached the highest value in our corporate history at more than EUR 19 million. The decisive contributing factor was the active, efficient asset management whereby among others, the portfolio

of approximately 4 300 rental units acquired in the first half-year of 2021 was fully integrated into our manage- ment, vacancies were successfully reduced, and further optimizations of operational processes were rolled out.

We continued to progress our sustainability strategy in 2022 and reached an important milestone when we received our first ESG risk assessment from Morningstar Sustainalytics, with a low risk rating.

There is also a fundamental change in our 2022 reporting. For the first time, we are reporting our annual financial statements in Euro, which represents a more appropriate reflection of our underlying operations in Germany. The currency conversion should also be helpful to investors concerning the comparability of our key figures.

Stable overall real estate portfolio value, record FFO I result, strengthening of financial position through mandatory convertible bond

The stable framework conditions prevailing in the real estate sector have changed drastically over the past year, mainly by way of high inflation and unprecedented rising interest rates. The sharp rise in borrowing costs reduced the demand for mortgage loans, resulting in real estate prices falling in Germany for the first time since the reunification in 1990. Our real estate portfolio was not spared, and we recorded a slight devaluation of approximately EUR 12 million. The total value of our real estate

portfolio was around EUR 2.6 billion as of December 31, 2022, and remained virtually unchanged compared to the previous year due to our renovation and modernization investments and a small acquisition concluded in the second half-year. The result before taxes was EUR -20 mil- lion, which includes net foreign exchange losses of EUR 30 million. Excluding the impact of net foreign exchange losses, we report a profit before taxes of EUR 10 million.

Editorial 5

Our operating profit I (FFO I) increased by almost 90 percent compared with the previous year, to the highest value in our corporate history. Our operating success results primarily from the integration of our acquisitions in previous years and the associated efficiency potential we unlocked, the successful progress made in reducing va- cancies, and the further optimization and automation of operating processes.

As a result of the significant change in interest rates offered and the capital market environment, borrowing costs for financing rose sharply. Through our re- financing actions and accompanying interest rate hedging measures during the first half-year, we reduced our average financing costs slightly from 2.8 percent to 2.6 percent despite the unfavorable market conditions.

The average residual term of all financing is 3.7 years and remained virtually unchanged from the previous financial year.

With a focus on strengthening our equity, we announced in December 2022 the issuance of a short- termed mandatory convertible bond with an issue date in

January 2023. We received net issue proceeds of around EUR 68 million in January 2023 and used them in full to repay borrowings. As a result, our capital structure mix significantly improved. This measure translated into a pro- forma leverage ratio (LTV) of 52 percent in January 2023. As of December 31, 2022, our leverage ratio was around 54 percent. The new mandatory convertible bond was subscribed to by a large majority of our anchor shareholders and will be fully converted into Peach Property Group AG shares on April 12, 2023. The mandatory convertible bond transaction underpins the confidence of our shareholders in our robust business model and the positive assessment of its potential.

We achieved another important operational milestone in the reporting year with our last remaining development project in Wädenswil, Switzerland where we held the official groundbreaking ceremony in December 2022. Of the

57 high-end residential units being built in a sought-after location on the shore of Lake Zurich, around 60 percent were already sold or reserved well before the ground- breaking ceremony. In total, the construction project has an estimated market value of around CHF 138 million.

Strong demand for affordable housing, vacancy rate reduced through active portfolio management, rental income significantly increased

Our focus on real estate in Tier II locations puts us in a market with continued strong demand for housing despite the challenging environment. This is not least evident from increases in rental income in 2022, which saw us increase like-for-like rental income by around 5 percent. At the same time, we have reduced vacant rental units from 8.0 percent in the previous year to 6.9 percent by year-end 2022.

As a result of Russia's war of aggression, energy, and electricity costs increased significantly over the 2022 financial year. However, thanks to the conclusion of forward-looking hedging transactions, we were able to avoid an increase in ancillary costs for many of our tenants. Our business focus will remain on affordable housing. Even though we made selective rent adjustments in 2022, our average rents charged remain below the German average. This further ties into our sustainability strategy which is not only aimed at environmental aspects, but also focuses on society.

Social responsibility towards tenants and society, first ESG rating with low-risk rating

In these current uncertain times characterized by significant cost increases, we remain committed to providing our tenants with secure and affordable housing. We advise and support our tenants in person at our Peach Points, by telephone, by e-mail, and online. For example, we advise on energy-saving practices in a household and support tenants in applying for government assistance.

In addition to our social responsibility towards our ten- ants, we are pursuing the goal of continuously reducing the CO2 emissions of our real estate portfolio and making our contribution to climate protection. Based on our decarbonization path, which we defined for the first time in the 2022 financial year, we aim to operate a climate-neutral real estate portfolio by 2050.