Graphisoft Park Real Estate Development European : Quarterly Report

GRAPHISOFT PARK SE

Interim Management Report - First Quarter 2023

May 9, 2023

GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2023

Executive Summary

The pro forma net result of 2.05 million euro in the first quarter of 2023 is significantly - by 640 thousand euro

• higher than the same period of the previous year and is also more favorable than the previously published forecast for 2023. The result, which surpasses the previous ones, is due to the increased indexation of the rental fees, as well as the still high occupancy rate of 97%, which exceeds the Budapest average. In addition, the interest income recognized on free forint funds and the exchange rate difference accounted due to the strengthening of the forint in the current period, also have a significant impact on profit. To a lesser extent, but also contributing to the favorable result is the better-than-planned development of operating costs in the first quarter, as some service fees and one-off items planned for 2023 have not yet arisen in the current period.

Despite the better-than-expected results, taking into account the experiences of the first quarter and the market trends, the Company continues to maintain its previous forecast for the year 2023: with sales of 16.3 million euros, we expect a pro forma net result of 6.3 million euros. Although the first quarter result is outstanding, risk factors that may affect the Company in the rest of the year must be considered. In the case of some tenants, it may arise that they require a smaller area in order to reduce their costs, which trend may be further enhanced by the expected oversupply in the office market. At the same time, in our opinion, the tenants of Graphisoft Park, who are mostly technology and knowledge-based companies employing highly qualified employees, in their case, personnel costs still make up a significant part of the total costs, therefore the rental fees and increased utility costs as a result of the energy crisis are only represent a smaller proportion of their total cost structure. In addition, the development of the world market price of energy is currently more favorable than in previous quarters, which also reduces the burden on tenants. Considering the expected result of the Company, in the case of operating costs in 2023, inflationary increases cannot be avoided, and the costs of projects that support tenant needs and promote energy efficiency, optimization of energy consumption and operation must also be taken into account. Furthermore, in accordance with the above, the Company is currently preparing its ESG strategy with the involvement of experts, which will be published in 2023 with the publication of the first ESG report. In addition to these, there may be changes in the forint interest rate environment during the year, as a result of which the interest income that can be realized in the following quarters is expected to decrease. Besides, the volatility of the forint may also adversely affect the exchange rate difference realized on the forint assets, which risks were already considered in our previously published - and currently unmodified - forecast.

In addition to all this, as the Company published on April 28, 2023, based on the resolution of the General Meeting, a dividend of around 5.4 million euros corresponding to 90% of the previous year's pro forma result will be paid in forint (201 HUF per ordinary share). The starting date for dividend payments will be May 12, 2023. After the dividend payment, the Company's available cash balance and the cash generated during the operations ensure the long-term safe operation of the company, ensure the financing of individual tenant designs, building modernizations and renovations, and provide a basis for the implementation of projects supporting the achievement of decarbonization goals.

Transition to the listing of shares in euros and postponement of the payment of dividends in euros

Following the approval of the extraordinary general meeting held on November 29, 2022, the Company submitted its application to the Budapest Stock Exchange (BÉT) regarding the modification of the trading currency in the product brochure of the Company's shares, and the date of the transition, i.e. the start date of euro-based trading - with regard to the IT and administrative tasks arising at organizations managing securities accounts - we set February 15, 2023. According to the relevant decisions of the BÉT, forint-based trading ended on February 10, 2023, and after the two-day suspension necessary for the transition and the unimpeded settlement of transactions still concluded in HUF, trading in euros could start on February 15, 2023. However, according to the information announced by the Company on March 27, 2023, the dividend payment in euros

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2023

has been postponed: the transition at the organizations managing securities accounts requires longer preparation than previously estimated, therefore the dividend for the 2022 business year will be paid by the Company in forints according to previous practice. At the same time, the Company's goal is to implement the payment of dividends in euros in the future by making appropriate preparations and by eliminating the unforeseen difficulties experienced during the transition of the trading currency.

Property portfolio and fair value of net assets

At the end of 2023 Q1, the independent valuer estimated the fair value of the real estate portfolio at 230.5 million euros, which represents a decrease of 400 thousand euros compared to the end of 2022. In more detail, the fair value of the completed and delivered properties decreased by 260 thousand euros compared to the end of the previous year, while the fair value of development lands decreased by 140 thousand euros. Volatility of energy prices, high inflation and general market uncertainty - especially with regard to the expected development of an oversupply in the office market - are the risk factors that caused the yield to increase further compared to the end of prior year, at the same time, thanks to the stable tenant base in the office park and the high utilization of the buildings, this together caused a marginal decrease in the value of properties. The slight (1%) decrease in the value of the development lands was primarily caused by the further increase in the expected cost requirements of future developments, the well-known cause of which is the drastic increase in raw material prices and labor fees. In addition, the expected time of implementation of the constructions also affects the fair value, which is also influenced by the narrowing investment opportunities due to oversupply in the near future, and the expected duration of the northern development area remediation.

Due the previously persistently low interest rates in the eurozone, which are not expected to decrease significantly in the next 1-2 years, the fair value1 of the interest rate swap hedging transactions concluded by the Company to fix the interest rates of its euro-based loans is still favorable (it increased by around 9 million in 2022), which increase is reflected in equity (net asset value). In the meantime, the Company's outstanding loan portfolio went below 90 million euros due to the continuous repayments. By the end of the first quarter of 2023, the Company's cash balance increased to 15 million euro, which will ensure, in addition to the dividend payment due in the second quarter, the long-term safe operation of the company, the financing of individual tenant designs, building upgrades and renovations, and also forms a reserve for the possible negative effects of the changing economic environment.

As a result of all this, despite the slight decrease in the fair value of the real estate portfolio, the net asset fair value of the Company exceeded the previous yearend's value by 2.5 million euros and reached 160 million euros.

[thousands of EUR]

1 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 2023

Pro forma results

Our "pro forma" financial results for the first quarter of 2023 were favorable: as a result of high utilization and the applied euro-based indexation, revenues exceeded the same period of the previous year by 373 thousand euros, nearly 10%. Most of the other income reflects the results of the construction and renovations of the rental property requested and financed by the tenants. In the current period, this result was reduced by the costs assumed by the Company, which are related to the reduction of energy consumption in the leased areas and the decarbonization strategy of the operation. In the first quarter, operating costs show only a small increase compared to the base period. At the same time, starting from the next quarter we plan to increase the price of services used to a greater extent, since the inflationary increase in the price of certain items will start from April. As previously predicted, the depreciation decreased slightly compared to the same period of the previous year due to the depletion of some older assets. The significant increase in the financial result is the combined result of several effects: as a result of loan repayments, the interest payable on the outstanding capital is reduced, in addition to this, interest income realized on forint assets also developed more favorably, and the strengthening of the forint in the first quarter of this year also had a positive effect on the exchange rate difference realized on our assets held in forint. As a result of the above, in the first quarter of 2023, EBITDA exceeds the same period of the previous year by 216 thousand euros, or 6%, and the profit after tax by 642 thousand euros, which is 46%.

Forecast

Despite the better-than-expected first quarter results, we still maintain our previous cautious forecast for the entire year. In terms of rental revenues, in addition to the increasing effect of indexation on sales, we are planning a moderate increase of 5% compared to the previous year and expect a rental revenue of 16.3 million euros, also considering some needs to reduce the area due to the economic situation and uncertainty. When planning the operational costs - which are expected to exceed the 2022 costs by nearly 400 thousand euros - in addition to the inflationary increase in the price of the services, we also take into account the other tasks that arise in line with our ESG strategy that is currently being developed (projects aimed at the efficiency of building operations, optimization of energy consumption, the data required for these also with the costs of developments enabling its measurement and analysis). Most of the other income reflects the result of the design and renovation of the rental property ordered by the tenants, the feasibility of which depends on the volume and timing of the tenants' needs. Overall, despite the expenses incurred in the first quarter, we expect no significant change compared to previous years. Based on these, in 2023, slightly exceeding the previous year,

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GRAPHISOFT PARK SE

BUSINESS REPORT

FIRST QUARTER 2023

the EBITDA may reach 15 million euros. The depreciation in 2023 is expected to decrease by 100 thousand euros in total due to the depletion of some older assets. As a result of continuous loan repayments, the interest to be paid on the principal debt is reduced, and the interest income realized on free funds is also favorable. But at the same time, due to the volatility of the forint, the exchange rate loss on our assets held denominated in forint may reduce the financial result. In 2023, due to uncertain exchange rate fluctuations, we expect a higher net financial cost of around 1.8 million euros. As a result of all this, the pro forma net result may increase by almost 5% and reach 6.3 million euros in 2023.

We are right in our pursuit of the "micro Silicon Valley" concept articulated some 25 years ago. Even during recessionary economic prospects and long-term changing and transforming office use needs, it is worth focusing on a well-defined customer base in real estate development, in our case, domestic and international companies dealing with technological development. Attracting talent is the key to success in this area. This is greatly enhanced by the 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 Factory and preserved in a modern way.

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