DES GB2015 Englisch

Profitable portfolio with stable value Deutsche EuroShop has a balanced and diversified portfolio of Ger- man and European shopping centers. The management focuses on investments in prime locations in cities with a catchment area of at least 300,000 residents that bring a high level of investment security. Seizing opportunities and maximising value In line with the buy & hold strategy, the management is increasingly concentrating on shopping center quality and returns rather than rapid portfolio growth. The management constantly monitors the mar- ket and takes opportunities to buy when they arise. Rapid decision- making chains and considerable flexibility regarding potential invest- ments and financing structures allow Deutsche EuroShop to react to very wide-ranging competitive situations. At the same time, the Group’s management focuses on optimising the value of the existing portfolio of properties. Tailored rent structure One key component of the rental model is a tailored rent structure. While city center property owners often focus on obtaining the high- est possible rents for their properties – creating a monolithic retail offering – Deutsche EuroShop’s management uses a calculation com- bining a range of factors to create an attractive sector mix and op- timise long-term rental income. Rental partners pay sector-specific and turnover-linked rent. Minimum rents linked to the consumer price index provide a guaranteed minimum level of income for Deutsche EuroShop AG during periods of economic weakness. The shopping experience concept Deutsche EuroShop has outsourced center management to an experi- enced external partner: ECE Projektmanagement GmbH & Co. KG (ECE), based in Hamburg. ECE has been designing, planning, building, letting and managing shopping centers since 1965. The company is currently the European market leader, with 196 shopping centers under man- agement. Deutsche EuroShop views professional center management as the key to successful shopping centers. In addition to guaranteeing standard opening hours and a consistently friendly, bright, safe and clean shopping environment, the center management can employ un- usual displays, promotions and exhibitions to make shopping an ex- perience. Each day, an average of 500,000 to 600,000 shoppers visit the 19 DES centers, where they are impressed not only by the range of sectors represented, but also by promotional activities including car, talent and fashion shows as well as a wide variety of activities for chil- dren. As a result, the shopping centers become market places where there is always something new and spectacular on offer. Basic information about the Group GROUP BUSINESS MODEL, TARGETS AND STRATEGY Deutsche EuroShop is an Aktiengesellschaft (public company) under German law. The Company’s registered office is in Hamburg. Deutsche EuroShop is the only public company in Germany to invest solely in shopping centers in prime locations. A total of 19 shopping centers in Germany, Austria, Poland and Hungary are held in the real estate port- folio. The Group generates its reported revenue from rental income on the space it lets in the shopping centers. The shopping centers are held by independent companies, in which Deutsche EuroShop holds stakes of 100% in eleven cases and be- tween 50% and 75% in the other eight. Depending on the share of nom- inal capital owned, these companies are either fully consolidated or accounted for using the equity method. More information on indi- rect or direct investments is provided in the notes to the consolidated financial statements. The Group managing company is Deutsche EuroShop AG. It is respon- sible for corporate strategy, portfolio and risk management, financing and communication. The Deutsche EuroShop Group has a central struc- ture and lean personnel organisation. Objectives and strategy The management focuses on investments in high-quality shopping centers in city centers and established locations offering stable long- term value growth. Another key investment target is the generation of high surplus liquidity from long-term leases in shopping centers, which is paid out to shareholders in the form of an annual dividend. To this end, the Company invests its capital in shopping centers in different Eu- ropean regions in accordance with the principle of risk diversification. Germany is the main focus for investment. Indexed and turnover-linked commercial rents ensure that the high earnings targets are achieved. The Company may invest up to 10% of equity in joint ventures in shop- ping center projects in the early stages of development. New investments should be financed from a balanced mix of sources, and borrowing may not account for more than 55% of financing across the Group over the long term. As a general rule, long-term interest rates are fixed when loans are taken out or renewed, with the goal of keeping the duration (average fixed interest period) at over five years. MANAGEMENT REPORT 116 Deutsche EuroShop AG Annual Report 2015

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