Strategy and Materiality Our Coordinates for the Company's Trajectory
Strategy and Materiality
Our Business Strategy
By year-end 2019, the real estate assets under the management of DIC Asset AG, including the real estate managed on behalf of institutional investors, equalled c. EUR 7.6 billion, with the proprietary holdings (Commercial Portfolio) accounting for EUR 1.9 billion and the third-party business (Institutional Business) for EUR 5.7 billion thereof. The company maintains a local presence of dedicated teams in seven regional branch offices that are located in Germany’s leading real estate markets. Having such a direct and regional presence on the ground regularly opens up buying, selling, letting and marketing opportunities while also enabling the company to cover the entire real estate value chain in its management of real estate assets. The revitalisation and repositioning of existing properties as the key to dynamic appreciation represents a service area that has visibly expanded with the integration of GEG, a group of companies acquired in June 2019.
Assets under management (EUR 7.6 billion)
Growth of the Investment Platform
- The main factor driving the success of our business model across segments is the application of our management expertise to a growing portfolio. We pursue a balanced growth strategy by expanding the bases of our revenues in both operating segments through additional acquisitions.
- Our investment mix covers all of Germany, the focus being on the regions surrounding or near our branch offices. This includes the “Big Seven” cities as well as attractive cities in economically strong centres and peripheral regions. In order to avoid long-term cluster risks, we strive for diversification by region, sector and tenant type.
Dynamic Performance through Agile Management
- Selling is an integral part of our activities. We engage in sales to optimise our portfolio, to realise profits at the right time and to release funds that improve our financial structure and capital efficiency.
- By entering into new leases, achieving higher rents for subsequent leases and reducing vacant space, our rental management team plays an important role in increasing the portfolio value on a daily basis.
- Thanks to our expertise, we are able us to raise the appreciation potential of our properties, especially through refurbishment work. We employ highly productive in-house teams for developments either in the proprietary portfolio or in third-party portfolios to carry out the measures necessary for the value-add repositioning of properties.
Multiple Angles in Third-Party Business
- Deliverables available to domestic and foreign institutional investors include our investment expertise of many years in the field, a transaction management with a demonstrable track record, and a broad spectrum of real estate services in the central and regional real estate markets of Germany.
- We employ our in-depth real estate know-how to drive the growth in third-party business, and take on asset management and property management mandates to generate recurrent and increasing earnings from management fees.
Strong Organisational and Financial Foundation
- Our stable financial architecture, which is based on predictable long-term cashflows and forward-looking planning, strengthens our robust standing in the market. The objective we pursue is to keep optimising our economic foundation through our business activities, our continuous cash flow from rent revenues, and the growth of our income from management fees.
- As an agile company with an active management approach, it is of the essence for us to keep our organisation highly productive and innovation-friendly. In a bid to mobilise our know-how, to create new service features and to keep enhancing our performance, we are pushing forward with the digitisation of our integrated management platform.
ESG Policy of DIC Asset AG
Sustainability as Part of Our Corporate Strategy
DIC Asset AG focuses on the long-term exploitation of opportunities and the sustainable optimisation of its business practices. At the centre of its corporate strategy is the generation of secure, steady long-term income via our highly productive in-house property management platform. The objective here is to increase the rental income and property market values of the directly owned Commercial Portfolio and to boost the recurrent revenues from the management services that are generated in the fast-trading institutional investor business.
As one of Germany’s leading listed real estate companies, DIC Asset AG is committed to a sustainable development: To ensure its long-term financial success, the company’s senior management takes ESG aspects (“ecological, social, governance”) into account in addition to economic aspects. The strategy focuses on identifying, monitoring and possibly mitigating the adverse consequences of our business activities under any of these aspects. The active communication with tenants, business partners, employees, investors and occupiers plays a key role in this context. After all, it is the cultivation of lasting stakeholder relationships, characterised by integrity and reciprocity, that lets you define our priorities when seeking the most effective ways to handle new challenges and opportunities.
Our sustainability approach includes
- strict adherence to environmental, social and safety requirements,
- integration of sustainability aspects into our business processes,
- open and transparent communication with stakeholders,
- incorporation of the precautionary principle into the management of sustainability projects
About this Report
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As a commercial enterprise, we are committed to preserving the long-term viability of our company and of our environment both, which is why we have continuously reported about our sustainability activities since 2009. Starting in March 2011, this has taken the form of a separate annual report in order to create an appropriate frame for the growing significance of the sustainability subject in our company.
This Sustainability Report covers the period between 1 January 2019 and 31 December 2019.
The Investor Relations division coordinates the reporting processes in close cooperation with other divisions of DIC Asset AG and its subsidiaries, evaluates the necessary information, processes it and reports directly to the Management Board. The Management Board defines goals and measures that are optimised to agree with the company’s sustainability principles.
For detailed information on the Company’s financial performance, portfolio and business divisions, check our 2019 Annual Report.
We are committed to helping improve the comparability and standardisation of sustainability reporting in our industry, which is why we consistently apply these internationally recognised reporting standards: This report is structured and presented in accordance with the “core” option of the standards of the Global Reporting Initiative (GRI standards), and the GRI Construction and Real Estate Sector Supplement (CRESS). The GRI standards used in our reporting are listed and annotated herein, on facts&figures.
Moreover, additional performance data are provided in accordance with the Best Practices Recommendations by the European Public Real Estate Association (EPRA). Also covered are social and governance-related EPRA sustainability indicators in addition to environmental indicators. For a note reconciling the EPRA indicators with GRI reporting, see facts&figures.
Our reporting relies on no third-party consultancy (“external assurance”), and the final quality control is also done in-house. Our disclosures on CO₂ emissions and consumption data for electricity and water were not subjected to external testing.
In collaboration with the ZIA German Property Federation and other real estate industry players, DIC Asset AG has been instrumental in driving the introduction of a sustainability code for the German real estate sector. Our sustainability reports have followed the recommendations of the German Sustainability Code (DNK) since its introduction in 2011 and will continue to do so.
European Public Real Estate Association (EPRA)
EPRA is a non-profit organisation that promotes, develops and represents the interests of European property stock corporations. It is committed to establishing best practices in the areas of accounting, reporting and corporate governance, on the one hand in order to provide high-quality information for investors and, on the other hand, to create a forum and decision-making framework for addressing future issues within the industry.
Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) is an independent international organisation for the development and publication of frameworks for voluntary reporting by companies on the consequences that their own business activities have for sustainability issues such as climate change, human rights, the fight against corruption, and many other things.
ZIA German Property Federation
Formed in 2006, the ZIA represents the general, economic and ideological interests of Germany’s entire real estate industry and promotes cooperation among its members. Moreover, it supports and accompanies suitable measures to maintain and improve the economic, legal, political and fiscal framework for the real estate industry.
Methodology and Scope
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This report employs the following methodology to present our company’s financial and non-financial performance indicators:
- In addition to the basic business model of DIC Asset AG, we present the ESG aspects of the company’s strategy. We also explain the organisational structure of DIC Asset AG and our principles of corporate governance. The 2019 Annual Report includes additional details on these subjects.
- The most important issues for DIC Asset AG are identified and prioritized in consultation with the stakeholders involved. The most recent stakeholder survey, which continues to be valid, took place in late 2016.
- In the sections Ecology, Social, Governance and Economics, we discuss the identified subjects in depth while integrating the quantitative and qualitative ESG indicators in accordance with GRI and EPRA.
Unless otherwise noted, the figures in this report refer to the 2019 financial year, supplemented by DIC Asset AG‘s outlook for 2020. Year-on-year changes in the scope of the report may be motivated by the acquisition, development or sale of properties as well as by changes in the organisational structure.
The consolidated financial statements of DIC Asset AG and its subsidiaries were prepared in accordance with the IFRS accounting standards of the International Accounting Standards Board (IASB). The accounts were audited by the audit firm Rödel & Partner. Their audit certificate in regard to the 2019 Annual Report and the disclosures it contains are part of the latest Annual Report.
Disclosures concerning our financial performance indicators cover the entire bandwidth of our asset management platform with its diversified revenue streams. This includes the real estate inventory owned outright be DIC Asset AG, which is held in the so-called Commercial Portfolio, and the services provided to third parties (Institutional Business).
The details and data in the Ecology section of the report refer exclusively to the assets held in the Commercial Portfolio. By contrast, consumption data on the assets managed in our third-party business are not considered in the analysis.
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As a result of its activities across Germany, DIC Asset AG is extremely well connected with all relevant players and service providers of the country’s real estate sector. Our decisions and actions affect investors and capital providers, around 250 employees, roughly 1,300 tenants in both operating segments, over 6,000 business partners and the entire context of properties managed by us either in our proprietary portfolio or on behalf of third parties.
The key challenges in reporting – especially non-financial reporting – include the identification of topics more important than others for both the company’s business and the various stakeholders. In addition, the materiality analysis also serves as a guideline for our sustainability targets and reporting procedures. It allows us to keep developing our corporate strategy in line with ESG criteria.
The most recent comprehensive stakeholder survey was conducted in 2016. In conjunction with the survey, around 1,000 employees, tenants, business partners and investors were asked to rate the significance of 27 different issues picked from a wide spectrum of subject areas. The questionnaire was developed and evaluated in accordance with the internationally recognised sustainability reporting standards of the Global Reporting Initiative (GRI).
The matrix derived from the survey, while not claiming to be comprehensive, provides the management with significant details for the ongoing stakeholder dialogue and the prioritisation of measures in the respective spheres of activity. The preferences of each stakeholder group will be separately discussed in the subsequent section of the report. Going forward, we are considering doing another stakeholder survey, especially because of the increased significance of the Institutional Business unit. The ESG activities of the Institutional Business will be separately discussed in this report for the first time.
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Stakeholder survey of December 2016
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This chapter discusses the priorities of the various stakeholders in more depth, and elaborates the actions taken to address the stakeholder needs during the reporting period.
DIC Asset AG is characterised by an internationally broad-based and principally stable shareholder structure. In addition to privately shareholders, institutional investors play a key role. Deutsche Immobilien Chancen-Group, from which DIC Asset AG was originally spun off purely as a portfolio company, has been invested since the IPO in 2006 and currently holds about 34.1% of the stock as anchor shareholder. On top of that, the RAG Foundation has been a major shareholder of DIC Asset AG with a long-term horizon since 2014 and currently holds around 10.0% of the stock. Ketom AG joined our shareholders on occasion of the capital increase in January, and now holds around 5.0%. The free float equals 50.9% at the moment, with US investor FMR LLC accounting for 5.8% thereof (all percentage figures quoted in accordance with the disclosures of the latest voting rights notification). Important stakeholder groups on the capital market also include the bearers of DIC Asset AG bonds, a number of financial institutes and finance partners, along with analysts of currently eleven institutes who are in constant dialogue with us concerning the DIC stock and company valuation issues.
|Deutsche Immobilien Chancen Gruoup||34,1|
|– thereof FMR LLC||5.8|
Baseline date: June 2020
- Sustainable value-added and a balanced financial structure
- Continuity of dividends, even in times of crisis
- Adherence to compliance guidelines (especially capital market requirements/prohibition of insider trading)
- Transparent, accurate and timely communication of financial and non-financial information
- A responsible approach in handling investment processes
- A proactive dialogue and exchange with the Management and Investor Relations
Actions taken and Achievements during the 2019 Financial Year
- Funds from operations (FFO) in the property management business increased by 40% year on year, bringing the total up to top level of EUR 95 million in accordance with the corporate objectives.
- Earnings in the real estate management segment increased by 87%, up to EUR 63 million, after the take-over of asset manager GEG in June 2019.
- The full value of the Institutional Business unit was initially recognised with the adjusted NAV figure (EUR 22.26 as of 31 December 2019).
- The 14/19 corporate bond (coupon rate: 4.625% p.a.) was repaid, and the promissory note loan (average rate: 1.55% p.a.) for the purpose of optimising and diversifying the funding structure was issued.
- The dividend was raised by around 38% to EUR 0.66 and the offer of a “scrip dividend” option renewed.
- A sustainability report was published in addition to annual and quarterly reports, press releases and other publications.
- The preparation, review and publication of monthly, quarterly and annual financial statements was accelerated (“fast close”).
- Transparency on the portfolio level and property level have been continuously improved, including in regard to the value drivers of the two operating segments.
- Nine road shows, seven investor conferences and one analyst event were conducted – a total of 111 investor meeting in five different countries.
By 31 December 2019, a total of 247 employees were on the payroll of DIC Asset AG (31 December 2018: 186). The year-on-year increase is explained by organic growth of the asset management and property management business, and notably by the takeover of GEG.
- Fair treatment and competitive compensation
- Options for professional training and continued development
- Secure and pleasant working environment and flexible working hours
- Diversity and equal opportunity
Actions Taken and Achievements
- Employees willing to undergo further training received personal support, including grants and leave time.
- Regular work meetings and events were organised to facilitate exchange of knowledge and to boost team morale.
- Performance-based remuneration: In 2019, employees were paid EUR 3.7 million in performance-related remuneration (15% out of the total compensation expenses of EUR 24.9 million).
- Modern, sustainable office workstations with generously proportioned common areas and an all-you-can-drink offer of hot and cold beverages
The group of around 1,300 tenants in both segments (Commercial Portfolio and Institutional Business) is composed of commercial occupiers of every size, from mid-market companies to international conglomerates. Roughly two in three tenants occupy premises of 750 sqm or less.
- Protection of privacy and personal data in accordance with the European Data Protection Regulation (GDPR)
- Resource-conserving buildings and facilities
- Efficient and attractive properties whose specifications meet tenant requirements
- Regular and responsive communication
- Competent and bespoke services on location
- Transparency in relation to compliance guidelines (especially avoidance of corruption risks and protection of competition)
Actions Taken and Achievements
- Under a tenant-oriented approach to customer service, employees specialise in companies of a certain size or sector affiliation.
- We invest regularly in our portfolio to keep the properties permanently attractive and technologically up to date; we closely coordinate our efforts with the tenants when repositioning a given property.
- We maintain a constant dialogue with the tenants to ensure the high service quality, reliability and consistent availability of our commercial and technical property management.
Size structure of rental units (across segments)
(as of: 31 December 2019)
200 sqm or less
10,000 sqm or more
We work with over 6,000 business partners to implement joint projects or to use third-party services in our real estate value chain. These include, for instance, general contractors or contractors for certain trades in the context of redeveloping portfolio properties.
Business Partner Expectations
- Long-term and consistent business relations
- Fair treatment and support by the DIC contacts
- Protection of privacy and personal data in accordance with the European Data Protection Regulation (GDPR)
- Energy efficiency and reduction of the environmental impact, applying measurable criteria
Actions Taken and Achievements
- The “smart metering” project: The replacement of meters in the managed properties for the purpose of automating the collection and evaluation of consumption data is now under way (see project presentation )
- Since 2010, master agreements for supplying all of our properties exclusively from renewable energy sources have been in place
- Compliance with relevant standards on occupational health and safety as well as with environmental constraints
- Our headquarters are cleaned by a facility management service that is certified according to the DIN/EN ISO 9001 and 14001 standards, and that uses environmentally friendly cleaning methods.
- We consistently implement the stated financial goals and requirements so as to ensure the long-term sustainability of the company’s financial position
This group includes municipalities, authorities and civil society.
- Consideration of the needs, wishes and concerns of local neighbours and willingness to engage in dialogue, e. g. in the repositioning context
- Support for local, regional and inter-regional initiatives to revitalise and develop living and working environments
Actions Taken and Achievements
- Ongoing dialogue with the various stakeholders to promote the common good
- We cultivate active press and media relations, particularly on the local level
- We have long involved ourselves in relevant professional associations, such as ZIA (German Property Federation), EPRA (European Public Real Estate Association) and DAI (Deutsches Aktieninstitut, German Equities Institute). Sonja Wärntges, CEO, contributes her expertise to the German Property Federation as a member of its executive committee while also sitting on the board of the German Equities Institute.
- The fund management is a member of the European Association for Investors in Non-Listed Real Estate Vehicles (INREV)
ESG in the Institutional Business
Growing Significance of Third-Party Business, and New Stakeholder Requirements: The business with asset management and investment management services for third parties (Institutional Business) quickly gained in significance for DIC Asset AG over the past financial years, and has been gathered into the GEG brand since 2019. During the 2019 financial year, the Institutional Business units pulled level with the portfolio business (Commercial Portfolio) as equivalent …