Annual Report (ESEF) • Apr 5, 2023
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Download Source FileUntitled Company : Park Street A/S CVR: 12932502 Svanevej 12, 4 th Floor 2400 København NV Accounting period: 1 January – 31 December 2022 Chairman: Annual Report 2022 Company: Park Street A/S Svanevej 12 DK-2400 København NV CVR no.: 12 93 25 02 LEI no.: 213800VGJC18MRKMZC33 Registered office: Copenhagen, Denmark Phone: +45 33 33 93 03 Internet: www.nordicom.dk / www.psnas.com E-mail: [email protected] Board of Directors: Anita Nassar, Chairman Claes Peter Rading Ohene Aku Kwapong Pradeep Pattem Management: CEO Pradeep Pattem Auditor: PriceWaterhouseCoopers Statsautoriseret Revisionspartnerselskab Main activity: Park Street is a fully integrated European real estate investment and asset management company with offices in Copenhagen and London. It owns and manages a large portfolio of commercial properties located across Denmark. Annual General Meeting: Annual General Meeting to be held on 28th April 2023 at 16:00 at Svanevej 12, 2400 Copenhagen NV, Denmark. Annual Report 2022 1 Contents Directors' report 2 Directors' report 2 Subsequent events after 31 December 2022 3 Outlook and strategy for 2023 4 Financial Highlights 17 Financial Results 18 Risk Factors 21 Statutory Report CSR 23 Legal requirements for Corporate Governance 23 Statutory report on diversity in management 23 Management composition and remuneration 24 Board of Directors and Management 25 Shareholder structure 26 Group structure as of 31 December 2022 28 Statements 29 Statement by Board of Directors and Management 29 Independent auditors report 30 Consolidated Financial statements 34 Income statement 36 Statement of comprehensive income 37 Statement of financial position 38 Statement of equity 39 Statement of cash flows 40 Notes 42 Annual accounts for Park Street A/S 69 Income statement 71 Statement of comprehensive income 72 Statement of financial position as of 31 December 2022 73 Statement of equity 74 Statement of cash flows 75 Notes 77 Property Overview 92 Park Street/ Director’s report 2 Main Activity Park Street is a fully integrated European real estate investment and asset management company with offices in Copenhagen and London. It owns and manages a large portfolio of commercial properties located across Denmark. Results of the year 2022 Park Street result analysis primarily uses the term EBVAT (Earnings before value adjustments and tax) to measure the Group’s operating results. The Group achieved in 2022 an EBVAT (profit excluding value adjustments and tax) of DKK 42.9 million (2021:DKK 56.8 million), as compared to expectations of DKK 50 million (published in the Park Street Interim Report Half Year 2022 results announcement in Aug 2022), primarily driven due to a combination of reduction in number of assets from sale of properties, leading to lower income, combined with an increase in financial expenses due to changes in interest rates. Furthermore there was an increase in new leasing adding to costs for marketing activity, and an increase in energy costs related to vacant units. We expect the EBVAT for 2023 to be DKK 55m in view of our expectation for new leases in pipeline and expected reduction in costs. This outlook assumes the portfolio to remain same and could change with any significant sales or additions to properties. The evolution of the EBVAT is influenced by the following factors: Gross profit in 2022 is DKK 104.7 million (2021: DKK 117.4 million), equivalent to a decrease of DKK 12.7 million. The reduction in gross profit is primarily due to a reduction in rental income (- DKK 8 million) offset by an increase in income received from the hotels in the group (DKK 5.8 million), and an increase in Opex of DKK 7.8 million, driven in part by increased energy costs. The Group's overheads were DKK 31.8 million in 2022 against DKK 34.7 million in 2021. The decrease of DKK 2.9 million is caused by a savings in external advisor expenses. Net financial items amounts to DKK -29.9 million in 2022 against DKK -25.9 million in 2021, representing a negative change of DKK 4 million driven by an increase in interest costs due to an increase in the debt in 2021 with financial institutions including development loan for Pulse N with higher margins interest rates. The decrease in the Net Profit for the period from DKK 145.4 million in 2021 to DKK 55 million in 2022 is due to the following effects: Fair value adjustment in 2022 with a net of DKK 36.1 million while the fair value adjustment in 2021 had a net effect of DKK 128.9 million. In both periods an evaluation of the domicile and investment properties have been made adjusting the yield and the estimated profit and loss by the entire portfolio of Park Street A/S and subsidiaries. The Group's equity as at 31 December 2022 was DKK 1,087 million, compared to DKK 1,217 million as at 31 December 2021. The decline in equity is due to the purchase of treasury shares. The operation of the Group's properties in 2022 included negotiations and closings of several new leases and sale of assets not core to Park Street. This should positively impact the performance of 2023 towards reducing vacant unit costs while enhancing the top line. However there are further lease terminations which need to be marketed. While the investment and interest rate environment has turned challenging, the demand for new leases and market rental levels continue to see positive traction. The current vacancy rate (calculated by rental value) for the Group's investment properties, in Retail reduced to 13.67% in 2022 (19.28% in 2021) and Office reduced to 17.46% in 2022 (24% in 2021). During the first months of 2023, there has been a positive traction with the signature of new leases. Property acquisitions and sales In 2022, Park Street sold the following properties and plots: Retail building in Aarhusvej 119-121, Ulrikkasvej 1, Randers Retail building in Femøvej 3, Næstved Land plot in Gule område/ Havnegade 50/ Officehuset, Næstved Retail building Aakirkebyvej 58-60, Rønne Retail building in Zahrtmannsvej 78, Rønne Retail building: Loftbrovej Park Street/ Director’s report 3 Organisation Since April of 2022 when the Annual General Meeting of the Company took place the Board of Directors of Park Street consists of Pradeep Pattem, Ohene Aku Kwapong, Anita Nassar and Claes Peter Rading. The number of employees of Park Street were 35 by the end of 2022, against 26 at the start of the year. Subsequent events after 31 December 2022 In January 2023, we have hedged the interest rate exposure on the floating rate non-mortgage debt through purchase of interest rate caps. These caps are now in the positive value. Mortgage loans due for interest rate fixing in April 2023 have now been fixed as F3 loans. From the balance sheet date until the date of presentation of this Annual Report no additional events have occurred other than the above mentioned which significantly affect the assessment of the annual report. Park Street/ Director’s report 4 Park Street Park Street A/S operates as a real estate investment and asset management company. The Company manages own real estate portfolio primarily in the office, retail, and residential segment. Founded in 1989. New executive management and board came in 2017. Company listed on NASDAQ OMX CPH: PARKST-A.CO Highly flexible asset management platform backed by 20+ dedicated and experienced employees. Company is technology driven with own developed asset and property management software geared and executing several real estate strategies. Team experience with 20+years track record of real estate investing spanning several cycles. Assets by segment 21% 34% 7% 1% 37% Retail Office Hospitality Logistic Residential Copenhagen London 45 assets ∼ 211,000 m² ∼ AUM EUR 367 mn/ Park Street/ Director’s report 5 Company Focus and Strategies Park Street aims to consolidate to the strategies, Pulse and Spark over 2-4 years. The proceeds from the portfolios; Stable, Nordicom, regional assets and Nordicom, development assets along with new capital are to be used to focus on developing Pulse- and Spark-portfolios. Park Street is currently managing four portfolio with different strategies across 45 assets in Denmark. • Pulse - youth living and hospitality partnerships • Spark - institutional quality office and retail • Stable - cash flow portfolio • Nordicom - divestment portfolio Each portfolio has its own strategy, focus areas and all assets have an asset management plan for execution. Fur- ther initiatives for optimization across assets and portfolio are also planned. 60% 40% Assets by portfolio Current Target 40% 30% 10% 20% Pulse Spark Stable Nordicom Park Street/ Director’s report 6 Asset Management Services Park Street is a one-stop-platform for asset management and property services. We cover the value chain through in-house expertise and strategic partnerships to execute on asset manage- ment plans. Park Street/ Director’s report 7 Review – data driven asset management and property management platform Park Street/ Director’s report 8 Portfolio Outline Park Street/ Director’s report 9 01. Pulse Park Street/ Director’s report 10 01. 1 Pulse Living Pulse Living is a community within and extending to the local community and institutions of higher education in Copenhagen. Further engaging the local community around the property through events and compatible com- mercial tenants Park Street/ Director’s report 11 01. 2 Pulse – Asset Management Case Pulse N, Copenhagen NV • Pulse N at Hejrevej 8-10 is a 9,000 m² office building built in 1967. Former office tenant, terminated its lease in year 2018. • In recent years, Copenhagen N and NV has become a very attractive urban area for both students, international visitors and tourist. The Copenhagen N and NV district has topped Time Out Magazine’s ‘World’s Coolest Neighborhoods 2021’ list. • Park Street’s Pulse concept was ideal for the area and the old office building is now under construc- tion into youth housing apartments with retail on the ground floor. • Total 204 apartments - on average 30 m² with own kitchen and bathroom. • Waiting list for the apartments under construction is more than 1,400+ people listed. • Four retail unit across 1,500 m² - tenant composition in synergy with Pulse Living youth housing con- cept and local community. • The project is under construction and will be ready in summer 2023. Park Street/ Director’s report 12 02. Spark Park Street/ Director’s report 13 02. 1 Spark Banegårdsavej, Glostrup • Banegårdsvej, Glostrup is a retail and office property located right at Glostrup Station with the new Letbane, DKK 7.5 billion of new railway infrastructure connecting Ishøj to Lyngby. • The property is 9,961 m² and was bought with the majority of the property being vacant. • Asset management plan is being executed with redevelopment and upgrading of property, change of floor planning and attracting quality and right composition of tenants with respect to the demographics of the area. New main tenant with lease of 3,000 m² office headquarter for a Danish engineering company, ABC Ingeniør. Several on-going negotiations with well-known and quality tenants for retail and of- fice. • Long-term large residential development opportunities. On-going discussion with Glostrup Municipal- ity. Park Street/ Director’s report 14 03. Stable Park Street/ Director’s report 15 04. Nordicom Park Street/ Director’s report 16 Selected properties for divestment Prøvestensvej 20, Helsingør Sjællandsgade 12,16,18, Vejle Selected properties with development potential Allerød Vestcenter, Lillerød with +2,400 m² of building rights Ringsted Centeret, Ringsted with +24,000 m² of building rights Park Street/ Director’s report 17 Financial Highlights Key figures Amounts in DKK 1000s 2022 2021 2020 2019 2018 Income statement Rental income 136,348 124,328 126,903 147,518 149,729 Total net sales 153,281 158,264 172,669 203,166 175,444 Gross profit 104,675 117,418 124,979 150,093 146,154 Profit from primary operations 74,499 187,225 187,929 146,021 142,341 Financial items -29,932 -25,881 -25,757 -29,105 -33,409 Earnings before value adjustments and tax (EBVAT) 42,898 56,866 69,983 83,223 88,014 Profit for the period 54,980 145,459 145,491 115,053 108,289 Statement of financial position Investment properties 2,521,581 2,615,015 2,462,633 2,477,995 2,304,614 Investments in property, plant and equipment -15,061 25,803 36,991 19,259 2,648 Balance sheet total 2,807,465 3,020,749 2,723,067 2,772,843 2,580,698 Interest-bearing debt 1,402,935 1,509,471 1,405,024 1,633,364 1,590,916 Total equity 1,087,024 1,217,038 1,071,946 931,133 810,652 Statement of cash flows Cash flows from operations 40,219 57,999 61,966 92,856 87,930 Cash flows from investment 116,508 -17,777 137,919 -125,487 51,825 Cash flows from financing -290,015 104,447 -238,341 39,927 -94,668 Other disclosures Non-current liabilities as a proportion of total liabilities (%) 95.6 95.7 94.1 89.7 94.1 Share capital 57,175 67,513 67,513 67,513 67,513 Share price, end of period (DKK) 13.90 14.10 10.00 6.65 6.7 Share price change in points -0.20 4.10 3.35 -0.05 0.9 Dividend per share 0.0 0.0 0.0 0.0 0.0 Number of employees in the Group (average) 27 26 26 32 27 Financial ratios 2022 2021 2020 2019 2018 Return on property portfolio (% p.a.) 3.9 4.3 4.7 5.8 5.9 Average loan rate (% p.a.) 2.1 1.8 1.8 1.8 2.0 Return margin on property portfolio (% p.a.) 1.8 2.5 2.9 4.0 3.9 Return on equity (%) 5.1% 11.9% 13.6% 12.4% 13.4% Equity ratio (%) 38.7% 40.3% 39.4% 33.6% 31.4% Net asset value per share, end of period (DKK) 19.0 18.0 15.9 13.8 12.0 Earnings per share (avg. Number of shares) (DKK) 1.1 2.2 2.2 1.7 1,7 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 Share Price/net asset value, end of period 0.3 0.4 0.4 0.5 0.6 Cash flow per share (DKK) 0.7 0.9 0.9 1.4 1.4 The above financial ratios are calculated in accordance with the definitions in Note 22 to the parent company financial statements in the Annual report for 2022. Park Street/ Director’s report 18 Financial Results Yearly result compared to expected development The Group achieved in 2022 an EBVAT (profit excluding value adjustments and tax) of DKK 42.9 million (2021:DKK 56.8 million), as compared to expectations of DKK 50 million, primarily driven due to a combination of reduction in number of assets from sale of properties, leading to lower income, combined with an increase in financial expenses due to changes in interest rates. Furthermore there was an increase in new leasing adding to costs for marketing activity, and an increase in energy costs related to vacant units. Segment Information Park Street does not present segment information and the Group’s portfolio is presented as one. Operation from Investment Properties The Group's investment properties at 31 December 2022 is composed of all the Group's 46 properties, excluding 2 properties classified as domicile property The Group's investment properties are geographically concentrated in Greater Copenhagen and Zealand. Based on investment property values, the portfolio allocates as follows: Amount in Million DKK 2022 2021 Zealand 1.852 74% 1.825 69% Bornholm 0 0% 38 1% Fyn 233 9% 249 9% Jutland 413 17% 524 20% Total 2.497 2.636 Park Street/ Director’s report 19 The breakdown by activity based the property value is split as follows : Amount in Million DKK 2022 2021 Residential 455 19% 515 20% Residential Project 511 20% 470 18% Office 827 33% 842 32% Retail 581 23% 692 26% Hotel 99 4% 92 3% Storage 24 1% 26 1% Total 2.497 2.636 The following table shows the calculated average vacancy divided by property types: Average vacancy in % 2022 2021 Retail 13.67% 19.28% Office () 17.46% 24.00% Residential 8.83% 10.85% Storage 53.54% 39.86% Others 0.00% 0.00% Total 20.47% 22.25% The following table shows the calculated average gross rent obtained divided by property types on properties held at 31 December 2022: Avg. gross rent per sqm p.a. (DKK) 2022 2021 Retail 1,058 1,184 Office 1,110 969 Residential 2,059 2,256 Storage 412 405 Other 988 924 Total 1,136 907 Park Street/ Director’s report 20 Consolidated Financial Review PROFIT AND LOSS Park Street's Net Profit is DKK 55 million for 2022 (2021: DKK 145.4 million), equivalent to a change of DKK 99.5 million in relation to 2021. As mentioned above the EBVAT in 2022 is DKK 42.9 million (2021: DKK 56.9 million), which is DKK 14 million lower than the one achieved in 2021. The reduction is primarily driven by the reduction of the gross profit (DKK -12.7 million), due to a reduction in rental income (- DKK 7.9 million) and primarily driven by the sale of properties, intentional vacancy in order to intiate residential projects and a delay on filling vacancies due to the uncertainties caused by the post Covid-19 impact. This has partially been offset by an increase in income received from the hotels in the group (DKK 5.8 million). The Net Profit for the period is DKK 55 million (2021: DKK 145.4 million) is due to fair value adjustment in 2022 with a net of DKK 36.1 million while the fair value adjustment in 2021 had a net effect of DKK 128.9 million. To finalize, the effect of the Tax on profit in 2022 is DKK -19.5 million (2021: DKK -41.8 million) due to a relatively lower increase in fair value adjustments. BALANCE SHEET Park Street's Net Assets as at 31 December 2022 were DKK 2,807.5 million, an decrease of DKK 212 million on the balance sheet total at 31 December 2021. The decline is mainly due to sale of investment properties leading to a reduction of DKK 84.2 million and a decrease in current assets of DKK 127.2 million (from DKK 205.9 million at 31 December 2021 to DKK 78.6 million at 31 December 2022) due to proceeds from sale of investment properties, financing and re-financing activities. There was a positive revaluation of investment and domicile properties of DKK 36.1 million. Non-current assets were DKK 2,728.8 million at 31 December 2022 (2021: DKK 2,813.6 million). The Group's equity as at 31 December 2022 was DKK 1,087 million, compared to DKK 1,217 million as at 31 December 2021. The decline in the Group's equity is mainly due to the decrease in the profit for the period with DKK -99.5 million. Liabilities to credit institutions were DKK 1,402.9 million as at 31 December 2022 (31 December 2021: DKK 1,509.5 million), consisting of DKK 1,382.6 million (99%) for non-current liabilities and DKK 20.3 million (1%) for current liabilities. In 2022, financial liabilities were decreased by DKK 106.6 million driven by decrease in debt and amortization repayments to credit institutions. CASH FLOWS FOR 2022 Cash flows from operating activities for 2022 were DKK 40.2 million (2021: DKK 58 million), equivalent to a decrease of DKK 17.8 million in relation to the same period last year. The decrease is primarily due to the decrease of operating profit (EBIT) previously mentioned. Cash flows from investing activities for 2022 were DKK 116.5 million (2021: DKK -17.8 million). Cash flows from investing activities increased com- pared to the previous year due to larger sale of assets in 2022 as compared to 2021 (2022: DKK 216 million, 2021: DKK 8 million). There was lower improvements made to investment properties of DKK -99 million (2021: DKK -25.8 million). Cash flows from financing activities for 2022 were DKK -290 million (2021: DKK 104.4 million) mainly driven by the repurchase of new shares of DKK 183.5 million, paydown of financing and amortization repayments to credit institutions of DKK 174.5 million. The Group's liquid assets amounted to DKK 34.5 million at 31 December 2022 against DKK 167.8 million as at 31 December 2021. Uncertainty in connection with recognition and measurement In connection with the Annual report, management makes a number of estimates and assessments regarding the carrying amount of assets and liabilities, including: Fair value of investment properties, Fair value of domicile properties, Impairment test on domicile properties, Classification of properties, Deferred tax assets and tax liabilities Because of assumptions, assessments and estimates, uncertainty relates to the mentioned conditions and items. It may be necessary to change previously made estimates, etc. due to changes in the circumstances underlying the estimate, changed strategy or due to additional information, further experience or subsequent events. Reference is made to note 1 of the consolidated financial statements and note 1 in the parent company's financial statements for further discussion of the assumptions, assessments, estimates and associated uncertainties. Park Street/ Director’s report 21 Parent company Park Street A/S For the parent company Park Street A / S, profit before tax amounts to DKK 79.5 million in 2022 (2021: DKK 187.2 million). The parent company's profit and loss before tax is affected by a decrease of the retail income of DKK 32 million (2021: DKK 8 million). Parent company equity per 31 December 2022 amounts to DKK 1,087 Million (31 December 2021: DKK 1,217 million). Risk factors Financial Risk The financial management of the Group is geared towards optimising the term structure of liabilities in line with the Group's operations and mini- mizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instru- ments, except to manage the financial risks inherent to the Group’s core activities. The Group is exposed to various financial risks due to its activities, including liquidity risk, market risks (primarily interest rate risk) and credit risk. Park Street regularly reviews the Group's risk profile in the areas of greatest risk, as per above description on page 2 and on the Consolidated Financial Statements Note 1 and 28. Other financial risks Park Street financial risks are described in the consolidated financial statements, Note 28 and includes a description of the following components: Liquidity risk • Refinancing risk • Liquidity risk management Interest rate risk. Credit risk. Capital management. Refer to the information in Note 28. Business risks Park Street is subject to normal commercial and societal risks applicable to players in the Danish real estate market. Park Street's significant business risks can be divided into the following categories: Properties market value Market Rent Vacancy Maintenance Sales of properties Errors and omissions concerning the renovation and new construction. Properties market value Park Street values investment properties at fair value (market value) and includes valuation adjustments in net profit. Park Street's portfolio of properties constitute a large share of the Group's balance sheet, which means that sensitivity to falling prices in the property market is relatively large. Property value is influenced by several factors, including a particular value sensitivity to fluctuations in the following parameters: Park Street/ Director’s report 22 i. Market rent ii. Vacancy iii. Yield Estimated changes in the properties' fair value changes of the parameters above are disclosed in note 1 to the consolidated financial statements. Market Rent Part Street’s portfolio of leases are generally at market rent levels. The Group has an opportunity to review the leases where there is a gap to market rents using section 13 clause to migrate the lease levels closer to market rents. Improving demand for space and increasing market rents could also give an opportunity to make capital investments on structurally vacant areas of the portfolio to create further lettable areas. Renegotiating with existing tenants could create the risk of increased vacancy, which in turn will create a need for further capital investment require- ments for upgrading the vacant space. Vacancy Park Street is dependent on the ability to maintain or create a natural user requirement for the properties. In the case of a tenant's relocation of a lease, there is a risk that the vacant lease cannot be re-leased within the expected time horizon or, if necessary, can only be leased at lower rent level than expected. In addition, vacancy rates are affected by the general economic situation in the area where the individual property is situated. Maintenance The basis for obtaining rental income is, of course, that Park Street can offer leases that meet the expectations and requirements of the tenants, including a satisfactory maintenance condition for the property. Lack of maintenance of properties therefore creates a risk to Park Street. Lack of maintenance can be due to many conditions, such as structural deficiencies, unforeseen wreckage, vandalism, extreme weather conditions, etc. The company prepares long term maintenance budgets and carries out the maintenance work necessary to maintain a satisfactory maintenance condition on the properties. Sales of properties Park Street sells properties that are suitable to sell. The selling price is naturally linked to uncertainty as it depends on the actual negotiation situation at the time of sale and is also influenced by a number of other factors, including the rental income of the property, the general interest rate level and market conditions at the time of sale. Errors and deficiencies regarding rebuilding and newbuilding When rebuilding the existing properties of the Group, or in the case of new construction, there is a risk of malfunctioning. Park Street ensures against this through contracts with the Group's suppliers (contractors, etc.) who will be required to correct any deficiencies. In cases where suppliers have gone bankrupt or for some reason cannot fill their obligations, Park Street may, however, have to rectify defects at your own expense, provided there is no guarantee or other security from the suppliers. Other risks Other risks can be divided into the following categories: Insurance risks. Tax risks. Legal risks. IT risks. Insurance risks Park Street subscribes to statutory insurance and insurance policies that are deemed to be relevant and customary. The Group regularly conducts an insurance review with the assistance of an insurance specialist. Based on the latest report on the company’s insurance coverage, management believes that Park Street has sufficient insurance coverage. Tax risks Changes in tax legislation may affect Park Street's fiscal situation. Legal risks Park Street/ Director’s report 23 Park Street regularly enters into a number of agreements, including agreements concerning the operation of properties. The agreements involve opportunities and risks, which are assessed and hedged in connection with the conclusion of the agreements. IT risks Park Street uses IT to a considerable extent and are thus exposed to operational disruption of the established IT safety. This can cause operating and financial losses. Park Street constantly works to ensure a high level of IT security, which is currently estimated to be the case. Statutory report CSR Business model Please, refer to the section Main Activity on page 2. Risks related to CSR While Park Street generally and based upon our business model has not identified nor experienced any material risks in relation to CSR, the Company has decided to author and implement policies with respect to environment, climate change, human rights, social and employee conditions and anti- corruption due to our social responsibility in each of the business activities that are performed. CSR is reflected in the way we manage and refurbish our properties, in our relationship with tenants, employees, business partners and any stakeholder that the Group operates with. Policies, activities and results Environmental and climate conditions: In connection with the re-devolpment and maintenance of the existing assets Park Street is follow- ing all applicable building regulations with the the goal of reducing energy consumptions. In 2022, the Group invested over DKK 96 million in the maintenance and modernization of the existing properties. Social conditions and employee relations and respect for human rights: Employees are the most important resource for progress, and therefore the Group is constantly working to ensure a healthy physical and mental work environment with a focus on reducing sickness absence. Park Street supports all human rights within national laws as well as international laws, and acknowledges the importance of supporting the local community as well as helping in a larger perspective. In order to support the data protection for individuals, the Group is implementing and continuously improving processes and IT measures to meet the EU GDPR standards. At the same time a policy is getting established for development of future employees. No breach of these policies have been identified in 2022. Anti-corruption and bribery: The Group is has invested to develop systems for transparently reviewing invoices and implemented a vendor and property specific approval policy and workflows to mitigate any risks related to expenses. The group has established an Anti-corruption policy were employees and business partners are not allowed to receive gifts from suppliers larger than DKK 500. In connection with the ongoing controlling of employees, the Group has strict guidelines on only paying bills according to legal documents with documented expenses, and that prices are benchmarked against usual costs. No corruption has been detected in 2022. Data ethics: The Park Street Group does not have a formalized policy on data ethics. Park Street only processes data for business purposes. Park Street does not make use of new technologies such as artificial intelligence, advanced algorithms, monitoring and the like. Data processed in Park Street is not made available to third parties. Should there be a desire to make data available to third par- ties, it should be approved by the company's top management. The Park Street Group complies with applicable legislation for the pro- cessing of personal data. As a rule, the Group does not process personal data, apart from what relates to employee data. Legal requirements for corporate governance Park Street has chosen on the company's website to publish the statutory statement of business management, according to section § 107b of the Danish Financial Statements Act (Årsregnskabslovens § 107b.). The full statutory report available on our website http://www.psnas.com/index.php/corporate-governance-statement/ Statutory report on diversity in management Park Street’s board composed at the time of publication of the annual report for 2022 by three men and one woman. In accordance with the Danish Commerce and Industry Agency's (Erhvervsstyrelsens) "Guidelines on targets and Policies for Gender Composition of Management and Reporting on this issue" issued in March 2016, Park Street has a sub-representation of the board (top Management body). Park Street has set a target for the underrepresented gender in the Board of Directors (top Management body). Park Street has chosen that the under-represented sex must be represented by 40% of the board by the end of 2022. Consequently the goal of 40% women in the Board of Directors has not been met yet as no candidates of the underrepresented gender were up for election in the previous year. Park Street/ Director’s report 24 Since the number of employees in the Group is less than 50, Park Street is not required to develop policies to increase the proportion of under- represented gender in the Group's other management levels, however the percentage of female employees represents 50% of the employees in the Group by the end of 2022. Group’s overall policy is to employ or promote the best suitable candidates no matter of gender. Internal control and risk management systems in relation to the accounting process Park Street Board of Directors and the Audit Committee have the overall responsibility for risk management and internal controls in relation to the presentation of the Group financial statements. Group’s internal control and risk management systems relating to the accounting process are de- signed to minimise the risk of irregularities and significant errors in the published financial statements. The Board of Directors / Audit Committee regularly assess material risks and internal controls in order to ensure that the control environment of Park Street provides a good risk management and effective internal control. At least once a year, as part of risk assessment, the Board of Directors / Audit Committee and the Executive Board undertake a general identification and assessment of risks in connection with the financial reporting, including the risk of fraud, and consider the measures to be implemented in order to reduce or eliminate such risks. The Board of Directors is overall responsible for the Group having information and reporting systems in place to ensure that its financial reporting is in conformity with rules and regulations. For this purpose, the Company has set out detailed requirements in policies, manuals and procedures. The internal control and risk management systems are monitored at different levels within the Group. Any weaknesses, control failures and violations of the applicable policies, manuals and procedures or other material deviations are communicated upwards in the organization in accordance with relevant policies and instructions. Any weaknesses, omissions and violations are reported to the Executive Board. The auditors elected by the Annual General Meeting account for any material weaknesses in the internal control systems related to financial reporting in the Auditor’s Long-form Report to the Board of Directors. Minor irregularities are reported in Management Letters to the Executive Board. Management composition and remuneration The management of Park Street consist of the following: Board Directors Executive Board Appointed / Employee Expiry of electoral term Age Shareholding at the beginning, number of shares Share buy in the year, number of shares Shareholding at the end of the year Independence Sex Board of Directors Andrew LaTrobe (*) 2017 2023 57 0 0 0 Not Independent M Pradeep Pattem (*)() 2016 2023 46 6,722,484 0 6,722,484 1) Not Independent M Ohene Kwapong 2016 2023 61 0 0 0 Independent M Anita Nassar()(*) 2016 2023 60 0 0 0 Independent F Claes Peter Rading 2021 2023 60 0 0 0 Independent M () Anita Nassar holds the position of chairman of the Board () Pradeep Pattem holds the position of CEO of the Company () Pradeep Pattem holds controlling rights in Park Street Nordac Sarl through Park Street Asset Management () Anita Nassar hold shares in Park Street Nordac Sarl without controlling rights (*) Andrew LaTrobe has not been re-elected after the Annual General Meeting held on April 25, 2022 1) Acquired via Park Street Asset Management Ltd. Park Street/ Director’s report 25 Remuneration to the Board of Directors and Executive Board The purpose of the Group's remuneration, including any incentive remuneration, is to attract and retain the group's management skills and promote the management incentive to realize Park Street’s objectives and create value in and for the company. A remuneration policy has been prepared that describes the guidelines for defining and approving remuneration for the members of the Board of Directors and the Executive Board. The remuneration policy approved at the company's general meeting and is available on www.nordicom.dk and www.psnas.com. The board members receive a fixed monthly fee. The Chairman receives DKK 250,000 annually, the Vice Chairman of the Board (currently vacant) receives DKK 150,000 annually, and other Board members receive DKK 100,000 annually. In addition, the Chairman of the Audit Committee receives DKK 75,000 annually and other members of the Audit Committee receive DKK 50,000 annually. The remuneration for the members of the Board of Directors in 2022 is shown in Note 5 of the consolidated financial statements. Salary and employment conditions for the Executive Board are set at least once a year by the Board of Directors. The salary consists of fixed salary, without bonus and pension. In addition, the Executive Board receives free telephone, etc. Total wage package is composed so that the fees are set at a competitive level, taking into account the competencies and efforts of the Executive Member and the results achieved. Reference is made to Note 5 of the consolidated accounts regarding remuneration to the Executive Board. Board of Directors and Management Pradeep Pattem (Indian Citizen), Director and CEO Pradeep Pattem is a graduate engineer from the Delhi Institute of Technology and has an MBA from the Indian Institute of Management, Calcutta. As the founder and CEO of Park Street Advisors Limited, Pradeep has advised and implemented investments in across Europe since its establish- ment in 2014. Pradeep previously had a position as Managing Director, Head of Credit & Mortgage Markets for Europe and Asia in the Royal Bank of Scotland (RBS). In connection with the employment in RBS, Pradeep also held senior positions as a member of the Global Trading Management Committee, the Chairman of the Strategic Investments Committee and the Chair of Credit & Mortgage Risk and Compliance Committee. Director Positions Park Street Asset Management Limited, England Park Street Advisors, England Park Street A/S Pulse Taastrup P/S, Denmark Pulse Glostrup P/S, Denmark PS Holdco I P/S Pulse Glostrup P/S Pulse Taastrup P/S Pulse O P/S Pulse N P/S Svanevej P/S Ballerup Hotel P/S Toldbuen P/S Management positions CEO of Park Street A/S, Denmark Phoam Studio ApS PSN ApS Pulse Living ApS Albuen ApS PS I ApS Ohene Aku Kwapong (US citizen, Ghanaian citizen) Ohene Aku Kwapong is a graduate of Massachusetts Institute of Technology’s (MIT) Sloan School of Management, Cambridge, Massachusetts, with MBA in Financial Engineering and also studied Chemical / Nuclear Engineering at MIT. He holds a PHD in Non-linear Systems Dynamics from Columbia University, New York. Ohene Aku has previously held senior positions at Exxon Mobil, Deutsche Bank London, Senior Manager at Microsoft Corporation, VP at GE Capital, Senior Vice President at the New York City Economic Development Corporation, Senior VP at Deutsche Bank in New York, and COO EMEA Credit at Royal Bank of Scotland in London. Since 2014, Ohene Aku has been engaged in consultancy in restructuring and launched The Songhai Group, a corporate development company. Management Positions Managing Partner, The Songhai Group, US. Park Street/ Director’s report 26 Director positions Ecobank Ghana, Risk and Governance Committees. The Practice School, an executive management skills company. Trustee, Head of State Award Scheme – Ghana. Anita Nassar (formerly Kamal) (French citizen) Anita Nassar holds a bachelor's degree in business administration from the American University of Beirut. Anita is the founder of 'Alternative Con- sultant Group'. Ms Nassar is Partner and Senior Managing Director at Balyasny Asset Management. She is also a member of BAM’s Management Committee. Anita joined BAM from Citadel where she was a Partner and Managing Director serving Europe, the Middle-East, Africa and Asia Pacific. Prior to joining Citadel, Anita served at Merrill Lynch, London as Managing Director, Co-Head of Government Institutions Sales. Previously, she worked at HSBC London as Managing Director, Global Head of Government Sales, serving Asia, Europe, and the Americas. Management Positions Founder and CEO at Alternative Consultant Group. Partner, Senior Managing Director at Balyasny Asset Management. Director positions Board of Trustees at Northeastern University, Boston, USA. Endowment Trustee in the Funds and Investments Subcommittee at Northeastern University, Boston, USA. Claes Peter Rading (Swedish citizen) Peter Rading is a Swedish citizen who graduated with a Bachelor of Science in Business Administration Summa Cum Laude from Georgetown University DC in 1986. He worked for Royal Bank of Scotland Plc from 1990 to 2013, running multiple complex global businesses for the bank between 2000 and 2013, when he then retired from the bank and the banking industry. His final position at the bank was as Global Co-Head of Trading and included his serving on the Investment Bank executive committee, the Markets division management committee and as Chair of the bank’s technology board. Since his departure from Royal Bank of Scotland Plc in 2013, Peter has actively focused on private investment activity in the real estate sector, including an active involvement in the Nordics and high growth specialist real estate sub-sectors. Director positions: Elwyn Green Ltd IP Nexus, US Kamo River Investments Ltd LocalCircles India Pvt Ltd, India Seequestor, UK Tillingbourne (Canterbury) Ltd Tillingnourne (Horham) Ltd Shareholder structure Shareholders above 5% In percent Park Street Asset Management Ltd. 93.06% The number of registered shareholders amounts as of 31 December 2022 to 865 pcs. (December 31, 2021: 913 pcs.). The registered shareholders represent per 31 December 2022 99% of the share capital (31 December 2021: 99%). Share capital DKK 57,175,572 Nominal share amount DKK 1 Number of shares 57,175,572 shares Share Classes DKK 12,827,637 A-shares Listed DKK 44,347,935 B-shares Not listed Number of votes per share One Bearer Yes Restriction on voting rights No Limitations on transferability No ISIN DK0010158500 Stock Exchange Nasdaq Copenhagen Park Street/ Director’s report 27 All Park Street A / S shares are listed on Nasdaq Copenhagen and are part of the Small Cap segment. The share price ended 31 December 2022 at price 13.9 (31 December 2021: 14.1), which is a decrease of 0.2 points in relation to the share price per share as of 31 December 2022. The market value of Park Street A / S constitute as of 31 December 2021 178.3 million (31 December 2021: DKK 169.59 million). Appointment of board members Rules of appointing and replacing members of the board of directors are included in the section 13.1 of the articles of association. Rules for changing articles of association Park Street A/S articles of association can be changed by a General Meeting in accordance with the Companies Act §§106 and 107. Resolution on amendment of the Articles of Association are only valid if the resolution is approved by at least 2/3 of both voting rights and percentage of equity which are present at the meeting. Own shares Information about treasury shares is shown in note 23 of the consolidated financial statements. Dividends The Board of Directors deems it prudential to propose to the Annual General Meeting that no dividend will be paid for the financial year 2022. Investor Relations It is Park Street's policy to inform quickly about relevant matters. The Executive Board informs shareholders and investors according to guidelines agreed with the Board, and it is the goal to meet the information obligations of Nasdaq Copenhagen each time. It is part of Park Street's information policy to: publish interim reports, issue annual reports, and provide quick responses to inquiries to the group. Stock exchange announcements in 2023 and 2022 Date Title 02-03-2023 Park Street A/S : 2023 Strategy 28-12-2022 Park Street A/S – New Share buyback program 21-12-2022 Park Street A/S – New Share buyback program 14-12-2022 Park Street A/S – New Share buyback program 07-12-2022 Park Street A/S – New Share buyback program 30-11-2022 Park Street A/S – New Share buyback program 23-11-2022 Park Street A/S – New Share buyback program 16-11-2022 Park Street A/S – New Share buyback program 09-11-2022 Park Street A/S – New Share buyback program 02-11-2022 Park Street A/S – New Share buyback program 26-10-2022 Park Street A/S – New Share buyback program 19-10-2022 Park Street A/S – New Share buyback program 12-10-2022 Park Street A/S – New Share buyback program 05-10-2022 Park Street A/S – New Share buyback program 28-09-2022 Park Street A/S – New Share buyback program 21-09-2022 Park Street A/S – New Share buyback program 14-09-2022 Park Street A/S – New Share buyback program 26-08-2022 Park Street A/S – Park Street Interim Report Half Year 2022 26-08-2022 Park Street A/S – Park Street Interim Report Half Year 2022 Park Street/ Director’s report 28 19-07-2022 Park Street A/S – Conversion of class B shares into listed class A shares 11-06-2022 Park Street A/S – Reduction of share capital 25-04-2022 Park Street A/S – Results of general meeting 2022 12-04-2022 Park Street A/S – New share buyback program 11-04-2022 Park Street A/S – New share buyback program 01-04-2022 Park Street A/S – New share buyback program 01-04-2022 Park Street A/S – Annual Report 2021 01-04-2022 Park Street A/S – Annual Report 2021 01-04-2022 Park Street Nordicom A/S – Annual General Meeting 2022 30-03-2022 Park Street A/S – Publishes updated financial calendar 25-03-2022 Park Street A/S – New share buyback program 16-03-2022 Park Street A/S – New share buyback program 07-03-2022 Park Street A/S – New share buyback program 25-02-2022 Park Street A/S – New share buyback program 04-02-2022 Park Street A/S : 2022 Strategy Financial Calendar 05-04-2023 Annual Report 2022 28-04-2023 Ordinary General Meeting More info Further information on company and shareholder matters and the Group's activities can be found on Park Street's website www.nordicom.dk and www.psnas.com Inquiries regarding the Group's relations with investors and the stock market can be addressed to: CEO: Pradeep Pattem Tel.: + 45 33 33 93 03 E-mail: [email protected] Group structure at December 31, 2021 The Group structure at December 31, 2022 consists of the company Park Street A/S and the fully owned subsidiaries Pulse Taastrup P/S, Pulse Glostrup P/S, Pulse N P/S, Pulse O P/S, Ballerup Hotel P/S, Svanevej P/S, Toldbuen P/S, PS Holdco I P/S, Phoam Studio ApS, PSN ApS, Pulse Living ApS, Albuen ApS, PS I ApS, and Park Street UK. Information on investment is disclosed in note 8 of the parent company's financial statements. All subsidiaries are fully consolidated in the consoli- dated financial statements of Park Street A/S. Park Street/ Statements 29 Statement by Board of Directors and Management The Board of Directors and management have today considered and adopted the annual report for the financial year 1 January - 31 December 2022 for Park Street A/S. The annual report is prepared in accordance with International Financial Reporting Standards as adopted by the EU, and further requirements in the Danish Financial Statement Act and rules for listed companies. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group and the Parent's financial position as at 31 December 2022 and of the results ofthe Group's and the Parent Company’s operations and cash flows for 2022. It is also our opinion that the directors' report contains a true and fair account of the development of the Group's and the parent company’s activities and financial conditions, the profit for the period and the Group's and the Parent Company’s financial position as a whole, and a description of the significant risks and uncertainty factors that the Group and the Parent Company faces. In our opinion, the annual report of Park Street A/S for the financial year 1 January to 31 December 2022 with the file name 213800VGJC18MRK- MZC33-2022-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. The annual report is submitted to the Ordinary General Meeting for approval. Copenhagen, 5 April 2023 Management Pradeep Pattem CEO Board of Directors Anita Nassar Pradeep Pattem Chairman Ohene Aku Kwapong Claes Peter Rading Park Street/ Independent Auditor’s Report 30 Independent Auditor’s Report To the shareholders of Park Street A/S Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2022 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2022 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of Park Street A/S for the financial year 1 January to 31 De- cember 2022 comprise income statement and statement of comprehensive income, statement of financial position, statement of equity, statement of cash flows and notes, including summary of significant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial State- ments section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of Park Street A/S on 27 April 2017 for the financial year 2017. We have been reappointed annually by share- holder resolution for a total period of uninterrupted engagement of 6 years including the financial year 2022. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2022. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Park Street/ Independent Auditor’s Report 31 Independent Auditor’s Report (continued) Key audit matter How our audit addressed the key audit matter Valuation of Investment Properties and Domiciles The Group owns a portfolio of investment properties that are val- ued at fair value and 2 domiciles that are revalued to fair value at 31 December 2022. Valuation of investment properties and domiciles at fair value contains significant estimates based on significant assumptions, where even minor changes in the assumptions can have a signifi- cant effect on the fair value of the properties. Management has used the capitalisation method to determine the fair value. The model is descripted in note 1.2, with market rent and yield being the significant assumptions. Management has obtained valuations from an external valuer to support the fair value determined by Management; including the assumptions used, with market rent and yield being the signifi- cant assumptions. We focused on this area as valuation of investment properties and domiciles at fair value is based on significant estimates which are subjective and a high degree of estimation uncertainty. Refer to note 1.2,9, 14 and 15. We assessed the method used by management to measure the fair value of investment properties and domiciles, and we challenged the assumptions applied, using our knowledge of the real estate market and professional scepticism. We assessed the competencies and independence of external valuer used by Management. We assessed and tested on a sample basis the data inputs used to determine fair value, including market rent and yields, by comparing the valuation made by Management with the valuation made by the external valuer and comparable trades. We tested on a sample basis the calculation for the fair values includ- ing the assumptions used and the related disclosures in the notes. Statement on Management’s Review Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Park Street/ Independent Auditor’s Report 32 Independent Auditor’s Report (continued) Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a mate- rial misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and main- tain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for- gery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s re- port to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to ex- press an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independ- ence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of Park Street A/S for the financial year 1 January to 31 December 2022 with the filename 213800VGJC18MRKMZC33-2022-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. Park Street/ Independent Auditor’s Report 33 Independent Auditor’s Report (continued) Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of proce- dures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Park Street A/S for the financial year 1 January to 31 December 2022 with the file name 213800VGJC18MRK- MZC33-2022-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 5 April 2023 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 33 77 12 31 Torben Jensen Jacob Dannefer State Authorised Public Accountant mne18651 State Authorised Public Accountant mne47886 Park Street/ Independent Auditor’s Report 34 Park Street/ Independent Auditor’s Report 35 2022 CONSOLIDATED FINANCIAL STATEMENTS Park Street | CONSOLIDATED Financial Statements 36 Income statement Note Amounts in DKK 1000s 2022 2021 3 Net sales 153,281 158,264 4 Operating expenses -48,606 -40,846 Gross profit 104,675 117,418 5 Employee benefit expenses -17,231 -17,808 6 Other expenses, by nature -10,936 -12,532 7 Depreciation, amortisation and impairment -3,678 -4,330 Operating profit (EBIT) 72,830 82,748 8 Financial expenses -29,932 -25,881 Earnings before value adjustments (EBVAT) 42,898 56,867 9 Adjustment to fair value, net 36,066 128,887 10 Gains realised on the sale of investment properties -4,466 1,472 Profit before tax 74,498 187,225 11 Tax on profit for the period -19,518 -41,767 Profit for the period 54,980 145,458 Distributed as follows Parent's shareholders 54,980 145,458 Profit for the period 54,980 145,458 12 Earnings per share, end of period 1.00 2.85 12 Diluted earnings per share, end of period 1.00 2.85 Park Street | CONSOLIDATED Financial Statements 37 Statement of comprehensive income Note Amounts in DKK 1000s 2022 2021 Profit for the period 54,980 145,458 Other comprehensive income: Items that cannot be reclassified to the income statement: Fair value adjustment of domicile properties 11,252 -503 Tax on fair value adjustment of domicile properties -2,420 111 Other comprehensive income after tax 8,832 -392 Comprehensive income for the period 63,812 145,066 Distributed as follows Parent's shareholders 63,812 145,066 Comprehensive income for the period 63,812 145,066 Park Street | CONSOLIDATED Financial Statements 38 Statement of financial position Note Amounts in DKK 1000s 2022 2021 ASSETS Non-current assets Intangible assets 13 Software 446 1,865 13 Capitalised leasing costs 625 0 1,071 1,865 Investment property and Property, plant and equipment 14 Domiciles 203,462 194,000 15 Investment properties 2,521,581 2,615,015 16 Machinery and equipment 507 490 2,725,550 2,809,506 Financial assets 17 Investment in associates 2,029 2,029 Deposits 161 186 2,190 2,215 Total non-current assets 2,728,811 2,813,586 Current assets 18 Current financial assets at amortised cost 7,412 7,671 19 Trade and other current receivables 28,594 23,973 Income tax receivable 6,774 3,770 Prepaid expenses and accrued income 2,609 2,662 20 Cash and cash equivalents 34,532 167,820 Total current assets 78,654 205,896 Total assets 2,807,465 3,019,482 Equity Share capital 57,175 67,513 Revaluation reserve 59,961 52,920 Share Premium 289,260 289,260 Accumulated profit 680,628 807,345 21,22 Total equity 1,087,024 1,217,038 LIABILITIES Non-current liabilities 23 Deferred tax 254,025 232,087 24 Borrowings 1,382,643 1,488,364 Deposits 10,224 5,163 1,646,892 1,725,614 Current liabilities 25 Provisions for liabilities 400 400 24 Current borrowings 20,293 21,107 Trade and other payables 19,337 7,718 Deposits 27,693 33,367 Other liabilities 5,827 14,238 73,549 76,830 Total liabilities 1,720,441 1,802,444 Total equity and liabilities 2,807,465 3,019,482 Park Street | CONSOLIDATED Financial Statements 39 Statement of equity Amounts in DKK 1000s Share capi- tal Revaluation reserve Accumulated profit Share Pre- mium Equity Total Statement of equity for 2022: Equity as at 1 January 2022 67,513 52,920 807,345 289,260 1,217,038 Comprehensive income for the period Profit for the period 0 0 54,980 0 54,980 Fair value adjustment of domicile 0 11,252 0 0 11,252 Tax on other comprehensive income 0 -2,420 0 0 -2,420 Other comprehensive income during the financial year 0 8,832 0 0 8,832 Comprehensive income for the period 0 8,832 54,980 0 63,812 Transactions with owners Repurchase own shares 0 0 -183,488 0 -183,488 Capital reduction -10,338 0 0 0 -10,338 Total transactions with owners -10,338 0 -183,488 0 -193,826 Other adjustments Depreciation of revalued value of domiciles 0 -1,790 1,790 0 0 Total other adjustments 0 -1,790 1,790 0 0 Equity as at 31 December 2022 57,175 59,961 680,628 289,260 1,087,024 Statement of equity for 2021: Equity as at 1 January 2021 67,513 55,107 660,066 289,260 1,071,946 Comprehensive income for the period Profit for the period 0 0 145,459 0 145,458 Fair value adjustment of domicile 0 -503 0 0 -503 Tax on other comprehensive income 0 111 0 0 111 Other comprehensive income during the financial year 0 -392 0 0 -392 Comprehensive income for the period 0 -392 145,459 0 145,066 Transactions with owners Repurchase own shares 0 0 25 0 25 Total transactions with owners 0 0 25 0 25 Other adjustments Depreciation of revalued value of domiciles 0 -1,795 1,795 0 0 Total other adjustments 0 -1,795 1,795 0 0 Equity as at 31 December 2021 67,513 52,920 807,345 289,260 1,217,038 Park Street | CONSOLIDATED Financial Statements 40 Statement of cash flows Note Amounts in DKK 1000s 2022 2021 Operating profit (EBIT) 72,830 82,748 Adjustment for illiquid operating items, etc. 3,678 4,330 Change in operating capital -4,616 5,204 Cash flows concerning primary operations 71,892 92,282 Financial income received 0 895 Financial expenses paid -29,932 -29,902 Paid Corporate Tax -1,742 -5,275 Total cash flow from operating activities 40,219 58,000 Cash flow from investing activities Improvements to investment properties -99,024 -25,803 Sales of investment properties 216,202 8,026 Purchase of intangible assets -670 Total cash flow from investing activities 116,508 -17,777 Cash flow from financing activities Repurchase own shares -183,479 0 Proceeds from assumption of liabilities to credit institutions 67,994 503,306 Repayment of other liabilities to credit institutions -174,530 -398,859 Total cash flow from financing activities -290,015 104,447 Total cash flow for the period -133,288 144,669 Liquid assets as at 1 January 167,820 23,151 Liquid assets at the end of the period 34,532 167,820 Liquid assets at the end of the period Cash and short term deposits 34,532 167,820 Liquid assets at the end of the period 34,532 167,820 41 Summary Note 1 Accounting policies, accounting estimates and risks, etc. Note 2 Segment information Note 3 Net sales Note 4 Operating expenses Note 5 Employee benefits expenses Note 6 Auditor’s fees Note 7 Depreciation and amortization Note 8 Financial Expenses Note 9 Adjustment to fair value, net Note 10 Realized gains on the sale of investment properties Note 11 Tax on profit for the year and other comprehensive income Note 12 Earnings per share Note 13 Intangible assets Note 14 Domicile Note 15 Investment properties Note 16 Machinery and equipment Note 17 Investment in associates Note 18 Mortgages and instruments of debt Note 19 Receivables Note 20 Cash and cash equivalents Note 21 Share capital Note 22 Own shares Note 23 Deferred taxes Note 24 Borrowings Note 25 Provisions for liabilities Note 26 Contingent assets and liabilities Note 27 Financial risks Note 28 Non-current operating items, etc. Note 29 Change in operating capital Note 30 Related parties Note 31 Subsequent events Note 32 Accounting policies 42 Notes Note 1 - Accounting policies, accounting estimates and risks, etc. Note 1.1. – Basis of preparation a. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Refer to note 33 for a full description of the accounting policies used. The company presents its annual report in compliance with reporting class D. b. Changes to accounting policies Accounting policies are unchanged from the previous year. Note 1.2. – Investment properties A property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. An investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, an investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. The fair value of an investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Changes in fair values are recognised in the income statement. Investment properties are derecognised when they have been disposed. Where the Group disposes of a property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement within net gain from fair value adjustment on investment property. The principles and methods for determining the estimated fair value of the properties in this category is based on the capitalisation method. The determination of fair values in accordance to the capitalisation method is generally the most accepted and widely used model for valuating property. The method is based on a stabilised net rent, capitalised at a rate of return assuming a stabilised property in a stable market, which is fully let at an annual market rent at, or close to, market level. For non-stabilised properties, special conditions such as vacancy and refurbishment costs are taken into consideration. The Market Valuation of the properties could vary from year to year based on changes i the market yield and market rent, but also could be impacted when the properties or units are either significantly changed in quality (upgraded or otherwise) or from change of usage, which in itself would change the applicable market rents. Furthermore reduction or change in vacancy can impact in valuations, based on the real rent achieved from leases compared to assumed market rents, and the actual capex compared to the refurbishment capex assumed in previous valuations. On a overall portfolio basis the average market yield could vary from year to year based on yields of the properties sold or acquired during the year. T he model used contains the following main elements: 1 + Annual Rental Income (fully rented) 2 - Non-recoverable operating costs 3 = Net Operating Income (NOI) 4 - Cap rate (net initial yield) 5 = Market value before regulations and deposits 6 - Vacancy costs 7 - Refurbishment cost 8 - Rental loss (discounts, etc.) 9 + Net Present Value (NPV) of Overrented elements 10 - Net Present Value (NPV) of Underrrented elements 11 + Cash deposits 12 + Other 13 = Market value after regulations and deposits (Fair Value) 43 Ad. 1) The annual rental income represents the budget rent. For non-vacant units, the budget rent equals the actual rental income. If the actual rental income differs significantly, the market rent is used. For vacant areas, the market rent is used. Ad. 2) All operating expenses not recoverable from the tenants are deducted. This includes taxes, insurance, cleaning, utility costs, service subscrip- tions, administration, external maintenance etc. Ad. 4) The yield requirement is determined individually for each property based on the yield requirement for comparable properties in the same geographical area (where this is possible) and the property's risk profile. Ad. 6) Vacancy costs reflect the estimated loss of rental income until a re-letting is assumed. There is vacancy until the stablised level is reached. When the stabilised level is reached all properties are assumed fully let. Ad. 7) For vacant units, it is assumed that a refurbishment is required before a re-letting can take place. At some properties, these are not included as the leases already are ready for reletting. Ad. 8) Current discounts are deducted from the market value. Ad. 9) If an overrented lease is regulated to market rent, it is implemented over a 4-year period according to section 13 in the Danish Commercial Rent. As a result, the lease will generate an overrenting element in this period. Ad. 10) If an underrented lease is regulated to market rent, it is implemented over a 4-year period according to section 13 in the Danish Commercial Rent. As a result, the lease will generate an underrenting element in this period. . The calculation of the properties' fair value is sensitive to changes in all the above inputs to the valuation model. The most significant non-observable inputs used in calculating the current value of the completed investment properties are as follows: i. Market Rent per square meter (sqm.) per year ii. Vacancy iii. Yield A general increase in market rent per sqm and decrease of the vacancy in the areas in which Park Street's properties are located, will likely decrease the yield requirements. i. Market Rent per sqm per year Market rent per sqm per year represents an important input for calculating the fair value of the property. If it is estimated that the current rent is lower or higher than the rent that can be obtained by re-hire, a correction of the current rent will be made to the expected rent on re-hire. This input is based on an estimate. Similarly, input on market rent for empty areas is based on an estimate. The long-term average market rent (ie at terminal level) is the following divided by property types: Avg. gross rent per sqm p.a. (DKK) 2022 2021 Retail 1,058 1,184 Office 1,110 969 Residential 2,059 2,256 Storage 412 405 Other 988 924 Total 1,136 907 The estimated fair value is sensitive to changes in the estimated budget rent. The sensitivity of changes in the average budget rent per sqm are illustrated in the table below, which shows the effect on the fair value of the properties if only the average budget rent per change is changed sqm per year. 44 Change in market rent Change in market value per sqm per year (DKK) (Million DKK) 2022 2021 200 637 592 100 319 296 50 159 148 -50 -159 -148 -100 -319 -296 -200 -637 -592 The table shows that an increase in the market price of, for example 50 DKK per sqm per year will increase the completed investment properties' fair value by DKK 159 million (31 December 2021: DKK 148 million). ii. Vacancy No structural vacancy has been considered in the property valuation; as it has been estimated that the current vacancy will be let within 6 to 12 months. An increase in the current vacancy has been estimated and represents the following (broken down by property types and calculated as estimated vacancy divided by the market rent in the terminal): Change in Vacancy Change in market value (%-point) (Million DKK) 2022 2021 10% -6 -4 5% -3 -2 -2% 1 1 -5% 3 2 The table shows that an increase in the vacancy by 5 percentage points will reduce the finished investment property with the fair value of DKK -3 Million (31 December 2021: DKK -2 million). iii. Yield The fixed return requirement is an essential input in estimating fair values. The table below shows the ranges for the return requirement divided by property type and the weighted return requirement in- for each property type. Percentage p.a. 2022 2021 Interval Weighted Avg Interval Weighted Avg Retail 4.85 – 9.00 6.95 5.92 – 8.75 7.64 Office 5.25 – 11.68 6.97 5.27 – 7.50 6.60 Storage 9.00 – 9.50 9.25 8.50 – 9.50 9.00 Residential 4.00 – 7.58 5.60 3.85 – 6.49 4.68 Others 6.50 – 6.50 6.50 5.50 – 6.50 5.92 Total 4.00 – 11.68 6.80 3.85 - 9.50 6.20 The table shows that the return requirements for completed investment properties at December 31, 2022 is in the range 4.00% - 11.68% per annum. The corresponding interval at December 31, 2021 amounted to 3.85% - 9.50% per annum. The weighted yield requirement in the table are calculated as each property yield requirements weighted by the property's fair value in relation to property type's / portfolio's fair value and amounts at December 31, 2022 6.80% per annum for the overall portfolio of finished investment properties at December 31, 2021, the corresponding weighted return requirements for the entire portfolio 6.20% per annum. 45 The yield requirements used have a significant impact on the fair value of the property. The sensitivity of changes in the return requirement is illustrated in the table below which shows the effect on the fair value of the properties if only the average return rate is changed. Change in return requirements Change in market value (Million DKK) (% points) 2022 2021 1.00% -482 -330 0.75% -376 -256 0.50% -261 -177 0.25% -136 -92 -0.25% 149 99 -0.50% 313 207 -0.75% 495 325 -1.00% 698 455 The table shows that an increase in the rate of return of 0.25 percentage point would reduce the completed investment property fair value DKK - 136 million (31 December 2021: DKK -92 million). The breakdown by activity based the property value is split as follows : Amount in Million DKK 2022 2021 Residential 455 19% 515 20% Residential Project 511 20% 470 18% Office 827 33% 842 32% Retail 581 23% 692 26% Hotel 99 4% 92 3% Storage 24 1% 26 1% Total 2,497 2,636 Determining the fair value of Domicile properties From 2015 domicile properties have been evaluated at the amount equivalent to the fair value at the date of revaluation less depreciation, see mention in the note 33. Park Street possesses at 31 December 2022 the following two domiciles: Svanevej 12, Copenhagen NV (Park Street's headquarters in Copenhagen Nordvest neighborhood). Marbækvej 6, Ballerup (Hotel in Ballerup). When calculating the fair value of the above two domicile properties, principles and calculation methods are applied which are used to estimate the property's fair values. Due to different characteristics, different principles and calculation methods are used for each of the two domicile properties.The fair value of both owner-occupied properties is based on significant estimates. Changes in fair values are recognised in other comprehensive income statement. Domicile properties are derecognised when they have been disposed or transferred into investment property. The estimation of the properties’ fair value as of December 31, 2022 resulted in a revaluation of the properties’ book value by DKK 11 million (31 December 2021: DKK -0.5 million), which is included under "Fair value adjustment of domicile properties" in other comprehensive income. i. Park Street domicile in Copenhagen Park Street's headquarters at Svanevej 12 in Copenhagen Nordvest neighbourhood is an office building that is partially used as domicile for Park Street and partly for rental. The property is characterized by generating a current return on rent, similar to the Group’s investment properties (see description above except that the property is also used as domicile for Park Street). Principles and methods for determining the property’s fair value is the same as the applied to Investment properties described above. 46 Property estimated market rent and determining the required return on owner-occupied property is based on inputs from an independent valuer. The estimate of the property's fair value, similar to the Group's completed investment properties, is sensitive to changes in input in the valuation model. The most significant non-observable input used for estimating the fair value of the domicile property is as follows: Domicile Office 2022 2021 Market rent per sqm. per year (DKK) 1,150 1,200 Vacancy (%) 0 0 Return requirement (% p.a.) 5.50 5.26 The sensitivity to changes in the above non-observable input can be illustrated as follows (assuming the listed events occur one by one): An increase or decrease in the market price of DKK 50 per sqm per year will result in a change of the property's fair value, respectively DKK +3.7 million. (31 December 2021: DKK +3.8 million) and DKK -3.7 million (31 December 2021: DKK -3.7 million). An increase or a reduction of the required yield of 0.50% point will entail a change of the property's current value, respectively DKK -7.7 million (31 December 2021: DKK -7.9 million) and DKK +9.3 million (31 December 2021: DKK +9.5 million). A general increase in market rent per sqm and decrease in vacancy in the district, where the property is located, will likely cause a drop in the yield requirement. ii. Hotel in Ballerup Park Street hotel on Marbækvej 6 in Ballerup is a property where Park Street via a management agreement operates the hotel. This property is thus characterized by generating a current return operation from the property. In order to calculate the property's fair value separated from the hotel operations, the measurement of the property's fair value based on an estimate of market rent that could be obtained on a normal lease. The estimate of market rent is calculated as a fixed percentage of the revenue of the hotel. The estimate of the hotel’s expected revenue is based on budgeted stabilized revenue discounting a ramp up cost that equals the difference between 2021 actual revenue and the stabilized budget revenue. Property estimated market rent and determining the required return on owner-occupied property is based on inputs from an independent valuer. The estimate of the property's fair value, similar to the Group's completed investment properties, is sensitive to changes in input in the valuation model. The most significant non-observable input used for estimating the fair value of the domicile property is as follows: Domicile Hotel 2022 2021 Market Rent - % of Revenue 38 35 Return requirement (% p.a.) 7.5 6.5 The sensitivity to changes in the above non-observable input can be illustrated as follows (assuming the listed events occur one by one): An increase or a reduction of the required yield of 0.50% point will entail a change of the property's current value, respectively DKK -7.9 million (31 December 2021: DKK -4.0 million) and DKK +9.0 million (31 December 2021: DKK +5.0 million). Classification of properties Park Street classifies the properties in the following categories: Domicile (Owner-occupied properties) Investment Properties Reference is made to note 33 in accounting policies for a more detailed description of how the properties are included in the above-mentioned classifications. Classification of properties takes place on the basis of Park Street's intentions with each land or property at the time of acquisition. If the future purpose for some reason is not finalized at the time of acquisition, the foundation is classified as an investment property. 47 In some cases, services may be provided to tenants, etc. that constitute significant benefits. Park Street owns and operates a hotel where services to guests form a significant part of the total product. The property is therefore classified as a residential property. Reclassification of properties between the above categories is made when the application is changed and a number of criteria are met. Notes to the individual financial statements indicate whether changes have been made to the classification regarding properties owned by Park Street. Disclosure of deffered taxes Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period. Tax assets arising from unused tax losses, are valued based on existing budgets and profit forecasts for a 3-year period. Tax is recognized for an unused tax loss carryforward or unused tax loss carryforward when it is considered probable that there will be sufficient future taxable profit against which the loss or credit carryforward can be utilised. At December 31, 2022 the Group has included unused tax losses of DKK 137 million (31 December 2021: DKK 148 million) all of which is estimated to be realized within a three-year period or against deferred tax liabilities. The reduction in unutilized losses in 2022 and 2021 is due to positive tax income. Disclosure of borrowings As stated on Note 25 the value of the Group’s mortgage debt and bank debt is classified as amortized cost. As stated in Note 25 Group's non-convertible bonds are recognized as liabilities towards credit institution and are recognized as at fair value based on data that is non-observable in the market. Note 2 – Segment information Park Street's property portfolio is managed under a single management makes no segmentation of the portfolio. Information on the Group's revenue to external customers is disclosed in note 3 below. The Group has no customers / tenants who make up more than 10% of the group's rental income. The group only has activities in Denmark. Note 3 - Net sales Amounts in DKK 1000s 2022 2021 Rental income 136,348 139,087 Of which rental income from: Investment properties 111,415 124,328 Domicile properties 24,933 14,579 Sales of other services 16,478 18,958 Total sales of services 152,826 157,369 Interest income, mortgages and instruments of debt 455 895 153,281 158,264 Note 4 - Operating expenses Amounts in DKK 1000s 2022 2021 Operating expenses, investment properties 41,630 35,678 Operating expenses, other services 6,976 5,168 48,606 40,846 () Of the operating expenses for investment properties, DKK 848000 relate to operating expenses for vacant units 48 Note 5 – Employee benefits expenses Amounts in DKK 1000s 2022 2021 Salary 16,040 16,442 Contribution-based pensions () 716 862 Other social security costs 59 59 Other staff costs 416 445 17,231 17,808 Average number of employees 27 26 () The Group has only defined contribution plans. For defined contribution plans, the employer undertakes to pay a defined contribution to a pension fund, but has no risk with regard to future developments in interest rates, inflation, mortality, disability, etc. as regards the amount to be paid to the employee. Disclosure of information about key management personnel (Pradeep Pattem) comprises the following (): Salary 2,760 2,760 Contribution-based pensions 0 0 Bonus 0 0 2,760 2,760 Disclosure of share-based payment arrangements (): Amounts in DKK 1000s 2022 2021 Board members Pradeep Pattem (CEO) 100 100 Andrew LaTrobe (Member of the Audit Committee) (*Jan-Apr 2022) 50 150 Ohene Kwapong (Chairman of the Audit Committee) 175 175 Lars-Andreas Nilsen (Member of the Audit Committee) (Jan-Apr 2021) 0 150 Anita Nassar (Chairman of the Board) 250 250 Claes Peter Rading (Member of the Audit Committee) (May-Dec 2021, Jan-Dec 2022) 150 50 725 875 Note 6 – Auditor’s fees The auditor appointed in 2022 and 2021 is PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab. Their fees can be specified as follows: Amounts in DKK 1000s 2022 2021 Statutory audit 897 533 Other assurance services 0 38 Tax and VAT advice 334 264 Other services 0 0 1,231 835 Fees for non-audit services delivered by PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab, include issuing assurance statement on opening balance in subsidiary and general accounting and tax advisory services. 49 Note 7 – Depreciation, amortisation and impairment Amounts in DKK 1000s 2022 2021 Depreciation, software 1,464 1,807 Depreciation, domicile properties 1,790 1,795 Depreciation, inventory and fixed assets 424 728 3,678 4,330 Note 8 – Financial expenses Amounts in DKK 1000s 2022 2021 Interest expenses, liabilities to credit institutions measured at amortized cost 28,388 23,968 Other interest costs and fees 852 645 Borrowing costs 691 1,268 29,932 25,881 Note 9 – Adjustments to fair value, net Amounts in DKK 1000s 2022 2021 Fair value adjustment, investment properties 36,066 128,887 36,066 128,887 Note 10 – Gains realised on the sale of investment properties Amounts in DKK 1000s 2022 2021 Sales, investment properties 110,772 6,500 The property's carrying amount on sale etc. -115,238 -5,028 -4,466 1,472 Note 11 – Tax on profit for the year and other comprehensive income Amounts in DKK 1000s 2022 2021 Annual tax can be divided as follows: Current tax on profit of the year 0 1,128 Current tax, previous years 0 59 Current tax on domicile 2,420 0 Changes in deferred tax liabilities 19,518 40,119 21,928 41,306 50 Amounts in DKK 1000s 2022 2021 Tax on profit for the year can be explained as follows: Estimated tax at a tax rate of 22% 16,390 41,189 Non-deductible costs 0 44 Non-taxable income 0 0 Adjustment of previous years taxes 5,548 73 21,938 41,306 Effective tax rate 29.45% 22.06% Note 12 – Earnings per share Amounts in DKK 1000s 2022 2021 Profit for the period 61,904 145,491 Parent company shareholders' share of profit for the year, used to calculate earnings per share 61,904 145,491 Average number of shares 57,175,572 67,513,732 Average number of own shares -2,428,031 -1,037,804 Average number of shares in circulation 54,747,541 66,475,928 Convertible bond's average dilution effect 0 0 Diluted average number of shares in circulation 54,747,541 66,475,928 Number of shares, end period 57,175,572 67,513,732 Number of own shares, end period -2,428,031 -1,037,804 Number of shares in circulation, end period 54,747,541 66,475,928 Convertible bond's dilution effect, end of period 0 0 Diluted average number of shares in circulation 54,747,541 66,475,928 Earnings per share (average number of shares) (DKK) 1.13 2.19 Diluted results per. share (average number of shares) (DKK) 1.13 2.19 Earnings per share (DKK), end period 1.13 2.19 Diluted results per share (DKK), end period 1.13 2.19 Note 13 – Intangible assets Amounts in DKK 1000s 2022 2021 Cost at 1 of January 5,421 5,421 Additions during the year 670 Cost at 31 December 6,091 5,421 Amortization at 1 January -3,556 -1,749 Amortization during the year -1,464 -1,807 Amortization at 31 December -5,020 -3,556 Balance at 31 December 1,071 1,865 51 Note 14 – Domiciles Amounts in DKK 1000s 2022 2021 Cost at 1 of January 208,186 208689 Revaluation of value 11,252 -503 Cost / Revaluated Value at 31 December 219,438 208,186 Depreciation and amortization at 1 January -14,186 -12,391 Revaluation of the domicile 0 0 Depreciation -1,790 -1,795 Depreciation and amortization at 31 December -15,976 -14,186 Balance at 31 December 203,462 194,000 Domicile properties consist of a hotel in Ballerup and Park Street’s headquarters in Copenhagen. Disclosure of fair value measurement As the property is presented as a domicile, depreciation is required in accordance with IAS 16. Assets are revaluated equal to fair value at the date of revaluation less accumulated depreciation and subsequent impairment losses. There have been revaluations both as of December 31, 2022 and December 31, 2021. Domicile properties are pledged as security for loans, mortgage loans and other credit institutions as stated in Note 18. Information on fair value hierarchy of Domicile property is as follows: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2022: Domicile property 0 0 203,462 203,462 0 0 203,462 203,462 At 31 December 2021: Domicile property 0 0 194,000 194,000 0 0 194,000 194,000 Classification of domicile properties in level 3 means that determining the fair value of domicile properties mainly based on data that are not observable in the market. During the 2022 and 2021 there have been no transfers between levels of the fair value hierarchy. The fair value of domicile properties is based on estimates. Refer to note 1 for additional details. No domiciles have been acquired in 2022 and 2021. If Park Street domiciles were measured at the historical cost less accumulated depreciation, the book value would have been the following: Amounts in DKK 1000s 2022 2021 Domicile properties 114,043 115,833 114,043 115,833 52 Note 15 – Investment properties As of 31 December 2022 there are no ongoing sales processes regarding investment properties. Amounts in DKK 1000s 2022 2021 Balance at 1 of January 2,615,814 2,462,633 Costs incurred for improvements 98,638 25,803 Adjustment to fair value, net 36,066 128,887 Depreciation of fixed assets 0 3,519 Retirement on sale -228,938 -5,028 Balance at 31 December 2,521,580 2,615,814 Disclosure of fair value measurement Fair value hierarchy for investment: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2022: Investment properties 0 0 2,521,581 2,521,581 0 0 2,521,581 2,521,581 At 31 December 2021: Investment properties 0 0 2,615,814 2,615,814 0 0 2,615,814 2,615,814 Classification of investment properties in level 3 means that determining the fair value of investment properties is mainly based on data that is not observable in the market. During 2022 and 2021 there has been no transfers between levels of the fair value hierarchy. The fair value of investment properties is based on estimates. Refer to note 1 for additional details. Total fair value adjustments on investment properties in the financial year are: Amounts in DKK 1000s 2022 2021 Investment properties 36,066 128,887 36,066 128,887 Total fair value adjustments amounts to DKK 36.1 million (2021: DKK 128.9 million) for the properties owned by the Company as of December 31, 2022. These value adjustments are recognized in the income statement as “Adjustments to fair value, net”. Investment properties are pledged as security for debt to mortgage banks and other credit institutions as indicated in Note 27. The Group does not have any agreement which required the Group to build or redevelop any properties neither in 2022 or 2021. The net income of the investment portfolio is as follows: Amounts in DKK 1000s 2022 2021 Rental income from investment properties 111,415 119,609 Operating expenses, investment properties -40,609 -34,679 Net income from investment properties 70,806 84,930 53 Note 16 – Machinery and equipment Amounts in DKK 1000s IT Equipment Appliances Total Machinery and Equipment Cost at 1 of January 2022 3,568 4,285 7,853 Additions during the year 0 248 248 Disposals during the year 0 0 0 Cost at 31 December 2022 3,568 4,534 8,102 Amortization at 1 January 2022 -3,524 -3,839 -7,363 Amortization during the year -10 -222 -231 Amortization at 31 December 2022 -3,534 -4,061 -7,594 Balance at 31 December 2022 34 473 507 Cost at 1 of January 2021 4,247 8,484 12,731 Additions during the year 0 0 0 Disposals during the year -679 -4,199 Cost at 31 December 2021 3,568 4,285 7,853 Amortization at 1 January 2021 -4,187 -7,752 -11,939 Amortization during the year 663 3,913 4,576 Amortization at 31 December 2021 -3,524 -3,839 -7,363 0 Balance at 31 December 2021 44 446 490 Note 17 – Investment in associates The company acquired 150,000 units of common membership interest in the entity Enterra Solution, LLC (Address: One Palmer Square, Suite 530, Prince-ton, NJ 08542) in August 2019 as part of the strategy to develop a Real Estate Platform with Technology. This company is developing an advanced AI (Artificial Intelligence) based system that allows organizations to capture, curate and analyse data which will help the Company to increase efficiency in the operations and simplify the processes. Amounts in DKK 1000s 2022 2021 Cost price at January 1 2,029 2,029 Cost price at December 31 2,029 2,029 Carrying amount at December 31 2,029 2,029 Note 18 – Current financial assets at amortised cost The Group has the following mortgage and debt instruments classified as "Financial assets measured at amortized cost": Amounts in DKK 1000s 2022 2021 Financial assets at amortized cost at 1 January 7,671 8,000 Repayment of the year -259 -329 Financial assets at amortized cost at 31 December 7,412 7,671 54 Mortgages and debt securities classified as financial instruments in the category "Financial assets at amortized cost" expire in the following periods: Effective interest rate p.a. Balance in DKK 1000 Fair value in DKK 1000 Amounts in DKK 1000s 2022 2021 2022 2021 2022 2021 Value Expire DKK 2025 7.50% 7.5% 7,412 7,671 7,412 7,671 7,412 7,671 7,412 7,671 The calculated fair value is based on estimates (Level 2 in fair value hierarchy). Note 19 – Trade and other current receivables Amounts in DKK 1000s 2022 2021 Receivable Rental Income 6,313 4,318 Deposited funds in banks 24,821 15,589 Other Receivables -2,541 4,066 Receivables at 31 December 28,594 23,973 Write-downs on receivable rental income have been made after an individual assessment and have developed as follows: Bad debt provision as of 1st of January 2,788 1,862 Net additional provisions 69 922 Recognized losses (Write off) 2,104 4 4,961 2,788 In the above tenant rental income, receivables have been recognized which were overdue as at 31 December but have not been written down, with the following amounts: 2022 2021 Up to 30 days 121 117 Between 30 and 90 days 2,172 1,647 Over 90 days 5,583 5,224 7,876 6,988 Trade receivables are predominantly non-interest bearing. Apart from rental income receivable, Park Street has no receivables that are overdue at the balance sheet date or which have been assessed as impaired. Funds deposited in banks relate to receivables selling price from properties sold, funds deposited as collateral for mortgage loans and deposits as security for the initiated maintenance work on properties. Note 20 – Cash and cash equivalents Amounts in DKK 1000s 2022 2021 Petty cash 64 64 Deposits in banks for free disposal 34,468 167,756 34,532 167,820 55 Note 21 – Share capital Amounts in DKK 1000s 2022 2021 Share capital as on 1st of January 67,513 67,513 Share capital Decrease -10,338 0 Share capital as on 31. December 57,175 67,513 The share capital consists of 57,175,572 shares of DKK 1 (31 December 2021: 67,513,372 shares of DKK 1). No shares have special rights. The shares are fully paid. Park Street Asset Management Ltd. and Park Street NordAc Sarl own 100% of the nominal class B share capital and 55.89% of the nominal class A share capital and a total of 93.06% (and a corresponding percentage of the votes) of the total nominal share capital of the Company. Note 22 – Treasury shares Number of shares Nominal value Share of share capital (Amount in DKK 1000) 2022 2021 2022 2021 2022 2021 As at 1 January 1,037,804 1,037,804 1,037 1037 0.2% 0.2% Additions during the year 2,428,031 0 2,428 0 1.3% 1.3% As at 31 December 3,465,835 1,037,804 3,465 1,037 1.5% 1.5% The share buy-back programme announced has now been concluded. In the period 14 September 2022 to 28 December 2022, Park Street A/S has bought 2,428,031 shares (263,166 Class A shares and 2,164,865 Class B shares) for an average price of DKK 13.97. All own shares are owned by Park Street A/S. As indicated on the company announcement published on 25 February 2022, Park Street A/S had initiated a share buyback program for up to DKK 250m of Class A and Class B shares, to be executed during the period from 25th February 2022 to 30th June 2022. The buyback program was launched in accordance with the authorization granted to the board of directors as stated on the point 3.7 of the Articles of Associated and approved by the shareholders at the Annual General Meeting on 22nd April 2021. The board of directors is authorized in the period until 21st April 2026 to allow the Company to acquire Class A and Class B treasury shares corresponding to a total of 35% of the Company’s Class A and 35% of Class B share capital. On 14th September 2022, Park Street A/S announced a share buy-back programme, as described in Company Announcement dated 14-09-2022. The programme is carried out in compliance with the provisions of Regulation No 596/2014 of the European Parliament and of the Council on market abuse (the Market Abuse Regulation – MAR) and delegated legislation under MAR; except for the limitation of implementing the authorized buy-back of the Company’s shares within the 25% daily trading volume, due to the low levels of market liquidity in the Company’s shares. According to the programme, Park Street A/S will repurchase Class A and Class B shares for up to DKK 50 million. Note 23 – Deferred Taxes Amounts in DKK 1000s 2022 2021 Deferred tax liabilities at 1st of January 232,087 191,733 Recognized in other comprehensive income 2,420 -111 Correction from previous years 0 0 Recognized in the income statement 19,518 40,465 Deferred tax liabilities at 31 December 254,025 232,087 Deferred tax is recognized in the balance sheet as follows: Deferred tax (active) Deferred tax (liability) -254,025 -232,087 Deferred tax at 31 December -254,025 -232,087 56 Deferred tax recognized in the balance The calculation of deferred taxes included DKK 32.6 million relating to tax losses carried forward from Group companies. Based on budget account- ing and tax profits in the period 2023-2026 and deferred tax liabilities, it is estimated that all tax losses (tax base) will be realized, which is included in the calculation of deferred tax DKK 254 million (taxable value) per 31 December 2022 (2021: DKK 232.1 million) Deferred tax assets (value calculated at a tax rate of 22%) recognized in the balance sheet relate to profit and losses from the subsidiaries Pulse Taastrup P/S, Pulse Glostrup P/S, Pulse N P/S, Pulse O P/S, Ballerup Hotel P/S, Svanevej P/S, Toldbuen P/S, PS Holdco I P/S, Phoam Studio ApS, PSN ApS, Pulse Living ApS, Albuen ApS, PS I ApS, and Park Street UK. Amounts in DKK 1000s Balance 1/1 Recognized in the income statement (Open- ing Balance ad- justment) Recognized in another comprehensive in- come Balance 31/12 2022 Software 410 -312 0 98 Investment and residential properties 266,087 15,692 2,420 284,199 Fixtures and fittings -413 25 0 -388 Project Holdings 0 0 0 0 Receivables -612 0 0 -612 Provisions 0 -88 0 -88 Credit institutions -779 1,910 0 1,131 Tax losses carryforward -32,606 2,291 0 -30,315 232,087 19,518 2,420 254,025 2021 Software 807 -397 0 410 Investment and residential properties 228,140 38,058 -111 266,087 Fixtures and fittings -523 110 0 -413 Project Holdings 0 0 0 0 Receivables -409 -203 0 -612 Provisions -88 88 0 0 Credit institutions 204 -983 0 -779 Tax losses carryforward -36,398 3,792 0 -32,606 191,733 40,465 -111 232,087 Note 24 – Borrowings Amounts in DKK 1000s 2022 2021 Borrowings, nominal 1,408,514 1,515,581 Market value adjustments -5,579 -6,110 1,402,935 1,509,471 The liabilities are thus included in the balance sheet: Borrowings, long-term 1,382,643 1,488,364 Borrowings, short-term 20,293 21,107 1,402,935 1,509,471 The Group's loans and credits are distributed as per 31 December as follows: 57 Liabilities recognized at fair value Currency Rate type Expiry date 2022 2021 Convertible bonds DKK Interest-free 11-15 years 11,335 11,335 11,335 11,335 Market value adjustments -5,579 -6,110 Carrying amount 5,757 5,226 Liabilities recognized at amortized cost Currency Rate type Expiry date 2022 2021 Banks Debt DKK Fixed 0-1 years 0 0 Banks Debt DKK Fixed 2-5 years 575,630 503,615 Mortgage Debt DKK Variable 2-5 Years 64,604 43,402 Mortgage Debt DKK Variable 6-10 years 0 35,987 Mortgage Debt DKK Variable 11-15 years 667,824 593,362 Mortgage Debt DKK Variable 16-20 years 109,780 342,380 Carrying amount 1,417,838 1,518,747 The nominal amounts stated in the tables represent the amount that Park Street will repay under the loan agreements by the end of these agree- ments. The interest component is not included in the table above. Fixed interest loans stated in the tables indicate that a fixed rate applies until the loans' maturity date or until a new negotiation is made with the individual bank. Variable interest rates expressed in the tables indicate that the loans have interest rates that are regularly adjusted over the term of the loans due to fluctuations in market interest rates. The evolution of the long and short term liabilities with credit institutions is specified follows: Amounts in DKK 1000s 2022 2021 Non-current financial liabilities 1,488,364 1,354,054 Current financial liabilities 21,107 50,970 Financial liabilities with credit institutions at 1 January 1,509,471 1,405,024 Repayment of liabilities to credit institutions -174,530 -398,859 Proceeds from assumption of liabilities to credit institutions 67,994 503,306 Financial liabilities with credit institutions at 31 December 1,402,935 1,509,471 Non-current financial liabilities 1,382,643 1,488,364 Current financial liabilities 20,293 21,107 Total financial liabilities with credit institutions at 31 December 1,402,935 1,509,471 Determining the fair value of debt to credit institutions Information on Group’s financial loan agreements, mortgage debt and convertible bonds is disclosed in note 25. Information on estimates and judg- ments related to the determination of fair value of financial liabilities is disclosed in note 1. As stated in these notes mortgage and bank debt have been recognized at amortised cost in 2022 and 2021. Zero-coupon bonds (former Convertible bonds) As a result of a prior bank agreement, Park Street issued in 2010 convertible bonds for a number of credit institutions for a total nominal DKK 69.0 million. The bonds are non-callable by credit institutions until 31 December 2029 and non-amortized. Conversion period for the bonds to shares has expired, and as a result, the bonds in the annual report classified as normal loans from credit institutions and is therefore included under "Credit institutions" in the balance sheet (zero-coupon bonds). The convertible bonds are recorded as subordinated loan capital and are subordinate to all other unsubordinated debt. The movement of the nominal value of these zero-coupon bonds is as follows: 58 Amounts in DKK 1000s 2022 2021 Zero-coupon bonds at 1 January (Nominal value) 11,335 11,335 Bonds converted into class B shares (Nominal value) 0 0 Zero-coupon bonds at 31 December (Nominal Value) 11,335 11,335 The fair value estimated by an independent reviewer (Level 3 of the fair value hierarchy) at December 31 2022 corresponds to a rate of 50.79 (31 December 2021 – 46.10). The carrying value of zero-coupon bonds in the statement of financial position is shown in the following table: Amounts in DKK 1000s 2022 2021 Fair value of financial liability at the date of issue 5,226 3,548 Amortization of convertible bonds at 31 December 0 0 Fair Value adjustment recognized in the Profit and Loss 531 1,678 Fair Value adjustment of convertible bonds converted in Equity 0 0 Balance at 31 December 5,757 5,226 As stated in note 24 Group's non-convertible bonds are recognized as liabilities towards credit institution and are recognized as at fair value based on data that is non-observable in the market. Note 25 – Provisions Amounts in DKK 1000s 2022 2021 Provisions at 1 January 400 400 Used in the year 0 0 Reversed during the year 0 0 Accrued in the year 0 0 Provisions 31 December 400 400 Provisions relate to an obligation with the purchaser of a property concerning environmental clean-up on a land. Note 26 – Contingent assets and liabilities Disclosure of collateral The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2022 amounts a total of DKK 1,728 million (31 December 2021: DKK 1,728 million), the nominal value of the loans amounts a total of DKK 1,403 million (31 December 2021: DKK 1,509 million) in the group's investment properties and domiciles with a book value totalling DKK 2,736 million (31 December 2021: DKK 2,809 million). The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2022 amounts a total of DKK 7.4 million (31 December 2021: DKK 7.7 million), in the group's deposited mortgage deeds with a book value totalling DKK 7.4 million (31 December 2021: DKK 7.7 million). Disclosure of contingent liabilities Park Street had a legal dispute with a previous tenant in relation to the lease being deemed as a commercial or a residential lease. Park Street has lost the argument and now the lease is deemed to be residential. This could lead to some potential liability in relation to the dilapidations claim and other aspects. This will be clarified as the case proceeds further with the Housing Board. 59 No additional significant litigations and disputes are acknowledged by the Group at December 31, 2022 other than the ones indicated in Note 27. Conditional debt relief and contingencies In connection with the sale of a property in 2014, Park Street has been subject to a surcharge for the property if the purchaser on the site before 1 January 2024 obtains more building rights than assumed at the conclusion of the transaction. The additional price amounts to DKK 2,000 for each building rights. Additional building plans will require a change of the local plan for the area in which the property in question is located. Park Street is not aware of any plans to change the local plan in question, for this reason Park Street does not consider the potential additional price as a contingent asset. Contingent assets As part of the sales agreement of the property sold in 2018, Park Street and the buyer have agreed that Park Street is entitled to obtain an additional supplement of DKK 1 million if the buyer completer a development project of more than 5,000 square meters within 5 years from the date of acquisition; the Company has decided not to recognize the contingent asset in the balance as at December 31, 2022. Disclosure of leases There are leases hire for cars rental and printers. Amounts in DKK 1000s 2022 2021 Within 1 year from the balance sheet date 10 1 Between 1 and 5 years from the balance sheet date 422 5 After 5 years from the balance sheet date 0 0 Lease hire obligations at 31 December 431 6 Minimum lease payments recognized in the profit and loss account for the year 31 130 Note 27 – Financial risks Amounts in DKK 1000s 2022 2021 Mortgages and debentures 7,412 7,671 Financial assets measured at fair value through profit or loss 7,412 7,671 Receivables 28,594 23,973 Cash and equivalents 34,532 167,820 Loan and receivables 63,125 191,793 Credit institutions -5,757 -5,226 Financial liabilities measured at fair value through profit or loss -5,757 -5,226 Credit institutions 1,402,935 1,509,471 Deposits 37,916 38,530 Accounts payable 19,336 7,718 Other Debts 5,827 14,238 Financial liabilities measured at amortized cost 1,466,016 1,569,957 Risk management policy The financial management of the Group is geared towards stabilization and optimization of the Group's operations, while at minimizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instruments. The group is due to its activities exposed to various financial risks, including liquidity risk, market risks (primarily interest rate risk) and credit risk. 60 Liquidity risk Park Street’s liquidity risk consists on not being able to make regular payments and not being able to provide sufficient liquidity to cover the financing costs, capital repayment obligations and capital investments. Lack of liquidity may arise from insufficient cash resources and may be adversely affected by missed payments from Park Street tenants, increased vacancy, repayment of deposits, divestments, unexpected costs and investment needs. Lack of liquidity may also arise from default of loans signed and in connection with refinancing when existing loan agreements expire or are terminated. Cash reserves total at December 31, 2022 DKK 34.5 million (31 December 2021: DKK 167.8 million). Park Street forecasts that current and gener- ated liquidity is sufficient to carry out the group's planned activities throughout 2023. Maturity of financial liabilities is specified as follows: Amounts in DKK 1000s Carry forward balance Contractual cash flows 0 - 1 Years 2 - 3 Years 4 - 5 Years After 5 Years 2022 Non-derivative financial instruments Credit institutions 1,402,935 1,685,331 82,476 697,124 96,146 809,585 Trade payables 18,336 18,336 0 0 0 0 Deposits 37,916 37,916 27,693 5,028 2,453 2,742 Other debts 5,310 5,310 0 0 0 0 Total 1,464,497 1,746,893 110,169 702,152 98,599 812,327 2021 Non-derivative financial instruments Credit institutions 1,509,471 1,654,089 43,938 89,546 578,304 942,300 Trade payables 7,718 7,718 0 0 0 0 Deposits 38,530 38,530 33,367 3,802 186 1,175 Other debts 14,238 14,238 0 0 0 0 Total 1,569,957 1,714,575 77,305 93,348 578,490 943,475 Interest rate risk Park Street is as a result of its financing activities in significant extent exposed to interest rate fluctuations. The interest rate risk is therefore an essential element in the overall assessment of the Group's financial situation. The interest rate risk as of December 31, 2022 primarily relate to the following: Fluctuations in market interest rates on mortgages with variable rates (Cibor6, F2, F3, F5). Renegotiation of the margin rate applied on the mortgage loans. Renegotiation of fixed interest rate of bank debt associated with the extension of loans / terms. Fixed rate includes loans, which applies a fixed rate until the loans' maturity date, to other agreed point in time or until a renegotiation is made with the individual bank. Park Street’s major interest rate risk is the risk that the financial creditors on short notice increase terms of interest and margin rates. In this situation, the level of interest and contribution rates depend on negotiations with the financial institutions. The Group's loan portfolio is continuously monitored with a view to optimizing the group's exposure to interest rate risks. Park Street at December 31, 2022 does not have financial instruments for interest rate hedging, and the group has limited opportunities to influence the interest rate risk in the current financial situation. Group's nominal financial debt is specified as follows, based on the type of interest rate that is linked to individual loans: 61 Type of loan Nominal * Weighted (DKK million) interest rate (per an- num) At December 31, 2022: Mortgage debt Cibor3 0 Mortgage debt Cibor6 104 4.91% Mortgage debt F2 43 2.64% Mortgage debt F3 232 0.86% Mortgage debt F5 463 0.98% Bank debt etc. Cibor3 576 6.67% Others Interest- free 0 1,418 3.61% * Rates have been hedged in January 2023, as detailed in Subsequent Events Type of loan Nominal * Weighted (DKK million) interest rate (per an- num) At December 31, 2021: Mortgage debt Cibor3 0 Mortgage debt Cibor6 139 2.06% Mortgage debt F2 46 2.48% Mortgage debt F3 324 0.59% Mortgage debt F5 505 1.06% Bank debt etc. Cibor3 504 0.84% Others Interest- free 0 0.00% 1,519 1.53% () Weighted interest rate (pa) includes contributions to mortgage and expresses the average weighted interest rates in effect at the turn of the year and in the subsequent period until the next repricing date. The calculated weighted interest rate for all Group loans at 31 December 2022 is 3.61% per annum, and is based on the latest confirmed interest rates. The corresponding calculated weighted rate at 31 December, 2021 was 1.53% per annum. This did not have a significant impact on the P&L for 2021. Breakdown by maturity until the next date of interest rate adjustment distributes the Group's loans as follows (as of Dec. 31): Amounts in DKK 1000s 2022 2021 Within six months 655 123 Between 6 and 12 months 65 121 Between 1 and 2 years 16 254 Between 2 and 5 years 682 1,006 After 5 years 0 5 1,418 1,509 The interest rate adjustment date for fixed-rate and interest-free loans is included in the above table at the time of the renegotiation of the maturity and / or terms of the loans or where existing confirmations on a given interest rate expire for a period. Interest rate risk from Park Street’s view can be presented in the following two divisions: Variable market interest rates: Risks associated with fluctuations in market interest rates, i.e. on loans where interest rate adjustment takes place at defined times based on market fluctuations. This applies to mortgage loans with variable interest rates. Interest, etc. on all loans: Risks associated with fluctuations in interest rates on all loans. In addition to the above fluctuations in market rates, this includes the renegotiation of contribution rates at mortgage banks and renegotiation of loan terms with bank creditors. 62 The hypothetical effect on the results and equity after tax as a result of 1 percentage point increase in interest rates (ex. Fair value adjustments) is illustrated in the following table: Amounts in DKK 1000s 2022 2021 Variable Interest rate loans: Effect on income statement -6.8 -10.2 Effect on equity -6.8 -10.2 Regarding loans from credit institutions that have ongoing interest rate adjustments resulting from changes in market interest rates, the table above illustrates that the hypothetical effect on net income and equity as a result of one percentage point increase in interest rates amounts to DKK –6.8 million per annum (2021: DKK –10.2 million). The approach used to determine the effect has been carried out by increasing the base rate by 100 basis points of all the loans with floating rate exposure. This analysis includes F2, F3, F5 loans as well. The effect on the income statement has been calculated for a 12 month period. Currency risk The group exposure is very limited to changes in currency rates. Credit risk The Group's credit risk is primarily related to: Lease receivables Receivables from the sale of properties Receivables form mortgages The maximum credit risk for financial assets is reflected in the accounting values of the balance sheet, and taking into account securities received. Risks concerning to rental receivables are limited to Park Street’s options to deduct payments from deposits and termination of the covered leases. Credit risk on receivables arising from the sale of properties is limited, as the transactions are always subject to payment of purchase price and deposit of the purchase price. With mortgage deeds, the Group has a usual debtor risk, which is reduced by mortgages on properties. In order to minimize the risk of loss of receivable rent, the tenants' ability to pay prior to entering into leases is assessed to the extent that it is relevant. In addition, there is usually a requirement for a cash deposit, a guarantee and / or prepaid rent. However, if a tenant is unable to pay, it may result in loss as well as reduced income due to rental allowance upon relocation, lower future rental income and any additional costs incurred in connection with refurbishment etc. Credit risk on receivables at December 31, 2022 is further described in note 19. Group’s Cash and cash equivalents consists primarily of deposits in reputable banks. The group believes that there is no significant credit risk associated with the cash. Deposits in banks are labelled at variable interest rate. Financial liabilities with credit institutions and fair value Group’s mortgage debt and bank debt is classified as amortized cost. Fair value of loans measured at amortised cost amount to DKK 1,405 thousand. Fair value has been determined as the present value of the contractual cash flows discounted at a rate reflecting the current borrowing rate. Due to the fact that the terms of all loans were renegotiated in 2017, fair value of all floating rate loans is considered to be equal to their carrying amount. Based on a recent transaction, the fair value measurement is considered a level 2 measurement. The fair value of zero-coupon debt is established based on the fair value estimated by an independent reviewer (estimated rate of 50.79 at December 31, 2022). The Group's financial assets and liabilities measured at fair value are classified on the following 3 levels in the fair value hierarchy: Level 1: Based on listed prices (non-adjusted) on active markets for identical assets or liabilities. Level 2: Based on inputs other than listed prices that are observable for the asset or liability, either direct (as prices) or indirect (derived from prices). Level 3: Based on data that is not observable in the market. 63 Amounts in DKK 1000s Carry forward balance Level 1 Level 2 Level 3 2022 Mortgages and debentures 7,412 0 7,412 0 Total financial assets 7,412 0 7,412 0 Credit institutions 5,757 0 0 5,757 Total financial liabilities 5,757 0 0 5,757 2021 Mortgages and debentures 7,671 0 7,671 0 Total financial assets 7,671 0 7,671 0 Credit institutions 5,226 0 0 5,226 Total financial liabilities 5,226 0 0 5,226 It is the Group's policy to recognise transfers between the different levels from the time at which an event or change in circumstances entails a change in the classifications. No transfers were made between levels 1 and 2 in the accounting period. When calculating the fair value of the Group's liabilities in accordance with level 3 of the fair value hierarchy, a correction is made for the Group's own credit rating, taking into account the legal status of the liabilities, and the security in the assets measured at fair value. Consequently, no direct assumptions of discount factors, etc. are included when measuring liabilities to credit institutions in accordance with level 3 of the fair value hierarchy. The table below shows the change in liabilities to credit institutions measured at fair value in the balance sheet based on valuation methods in which significant inputs are not based on observable market data (level 3): Amounts in DKK million 2022 2021 2020 Carrying amount at 1st of January 5,226 3,548 3,548 Gains / losses in the income statement 531 1,678 0 Redemptions 0 0 0 Transfer to Level 3 0 0 0 Transfer from Level 3 0 0 0 Balance at 31st of December 5,757 5,226 3,548 Gain / loss in the income statement for liabilities held as at 31 December 531 1,678 0 Gains/losses concerning credit institutions measured at fair value are included in the item 'Adjustment to fair value, net' in the income statement. Liabilities to credit institutions measured at fair value are transferred to/from level 3 in the fair value hierarchy depending on whether the fair value of the loans contains a correction for the Group's own credit rating. For financial instruments that are not measured at fair value, the book value is assessed as being a reasonable approximation of fair value. This is based on the trade price of the underlying bonds (Level 2). Note 28 – Non-current operating items, etc. Amounts in DKK 1000s 2022 2021 Depreciation and amortization -3,678 -4,330 Profit/loss on sale of operating assets -4,466 1,472 Total regulation -8,144 -2,858 64 Note 29 – Change in operating capital Amounts in DKK 1000s 2022 2021 Change in receivables -4,620 -6,771 Change in provisons 0 0 Change in deposit -614 6,029 Change in trade payables 11,618 3,730 Change in total working capital 6,384 2,988 Note 30 – Disclosure of related parties Park Street Asset Management Ltd. (London, England) has controlling influence in Park Street A/S by virtue of its shareholding of 93.06% of shares and votes in Park Street A/S. See note 5, where the remuneration of Directors and Board of Park Street A/S appears. The Company additionally had the following transactions between Park Street and related parties that consisted of intangible assets. Amounts in DKK 1000s 2022 2021 Other related parties Intangible assets 446 0 Software expenses 1,338 2,234 There have been no other transactions, etc. with related parties during the period. Note 31 – Subsequent Events Subsequent events after 31 December 2022 In January 2023, we have hedged the interest rate exposure on the floating rate non-mortgage debt through purchase of interest rate caps. These caps are now in the positive value. Mortgage loans due for interest rate fixing in April 2023 have now been fixed as F3 loans. From the balance sheet date until the date of presentation of this Annual Report no additional events have occurred other than the abovementioned which significantly affect the assessment of the annual report. Note 32 – Accounting policies Statement of IFRS compliance The annual report for the period January 1 to December 31, 2022 for Park Street A/S comprises the consolidated financial statements of Park Street A/S and its subsidiary companies and separate financial statements of the parent company. The annual report of Park Street A / S for the year 2022 is prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and requirements according to the Danish Financial Statements Act. The annual report has been approved by the Board of Directors on 5 April 2023. The annual report shall be submitted to Park Street A / S shareholders for approval at the Annual General Meeting that will take place on 28 April 2023. Disclosure of authorization of financial statements The annual report is presented in Danish crown (DKK) rounded to the nearest DKK 1,000, which is considered to be the primary currency of the Group's activities and the functional currency of the parent company. The annual report is prepared on a historical cost basis, except for investment properties and certain financial obligations that are measured at fair value. Further, investment properties and domicile are measured at reassessed value. The accounting policies are otherwise as described below. CHANGES IN ACCOUNTING POLICIES Accounting policies are unchanged from the previous year. 65 DESCRIPTION OF CONSOLIDATED ACCOUNTING POLICIES Consolidated Financial Statements The consolidated financial statements include Park Street A / S (parent company) and companies (subsidiaries) controlled by the parent. The parent company is deemed to have control if it (i) has control of the relevant activities in the entity, (ii) is exposed to or are entitled to a variable returns from the investment and (iii) may use its controlling interest to affect the variables of their return. The consolidated financial statements are prepared as a consolidation of the parent financial statements and accounts of the individual subsidiaries, which have been prepared in accordance with the Group's accounting policies, the elimination of intercompany income and expenses, sharehold- ings, balances, dividends and gains and losses on transactions, taken between the consolidated companies. Sale of subsidiaries and activities When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Foreign currency Transactions in currencies other than the individual companies’ functional currencies are translated initially at the transaction date. Receivables and payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated at the closing rate. Exchange differences arising between the date of transaction and payment date or the balance sheet date are recognized in the income statement under financial income or expenses. Exchange differences arising from the translation of foreign companies' balance sheet items at the beginning of the exchange rates and the translation of income statements from average rates to closing rates are recognized in other comprehensive income. Exchange rate on full or partial disposal of foreign entities, where control is transferred, the foreign currency translation adjustments are recognized in other comprehensive income, which is attributable to the unit from other comprehensive income to net income along with the gain or loss on the disposal. PROFIT AND LOSS STATEMENT Revenue Revenue includes rental income, interest on mortgage and debt instruments measured at fair value, sale amount from sold project holding, sales of goods and sales of other services. Rental Revenue is measured at the fair value of the consideration received or receivable and is calculated exclusive of VAT collected on behalf of third parties and discounts. Revenue from the sale of project portfolios is recognized when delivery takes place and transfer of risk to the buyer (sales method), ie when any construction is completed and finally transferred to the buyer, and all essential elements of the sales agreement are met. Sales of goods factored when delivery and risk transition have taken place. Rental income, interest on mortgage and debt instruments measured at fair value, and sales of other services is recognized in the periods to which they relate. Operating costs Operating costs include costs directly related to turnover, including ongoing operating expenses of the Group investment properties, costs associated with the acquisition and construction of submitted project inventories and other operating costs. Adjustments to fair value, net Adjustment to fair value, net includes continuous adjustments of investment properties through profit or loss. Realized gains on sale of investment properties Realized gains on sale of investment properties is recognized when the risks and rewards are transferred to the buyer, and the control of the property has been transferred. Financial income and expenses Financial items include interest income and interest expenses, foreign exchange rate adjustments, amortization premiums / discounts, realized and unrealized gains and losses on securities as well as surcharges and refunds under the tax. 66 Borrowing costs directly attributable to the development projects of investment or project portfolios, added to the cost of the assets until the time when the project is completed and the property can be used for the intended purpose. If there is a loan directly to finance the development project, calculated borrowing costs on the basis of an average interest rate of the group's loans except for loans recorded at the acquisition of specific assets. Other borrowing costs are recognized in the income statement in the periods to which they relate. Income tax expense Tax for the year comprises current tax and changes in deferred tax, is recognized in the income statement with the portion attributable to the profit and directly in equity or in other comprehensive income with the portion attributable to amounts recognized directly in equity and in other compre- hensive income. BALANCE STATEMENT Intangible assets Intangible assets (software) is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acqui- sition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation, based on a component approach, is calculated using the straight line method to allocate the cost over the asset’s estimated useful lives. Intangible assets (software) have been depreciated under the assumption of 3 years of useful live. Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Domicile Domicile properties are initially measured at cost. The cost comprises the cost and expenses directly associated with the acquisition. Fair value at the time of a previous investment property is transferred to owner-occupied properties, is considered the property new cost. Domicile properties are then measured at a readjusted value, corresponding to the fair value at the time of re-evaluation less accumulated depreciation. Principles and Estimates Management's estimate of the properties' fair value are shown in note 1. Revaluations recognized in other comprehensive income and attributed to the separate reserve for revaluation of equity. Owner-occupied properties are depreciated over the assets / components' estimated useful lives, as follows: Buildings 50 years Other components 15-30 years Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Land is not depreciated. Investment properties Investment property includes land and buildings held by Park Street to earn rental income and / or capital gains. Investment properties are measured initially at cost, which comprises the properties and cost, directly related costs. Investment properties are then measured at fair value and all value adjustments are recognized in the income statement under "Adjustment to fair value, net". Principles and methods for management's estimate of the properties' fair values is disclosed in note 1. Land plots, where here is no final decision on the purpose of usage have been included in the Group’s portfolio as investment properties. Machinery and equipment All machinery and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation, based on a component approach, is calculated using the straight line method to allocate the cost over the asset’s estimated useful lives as stated above on Domicile. 67 Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Investment in associates Investments in associates are recognised at cost price following the cost method principle. The investment is recorded at its historical cost (purchase price). Once the initial transaction is recorded there is no need to adjust it, unless there is evidence that the fair market value of the investment has declined below the recorded historical cost. If so, the investment is written down to adjust to its new fair value. Impairment of non-current assets The carrying value of tangible assets that are not measured at fair value are assessed regularly and at least annually to determine whether there is any indication of impairment. When such an indication is present, the asset is valued at recovery value. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. Value in use is the present value of expected future cash flows from the asset or cash-generating unit to which the asset belongs. If the asset does not generate cash independently of other assets, the recoverable amount of the smallest cash- generating unit that includes the asset. Impairment is recognized if the carrying amount of an asset or cash-generating unit exceeds the assets' useful or cash-generating unit's recoverable amount does not exceed the carrying amount that the asset would have had after depreciation if the asset had not been impaired. Current financial assets measured at fair value Mortgages classified as financial instruments categorized as "financial assets measured at fair value through profit or loss" are recognized at fair value on initial recognition and subsequently measured at fair value, continuously carried out a revaluation of this statement. Fair value is deter- mined based on observable market data (interest rates), the debtor's creditworthiness and on assessments of the loan term to maturity and ranking in the position. Receivables Receivables are measured at amortized cost. Impairment losses are made for losses which are deemed to have resulted in an objective indication that an individual receivable is impaired. Prepayments Prepayments recognized under assets comprise incurred costs related to coming financial years. Prepayments are measured at cost. Dividends Dividends are recognized as a liability at the time of adoption at the general meeting. Dividends proposed for distribution is shown as a separate component of equity until the Annual General Meeting. Own shares Acquisition and selling prices of company shares and dividends are recognized directly in equity under retained earnings. Foreign currency reserve Currency translation reserve includes the parent company shareholders' share of exchange rate differences arising from the translation of accounts for companies with a different functional currency than Danish crown. The reserve is dissolved by the disposal of foreign entities. Revaluation reserve Reserve for revaluation includes the accumulated revaluation of domicile. The reserve is reduced by transfer to the profit for the year, as depreciation and write-downs are made on the properties written up or for sale. Corporate tax and deferred tax Current tax liabilities and current tax receivables are recognized in the balance sheet as calculated tax on the taxable income, but adjusted for tax on prior years' taxable income and taxes paid on account. Deferred tax is measured using the balance sheet liability method on temporary differences between accounting and tax values of assets and liabili- ties, excluding deferred taxes on temporary differences arising on initial recognition of goodwill or the initial recognition of a transaction that is not a business combinations, and where the temporary difference found at the time of initial recognition affects neither the accounting profit nor taxable income. Deferred tax assets including the tax value of tax loss carryforwards, are recognized under non-current assets at the value at which they are expected to be used either by elimination in tax on future earnings or against deferred tax liabilities. Deferred tax assets are reviewed annually and recognized only to the extent that it is probable that they will be utilized. 68 Deferred tax is measured based on the tax rates and at the balance sheet date will be applicable in the respective countries when the deferred tax is expected to crystallize as current tax. Change in deferred tax due to changes in tax rates is recognized in the income statement. Provisions Provisions are recognized when, as a result of an event occurring before or at the balance sheet date has a legal or actual obligation and it is probable that a payment will be needed to settle the obligation. The item includes provision for dealing with specific uncertainties on completed projects. Provisions are measured on a best estimate of the amount required to settle the obligation. Provisions with an expected maturity of one year and above are classified as non-current liabilities. Liabilities Borrowings are initially recognized at fair value which is generally proceeds received, and net of transaction costs incurred. Subsequently, borrowings are measured at amortized cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Other financial liabilities, including trade and other payables, are on initial recognition measured at fair value. The liabilities are subsequently measured at amortized cost. Assets held for sale Assets held for sale include non-current assets that are for sale. Liabilities relating to assets held for sale are liabilities directly related to those assets that will be transferred during the transaction. Assets are classified as "held for sale" when their carrying amount will primarily be recouped through a sale within 12 months according to a formal plan rather than through continued use and provided that the sale at the balance sheet date is considered to be highly probable. When the properties are expected to be recovered from the sale of subsidiaries that own the properties, all the subsidiaries' assets and liabilities are reclassified. Assets are not depreciated from the time they are classified as "held for sale". Assets held for sale are measured at the lower of the carrying amount at the time of the "sale-for-sale" or fair value less cost of sale. However, investment properties held for sale are measured according to the Group's usual accounting policies for investment properties, ie. at fair value without deduction of selling costs. CASH FLOW STATEMENT The cash flow statement is presented according to the indirect method and shows cash flows divided by operating, investing and financing activities for the year, the year's shift in cash and cash equivalents at the beginning and end of the year. The liquidity effect on the sale of companies is shown separately under cash flow from investing activities. The cash flow statement recognizes the cash flows of sold companies until the date of sale. Cash flows from operating activities are calculated as operating profit adjusted for non-cash operating items, changes in working capital, received and paid financial income and expenses and paid corporation tax. Cash flows from investing activities include payments in connection with sales of companies and activities, purchase and sale of financial assets as well as purchase, development, improvement and sales, etc. of intangible and tangible assets, including investment properties. Cash flows from financing activities include changes in the parent company's share capital and associated costs as well as admission and repayment of loans, repayment of interest-bearing debt, purchase and sale of own shares and payment of dividends. Cash and cash equivalents comprise cash with insignificant price risk. 69 Park Street | Park Street A/S Financial Statements 70 2022 PARK STREET A/S FINANCIAL STATEMENTS Park Street | Park Street A/S Financial Statements 71 Income statement Note Amounts in DKK 1000s 2022 2021 2 Net sales 93,549 140,258 3 Operating expenses -26,245 -35,581 Gross profit 67,304 104,677 4 Employee benefit expenses -12,713 -16,396 5 Other expenses, by nature -9,331 -11,264 6 Depreciation, amortisation and impairment -1,648 -3,938 Operating profit (EBIT) 43,611 73,079 Financial income subsidiaries 11,426 11,777 7 Financial expenses -8,113 -20,931 Earnings before value adjustments (EBVAT) 46,924 63,926 8 Income / Loss from subsidiaries 12,727 54,289 9 Adjustment to fair value, net 24,374 67,539 Gains realised on the sale of investment properties -4,466 1,472 Profit before tax 79,559 187,225 10 Tax on profit for the period -15,747 -41,767 Profit for the period 63,812 145,459 Distributed as follows Parent's shareholders 63,812 145,459 Profit for the period 63,812 145,459 Park Street | Park Street A/S Financial Statements 72 Statement of comprehensive income Note Amounts in DKK 1000s 2022 2021 Profit for the period 63,812 145,321 Other comprehensive income: Items that cannot be reclassified to the income statement: Fair value adjustment of domicile properties 0 7,040 Tax on fair value adjustment of domicile properties 0 -1,549 Other comprehensive income after tax 0 5,491 Comprehensive income for the period 63,812 150,812 Distributed as follows Parent's shareholders 63,812 150,812 Comprehensive income for the period 63,812 150,812 Park Street | Park Street A/S Financial Statements 73 Statement of financial position Note Amounts in DKK 1000s 2022 2021 ASSETS Non-current assets Intangible assets Software 446 1,865 Capitalised Leasing Fees 625 0 1,071 1,865 Property, plant and equipment 12 Investment properties 1,398,766 1,596,596 13 Machinery and equipment -45 49 1,398,721 1,596,645 Financial assets 11 Investment in subsidiaries 465,332 452,291 Investment in associates 2,029 2,029 Deposits 161 161 467,522 454,481 Total non-current assets 1,867,314 2,052,991 Current assets 14 Mortgages and instruments of debt 165,296 165,554 15 Trade and other current receivables 60,252 36,038 Income tax receivable 2,270 4,986 Prepaid expenses and accrued income 911 2,029 Cash and short-term deposits 7,167 152,652 Total current assets 235,839 361,259 Total assets 2,103,154 2,414,250 Equity Share capital 57,175 67,513 Share Premium 289,260 289,260 Accumulated profit 740,589 860,265 Total equity 1,087,024 1,217,038 LIABILITIES Non-current liabilities 16 Deferred tax 247,723 232,087 17 Borrowings 720,686 894,301 Deposits 1,615 4,413 970,024 1,130,801 Current liabilities Provisions for liabilities 400 400 17 Current borrowings 20,347 20,347 Trade and other payables -1,804 11,860 Deposits 25,108 25,108 Other liabilities 2,055 7,454 46,106 66,411 Total liabilities 1,016,130 1,197,212 Total equity and liabilities 2,103,154 2,414,250 Park Street | Park Street A/S Financial Statements 74 Statement of equity Amounts in DKK 1000s Share cap- ital Revaluation re- serve Accumulated profit Share Pre- mium Equity Total Statement of equity for 2022: Equity as at 1 January 2022 67,513 0 860,265 289,260 1,217,038 Comprehensive income for the period Profit for the period 0 0 63,812 0 63,812 Fair value adjustment of domicile 0 0 0 0 0 Tax on other comprehensive income 0 0 0 0 0 Other comprehensive income during the financial year 0 0 0 0 0 Comprehensive income for the period 0 0 63,812 0 63,812 Transactions with owners Repurchase own shares 0 0 -183,488 0 -183,488 Capital reduction -10,338 0 0 0 -10,338 Total transactions with owners -10,338 0 -183,488 0 -193,826 Equity as at 31 December 2022 57,175 0 740,589 289,260 1,087,024 Statement of equity for 2021: Equity as at 1 January 2021 67,513 55,107 660,066 289,260 1,073,085 Comprehensive income for the period Profit for the period 0 0 145,459 0 145,459 Comprehensive income for the period 0 0 145,459 0 145,459 Transactions with owners Repurchase own shares 0 0 25 0 25 Cash injection by existing shareholders 0 -55,107 54,715 0 -392 Liabilities wih financial institutions converted into Equity 0 0 0 0 0 Total transactions with owners 0 -55,107 54,740 0 -367 Other adjustments Depreciation of revalued value of domiciles Equity as at 31 December 2021 67,513 0 860,265 289,260 1,217,038 Park Street | Park Street A/S Financial Statements 75 Statement of cash flows Note Amounts in DKK 1000s 2022 2021 Operating profit (EBIT) 43,611 73,079 Adjustment for illiquid operating items, etc. 1,648 3,939 Change in other operating capital -41,641 -7,217 Cash flows concerning primary operations 3,618 69,801 Financial expenses paid -8,113 -20,931 Paid Corporate Tax -3,079 -5,275 Total cash flow from operating activities -7,572 43,594 Cash flow from investing activities Improvements to investment properties -6,313 -17,689 Sales of investment properties 225,505 8,026 Share capital increase (cash injection) 0 -25 Total cash flow from investing activities 219,192 -9,688 Cash flow from financing activities Repurchase Own Shares -183,488 0 Proceeds from assumption of liabilities to credit institutions 0 503,306 Repayment of liabilities to credit institutions -29,524 -397,881 Repayment of debt from disposal of assets -144,092 0 Total cash flow from financing activities -357,104 105,425 Total cash flow for the period -145,485 139,331 Liquid assets as at 1 January 152,652 13,321 Liquid assets at the end of the period 7,167 152,652 Liquid assets at the end of the period Cash and short term deposit 7,167 152,652 Liquid assets at the end of the period 7,167 152,652 Park Street | Notes to Park Street A/S Financial Statements 76 Summary Note 1 Accounting policies, accounting estimates, risks etc. Note 2 Net sales Note 3 Operating expenses Note 4 Employee Expenditure Note 5 Auditor's fees Note 6 Depreciation and amortization Note 7 Financial expenses Note 8 Income / (loss) from subsidiaries Note 9 Adjustment to fair value, net Note 10 Tax on profit for the year and other comprehensive income Note 11 Investment in subsidiaries Note 12 Investment properties Note 13 Machinery and equipment Note 14 Mortgages and instruments of debt Note 15 Trade and other current receivables Note 16 Deferred taxes Note 17 Borrowings Note 18 Contingent assets and liabilities Note 19 Financial risks Note 20 Change in other working capital Note 21 Related parties Note 22 Events after the balance sheet date Note 23 Accounting policies Park Street | Notes to Park Street A/S Financial Statements 77 Notes Note 1 - Accounting policies, accounting estimates and risks, etc. The accounting assumptions, assessments and estimates made in the preparation of the parent company accounts are the same as described in note 22 of these financial statements, to which reference is made. See note 11 regarding the recognition and measurement of investments, receivables from subsidiaries and provisions relating to subsidiaries in the Parent Company's financial statements. Note 2 - Net sales Amounts in DKK 1000s 2022 2021 Rental income 80,543 111,926 Sales of other services 12,551 27,437 Total sales of services 93,094 139,363 Interest income, mortgages and instruments of debt 455 895 93,549 140,258 Note 3 - Operating expenses Amounts in DKK 1000s 2022 2021 Operating expenses, investment properties 26,245 31,528 Operating expenses, other services 0 4,053 26,245 35,581 Note 4 – Employee benefits expenses Amounts in DKK 1000s 2022 2021 Salary 11,595 15,190 Contribution-based pensions () 677 819 Other social security costs 57 58 Other staff costs 385 327 12,713 16,396 Average number of employ- ees 17 18 () Park Street A/S has only defined contribution plans. For defined contribution plans, the employer undertakes to pay a defined contribution to a pension fund, but has no risk with regard to future developments in interest rates, inflation, mortality, disability, etc. as regards the amount to be paid to the employee. Remuneration of the CEO and the Board of Directors is described in Note 5 of the consolidated accounts. Park Street | Notes to Park Street A/S Financial Statements 78 Note 5 – Auditor’s fees The auditor appointed in 2022 and 2021 is PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab. Their fees can be specified as follows: Amounts in DKK 1000s 2022 2021 Statutory audit 588 420 Other assurance services 0 40 Tax and VAT advice 334 192 922 652 Fees for non-audit services delivered by PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab, include general accounting and tax advisory services. Note 6 – Depreciation, amortisation and impairment Amounts in DKK 1000s 2022 2021 Depreciation, software 1,464 1,807 Depreciation, domicile properties 0 1,497 Depreciation, inventory and fixed assets 185 634 1,648 3,938 Note 7 – Financial Expenses Amounts in DKK 1000s 2022 2021 Interest expenses, liabilities to credit institutions measured at amortized cost 6,781 19,142 Other interest costs and fees 640 521 Borrowing costs 691 1,268 8,113 20,931 Note 8 – Income / (loss) from subsidiaries Amounts in DKK 1000s 2022 2021 Intergration of subsidiaries -15,269 -16,316 Other subsidiaries 31,767 0 16,498 -16,316 Note 9 – Adjustments to fair value, net Amounts in DKK 1000s 2022 2021 Fair value adjustment, investment properties 24,374 67,539 Fair value adjustment, mortgage debt and bank debt 0 0 24,374 67,539 Park Street | Notes to Park Street A/S Financial Statements 79 Note 10 – Tax on profit for the year and other comprehensive income Amounts in DKK 1000s 2022 2021 Annual tax can be divided as follows: Current tax on profit of the year 0 1,242 Current tax adjustment 0 59 Changes in deferred taxes 21,565 38,938 Changes in deferred taxes previous years -5,818 1,527 15,747 41,766 Tax on profit for the year can be explained as follows: Estimated tax at a tax rate of 22% 17,503 41,190 Non-deductible costs 0 44 Adjustment of deferred tax assets and liabilities -1,756 533 15,747 41,766 Effective tax rate 19.79% 22.31% Amounts in DKK 1000s 2022 2021 Tax on other comprehensive income: Tax on fair value adjustment of domicile properties 0 111 0 111 Note 11 – Investment in subsidiaries See accounting policies on note 22 of the Parent’s Financial Statements. Receivables considered to be part of the overall investment in the subsidiary are written down by any remaining negative equity value. Amounts in DKK 1000s 2022 2021 Cost price at January 1 404,144 92,377 Additions 0 311,767 Cost price at December 31 404,144 404,144 Value adjustments at 1 January 49,699 -4,590 Share of profit/loss for the year after tax 12,727 54,289 Value adjustments at December 31 62,426 49,699 Carrying amount at January 1 452,291 87,668 Investments with negative equity offset against trade receivables 252 -1,553 Carrying amount at December 31 466,570 452,291 Park Street | Notes to Park Street A/S Financial Statements 80 List of subsidiaries: Subsidiaries Registered Address Equity PSN ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Glostrup P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Taastrup P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Phoam Studio ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Living ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Albuen ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% PSI ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% PSI Hold Co P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse N P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse O P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Ballerup Hotel P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Toldbuen P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Svanevej P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Park Street Nordicom UK Ltd 85, Great Portland Street, London, W1W 7LT, England 100% Note 12 – Investment properties As of 31 December 2022 there are no ongoing sales processes regarding investment properties. Amounts in DKK 1000s 2022 2021 Balance at 1 of January 1,596,596 2,131,476 Transfer to / from a subsidiary 0 -620,913 Transfer to / from project holdings 0 0 Costs incurred for improvements 6,313 17,689 Adjustment to fair value, net 24,374 76,553 Acquisition of properties 0 0 Additions fixed assests 561 0 Depreciation of fixed assets -185 -129 Retirement on sale -228,938 -8,080 Balance at 31 December 1,398,722 1,596,596 Fair value hierarchy for investment: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2022: Investment properties 0 0 1,398,722 1,398,722 0 0 1,398,722 1,398,722 At 31 December 2021: Investment properties 0 0 1,596,596 1,596,596 0 0 1,596,596 1,596,596 Park Street | Notes to Park Street A/S Financial Statements 81 Classification of investment properties in level 3 means that determining the fair value of investment properties is mainly based on data that is not observable in the market. During 2022 and 2021 there has been no transfers between levels of the fair value hierarchy. The fair value of investment properties is based on estimates. Refer to note 15 in the consolidated financial statements for additional details. The net income of the investment portfolio is as follows: Amounts in DKK 1000s 2022 2021 Rental income from investment properties 80,543 119,609 Operating expenses, investment properties -26,245 -34,679 Net income from investment properties 54,298 84,930 The Group has entered into operating leases (leases) to tenants of its investment properties. The leases duration is up to 15 years. The contract minimum payments under existing leases are distributed as follows: Amounts in DKK 1000s 2022 2021 Remaining termination within 1 year from the balance sheet date 26,972 26,972 Remaining termination between 1 and 5 years from the balance sheet date 70,238 70,238 Remaining termination after 5 years from the balance sheet date 57,607 57,607 154,817 154,817 Note 13 – Machinery and equipment Amounts in DKK 1000s IT Equipment Appliances Total Machinery and Equipment Cost at 1 of January 2022 4,150 8,424 12,574 Additions during the year 0 0 0 Disposals during the year 0 0 0 Cost at 31 December 2022 4,150 8,424 12,574 Amortization at 1 January 2022 -4,131 -8,395 -12,526 Amortization during the year -10 0 -185 Amortization at 31 December 2022 -4,141 -8,395 -12,536 Balance at 31 December 2022 9 29 38 Cost at 1 of January 2021 4,150 8,424 12,574 Additions during the year 0 0 0 Disposals during the year 0 0 0 Cost at 31 December 2021 4,150 8,424 12,574 Amortization at 1 January 2021 -4,115 -7,715 -11,830 Amortization during the year -16 -680 -696 Amortization at 31 December 2021 -4,131 -8,395 -12,526 Balance at 31 December 2021 19 29 48 Park Street | Notes to Park Street A/S Financial Statements 82 Note 14 – Mortgages and instruments of debt Park Street has the following mortgage and debt instruments classified as "Financial assets measured at amortized cost": Amounts in DKK 1000s 2022 2021 Financial assets at amortized cost at 1 January 165,554 165,883 Repayment of the year -258 -329 Financial assets at amortized cost at 31 December 165,296 165,554 Mortgages and debt securities classified as financial instruments in the category "Financial assets recognized at amortized cost" expire in the follow- ing periods: Effective interest rate p.a. Balance in DKK 1000s Fair value in DKK 1000s Value Expire 2022 2021 2022 2021 2022 2021 DKK 2025 7.50% 7.50% 7,412 7,671 7,412 7,671 DKK 2022 7.50% 7.50% 1,000 1,000 1,000 1,000 DKK 2022 7.50% 7.50% 1,500 1,500 1,500 1,500 DKK 2022 7.50% 7.50% 2,200 2,200 2,200 2,200 DKK 2022 7.50% 7.50% 13,100 13,100 13,100 13,100 DKK 2022 7.50% 7.50% 140,083 140,083 140,083 140,083 165,295 165,554 165,295 165,554 Park Street A/S has provided a credit line facility to the subsidiary Pulse Taastrup P/S with an aggregate principal amount of nominal DKK 175 million (153.2 million utilized at 31.12.21) with an annual interest rate of 7.5% payable at the maturity date of the loan. Additionally, Park Street A/S has provided a credit line facility to the subsidiary Phoam Studio ApS with an aggregate principal amount of nominal DKK 5 million (4.7 million utilized at 31.12.21) with an annual interest rate of 7.5% payable at the maturity date of the loan. The calculated fair value is based on estimates (Level 3 in fair value hierarchy). Note 15 – Trade and other current receivables Amounts in DKK 1000s 2022 2021 Receivable Rental Income 4,607 3,963 Deposited funds in banks 8,272 12,209 Other Receivables 349 409 Receivables from related parties 47,025 19,456 Receivables at 31 December 60,252 36,038 Write-downs on receivable rental income have been made after an individual assessment and have developed as follows: Bad debt provision as of 1st of January 2,444 1,712 Additional provisions -277 736 Recognized losses (Write off) 0 -4 Reversal -1 0 2,165 2,444 Park Street | Notes to Park Street A/S Financial Statements 83 In the above tenant rental income, receivables have been recognized which were overdue as at 31 December but have not been written down, with the following amounts: Up to 30 days 276 0 Between 30 and 90 days 2,535 0 Over 90 days 1,801 1,300 4,612 1,300 Trade receivables are predominantly non-interest bearing. Apart from rental income receivable, Park Street has no receivables that are overdue at the balance sheet date or which have been assessed as impaired. Funds deposited in banks relate to receivables selling price from properties sold, funds deposited as collateral for mortgage loans and deposits as security for the initiated maintenance work on properties. Note 16 – Deferred Taxes Amounts in DKK 1000s 2022 2021 Deferred tax liabilities at 1st of January 232,087 191,733 Recognized in other comprehensive income 0 -111 Correction from previous years -111 0 Recognized in the income statement 15,747 40,465 Deferred tax liabilities at 31 December 247,723 232,087 Deferred tax is recognized in the balance sheet as follows: Deferred tax (active) Deferred tax (liability) -247,723 -232,087 Deferred tax at 31 December -247,723 -232,087 Deferred tax recognized in the balance The calculation of deferred taxes included DKK 32.6 million relating to tax losses carried forward from Group companies. Based on budget ac- counting and tax profits in the period 2021-2024 and deferred tax liabilities, it is estimated that all tax losses (tax base) will be realized, which is included in the calculation of deferred tax DKK 247.7 million (taxable value) per 31 December 2022 (2021: DKK 232.1 million). Amounts in DKK 1000s Balance 1/1 Recognized in the income statement Recognized in another comprehen- sive income Balance 31/12 2022 Software 410 -312 0 98 Investment and residential properties 266,087 11,810 0 277,897 Fixtures and fittings -413 25 0 -388 Project Holdings 0 0 0 0 Receivables -612 0 0 -612 Provisions 0 -88 0 -88 Credit institutions -779 1,910 0 1,131 Tax losses carryforward -32,606 2,291 0 -30,315 232,087 15,636 0 247,723 Park Street | Notes to Park Street A/S Financial Statements 84 Amounts in DKK 1000s Balance 1/1 Recognized in the income statement Recognized in another comprehen- sive income Balance 31/12 2021 Software 807 -397 0 410 Investment and residential properties 228,140 38,058 -111 266,087 Fixtures and fittings -523 110 0 -413 Project Holdings 0 0 0 0 Receivables -409 -203 0 -612 Provisions -88 88 0 0 Credit institutions 204 -983 0 -779 Tax losses carryforward -36,398 3,792 0 -32,606 191,733 40,465 -111 232,087 There are no deferred tax assets not recognized in the balance. Note 17 – Borrowings Amounts in DKK 1000s 2022 2021 Credit institutions, nominal 747,142 920,758 Market value adjustments -6,110 -6,110 741,032 914,648 The liabilities are thus included in the balance sheet: Credit institutions, long-term 720,686 894,301 Credit institutions, short-term 20,347 20,347 741,032 914,648 The Group's loans and credits are distributed as per 31 December as follows: Liabilities recognized at fair value Currency Rate type Expiry date 2022 2021 Convertible bonds DKK Interest-free 11-15 years 11,335 11,335 11,335 11,335 Market value adjustments -5,579 -6,110 Carrying amount 5,757 5,226 Liabilities recognized at amortized cost Currency Rate type Expiry date 2022 2021 Banks Debt DKK Fixed 2-5 years 0 4,985 Mortgage Debt DKK Variable 2-5 years 64,604 43,402 Mortgage Debt DKK Variable 6-10 years 0 35,987 Mortgage Debt DKK Variable 11-15 years 667,824 593,362 Mortgage Debt DKK Variable 16-20 years 0 231,685 Carrying amount 732,428 909,420 Park Street | Notes to Park Street A/S Financial Statements 85 The nominal amounts stated in the tables represent the amount that Park Street will repay under the loan agreements by the end of these agree- ments. Fixed interest loans stated in the tables indicate that a fixed rate applies until the loans' maturity date or until a new negotiation is made with the individual bank. Variable interest rates expressed in the tables indicate that the loans have interest rates that are regularly adjusted over the term of the loans due to fluctuations in market interest rates. The evolution of the long and short term liabilities with credit institutions is specified follows: Amounts in DKK 1000s 2022 2021 Non-current financial liabilities 894,301 1,259,880 Current financial liabilities 50,970 50,970 Liabilities associated with assets held for sale 0 0 Financial liabilities with credit institutions at 1 January 914,648 1,310,850 Repayment of liabilities to credit institutions -173,616 -397,881 Fair value adjustment of Debt 0 1,678 Financial liabilities with credit institutions at 31 December 741,032 914,648 Non-current financial liabilities 720,686 894,301 Current financial liabilities 20,347 20,347 Total financial liabilities with credit institutions at 31 December 741,032 914,648 Determining the fair value of debt to credit institutions Information on Group’s financial loan agreements, mortgage debt and convertible bonds is disclosed in note 26 of the consolidated financial state- ments. Information on estimates and judgments related to the determination of fair value of financial liabilities is disclosed in note 1 of the Consolidated Financial Statements. As stated in these notes mortgage and bank debt have been recognized at amortised cost in 2022. No reversal of fair value adjustments in 2022 and 2021. Zero-coupon bonds (former Convertible bonds) See note 24 in the Consolidated Financial Statements. Note 18 – Contingent assets and liabilities Pledges and guarantees The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2022 amount a total of DKK 732 million (31 December 2021: DKK 909 million), the nominal value of the loans amounts a total of DKK 732 million (31 December 2021: DKK 909 million) in the group's investment properties and domiciles with a book value totalling DKK 1,410 million (31 December 2021: DKK 1,597 million). The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2022 amount a total of DKK 7.4 million (31 December 2021: DKK 7.7 million), in the group's deposited mortgage deeds with a book value totalling DKK 7.4 million (31 December 2021: DKK 7.7 million). Litigations and disputes Park Street had a legal dispute with a previous tenant in relation to the lease being deemed as a commercial or a residential lease. Park Street has lost the argument and now the lease is deemed to be residential. This could lead to some potential liability in relation to the dilapidations claim and other aspects. This will be clarified as the case proceeds further with the Housing Board. No additional significant litigations and disputes are acknowledged by the Group at December 31, 2022 other than the ones indicated in Note 27. Conditional debt relief and contingencies In connection with the sale of a property in 2014, Park Street has been subject to a surcharge for the property if the purchaser on the site before 1 January 2024 obtains more building rights than assumed at the conclusion of the transaction. The additional price amounts to DKK 2,000 for each Park Street | Notes to Park Street A/S Financial Statements 86 building rights. Additional building plans will require a change of the local plan for the area in which the property in question is located. Park Street is not aware of any plans to change the local plan in question, for this reason Park Street does not consider the potential additional price as a contingent asset. Contingent assets As part of the sales agreement of the property sold in 2018, Park Street and the buyer have agreed that Park Street is entitled to obtain an additional supplement of DKK 1 million if the buyer completer a development project of more than 5,000 square meters within 5 years from the date of acqui- sition; the Company has decided not to recognize the contingent asset in the balance as at December 31, 2022. Lease hire agreements There are lease hire agreements for cars rental and printers. 2022 2021 Within 1 year from the balance sheet date 10 1 Between 1 and 5 years from the balance sheet date 422 5 After 5 years from the balance sheet date 0 0 Lease hire obligations at 31 December 431 6 Minimum lease payments recognized in the profit and loss account for the year 31 130 Note 19 – Financial risks Amounts in DKK 1000s 2022 2021 Mortgages and debentures 7,412 7,671 Intercompany loan 157,883 157,883 Financial assets measured at amortized cost 165,296 165,554 Receivables 60,252 36,038 Cash and equivalents 7,167 152,652 Loan and receivables 67,419 188,690 Credit institutions 5,757 5,226 Financial liabilities measured at fair value through profit or loss 5,757 5,226 Credit institutions 735,806 909,421 Deposits 26,723 29,521 Accounts payable -2,001 11,860 Other Debts 5,171 7,454 Financial liabilities measured at amortized cost 765,699 958,256 Risk management policy The financial management of the Group is geared towards stabilization and optimization of the Group's operations, while at minimizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instruments. The group is due to its activities exposed to various financial risks, including liquidity risk, market risks (primarily interest rate risk) and credit risk. Park Street | Notes to Park Street A/S Financial Statements 87 Liquidity risk Park Street’s liquidity risk consists on not being able to make regular payments and not being able to provide sufficient liquidity to cover the financing costs, capital repayment obligations and capital investments. Lack of liquidity may arise from insufficient cash resources and may be adversely affected by missed payments from Park Street tenants, increased vacancy, repayment of deposits, divestments, unexpected costs and investment needs. Lack of liquidity may also arise from default of loans signed and in connection with refinancing when existing loan agreements expire or are terminated. Cash reserves total at December 31, 2022 DKK 7.2 million (31 December 2021: DKK 152.6 million). Park Street forecasts that current and generated liquidity is sufficient to carry out the group's planned activities throughout 2022. Maturity of financial liabilities is specified as follows: Amounts in DKK 1000s Carry forward balance Contractual cash flows 0 - 1 Years 2 - 3 Years 4 - 5 Years After 5 Years 2022 Non-derivative financial instruments Credit institutions 741,032 751,837 19,409 0 64,604 667,824 Trade payables -2,001 -2,001 0 0 0 0 Deposits 26,723 27,507 14,591 10,583 1,570 764 Other debts 5,171 5,171 5,171 0 0 0 Total 770,925 782,514 39,170 10,583 66,174 668,588 2021 Non-derivative financial instruments Credit institutions 914,647 998,587 31,338 62,675 62,796 841,778 Trade payables 11,860 11,860 0 0 0 0 Deposits 29,521 29,521 25,108 3,634 97 682 Other debts 7,454 7,454 7,454 0 0 0 Total 963,482 1,047,422 63,900 66,309 62,893 842,460 Interest rate risk Park Street is as a result of its financing activities in significant extent exposed to interest rate fluctuations. The interest rate risk is therefore an essential element in the overall assessment of the Group's financial situation. The interest rate risk as of December 31, 2021 primarily relate to the following: Fluctuations in market interest rates on mortgages with variable rates (Cibor6, F2, F3, F5). Renegotiation of the margin rate applied on the mortgage loans. Renegotiation of fixed interest rate of bank debt associated with the extension of loans / terms. Fixed rate includes loans, which applies a fixed rate until the loans' maturity date, to other agreed point in time or until a renegotiation is made with the individual bank. Park Street’s major interest rate risk is the risk that the financial creditors on short notice increase terms of interest and margin rates. In this situation, the level of interest and contribution rates depend on negotiations with the financial institutions. The Group's loan portfolio is continuously monitored with a view to optimizing the group's exposure to interest rate risks. Park Street at December 31, 2022 does not have financial instru- ments for interest rate hedging, and the group has limited opportunities to influence the interest rate risk in the current financial situation. Park Street | Notes to Park Street A/S Financial Statements 88 Group's nominal financial debt is specified as follows, based on the type of interest rate that is linked to individual loans: Type of loan Nominal (DKK million) * Weighted interest rate (per annum) At December 31, 2022: Mortgage debt Cibor6 104 4.91% Mortgage debt F2 43 2.64% Mortgage debt F3 122 0.86% Mortgage debt F5 463 0.98% Bank debt etc. Fixed 0 - Others Interest-free 0 - 732 1.62% At December 31, 2021: Mortgage debt Cibor6 139 2.08% Mortgage debt F2 46 2.54% Mortgage debt F3 214 0.83% Mortgage debt F5 505 0.84% Banks and other payables. Fixed 5 0.00% Others Interest-free 5 0.00% 914 1.11% The calculated weighted interest rate for all Park Street loans are at 31 December 2022 1.62% per annum, and is based on the latest confirmed interest rates. The corresponding calculated weighted rate at 31 December, 2021 was 1.11% per annum. Breakdown by maturity until the next date of interest rate adjustment distributes the Group's loans as follows (as of Dec. 31): Amounts in DKK million 2022 2021 Within six months 80 193 Between 6 and 12 months 65 0 Between 1 and 2 years 0 212 Between 2 and 5 years 588 505 After 5 years 0 5 732 914 The interest rate adjustment date for fixed-rate and interest-free loans is included in the above table at the time of the renegotiation of the maturity and / or terms of the loans or where existing confirmations on a given interest rate expire for a period. Interest rate risk from Park Street’s view can be presented in the following two divisions: Variable market interest rates: Risks associated with fluctuations in market interest rates, ie. on loans where interest rate adjustment takes place at defined times based on market fluctuations. This applies to mortgage loans with variable interest rates. Interest, etc. on all loans: Risks associated with fluctuations in interest rates on all loans. In addition to the above fluctuations in market rates, this includes the renegotiation of contribution rates at mortgage banks and renegotiation of loan terms with bank creditors. The hypothetical effect on the results and equity after tax as a result of 1 percentage point increase in interest rates (ex. Fair value adjustments) are illustrated in the following table: Amounts in DKK 1000s 2022 2021 Variable Interest rate loans: Effect on income statement -1.0 -11.3 Effect on equity -1.0 -11.3 Park Street | Notes to Park Street A/S Financial Statements 89 On loans from credit institutions, with ongoing interest rate adjustments resulting from changes in market interest rates, illustrates the table above that the hypothetical effect on net income and equity as a result of one percentage point increase in interest rates amounts to DKK –1.0 million per annum (2021: DKK -11.3 million). Currency risk The group exposure is very limited to changes in currency rates. Credit risk The Group's credit risk is primarily related to: Lease receivables Receivables from the sale of properties Receivables form mortgages The maximum credit risk for financial assets is reflected in the accounting values of the balance sheet, and taking into account securities received. Risks concerning to rental receivables are limited to Park Street’s options to deduct payments from deposits and termination of the covered leases. Credit risk on receivables arising from the sale of properties is limited, as the transactions are always subject to payment of purchase price and deposit of the purchase price. With mortgage deeds, the Group has an usual debtor risk, which is reduced by mortgages on properties. In order to minimize the risk of loss of receivable rent, the tenants' ability to pay prior to entering into leases is assessed to the extent that it is relevant. In addition, there is usually a requirement for a cash deposit, a guarantee and / or prepaid rent. However, if a tenant is unable to pay, it may result in loss as well as reduced income due to rental allowance upon relocation, lower future rental income and any additional costs incurred in connection with refurbishment etc. Credit risk on receivables at December 31, 2022 is further described in note 19 of the consolidated financial statements. Group’s Cash and cash equivalents consists primarily of deposits in reputable banks. The group believes that there is no significant credit risk associated with the cash. Deposits in banks are labelled at variable interest rate. Financial liabilities with credit institutions and fair value Group’s mortgage debt and bank debt is classified as amortized cost. Fair value of loans measured at amortised cost amount to DKK 909,420. Fair value has been determined as the present value of the contractual cash flows discounted at a rate reflecting the current borrowing rate. Due to the fact that the terms of all loans were renegotiated in 2017, fair value of all floating rate loans is considered to be equal to their carrying aomunt. Based on a recent transaction, the fair value measurement is considered a level 2 measurement. The fair value of zero-coupon debt is established based on the fair value estimated by an independent reviewer (estimated rate of 50.79 at December 31, 2022). The Group's financial assets and liabilities measured at fair value are classified on the following 3 levels in the fair value hierarchy: Level 1: Based on listed prices (non-adjusted) on active markets for identical assets or liabilities. Level 2: Based on inputs other than listed prices that are observable for the asset or liability, either direct (as prices) or indirect (derived from prices). Level 3: Based on data that is not observable in the market. Park Street | Notes to Park Street A/S Financial Statements 90 Amounts in DKK 1000s Carry forward balance Level 1 Level 1 Level 2 2022 Mortgages and debentures 7,412 0 0 7,412 Intercompany loan 157,883 157,883 Total financial assets 165,296 0 0 165,296 Credit institutions 5,757 0 0 5,757 Total financial liabilities 5,757 0 0 5,757 2021 Mortgages and debentures 7,671 0 0 7,671 Intercompany loan 157,883 157,883 Total financial assets 165,554 0 0 165,554 Credit institutions 5,226 0 0 5,226 Total financial liabilities 5,226 0 0 5,226 It is the Group's policy to recognise transfers between the different levels from the time at which an event or change in circumstances entails a change in the classifications. No transfers were made between levels 1 and 2 in the accounting period. When calculating the fair value of the Group's liabilities in accordance with level 3 of the fair value hierarchy, a correction is made for the Group's own credit rating, taking into account the legal status of the liabilities, and the security in the assets measured at fair value. Consequently, no direct assumptions of discount factors, etc. are included when measuring liabilities to credit institutions in accordance with level 3 of the fair value hierarchy. The table below shows the change in liabilities to credit institutions measured at fair value in the balance sheet based on valuation methods in which significant inputs are not based on observable market data (level 3): Amounts in DKK million 2022 2021 Carrying amount per. 1st of January 5,226 3,548 Gains / losses in the income statement 531 1,678 Balance at 31st of December 5,757 5,226 Gain / loss in the income statement for liabilities held at 31st of December 531 1,678 Gains/losses concerning credit institutions measured at fair value are included in the item 'Adjustment to fair value, net' and in the item 'Special items' in the income statement of the consolidated financial statements. Liabilities to credit institutions measured at fair value are transferred to/from level 3 in the fair value hierarchy depending on whether the fair value of the loans contains a correction for the Group's own credit rating. For financial instruments that are not measured at fair value, the book value is assessed as being a reasonable approximation of fair value. Note 20 – Changes in other working capital Amounts in DKK 1000s 2022 2021 Change in receivables -24,214 -17,327 Change in project holdings 0 0 Change in provisons 0 0 Change in deposit 2,798 1,581 Change in trade payables 13,861 -6,685 Change in total working capital -7,555 -22,431 Park Street | Notes to Park Street A/S Financial Statements 91 Note 21 – Related parties Park Street Asset Management Ltd. (London, England) has controlling influence in Park Street A/S by virtue of its shareholding of 93.06% of shares and votes in Park Street A/S. See note 5 in the Consolidated annual report, where the remuneration of Directors and Board of Park Street appears. The Company has additionally had the following transactions between Park Street and related parties: Amounts in DKK 1000s 2022 2021 Other related parties Intangible assets 446 0 Software expenses 1,338 2,234 There have been no other transactions, etc. with related parties during the period. Note 22 – Accounting policies Park Street A/S applies the same accounting policies as stated in Note 33 on the consolidated financial statements, in addition the following note is applicable for the parent company: Investment in subsidiaries Investments in subsidiaries are recognised and measured in the financial statements of the parent company under the equity method. On acquisition of subsidiaries, the difference between cost of acquisition and net asset value of the entity acquired is determined at the date of acquisition after the individual assets and liabilities having been adjusted to fair value (the acquisition method). The item ”Income (loss) from investment in subsidiaries” in the income statement includes the proportionate share of the profit after tax of the subsidiary. The item ”Investments in subsidiaries” in the balance sheet includes the proportionate ownership share of the net asset value of the entities calculated under the accounting policies of the parent company with deduction or addition of unrealised intercompany profits or losses and with addition of any remaining value of the positive differences (goodwill). Subsidiaries with a negative net assets value are measured at DKK 0, and any receivables from these are written down by the parent company’s share of the negative net asset value, if impaired. Any legal or constructive obligation of the parent company to cover the negative balance of the subsidiaries is recognised as provisions. The total net revaluation of investments in subsidiaries is transferred upon distribution of profit to ” Re- serve for net revaluation” under equity. Gains and losses on disposals or winding up of subsidiaries are calculated as the difference between the sales value or cost of winding up and the carrying amount of the net assets at the date of acquisition including goodwill and expected loss of dis- posal or winding up. The gains or losses are included in the income statement. Financial Ratios The financial ratios have been calculated as follows: Return on property portfolio (% p.a.): Gross profit x 100 / Fair value of investment and domicile properties Average loan rate (% p.a.): Financial items x 100 / Credit institutions Return margin on property portfolio (% p.a.): Return on property portfolio (% p.a.) - Average loan rate Return on equity (%): Profit for the period / Total equity Equity ratio (%): Total equity / Total assets Net asset value per share, end of period (DKK): Total equity / Share capital Earnings per share (avg. Number of shares) (DKK): Profit for the period / Average number of shares Earnings per share, end of period (DKK): Profit for the period / Number of own shares, end period Dividend yield (%): Dividend per share / Share price, end of period Price/net asset value, end of period: Share price / Net asset value per share, end of period Cash flow from operations per share (DKK): Cash flows from operations / Diluted average number of shares in circulation Park Street | Property Overview 92 PROPERTY OVERVIEW Park Street Group owns at 31 December 2022, 46 properties. # Strategy Property Type Address ZIP City 1 Spark Office Office Dannebrogsgade 2, 5000 Odense 2 Vilhelmskildevej 1 C, 5700 Svendborg 3 Birkemosevej 9 B, 6000 Kolding 4 Stagehøjvej 22, 8600 Silkeborg 5 Svendborgvej 275, 5260 Odense 6 Ørnevej 18 / Svanevej 12, 2400 København 7 Birkemose Allé 23-35, 6000 Kolding 8 Hejrevej 30, 2400 København 9 Banegårdsvej 2600 Glostrup 10 Hejrevej 26-28, Ørnevej 33-35, 2400 København 11 6, Toldbuen 4700 Næstved 12 9, Omøvej 4700 Næstved 13 30, Østergade 7600 Struer 14 Spark Retail Retail Silkeborgvej 102, 7400 Herning 15 13, Ro's Have 4000 Roskilde 16 1, Møllergade 5700 Svendborg 17 27, Immerkær 2650 Hvidovre 18 20, Prøvestensvej 3000 Helsingør 19 Nørregade 31-33, 4100 Ringsted 20 34A, Dæmningen 7100 Vejle 21 1, Helligkorsgade 6000 Kolding 22 1, Lilleholm 2670 Greve 23 2A, Engdahlsvej 7400 Herning 24 27, Nørregade 4100 Ringsted 25 13, Nørregade 4100 Ringsted 26 8, Ro's Have 4000 Roskilde 27 10, Dyssegårdsvej 4700 Næstved 28 23, Hersegade 4000 Roskilde 29 2, L. C. Worsøesvej 4300 Holbæk 30 11, Ro's Have 4000 Roskilde 31 3, Banetorvet 3450 Lillerød 32 1, Stenbukken 9200 Aalborg 33 19A, Albuen 6000 Kolding 34 Storage 78, Vordingborgvej 4700 Næstved 35 7, Blegdammen 4700 Næstved Park Street | Property Overview 93 36 Pulse Residential 29, Tåsingegade 2100 København 37 33, Jernbanegade 6000 Kolding 38 21, Nørregade 4100 Ringsted # Strategy Property Type Address ZIP City 39 Residential - Project 8, Hejrevej 2400 København 40 4, Kirsebærgården 3450 Lillerød 41 Skråningshusene 3070 Snekkersten 42 2, Selsmosevej 2630 Taastrup 43 12, Sjællandsgade 7100 Vejle 44 Parking J.C.Christensens Gade 2300 København 45 Pulse Hotel Hotel 13, Algade 4000 Roskilde 46 6, Marbækvej 2750 Ballerup 47 Sold Retail Århusvej 8960 Randers 48 60, Åkirkebyvej 3700 Rønne 49 78, Zahrtmannsvej 3700 Rønne 50 Sold Office 3, Femøvej 4700 Næstved 51 3, Femøvej 4700 Næstved 52 Loftbrovej 17, Nørre- sundby 9400 Aalborg Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2022-01-012022-12-312021-01-012021-12-31OpinionBasis for Opinion2023-04-282023-04-282023-04-05213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember213800VGJC18MRKMZC332022-01-012022-12-31213800VGJC18MRKMZC332021-01-012021-12-31213800VGJC18MRKMZC332022-12-31213800VGJC18MRKMZC332021-12-31213800VGJC18MRKMZC332021-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332022-01-012022-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332022-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332021-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332022-01-012022-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332022-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332021-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332022-01-012022-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332022-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332021-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332022-01-012022-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332022-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332020-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332020-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332020-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332020-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332020-12-31213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember1213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember2213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember3213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember4213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember1213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember1213800VGJC18MRKMZC332022-01-012022-12-31cmn:ConsolidatedMember2213800VGJC18MRKMZC332021-01-012021-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure
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