The voluntary commitments set out on this page, along with other such commitments, have been gathered by d.i.i. into a social charter. It defines the guidelines and principles we adopted to ensure adherence to social environmental and sustainability obligations within the framework of investing in and managing residential real estate.

d.i.i. Deutsche Invest Immobilien AG /d.i.i. Investment GmbH (AIF management company)

(hereinafter referred to as “d.i.i.”)

1 Preamble

d.i.i. Deutsche Invest Immobilien AG is a manager-owned company based, together with d.i.i. Investment GmbH (AIFM) in Wiesbaden, Germany. As one of Germany’s leading specialists for residential real estate, the activities of d.i.i. cover the entire real estate value chain, from property acquisitions to financing arrangements, and from the development and management of properties all the way to their eventual sale. The company sees itself as an effective asset manager that takes a balanced approach to act in the best interest of tenants, buyers and investors.

The core business of d.i.i. consists of setting up and managing residential real estate portfolios in Germany on behalf of private and institutional investors. Strategically, d.i.i. concentrates on long-term development and a sustainable value optimisation of its properties.

When investing in and managing residential real estate, d.i.i. is well aware of the social commitment that come with it, particularly vis-à-vis incumbent tenants within the statutory framework of tenant protection and beyond.

d.i.i. therefore strives to carry out property-specific (commercial and building engineering) measures planned for the purpose of optimising its housing estates in ways that will not negatively affect the social concerns of the incumbent tenants.

Primary objectives are to lower the operating costs, to permanently eliminate vacancies and to develop properties for the purpose of generating stable rent revenues in line with the local market rent level. In collaboration specifically with municipalities and cities, d.i.i. seeks to create sustainably attractive residential quarters for the respective target groups, and to manage them in a focused approach.

In addition, d.i.i. is aware of the challenges evolving in the wake of ongoing societal and demographic shifts that are manifest in Germany. Due to the progressive ageing and internationalization of society, our work as a major provider of residential accommodation requires sensitivity when interacting with our various tenants. Moreover, our in-house building and project department pays close attention to environmental and sustainability aspects when modernising existing properties or raising new ones.

To make this aspiration a binding commitment, this social charter defines relevant guidelines and principles whose purpose is to ensure adherence to social environmental and sustainability obligations within the framework of investing in and managing residential real estate.

2 Social Responsibility

As a provider of residential real estate, d.i.i. is well aware of its social responsibility and therefore guarantees its tenants protection that goes far beyond the safeguards of the statutory provisions.

2.1 Special Protection and Comfort for Elderly and Physically Disabled People

To our incumbent tenants aged 70 years or older, or who submit evidence of a physical disability, we offer lifelong guaranteed tenancy and an expanded protection against unwarranted eviction.

d.i.i. defines “lifelong guaranteed tenancy” as follows:

• Consideration of the financial situation (in the event of rent increases we may go so far as to waive the rent increase altogether)
• Expanded protection against eviction (up to a payment arrears equivalent to four times the net rent)
• Conclusion of payment plan agreements over periods of up to 24 months
• Option to move to age-/disability-compliant refurbished dwellings, assuming that such dwellings are available

At the time of rent reviews in the course of a given tenancy, we will consider any case of special hardship individually in close dialogue with the affected tenant. In the aforementioned cases, d.i.i. will therefore agree to review an impending rent increase and to negotiate a financially viable solution with the affected tenants, the objective being to ensure their continued residence at the housing estate.

To enable tenants who are subject to special hardships to remain at the housing estate, d.i.i. will offer its tenants the following options:

• raising the rents incrementally over several years, or
• in-house removals to smaller dwellings, if desired by the tenants, in order to lower the monthly total burden (provided that smaller dwellings are actually available and vacant at the time that a legitimate case of hardship is claimed) or
• waiving a percentage of the rent increase if the other options prove impractical. However, the latter option presupposes that a given tenant provides, upon request, factual and admissible evidence proving that the removal to a smaller flat which d.i.i. may have offered would be unreasonable. Acceptable criteria in this context are exclusively the occupancy limits of a dwelling or physical impairments of the tenant.

d.i.i. is specifically aware of the challenges posed by the ongoing demographic change. The company therefore pursues the goal of helping an ageing population to live a self-determined life in their rental homes. Therefore, d.i.i. strives to steadily increase the share of handicap-accessible and senior-oriented flats through capital expenditures in conjunction with the refurbishment of vacant dwellings. The company will approve sensible and financially viable capital expenditures toward structural alterations to ensure the accessibility of the front entrance area or of the grounds after reviewing the relevant circumstances.

In the context of modernisation measures, disability-friendly accommodation is created wherever it is technically feasible and economically sensible, usually on the ground floor. It is planned to include at least one handicap-accessible entrance in buildings that either have a lift system or where the installation of one is technically feasible and financially viable. To the extent possible, new-build developments of multi-family residential dwellings are supposed to have a handicap-accessible design.

2.2 Special Protection for Low-Income Residents

d.i.i. seeks to set aside 10% of the units at its housing estates—albeit only at housing estates of 50 residential units or more—for the tenant category of transfer payment recipients under the German Social Security Code (SGB II).

Moreover, d.i.i. will consider one-off cases of special hardship among low-income groups by engaging the affected tenants in personal dialogue. In the aforementioned cases, d.i.i. will therefore agree to review an impending rent increase and to negotiate a financially practical and viable solution with the affected tenants, the objective being to ensure their continued residence at the housing estate.

To enable tenants who are subject to special hardships to remain at the housing estate, d.i.i. will offer its tenants the following options:

• raising the rents incrementally over several years, or
• in-house removals to smaller dwellings, if desired by the tenants, in order to lower the monthly total burden (provided that smaller dwellings are actually available and vacant at the time that a legitimate case of hardship is claimed) or
• waiving a percentage of the rent increase if the other options prove impractical. However, the latter option presupposes that a given tenant provides, upon request, factual and legitimate evidence to prove that moving into a smaller dwelling that d.i.i. may have offered would be unreasonable. Acceptable criteria in this context are exclusively the occupancy limits of a dwelling or physical impairments of the tenant.

2.3 Preventing Losses of Homes/Home Emergencies

By taking suitable measures in cooperation and close coordination with the respective property managers, d.i.i. seeks to prevent or mitigate home emergencies and losses of homes (claims for possession in response to rent arrears).

Within the framework of its social responsibility, d.i.i. makes every effort to avoid the execution of eviction processes. In cases of rent arrears, d.i.i. gets in touch with the affected tenants early on, offering advice and support with the goal of preventing a further rise in rent arrears and to ensure payment of existing arrears. The company is prepared to negotiate payment plan agreements within the framework of its financial possibilities. d.i.i. is prepared, subject to coordination with the respective city administration, to waive the eviction of dwellings even if eviction orders have already been issued, provided that the payment arrears are settled.

2.4 Moderate Policy of Rent Review after Modernisations

d.i.i. always strives to offset increases of the net rent in the wake of modernisations through active service charge management and corresponding reductions of the advance payment of service charges, so as to minimise the net effect on rents. Since doing so is not always an option in certain cases and in times of drastic rises in energy, supply and disposal costs, d.i.i. implements the following regulations over and above the statutory provisions:

• The recoverable tenant share in a modernisation-related rent increase (pursuant to Art. 559+, German Civil Code) is limited to a maximum increase of the net rent without heating by €1.80/sqm over a 3-year period.

2.5 Active Service Charge Management

Through our close collaboration with the relevant property managers of our housing estate as well as through current and comprehensive analyses of the energy market we constantly achieve cost savings that our tenants benefit from more than anyone else.

Our measures toward this end include the following:

• We regularly take measures to optimise the energy-efficiency, including e. g. the replacement of heating systems, windows, façades and the thermal insulation of ceilings and basements.
• Contracts with supply and disposal companies as well as with energy companies are periodically reviewed and renegotiated as needed. These include above all the master agreements for gas, heating oil, district heating and power. We also regularly review, compare and – if necessary – terminate and reassign agreements for janitorial, maintenance and cleaning services.
• Another effective instrument for lowering operating costs is our benchmarking approach: Using a comparative analysis that references other housing estates and matching the federal or state-level operating cost tables with the operating costs of a given property, we quickly identify cost drivers and replace them with more affordable providers.
• Maintaining a regular dialogue with our property managers represents a key element in our quality management, and ensures that our measures are implemented on the ground.

2.6 Commitment to Transparent Communication

d.i.i. agrees to notify in good time the respective municipality or city about its intention to acquire residential units and about its underlying strategy, and agrees to meet with the municipal administration upon request if doing so is possible in conjunction with a given investment.

After the transfer of benefits and burdens, d.i.i. will notify the incumbent tenants in writing about the change of ownership via a tenant welcome letter within 5 business days.

Whenever demand arises or the situation calls for it, either d.i.i. or the contracted local property management will invite the incumbent tenants of the respective housing estate within a reasonable period after the transfer of benefits and burdens to an information event to introduce itself and to address open issues raised by the tenant base.

2.7 Sustainable Neighbourhood Development

Comfortable living is not limited to your own four walls. Your residential environment within the community and in the neighbourhood influence the quality of living, sense of security and liveability of residents in decisive ways. Consequently, socially responsible urban development should not only seek to create sufficient housing that adequately accommodates different personal circumstances, but should also be aimed at strengthening neighbourhoods, promoting interaction among the various population groups and preventing socio-spatial segregation. To achieve these objectives, it is of the essence to set up and institutionalise a neighbourhood management, and d.i.i. intends to expand the same in future.

In conjunction with new lettings, we take specific care to ensure the housing estates have a sound tenant mix. For d.i.i., a sound tenant mix implies the creation of socially balanced tenant and resident structures.

3 Environmental and Sustainable Responsibility

3.1 No Luxury Refurbishments

Comprehensive modernisations of housing estates tend to trigger concerns about subsequent rent hikes. d.i.i. undertakes no so-called “luxury refurbishments” in its housing estates. Rather, d.i.i. creates comfortable and attractive homes through repairs, reinstatements and capital improvements.

The refurbishment or modernisation standard is chosen to match the parameters of the immediate vicinity. Dwellings are predominantly refurbished after they have been vacated by their tenants.

When planning the measures, care is taken to ensure that rents do not exceed the standard market level, meaning the rent level of dwellings in the immediate vicinity that feature a similar specification standard.

3.2 Executing Energy Efficiency Upgrades pursuant to the Energy Saving Ordinance (EnEV)

The idea behind the modernisation and refurbishment measures of d.i.i. is to improve the quality of living for the residents and to substantially reduce the service charges. In the best case, the measures will enhance the quality of living while keeping the all-in rent stable because the increase in net rent is offset by a decrease in service charges.

Professional energy efficiency upgrades in our housing estates are always carried out in compliance with the applicable statutory provisions of the German Energy Saving Ordinance (EnEV).

3.3 Avoiding Vacancies and Minimising Vacancy Periods

Extended vacancies in a large number of your portfolio properties will have knock-on effects. On the one hand, vacancies constitute a cost factor because no rental income is generated while operating costs continue to be paid. On the other hand, a high vacancy level carries the risk of tainting the image of the respective housing estate and of thereby diminishing its attractiveness.

The objective is therefore to prevent or eliminate residential vacancies and to shorten vacancy periods. To this end, d.i.i. always prioritises the long-term retention of tenants in its dwellings. Whenever tenants give notice nonetheless and create vacancies, flats are groomed for subsequent lettings as soon as possible or else are reinstated by the in-house building department with expedited refurbishment times (normally 6 weeks). This way, d.i.i. ensures that refurbished accommodation is put back on the market as quickly as possible.

3.4 Creating New Residential Accommodation through Infill Densification

Against the background of the housing shortage especially in central locations, d.i.i. examines its housing estates for possibilities to create additional residential accommodation by adding extra floors to existing building or through infill densification in the residential quarters. This is done in close consultation with municipal planning offices and taking the interests of the incumbent tenants into account as much as possible. It is a great way to create additional housing of high urban-planning and architectonic quality in strained locations and to curb the urban sprawl for the sake of preserving the natural environment.

4 The Social Charter’s Scope of Application

The social charter of d.i.i. applies to all housing estates acquired and managed by the company.

The sale of a property will end d.i.i.’s obligation to uphold the rules and regulations for the respective housing estate.

That said, d.i.i. will advise the buyer to keep applying the rules and regulations of this social charter in future.