– Article 10 (Product Disclosure)

Date of publication: 27/01/2025

(a) Environmental and Social Characteristics promoted by MEREP 3

Description of the environmental and social characteristics

The Fund proudly promotes environmental and social characteristics pursuant to article 8 of the SFDR but does not have as its objective a sustainable investment.

The fund is committed to the following environmental characteristics:

• Ensuring ESG criteria are consistently embedded in every acquisition process since 2022, covering key aspects such as energy efficiency, renewable energy potential, soil and groundwater conditions, climate risk, and CRREM alignment.
• Incorporating ESG best practices in all construction and refurbishment projects since 2023, with a focus on circularity, health and safety, and climate resilience, ensuring our assets are future-proof and add long-term value.
• Expanding green financing initiatives, including green loans, with plans to introduce a formal green financing framework by 2026 to further strengthen our sustainable investment approach.
• Encouraging responsible energy, water, and material consumption by working closely with tenants to foster sustainable behaviors through Green Lease agreements.
• Achieving a BREEAM In-Use rating of “Very Good” or higher upon completion of all value-add and development projects by 2026, ensuring our buildings meet high environmental standards.

The Fund also promotes social characteristics, primarily centered around enhancing tenant experiences by improving property conditions through:

• Optimized spatial planning, expanded services, and upgraded infrastructure, including heating, air conditioning, and lighting, creating more comfortable and efficient spaces for tenants.

By embracing these initiatives, the Fund is driving positive change.

Asset allocation

MEREP 3 invests 100% of its assets indirectly in real estate through special purpose vehicles (SPVs).

All assets within the Fund adhere to stringent ESG criteria, ensuring that each asset contributes to achieving the environmental and social characteristics promoted by the financial product.

As of December 31, 2023, the allocation of the Fund’s assets is as follows:

• 98.53% in retail parks,
• 0% in urban logistics,
• 0% in light industrial properties, and
• 1.47% in self-storage facilities.

(b) Methodologies to Assess, Measure, and Monitor ESG Characteristics

Investment Strategy Ensuring Asset Alignment with Objectives

MEREP 3 invests in both (i) development projects, where land is acquired, permits obtained, and ground-up construction takes place, and (ii) standing assets with value-add potential, where income-producing properties are improved, extended, or repurposed. During the holding period, the manager, alongside local operating partners, conducts hands-on asset management, including tenant restructuring, refurbishment, repurposing, permitting, leasing, and financing.

ESG Considerations in Due Diligence and Value Creation

ESG considerations are embedded as a cornerstone in the due diligence and value-add/development processes. The Fund applies the ESG Due Diligence Checklist finalized in 2023, consistently across all acquisitions and developments. This checklist identifies and addresses material ESG risks, including:

• Environmental Impact: Hazardous materials, soil stability, natural risks, renewable energy potential, and BREEAM Part 1 pre-assessment.
• Social Impact: Community engagement, human rights, and worker safety.
• Governance: Anti-competitive behaviour, litigation, and property management.

The ESG-checklist incorporates the Green Building Manual as an integral element, ensuring its guidelines are systematically applied during the due diligence phase. This manual, also finalized in 2023, provides detailed guidance for decision-making during pre-use and construction stages for all projects.

The Green Building Manual comprises:

1. Obligations for Mitiska REIM as an entity and its funds, including ESG criteria during acquisitions.
2. A developer checklist ensuring ESG integration across project lifecycles.
3. A contractor checklist embedding ESG standards into agreements.
4. A green lease framework promoting sustainable tenant practices.

The manual ensures alignment with EU taxonomy guidelines and BREEAM standards, supporting the identification of ESG risks and opportunities.

Continuous refinement of the manual, supported by our external sustainability advisor, ensures its relevance and effectiveness while maintaining practicality in collaboration with third parties.

Due Diligence Process

The country team leads preliminary due diligence to identify key value drivers, risks, and opportunities, including ESG performance and climate risks. The team develops a business plan with clear pricing, timing, and execution strategies, incorporating ESG targets. Preliminary findings are summarized in an Investment Proposal and reviewed by the Underwriting Investment Committee (IC).

If approved, detailed confirmatory due diligence is conducted, encompassing business, regulatory, legal, tax, environmental, and engineering aspects. Third-party consultants are engaged as needed to ensure comprehensive analysis. ESG-specific considerations, such as the operating partner’s track record and capabilities, are integrated into this process.

Final IC approval is contingent on a detailed business plan and ESG strategy, including:

• ESG-related clauses in asset management agreements, focusing on health and safety, diversity and inclusion, and sustainability standards.
• Certification targets, with assets expected to achieve at least a “Very Good” BREEAM rating at the time of sale.
• Decarbonization targets (for operational carbon) with assets expected to remain minimum 10 years below the CRREM pathway post completion of the value add/development program.

ESG Objectives and Value Creation

MEREP 3 emphasizes improving the ESG profile of assets during the holding period. The Fund’s approach includes:

• Mitigating ESG risks to enhance property value, liquidity, and resilience.
• Optimizing ESG integration during design and development phases.
• Improving ESG credentials to ensure assets contribute positively to their communities and achieve measurable ESG improvements by the time of exit.

MEREP 3’s ESG strategy is based on best efforts and not on specific results. The fact that best efforts will be used to improve the overall ESG profile of every asset owned by MEREP 3 is a binding element of the investment strategy, with the intention to achieve a measurable improvement in the ESG profile of each asset by the time of exit.

Methodology for Measuring Environmental and Social Characteristics

The following sustainability indicators will be used to measure the attainment of the aforementioned characteristics (whereby it should be noted that not necessarily every indicator from the list below will be applied to each asset):

• BREEAM Assessments: Evaluation of building sustainability performance.
• CRREM Tool: Assessment of alignment with decarbonization pathways.
• Greenhouse Gas Emissions Monitoring: Tracking and managing carbon emissions across assets.
• Monitoring of Resource Consumption: Measurement of water, renewable and non-renewable energy usage, and, where feasible, waste generation through SCALER or equivalent software.
• GRESB: Participation in the Global Real Estate Sustainability Benchmark.
• Soil and Groundwater Analysis Reports: Evaluations of environmental conditions.
• Climate Risk Assessments: Identification and mitigation of climate-related vulnerabilities.
• Green Leases: Number of agreements incorporating ESG commitments between SPVs and tenants to improve building sustainability.
• Green Building Manual: Implementation of a structured framework for sustainability in construction and refurbishment projects.
• Green Financing Framework: Integration of sustainable financing principles into investment strategies.

Policy for Monitoring Good Governance Practices of Investee Companies

MEREP 3’s ESG practices are overseen by Mitiska REIM’s ESG Steering Committee, which ensures alignment with SFDR and other relevant regulations. The committee, composed of members of Mitiska REIM’s Management Committee, meets at least quarterly to address long-term ESG strategy, monitor progress on objectives, and evaluate performance. ESG is a recurring agenda item at PMC (Portfolio Management Committee) meetings and is integrated throughout Mitiska REIM via specialized workgroups and all-hands meetings. The ESG Steering Committee collaborates with local operating partners, stakeholders, and specialist advisors to ensure effective implementation of ESG initiatives and resolve specific challenges (e.g., certification processes).

In addition, MEREP 3 primarily invests in real estate SPVs that generally lack employees or dedicated management, apart from a board of directors, which is replaced upon acquisition. Good governance practices for these SPVs rely on Mitiska REIM’s post-acquisition management in its role as the AIFM of MEREP 3. Mitiska REIM applies its Code of Conduct and Investment Process to ensure consistent governance standards across all portfolio companies.

For operational businesses, Mitiska REIM conducts ESG due diligence, including a dedicated section on governance. This ensures robust management structures, ethical practices, and compliance with ESG standards.

ESG performance is actively monitored through regular evaluations by the ESG Steering Committee, with updates shared through frameworks such as GRESB.

The insights and progress from these ESG and governance efforts are compiled annually in Mitiska REIM’s ESG Report, developed in collaboration with internal teams and an external ESG consultant. This report provides transparency on our achievements and ongoing commitments, reinforcing our dedication to responsible investment and value creation.

(c) Reference benchmark

A specific index is not designated.

(d) Data Sources for ESG Investment Decisions

The Fund, in alignment with Article 10 of the SFDR, has established a comprehensive framework for data collection to support its ESG objectives, ensuring compliance with transparency requirements and a clear pathway towards decarbonization. The following methods are utilized to gather and analyse data across the Fund’s portfolio:

Automated Data Collection

The Fund prioritizes the automation of data collection through the implementation of smart meters across its portfolio.

For Mitiska REIM, by the end of 2023, 11% of the total energy data was automatically collected via these smart meters, while 89% was collected manually. Mitiska REIM, and by extension its funds, aims to increase the proportion of digital readings to over 45%, focusing on newly renovated and development projects.

Manual Data Collection

For properties without automated systems, an annual “December Data Campaign” is conducted, where meter readings are manually recorded.

For Mitiska REIM in 2023, this initiative achieved 100% data coverage with a minimal extrapolation rate of 17%, a significant improvement from 81% data coverage in 2022.

Engagement with External Service Providers

The Fund collaborates with external service providers to obtain metering data for energy consumption. These partnerships enhance the accuracy and breadth of data collected, particularly in categories that are harder to measure, such as refrigerants, embodied carbon, and waste streams.

Additionally, through green lease agreements, tenants provide critical data on energy consumption and waste management.

Visualization and Analysis

To ensure the data collected is actionable, user-friendly dashboards will be installed to allow investment teams to monitor and analyse asset performance in terms of energy consumption and CO₂ emissions. These tools enhance decision-making and the prioritization of sustainability initiatives.

Decarbonization and Target Setting

As part of its commitment to the Paris Agreement, the Fund has mapped its carbon footprint. Mitiska REIM, as a company, is actively engaged in the Science Based Targets initiative (SBTi) pilot project, “Building Sector,” which will guide its decarbonization efforts and ensure alignment with internationally recognized goals. This includes the gradual reduction of embodied carbon and the implementation of green building standards.

Future Objectives

For the future, Mitiska REIM aims to address remaining data collection challenges and maintain a minimum data coverage of 90%. The Fund is also exploring ways to reduce extrapolation rates further by enhancing the accuracy of data collection. The proportion of estimated data is minimized, but the Fund retains the right to make estimates based on reasonable assumptions if there is a lack of data.

The data are processed and validated by the Country Teams, where needed in collaboration with an external ESG consultant.