Continuing the growth story: Acquisition of Brack Capital Properties. February 2018

Transcription

1 Continuing the growth story: Acquisition of Brack Capital Properties February 2018

2 Disclaimer This document has been prepared by ADLER Real Estate Aktiengesellschaft (the Company ) and is the responsibility of the Company. This presentation may not be reproduced or redistributed to any person and may not be published, in whole or in part, for any purpose under any circumstances. This document does not constitute or form part of any offer to sell or issue or invitation to purchase or subscribe for, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. Any purchase of securities of the Company should be made solely on the basis of a prospectus prepared for that purpose. This document also does not constitute or form part of any offer to purchase or invitation to sell any securities of Brack Capital Properties, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any investment decision or contract with respect to securities of Brack Capital Properties. Any investment decision with respect to the Company s offer to purchase securities of Brack Capital Properties should be made solely on the basis of the offer document prepared for that purpose. To the extent available, the industry, market and competitive position data contained in this presentation come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. 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3 Agenda 1 Key terms of the transaction 2 Brack Capital Properties overview 3 Value enhancing transaction 4 Transaction financing and expected timeline 5 ADLER Real Estate track record 3

4 1. Key terms of the transaction 4

5 Key terms of the transaction Terms Transaction features Value enhancing Financing Rating BCP support Anticipated timing Cash acquisition of up to 70%+1 share of the share capital of Brack Capital Properties (also referred to as BCP ) Purchase price Up to 70%+1 share acquisition of BCP at ILS 440 (purchase price up to c. 539 m) Implies a fully consolidated enterprise value of ILS 6,598 m (c. 1,492 m) Attractive offer price of ILS 440 per share, implying a 12.3% premium to last close as of February 16, 2018 of ILS All cash offer for 41.04% of the share capital of BCP from Teddy Sagi (BCP s largest shareholder) Special tender offer to acquire up to 25.80% in BCP in cash 5.62% aggregate tender commitment from both Co-CEOs and a member of the senior management team, with a right to sell any shares not taken up through the special tender offer 5.00% minimum acceptance hurdle with maximum acceptance of 25.80% ADLER Real Estate to assume effective control and to fully consolidate BCP upon closing of transaction (defined as both the cash offer for Teddy Sagi and special tender offer) Significantly enhance portfolio quality with improvements in all key portfolio KPIs Increase exposure to growing metropolitan regions in Germany Add development platform capability, following the success of the Riverside development project in Berlin The consideration will be funded primarily through non-core assets sales of ADLER Real Estate, proceeds from ACCENTRO disposal and unsecured financing The transaction continues ADLER Real Estate s deleveraging path in line with rating agency thresholds Absolute leverage to remain similar post transaction ADLER Real Estate accelerates path towards an investment grade rating Brack Capital Properties Co-CEOs expressed their full support of the transaction by signing irrevocable tender commitment agreements 16-Feb: All cash offer for 41.04% stake from Teddy Sagi 19-Feb: Launch of special tender offer to acquire up to an additional 25.80% in Brack Capital Properties 22-Mar: End of ordinary acceptance period 01-Apr: Settlement of cash offer for Teddy Sagi stake and special tender offer (incl. additional acceptance period) Source: ADLER Real Estate information, FactSet as of February 9, 2018 Note: ILS/EUR exchange rate of as of February 16,

6 2. Brack Capital Properties overview A high-quality portfolio spread across major German metropolitan areas 6

7 1 Brack Capital Properties residential portfolio Sizeable exposure to some of Germany s highest growth markets Development /Inventories 14% Incomeproducing retail 34% Total GAV: 1.4 bn Income-producing residential 52% Rest of NRW 32% Dortmund 9% 250k to 500k residents 25% 100k to 250k residents 17% 100% in large cities 1 Well maintained portfolio Kiel 9% Leipzig 30% Hannover 10% Bremen 10% More than 500k residents 58% Buildings for conservation 678 units Low-rise 7,434 units Town Houses 1,185 units High-rise 1,758 units Residential BCP - Residential portfolio key metrics Total lettable area 648k sqm Occupancy 96% Rental income p.a. 45 m Average rent per sqm 6.03 Residential BCP - Residential portfolio current yield Rental yield 6.1% NOI yield 5.3% Residential BCP - Residential portfolio potential yield ERV yield 2 7.8% Adjusted NOI yield 3 7.0% Residential Brack Capital Properties residential portfolio overview Leipzig Hannover Bremen Kiel Dortmund NRW Total No. of units 3,318 1,167 1,083 1, ,524 11,055 Occupancy 96% 95% 97% 98% 97% 96% 96% Value per sqm ( ) 1,227 1,597 1,042 1,334 1, ,135 Rent per sqm ( ) ERV per sqm in new lettings ( ) Upside in rent based on ERV 4 29% 36% 22% 38% 44% 21% 27% Value per sqm 1,135 Upside in rent based on ERV 27% Brack Capital Properties has more than 11k residential units in Germany with a total lettable area of c. 648k sqm and an annualized rental income of c. 45 m The residential portfolio has an embedded upside in rent based on ERV of c. 27% Source: Brack Capital Properties information as of September 30, 2017 Note: 1 Split by units; 2 ERV rental income based on avg. new lettings; 3 Adjusted NOI under the assumption that all properties are let at ERV; 4 Full occupancy, based on new-lettings 7

8 2 Attractive residential development potential: primarily in the centre of Düsseldorf Düsseldorf Development /Inventories 14% Incomeproducing retail 34% Total GAV: 1.4 bn Income-producing residential 52% Aachen Old factory to be demolished Grafental I Successful development track-record Project under construction 850 units 703 units were sold to date Sales of 329 m to date Developer s profitability of 32% 39% increase in sale prices since project inception Grafental II Land for office under advanced rezoning to residential Adjacent to Grafental I project 650 units expected project size 300 units forecast to be ready for construction 350 units forecast to be ready for construction at end 2018 Land in Grafenberg Future Luxury project 84 units Adjacent to Grafenberg forest Approval of development scheme expected soon Building permit expected in H Aachen Land under rezoning to residential (BCP share 50%) 300 planned units: Mix of town houses and garden/roof apartments Approval of development scheme expected soon Building permit expected in H Residential development Attractive locations 1 BCP is currently developing and marketing residential properties in Düsseldorf and in Aachen BCP also owns two land plots in Düsseldorf in advanced stages of rezoning from office to residential use 1 Ranked first in the world in terms of quality of life vs. cost of living Düsseldorf metrics Expected shortage of ca. 31,000 units in 2020 Continued price growth of 6 7% p.a. and still remains inexpensive compared to western cities Seasoned development team: Skilled team with decades of experience in planning, development and sales of thousands of residential units in Düsseldorf and the surrounding area Source: Brack Capital Properties information as of September 30, 2017 Note: 1 Mercer, City of Düsseldorf

9 3 Brack Capital Properties retail portfolio Retail parks Diversified portfolio with stable cash flows and long leases Development /Inventories 14% Incomeproducing retail 34% Total GAV: 1.4 bn Income-producing residential 52% Commercial segment overview Brack Capital Properties operates 330k sqm of commercial income producing real estate Retail parks are characterized by long WALTs (c. 10 years) and a high occupancy rate of c. 96%, producing a long-term stable rental yield of c. 6.3% Retail parks Well diversified portfolio¹ Bavaria & Baden- Württemberg 19% with a significant presence in urban and affluent areas Hessen 6% Other 5% NRW 28% North Germany 42% General data Number of tenants ~310 Total lettable area 330k sqm Occupancy 96% Rental income p.a. 30 m WALT 2 ~10 years Current yield Rental yield 6.3% NOI yield 5.8% Potential yield ERV yield 3 7.2% Adjusted NOI yield 4 6.6% Key tenants GAV (%) Property description Strength Rental yield (%) GLA (k sqm) Hanse Center, Rostock Super regional retail park 24% of Retail portfolio 8% of Total portfolio The largest retail center in Rostock and in the federal state Additional building rights of approx. 5,000 sqm and rezoning potential with significant long term upside Celle Retail Park The main retail center in town 8% of Retail portfolio 3% of Total portfolio 4 properties constituting the only or dominant retail center in town Building rights of approx. 12,000 sqm Castrop-Rauxel Properties in major cities with rezoning potential 6% of Retail portfolio 2% of Total portfolio 5 properties in Düsseldorf, Cologne and Bavaria in proximity to residential neighborhoods Very low value of land: 675 per sqm Matrix Portfolio Dominant properties in affluent cities in Bavaria and Baden- Württemberg 27% of Retail portfolio 9% of Total portfolio 5 large neighborhood centers, anchored by Kaufland hypermarket, in affluent cities near Stuttgart and Munich Rent increase potential of ca. 40% DIY Portfolio DIY properties leased to category leaders in Germany for long lease terms 25% of Retail portfolio 8% of Total portfolio 8 of the properties are let to Obi and one to Toom for long lease terms Turnovers of approx m per store p.a. Others non-core 10% of Retail portfolio 3% of Total portfolio 1 office building in Düsseldorf + small hypermarket Long term rezoning to residential potential Source: Brack Capital Properties information as of September 30, 2017 Note: Excl. the non-core portfolio (9% of the retail portfolio and 3% of the total portfolio) consisting 2 long held properties, the rezoning potential of which was exhausted, designated for sale in the next 2 years ¹ Breakdown by geographical locations (based on book value); ²Contracts with anchor tenants; ³ ERV rental income based on avg. new lettings; 4 Under the assumption that all properties are let at ERV 9

10 3. Value enhancing transaction 10

11 Strategy for the acquisition of Brack Capital Properties Strategic considerations Transformational acquisition for ADLER Real Estate, in line with the Company s corporate growth strategy of creating value through complementary acquisitions in strong markets Leverages upon ADLER Real Estate s track record of successful corporate acquisitions, which will contribute to a swift, efficient and de-risked integration Clear intention to implement ADLER Real Estate s entrepreneurial hands on management approach and active asset management Significantly enhancing portfolio quality Attractive development pipeline exposure to larger cities (Düsseldorf, Aachen) High quality commercial portfolio Brack Capital Properties portfolio ADLER Real Estate is set to acquire a high quality portfolio of superior quality residential assets, exposed to A locations Meaningful overlap with ADLER Real Estate s in-place portfolio and potential for efficiency gains to result in tangible synergy creation Increase exposure to key metropolitan areas ADLER Real Estate to get access to an attractive residential development platform with pipeline in Düsseldorf and Aachen, strong metropolitan regions with healthy outlook and growth prospects Expansion of residential development at right point in the cycle, on the back of the Riverside development project in Berlin ADLER Real Estate will also acquire BCP land complexes in Düsseldorf which are expected to drive further value creation As part of the transaction, ADLER Real Estate is also set to acquire BCP s retail portfolio The portfolio is characterized by long WALTs and a high occupancy rate, and spread across attractive regions ADLER Real Estate believes pure-play residential players command a premium, and due to attractiveness of assets, a potential sale of the retail assets to free up capital will be explored Significant enhancement of KPIs Attractive & de-risked growth drivers Review of commercial assets sale in line with residential pure-play strategy Source: ADLER Real Estate information 11

12 Value enhancing transaction 1 2 Portfolio enhancing Scale Portfolio quality significantly enhanced by adding over 11k high quality residential units in growth markets such as Leipzig, Bremen, Kiel, NRW and Hannover Strong improvement in all key performance indicators Access to larger and growing cities across Germany, while also ensuring meaningful overlap with ADLER Real Estate s existing geographic footprint Transformational transaction increasing portfolio quality, scale and credit metrics, raising ADLER Real Estate s profile as top 5 residential company in Europe, larger in size than any pure-play commercial player in Germany Transaction to position ADLER Real Estate as 3 rd largest truly pan-german residential platform (after Vonovia and Grand City Properties), positioning the Company to remain an active player in the German residential consolidation story 3 4 Development capabilities Synergy Acquisition of Brack Capital Properties development capabilities to further position ADLER Real Estate to scale up and develop superior residential product at the right point of the cycle Structural supply / demand imbalance in German residential creates need for increased development activity with capital values increasing significantly faster than development costs c. 3 m run-rate property and asset management synergies expected from complementarity of the portfolio (joint administration and management of German residential units) and overhead reductions once full control is achieved (capitalised value of c. 55 m) 1 c. 3 m run-rate refinancing synergies through early-refinancing of Brack Capital properties debt (capitalised value of c. 55 m) 2 In addition, medium-to-long term financing synergies through enhanced overall credit profile Source: ADLER Real Estate information Note: 1 Capitalized at 5.5% yield; 2 Capitalized at 5.5% yield, excl. breakage costs of c m 12

13 Complementary footprint across Germany with significant enhancement of exposure to larger cities Combined ADLER and BCP Overview of top cities (combined) Duisburg Düsseldorf ADLER BCP Lower Saxony: 18,861 units 94% Potsdam 100% 100 Hannover % 29% Brandenburg Magdeburg Nordrhein-Westfalen 71% Sachsen-Anhalt Dortmund Leipzig 100% Essen 31% Erfurt Thuringia: 69% Dresden 100% 1,968 units Köln Saxony: Hessen Sachsen 10,657 units Thüringen NRW: 15,299 units Saarbrücken Bremen: 1,516 units 71% 6% Schleswig-Holstein: 1,921 units 53% 47% Wiesbaden Rheinland- Pfalz Saarland Kiel 100% Schleswig- Rostock Holstein Mecklenburg- Hamburg Vorpommern 29% Schwerin Bremen Niedersachsen Saxony-Anhalt: Berlin Frankfurt Mainz Stuttgart Baden- Württemberg 3,749 units Nürnberg Bayern München Mecklenburg-Western- Pomerania: 1,510 units Berlin: 1,698 units Other regions 1,083 units Total combined rental units: 58,365 1 Brandenburg: 3,707 units 100% Thuringia 3% Saxony- Anhalt 6% Schleswig- Holstein 3% Brandenburg 6% Saxony 17% Berlin 3% NRW 25% Other 7% Lower Saxony 30% Location Federal State ADLER BCP Combined As of September 30, 2017 Units % total Units % total Units % total 1 Wilhelmshaven Lower Saxony 6, % - - 6, % 2 Leipzig Saxony 1, % 3, % 4, % 3 Duisburg NRW 4, % n.a. 2 n.a. 2 >4,281 >7.3% 4 Cottbus Brandenburg 1, % - - 1, % 5 Dortmund NRW % % 1, % 6 Berlin Berlin 1, % - - 1, % 7 Halle Saxony-Anhalt 1, % - - 1, % 8 Hannover Lower Saxony % 1, % 1, % 9 Wolfsburg Lower Saxony 1, % - - 1, % 10 Helmstedt Lower Saxony 1, % - - 1, % 11 Bremen Lower Saxony % 1, % 1, % 12 Goettingen Lower Saxony 1, % - - 1, % 13 Chemnitz Saxony 1, % - - 1, % 14 Kiel Schleswig-Holstein % 1, % 1, % 15 Borna Saxony % % Other 22, % 3, % 26, % Total 47, % 11, % 58, % Top 15 locations account for c.54% of total portfolio on a combined basis in terms of units BCP s assets to enhance overall portfolio quality with over 11k residential units in high growth markets such as Leipzig, Dortmund and Hannover Source: ADLER and BCP information Note: 1 Rental units for ADLER post disposal of non-core, residential units from BCP; 2 Clustered within NRW category as per latest BCP reporting; 3 NRW assets of BCP 13

14 P&L Portfolio Acquisition of Brack Capital Properties residential assets to strengthen all key performance indicators 1 As of Q Portfolio value ( ) 2.6 bn 1.0 bn 2,7 3.6 bn Number of Units 47,310 11,055 4,7 58,365 4 Residential Residential In-place rent residential ( / sqm) , Occupancy residential (%) 92% 96% 4,7 93% 4 Fair value per sqm residential ( / sqm) 849 c. 1,135 4, Annualized total rental Income ( ) c. 178 m c. 45 m 2,7 c. 223 m Annualized FFO I ( ) c. 40 m 3,11 c. 21 m 2,7,8 > 60 m 11,12 Not including lockedin upside from schuldscheindarlehen refinancing in December 2017, sale of ACCENTRO and non-core residential asset disposal EBITDA margin (%) 9 c. 60% c. 73% c. 63% ICR (x) 10 c. 1.7x c. 3.0x > 2.0x 13 Cost of debt 2.7% % LTV (%) 15 c. 60% 42.8% = Combination with approximately 3.6 bn real estate assets and c. 58k units Source: ADLER Real Estate, Brack Capital Properties information Note: 1 Total rental portfolio post sale of non-core assets; 2 Income-producing residential assets and incl. entire development/inventory assets portfolio; 3 Target FFO 2017; 4 Based on income-producing residential assets only, excl. development/ inventory assets portfolio; 5 Pro forma for 100% of BCP; 6 PF disposals of BCP commercial and part of the development assets, by Dec-18; 7 Excl. c. 165 m residential portfolio bought in Q by Brack Capital Properties; 8 Estimate based on NRI split; 9 Rental EBITDA Margin over NRI as of Q3 2017; 10 ICR based on 2018E estimate pre any refinancing and transaction costs, 11 Based on last ADLER Real Estate guidance for 2017, i.e. not including locked-in upside from Schuldscheindarlehen refinancing in December 2017, sale of ACCENTRO and non-core residential asset disposal; 12 Only reflecting Brack Capital Properties; residential assets; 13 ICR set to stay > 2.0x even assuming BCP s retail portfolio is disposed at GAV; 14 Pro forma December bond refinancing; 15 LTV computed as Net debt over GAV, excl. in-the-money convertible bonds 14

15 Roadmap of LTV target of c. 55% Roadmap of LTV target Spot LTV Yielding portfolio valuation Development upside in Brack Capital Properties Brack Capital Properties retail portfolio Tender acceptance LTV target Spot LTV c. 60% 1 LTV post closing and funding of Brack Capital Properties transaction Usual increase in line with rental growth Additional yield compression expected in appraised values Brack Capital Properties portfolio expected to have considerable GAV growth driven by developments coming online Brack Capital Properties retail portfolio has a current market value of c. 0.5 bn Current tender acceptance assumes c. 70% stake in Brack Capital Properties In case of lower acceptance of the tender offer, the implied post closing LTV would be lower We aim towards a LTV ratio of c. 55% c. 65% c. 55% Source: ADLER and BCP information Note: 1 Spot LTV computed as net debt over GAV, Pro Forma for sale of ACCENTRO and Refinancing of December

16 ADLER Real Estate to become one of the largest German Real Estate companies Top 5 residential company in Europe and larger than any pure commercial players in Germany Ordered by GAV ( bn) bn NM xx = k units Commercial Residential (incl. inventories and development) NM NM NM NM 11.1 NM NM NM c c Transformational transaction increasing portfolio quality, scale and credit metrics, raising the Company s profile as top 5 largest residential company in Germany, larger than any pure commercial player in Germany Transaction to solidify ADLER Real Estate s position as third largest truly pan-german residential platform (after Vonovia and Grand City Properties), positioning the Company for further consolidation Source: Last company information 16

17 Operating synergies ADLER Real Estate s fully integrated platform is uniquely positioned to generate meaningful operational synergies De-centralized pan-german structure established through regional offices Internalization of Property and Facility Management finalized in early 2018 Shared Service Centre established for rent and operating cost administration Single IT system throughout the Group Integrated platform Capex and modernization program concerning 1,500 vacant residential units nearly finished, and soon to launch a second vacancy reduction program and to invest further capital in renovating another 1,000 vacant apartments until year-end 2018 Region North West Middle East Asset Management (ADLER Real Estate) Property Management (ADLER Wohnen Estate) Facility Management (ADLER Gebäude Service) Added services / extensions Property Management Synergies from overlapping asset locations (NRW, Saxony, Lower Saxony) ADLER Real Estate expects to achieve synergies on the asset and property management level 3 m p.a. operating synergies Capitalized synergies c. 55 m Senior management and Board of Directors Savings from overheads costs reduction already identified Estimated one-time cost of c. 1 m to achieve synergies One-off costs Net Benefit c. 1 m c. 54 m Fully integrated and streamlined operating platform to drive meaningful operational synergies once integration of Brack Capital Properties is completed Source: ADLER Real Estate and Brack Capital Properties information Note: 1 Capitalized at 5.5% yield 17

18 Financing synergies Near-term financial synergies driven by refinancing potential and additional value through enhanced credit quality of combined company Near-term financing synergies Significant savings potential from refinancing of BCP debentures package Average CoD of debentures of 3.9% 1 Refinancing at an indicative cost of 1.75% CoD will result in additional c. 3 m of FFO p.a., i.e. a capitalized value of c. 55 m 2 As of Dec-17 Interest % in ILS m in m 2020 debentures 2024 debentures 2026 debentures 3.30% % % Potential refinancing to generate additional c. 3 m p.a. of FFO c. 55 m c. (12-14)m c m Capitalized synergies Breakage costs 3 Net Benefit Other financing synergies Enhanced credit profile of the combined entity Further accelerates path to investment grade rating Savings through refinancing Approximately 3 m of FFO gain expected from financial synergies Source: ADLER Real Estate and Brack Capital Properties information Note: ILS/EUR exchange rate of as of February 16, 2018; 1 Average based on Dec-2017 outstanding amount. BCP s outstanding debentures are sinkable, therefore the average interest rate changes through time; 2 Capitalized at 5.5% yield, excl. breakage costs of c m; 3 Based on current trading price and make-whole provisions of the outstanding debentures 18

19 Transaction highly accretive for ADLER Real Estate shareholders Portfolio enhancing Scale FFO per share Portfolio quality significantly enhanced by adding over 11k residential units in high growth markets such as Leipzig, Bremen, Kiel, NRW and Hannover Strong improvement in all key performance indicators Access to larger and growing cities across Germany Transformational transaction increasing portfolio quality, scale and credit metrics, raising ADLER Real Estate s profile as top 5 residential company in Europe, larger in size than any pure-play commercial players in Germany Transaction to position ADLER Real Estate as 3 rd largest truly pan-german residential platform (after Vonovia and Grand City Properties), ensuring that the Company remains an active player in the ongoing German consolidation story Strong double-digit FFO accretion from day one Additional FFO gains expected from both operational and financing synergies given complementarity of the portfolio and enhanced credit profile Short to medium term EPRA NAV per share Transaction to be EPRA NAV accretive in the first year of consolidation (also excl. goodwill), driven by embedded growth potential in Brack Capital Properties portfolio Additional value uplift embedded in Brack Capital Properties development portfolio Short to medium term Credit metrics Transaction to improve ADLER Real Estate s credit metrics in the short- to medium-term, accelerating ADLER Real Estate s path to investment grade credit Short to medium term Source: ADLER Real Estate information 19

20 Potential concerns around the transaction mitigated, significantly de-risking the transactions from day one Potential concerns can be mitigated Deal structure Funding of transaction Brack Capital Properties commercial portfolio Development exposure Goodwill ADLER Real Estate will not immediately acquire 100% of Brack Capital Properties ADLER Real Estate currently plans to take significant control (targeting c. 70% + 1 share) of Brack Capital Properties The structure of the deal would allow ADLER Real Estate to control the Board of Directors of Brack Capital Properties even with a lower stake, and therefore both integration of the two platforms and synergy extraction can be fully achieved The structure also allows ADLER Real Estate to fully consolidate the target financials and remain on its path for investment grade rating Long-term, ADLER Real Estate may buy out the entire share capital of Brack Capital Properties ADLER Real Estate executing a large transformational transaction without additional capital raise ADLER Real Estate is recycling capital from non-core assets sales and the announced ACCENTRO disposal and is recycling this capital into a bolt-on of high quality German residential assets As such, the transaction is primarily equity funded through the use of c. 350 m of equity in the transaction (raised through cash on balance sheet, sale of non-core assets and proceeds from the disposal of ACCENTRO) Large portion of Brack Capital Properties portfolio is not residential c. 30% of Brack Capital Properties real estate portfolio is retail assets, which ADLER Real Estate believes to be a high quality portfolio spread across key growth cities/regions in Germany Brack Capital Properties retail portfolio s attractive cash flow profile, combined with very long lease length (c. 10 years), provides high cash flow visibility Nevertheless, considering ADLER Real Estate s pure play residential strategy, ADLER Real Estate intends to perform a strategic review of the retail business and could dispose the portfolio (sale of these assets is expected to generate strong interest from the market) Increased development exposure Brack Capital Properties development exposure is primarily concentred in the centre of Düsseldorf, and we therefore believe is highly attractive ADLER Real Estate believes that such a prime development project, in a city with strong demand and lack of supply would provide superior risk adjusted returns Increase in goodwill on balance sheet Goodwill more than offset through increased value uplift in developments, portfolio appreciation and synergies generated through the transaction Source: ADLER Real Estate information : Concern : Mitigants 20

21 ADLER Real Estate has shown a consistent track record of value creating M&A and successful integration Portfolio 1,906 units Portfolio c. 2,400 units Portfolio c. 8,500 units ESTAVIS AG c. 2,100 units Successful disposal of legacy Commercial assets Portfolio c. 4,300 units Westgrund AG Takeover offer c. 21,000 units Successful disposal of Berlin assets 1,174 units Track record and key milestones Portfolio c. 6,750 units Ajax portfolio c. 2,700 units Acquisition of 24.79% of ATX listed conwert Immobilien Invest SE 29,896 units ADLER Real Estate announces a package of measures to sustainably boost earnings strength Portfolio 160 units Additional 5m shares in conwert aquired Stake in conwert sold to Vonovia SE J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J S O N Portfolio c. 700 units Portfolio c. 2,500 units Portfolio c. 200 units Sale of 82% stake in ACCENTRO c. 180 m Portfolio c. 700 units + 258% share price performance since 2014 vs FTSE/EPRA ex UK of 41% Corporate Bond 14/19 50 m Capital increase in kind 80 m Tap 14/19 Corporate Bond 50 m Capital Increase 21 m Tap 14/19 Corporate Bond 30 m Corporate Bond 15/ m Capital increase in kind 190 m Mandatory Convertible Bond (IFRS Equity) 175 m Tap Corporate Bond 15/20 50 m Change in the Group s Management Board Convertible Bond 16/ m Redemption Schuldscheindarlehen 62 m Redemption Schuldscheindarlehen 30 m Redemption Margin Loan 200 m Tap Corporate Bond 15/ m Buyback ACCENTRO convertible 12 m Redemption Bond 14/ m Corporate Bond 16/ m Corporate M&A ESTAVIS: 2014 First public takeover by ADLER Real Estate, offer initially accepted by 92.7% of shareholders The acquisition also brought its ESTAVIS subsidiary ACCENTRO, focused on the privatisation of residential housing WESTGRUND: 2015 conwert: 2016 ACCENTRO: 2017 Second takeover by ADLER Real Estate, adding c. 21,000 units to the Group WESTGRUND had a business model very similar to ADLER Real Estate, but with key focus in medium and large towns in North and East Germany Initial stake bought in August 2015 In January 2017 ADLER Real Estate received 422 m in connection with the successful tender of its 26% share in conwert Immobilien Invest to Vonovia Economic profit amounting to c. 48 m Additional c. 10 m in FFO I and LTV ratio and WACD improvements Successful disposal of the residential housing privatisation business ACCENTRO at a considerable premium to book c. 45 m equity gain and thus supported ADLER Real Estate s financial policy Source: ADLER Real Estate information, FactSet as of February 15,

22 Capital structure Scale and portfolio ADLER Real Estate has fully turned around in terms of scale, portfolio quality and capital structure Organic growth: Successful internalization of property and asset management operations, driving meaningful value creation in form of occupancy and rent increases leading to strong fair value gains Acquisition growth: Strong track record of executing on complex portfolio as well as corporate M&A transactions Acquisition strategy contributed additional c. 2k units from ESTAVIS, c. 21k units from WESTGRUND, and additional 11k units upon integration of Brack Capital Properties residential portfolio Capital recycling: Ongoing selective capital recycling through disposal of non-core residential and other business operations Acceleration of non-core asset disposals ( 133 m sold) Successful sale of ACCENTRO privatization business (for 180 m) and conwert ( 422 m) investments at considerable profit for ADLER shareholders ADLER Real Estate GAV and number of units Units (k) GAV ( bn) Q3 17 Q3 17 PF PF BCP residential 2.6 Consistent track record of de-levering and strengthening of all relevant leverage and rating ratios through active asset management, equity creation and a flexible, diversified approach towards financing Rating upgrade to BB with stable outlook achieved in October 2017 with successful refinancing of a large portion of ADLER Real Estate s Schuldscheindarlehen debt with unsecured BB+ rated bonds at attractive terms Clearly defined path to additional upside from refinancing of other upcoming instruments which will contribute additional recurring FFO in the short to medium-term Prudent financial policy put in place, moving rapidly towards an investment grade capital structure with a c. 55% company LTV ratio target and the adoption of unsecured capital issuance as the principal financing tool WACD and LTV % 73.7% 59.9% 64.2% c.60%% 4.2% 4.0% 3.7% 3.5% 2.7% Q3 17 PF Q3 17 Interest % in m 2020 bond 4.750% 500 m convertible 2.500% 138 m 2021 bond 1.500% 500 m 2024 bond 2.125% 300 m Source: ADLER Real Estate information Note: 1 Post disposal of ACCENTRO and non-core assets; 2 Pro Forma for BCP residential assets; 3 LTV computed as Net debt over GAV, excl. convertible debt Further refinancing potential 22

23 4. Transaction financing and expected timeline 23

24 Available proceeds Acquisition of Brack Capital Properties Transaction assumptions and Sources & Uses Sources and uses Sources m Uses m ACCENTRO cash proceeds (to be received in 2018), non-core asset sale proceeds and other recycled cash 350 Total equity 350 Acquisition of up to 70%+1 share stake of BCP 539 Transaction assumptions Cash acquisition of up to 70%+1 share of the share capital of Brack Capital Properties Indicative offer price of ILS 440 per share, implying a 12.3% premium to last close as of February 16, 2018 of ILS and a 15.2% premium to last reported EPRA NAV ADLER Real Estate is recycling c. 350 m equity capital from the sale of ACCENTRO and of ADLER Real Estate s non-core assets Incremental debt up to 189 Total Sources 539 Total Uses 539 Source: ADLER Real Estate and Brack Capital Properties information Note: ILS/EUR exchange rate of as of February 16,

25 Timing and envisaged path to effective control of Brack Capital Properties Timeline 16-Feb-2018 ADLER Real Estate signed a sale and purchase agreement with Teddy Sagi for 41.04% of the share capital of Brack Capital Properties N.V. for ILS 440 (c ) per BCP share ( SPA ) BCP's two Co-CEOs and a member of the senior management team have signed irrevocable commitments to tender their stake of, in aggregate, 5.62% into a special tender offer by ADLER Real Estate ADLER Real Estate announces intention to launch special tender offer to all shareholders of BCP for up to 70% + 1 share stake After consummation of the SPA and the special tender offer, ADLER Real Estate will hold at least 46.66% which will allow it to gain control over the majority of BCP s board of directors 19-Feb-2018 Launch of special tender offer to acquire a minimum of 5% and up to an additional 25.80% of the shares in BCP at ILS 440 per share Mid- to End- Mar-2018 Merger control clearance expected 22-Mar-2018 End of ordinary acceptance period 23- to 26- Mar Apr-2018 Apr/May-2018 Additional acceptance period Settlement of special tender offer and SPA (with ADLER Real Estate having the right under the regulations to prolong the special tender offer to up to 60 days) Envisaged replacement of 5 out of 8 board members with ADLER Real Estate nominees/representatives at regular or extraordinary shareholders meeting, thereby achieving effective control Source: ADLER Real Estate information, FactSet as of February 16, 2018 Note: ILS/EUR exchange rate of as of February 16,

26 5. Appendix 26

27 Case study: ADLER Real Estate s successful track record of corporate actions ESTAVIS acquisition 2014 First public takeover by ADLER Real Estate, offer initially accepted by 92.7% of shareholders ESTAVIS was created in 2012, and it held c. 2,100 units at the time of the takeover The acquisition also brought its ESTAVIS s subsidiary ACCENTRO, focused on the privatisation of residential housing, into the ADLER Real Estate family Westgrund acquisition 2015 Second takeover by ADLER Real Estate, bringing additional c. 21,000 units to the Group WESTGRUND had a business model very similar to ADLER Real Estate, but with key focuses in medium and large towns in North and East Germany Both ADLER Real Estate and WESTGRUND have almost similar business models and strategies and share the aim to build a considerable property portfolio in Germany targeting B- and suburban areas of German metropolitan regions and contributing a positive cash flow after deduction of all recurring costs. ADLER Real Estate owned and managed c. 31,000 units, while WESTGRUND more than 18,000 residential units Following the takeover, the expanded ADLER Group held a total of almost 52,000 residential units in Germany. Successful track record of successful public M&A execution and integration Source: ADLER Real Estate and Brack Capital Properties information 27

28 Case study: ADLER Real Estate s successful track record of corporate actions (cont d) conwert stake sale to Vonovia 2016 On January 2017 ADLER Real Estate received 422 m in connection with the successful tender of its 26% share in conwert Immobilien Invest to Vonovia The transaction took place in the context of the voluntary takeover offer of Vonovia to the shareholders of conwert The deal brought in an economic profit amounting to c. 48 m and a non-cash book loss of less than c. 19 m Consistent with its strategy to improve its performance, ADLER Real Estate used the proceeds from the transaction to buy back higher yielding bank and capital markets debt The plan generated an additional c. 10 m in FFO I, with significant improvements also in regards to its LTV ratio and WACD ACCENTRO disposal to Vestigo Capital 2017 On October 20, ADLER Real Estate entered into an agreement to sell a stake of c. 80 % of the shares in ACCENTRO Real Estate and c. 92 % of the convertibles at a total price of c. 180 m to a partnership advised by Vestigo Capital Advisors ADLER Real Estate had acquired the holdings for a total consideration of c. 108 m. ADLER Real Estate intends to use the net proceeds from the sale to further grow its real estate portfolio and/or for the redemption of existing liabilities The sale strengthened ADLER Real Estate s equity base by c. 45 m and thus supported ADLER Real Estate s financial policy Ability to recycle capital at the right stage of the cycle Source: ADLER Real Estate and Brack Capital Properties information 28