INTERIM REPORT 1-6/2015

Transcription

1 INTERIM REPORT 1-6/2015

2 Performance at a glance Revenues (in T ) 113,516 Rental income 92,514 Proceeds from the sale of properties 3,653 Revenues from property services Key performance indicators 1-6/ /2014 Change 2014 Rental income T 113, , % 237,288 Property expenses T (38,868) (46,808) -17.0% (86,620) Net income from the rental business (NRI) T 74,649 74, % 150,667 Proceeds from sale of properties T 92,514 36, ,472 Revenues from property services T 3,653 4, % 10,488 Total revenue T 209, , % 381,247 EBITDA T 59,191 54, % 109,870 EBIT T 61,521 47, % 121,584 EBT T 29,202 (25,981) - (9,924) FFO I 1) Profit/loss for the period after tax T 24,499 (23,105) - (8,861) (in T ) 25,738 FFO I 1) T 25,738 15, % 34,785 FFO II 2) T 29,012 18, % 39,008 17,837 15,423 Cash profit 3) T 25,693 16, % 37,852 NRI margin % % 63.5 Adjusted NRI margin 4) % % /2013 5) 1-6/ /2015 Balance sheet indicators 30/06/ /12/2014 Change FFO II 2) Equity T 1,155,193 1,104, % (in T ) Equity ratio % % 27,137 18,671 29,012 Non-current liabilities T 1,306,796 1,580, % Current liabilities T 463, , % ø maturity of financial liabilities years % ø interest on financial liabilities % % 1-6/2013 5) 1-6/ /2015 EBIT (in T ) Stock exchange indicators 1-6/ /2014 Change 2014 Share price at end of period % 9.76 Shares in issue No. 83,782,809 82,782, % 82,782,809 Market capitalisation T 952, , % ,647 47,135 61,521 NAV per share % Share price/nav per share % % 77.3 Basic earnings per share 0.28 (0.30) - (0.14) FFO I 1) per share % 0.42 FFO I yield (FFO I 1) /market cap) % % 4.3 Share performance % 16.5 (7.1) /2013 5) 1-6/ /2015 EPRA NAV per share % ) FFO I: Earnings before tax (EBT) difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/ losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests + restructuring costs/one-off costs 2) FFO II: FFO I + difference between sales and carrying amount of sold properties sales income expenses 3) Cash profit: FFO II actual income taxes paid 4) Margin on net rental income (rental income less running costs charged to tenants) 5) The interim financial statements as at 30 June 2013 recognised a gain on bargain purchase of 7.5 mn, which was amended to 1.0 mn in the fourth quarter of For interim reporting purposes, recognition of this merger has been adjusted retrospectively.

3 Markets 2 Portfolio in Figures 3 Investor Relations 4 Segment Report 10 Condensed Interim Management Report 18 Economic Backdrop and Property Markets incl. Outlook 20 Business Performance 22 Financial Position and Assets 29 Risk Report 32 Related Party Disclosures 32 Disclosures on the Executive Bodies 33 Outlook for conwert 34 Events after the End of the Reporting Period 35 Condensed Consolidated Interim Financial Statements 36 Notes to the Condensed Consolidated Interim Financial Statements 42 Responsibility Statement 56 Report on the Review of the Condensed Interim Consolidated Financial Statements 57 Financial Calendar 60 Numerous amounts and percentage rates were rounded and the addition of these individual figures can therefore produce results that differ from the totals shown.

4 Markets Core NRW Usable space: 207,219 sqm Vacancy rate: 10.1% Yield: 7.9% Rental income: 5.11/sqm/m Leipzig Usable space: 324,536 sqm Vacancy rate: 4.5% Yield: 7.7% Rental income: 5.33/sqm/m Berlin Usable space: 319,035 sqm Vacancy rate: 2.5% Yield: 5.8% Rental income: 6.09/sqm/m Core Markets Other Markets Potsdam Usable space: 119,395 sqm Vacancy rate:1.8% Yield: 5.3% Rental income: 6.92/sqm/m Dresden Usable space: 47,100 sqm Vacancy rate: 3.8% Yield: 7.1% Rental income: 5.97/sqm/m Vienna Usable space: 323,631 sqm Vacancy rate: 6.1% Yield: 4.4% Rental income: 7.01/sqm/m 2 Interim Report 1-6/2015 Markets

5 The conwert Portfolio in Figures (as at 30/06/2015) Austria Space by usage type *) (as at 30/06/2015) Rental units No. 4,446 Parking spaces No. 4,273 Usable space sqm 525,269 Total vacancy rate % 10.0 Strategic vacancy rate % 2.8 Property assets T 914, % Residential 24.8% Commercial Germany Rental units No. 24,631 Parking spaces No. 7,293 Usable space sqm 1,762,797 Usable space by segment (as at 30/06/2015) Total vacancy rate % 7.7 Strategic vacancy rate % 1.1 Property assets T 1,760,026 Other countries Rental units No. 819 Parking spaces No. 774 Usable space sqm 74, % Austria 74.6% Germany 3.2% Other countries Total vacancy rate % 29.3 Strategic vacancy rate % 2.7 Property assets T 82,646 Total *) Allocation as commercial or residential is based on the majority use of the building as commercial or residential space. Rental units No. 29,896 Parking spaces No. 12,340 Usable space sqm 2,363,035 Total vacancy rate % 8.9 Strategic vacancy rate % 1.5 Property assets T 2,757,086 Interim Report 1-6/2015 Portfolio in Figures 3

6 INVESTOR RELATIONS THE RIGHT APPROACH IN THE RIGHT PLACE OUR CORE MARKETS conwert was founded in 2001 and has been listed on the Vienna Stock Exchange since Today the company is known as a successful real estate group, one of the largest in the German-speaking world. We focus on major urban regions in six core areas: Vienna, Berlin, Potsdam, Dresden, Leipzig and North Rhine-Westphalia. 4 Annual Report 2014 Company Intro Unterkapitel

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8 Investor Relations Developments on the stock exchange In the first half-year 2015 the stock prices of most companies listed on the Vienna Stock Exchange went up and trading volumes saw impressive growth. The rapid surge of the leading index was supported in the first quarter by the easing Russian-Ukrainian conflict and the lower oil price, as well as the depreciation of the euro. The political discussions over Greece s insolvency created higher market volatility around the end of the second quarter and slowed the uptrend. The leading Austrian index, ATX, climbed 11.7% and stood at 2, points as at 30 June Following the particularly lively turnover in March, trading activity remained strong in the subsequent months. The average monthly turnover in the first half-year 2015 was around 5.1 bn, and thereby a quarter higher than in the previous year (2014: 3.98 bn). Real estate shares also underwent strong growth in the first half of 2015 and the IATX was up by 11.9%. The DAX performed as strongly as the ATX with a plus of 11.6%, while the FTSE EPRA/NAREIT Developed Performance (in %) 1-6/2015 conwert 16.5 ATX 11.7 IATX 11.9 DAX 11.6 FTSE EPRA/NAREIT Developed Europe Index 9.0 Europe Index achieved a rise of 9.0%. (Source: Wiener Börse: Equity trading on Vienna SE rises in 1HY 2015 by more than a quarter, press release dated 1 July 2015) The conwert share in the first half of 2015 The performance of the conwert share was closely tied to the takeover offer by Deutsche Wohnen AG (Deutsche Wohnen) and reached its year-high of on 17 March 2015, the day before the offer was published. The year-low of 9.65 was seen on 14 January In the reporting period the conwert share achieved an overall price increase of 16.5% from 9.76 to 11.37, thereby performing better than the ATX (+11.6%). The discount to the EPRA Net Asset Value per share stood at 28.1% at the end of the reporting period. Deutsche Wohnen takeover offer rejected Deutsche Wohnen published a public takeover offer of per conwert share on 18 March The acceptance period, during which conwert shareholders could accept the offer, ran for four weeks and ended on 15 April The acquisition of conwert shares by Deutsche Wohnen was subject to the precondition of achieving a legally stipulated minimum threshold of 50% plus one share from conwert shareholders. During the acceptance period a total of 30,557,887 ordinary shares were pledged to Deutsche Wohnen with 35.8% of total voting rights. The legal threshold was thereby not met and the purchase of the pledged shares by Deutsche Wohnen did not take place. All publications related to the takeover offer including the statement by the Administrative Board can be downloaded from the Investor Relations section of the company website. Share price development since January 2015 conwert ATX FTSE EPRA/NAREIT Developed Europe Index Jan Apr Jun 6 Interim Report 1-6/2015 Investor Relations

9 Stock market listing conwert is one of the largest listed property companies in Austria. First quoted on the Vienna Stock Exchange on 28 November 2002, conwert shares were admitted to the prime market segment in June 2006, before being listed on the ATX in March In terms of trading volumes, conwert came 13 th among the ATX companies in the first half 2015; the company was 17 th in terms of free float market capitalisation. The conwert share s trading volumes practically doubled against the comparable period of the previous year. A total of 74,589,072 conwert shares were traded in the first half-year 2015 (double counting), with a trading volume of around mn (1-6/2014: mn). This corresponds to an average daily trading volume of 616,439 conwert shares worth around 7.2 mn, also applying double counting. conwert weighting in selected indices (in %) 30/06/2015 ATX 1.9 IATX 16.9 FTSE EPRA/NAREIT Developed Europe Index 0.4 Shareholder structure Based on notifications of voting rights, the following changes in the conwert shareholder structure occurred in the first half-year 2015: MountainPeak Trading Limited acquired the stake of longstanding, core shareholder, the Haselsteiner Family Private Foundation, and has held 24.79% of conwert shares since 13 May At the reporting date Petrus Advisers LLP held 6.7%, FIL Limited (Fidelity) held 6.6% and Earnest Partners, LLC had a stake of around 5%. Institutional investors accounted for 32.0% and private shareholders held 23.1%. conwert shareholders 1) (as at 30 June 2015) Institutional investors by region 32.0% Institutional investors 24.8% MountainPeak Trading Limited 2) 23.1% Retail 6.7% Petrus Advisers LLP 6.6% FIL Limited (Fidelity) 32.4% North America 26.3% Continental Europe 20.0% Austria 19.9% United Kingdom and Ireland 1.4% Other countries 5.0% Earnest Partners, LLC 3) 1.8% Treasury shares 4) 1) based on notifications of voting rights 2) MountainPeak Trading Limited announced on 8 May 2015 that it had acquired the shares of the Haselsteiner Family Private Foundation. The transfer of the shares took place on 13 May ) FIL Limited (Fidelity) announced at the beginning of May 2015 that it had held voting rights of 6.56% since 1 August ) As at 30 June 2015, a further 3.8% of the voting rights were attributable to conwert as per Article 91a Section 5 of the Austrian Stock Exchange Act due to a buyback of 5.25% convertible bonds , although conwert is not permitted to exercise the conversion rights tied to convertible bonds in accordance with Article 51 Stock Corporation Act. Interim Report 1-6/2015 Investor Relations 7

10 Stock market indicators 1-6/ / No. of shares on last trading day less treasury shares No. 83,782,809 82,782,809 82,782,809 Average no. of shares less treasury shares No. 82,965,129 82,782,809 82,782,809 Average trading turnover per day (double counting) mn Average trading turnover per day (double counting) No. 616, , ,866 Share price at start of year Share price at end of reporting period Share price high Share price low Market capitalisation at end of period mn AGM resolutions At the 14 th Annual General Meeting Phillip Burns and Barry Gilbertson were appointed to the Administrative Board, after the AGM resolved to reduce the number of Administrative Board members to four upon shareholder request. Kerstin Gelbmann and Alexander Tavakoli are no longer members of the Administrative Board as of the end of the AGM. Eveline Steinberger-Kern had already resigned from the Administrative Board with effect from 27 April The AGM also appointed Ernst & Young Wirtschaftsprüfungsgesellschaft mbh as the auditor for the business year The shareholder resolution proposed by the shareholder MountainPeak Trading Limited limiting transactions with shareholders was adopted with the required three-quarter majority. The shareholder resolution of Petrus Advisers Investments Fund L.P. and other shareholders rotating property valuation experts was rejected by a majority of votes cast. Share buyback programme and sale of treasury shares conwert sold 1,000,000 treasury shares in the first half of 2015 in order to fulfil the obligation in an option agreement related to the acquisition of a majority stake in KWG Kommunale Wohnen AG. The over-the-counter transaction was carried out on 29 May conwert currently holds 1,576,464 treasury shares, corresponding to 1.847% of the total share capital. No share buybacks were concluded in the reporting period. At present there is no valid authorisation to buy back treasury shares. Convertible bonds In the first half of 2015 there were no changes to the convertible bonds issued by conwert (5.25% convertible bonds and 4.50% convertible bonds ). 8 Interim Report 1-6/2015 Investor Relations

11 Investor Relations activities in the first half of 2015 conwert strives to offer direct contact to every shareholder and is available by phone via the shareholder hotline. In the first six months of 2015 the management took part in road shows in Frankfurt, London, Paris, Warsaw and Zurich and was represented at investor conferences in London and Zürs. Numerous talks with investors about the takeover offer of Deutsche Wohnen were held at the end of March and start of April as part of a road show tour. In addition, analysts and institutional investors received comprehensive information on the 2014 annual results and the performance in the first quarter of Analysts assessments At 30 June 2015 the conwert share was covered by seven analyst groups: + Baader Bank AG / Helvea SA + Deutsche Bank + Erste Group Bank AG + HSBC Trinkaus & Burkhardt AG + Kepler Cheuvreux + Oddo Seydler Bank AG + SRC-Research GmbH The average price target as at 30 June 2015 was and thereby 11.1% over the price at which the shares closed the period of At the reporting date the analyst recommendations were as follows: Buy 2 Hold 5 Information on conwert shares Investor Relations Manager Clemens Billek Shareholder hotline Vienna Stock Exchange Bloomberg Reuters ISIN Type of shares cwi@conwert.com CWI CWI AV CONW.VI AT Ordinary shares Number of shares including treasury shares 85,359,273 Share capital Segment Indices Specialist Market Maker mn Vienna Stock Exchange, Official Market ATX, ATX-Prime, IATX, FTSE EPRA/NAREIT Developed Europe Index Oddo Seydler Bank AG Baader Bank AG, CeFDex GmbH, Erste Group Bank AG, Flow Traders B.V., Hudson River Trading Europe Ltd., Kepler Capital Markets S.A., Raiffeisen Centrobank AG, Société Générale S.A., Spire Europe Limited, Virtu Financial Ireland Ltd. Interim Report 1-6/2015 Investor Relations 9

12 SEGMENT REPORT SATISFACTION STARTS AT HOME BEST SERVICE The Austrian and German property management subsidiaries are well-positioned on the service market. 10 Annual Report 2014 Corporate Company Governance Unterkapitel & CSR Unterkapitel

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14 Segment report conwert s business operations are divided into the three segments Austria, Germany and other countries; the latter is not among the Company s core markets and management is working on swiftly selling off the property portfolio in these countries. The sale of the entire portfolio in the Czech Republic, which was signed at the end of 2014 and represents around half of the remaining assets in the other countries segment, is expected to close by the end of the third quarter At 30 June 2015 the overall portfolio consisted of 29,896 rental units and 12,340 parking spaces. Total usable space stood at 2.4 mn sqm, property assets amounted to T 2,757,086 (30/06/2014: T 2,843,356). Property with a market value of T 86,777 was sold in the first half Of this total, T 55,407 was generated by the sale of commercial units including parking spaces. There will be an even sharper focus on selling commercial property in the future. Significant year-on-year improvements were achieved in the operational performance of the portfolio. The vacancy rate continued to fall, from 10.2% to 8.9% and was therefore below the previous record low of 9.0% achieved at the end of the 2014 business year. Average rents rose from 6.24/sqm/m to 6.37/sqm/m. This development arose from the sale of properties with high vacancy rates and the successful management of the property portfolio. Property portfolio as at 30/06/2015 *) Austria Germany Other countries Group Usable space 1,000 sqm , ,363.0 Residential 1,000 sqm , ,776.8 Commercial 1,000 sqm Rental units No. 4,446 24, ,896 Residential No. 2,576 23, ,789 Commercial No. 1, ,107 Parking spaces No. 4,273 7, ,340 Residential No , ,663 Commercial No. 3,466 1, ,677 Property assets T 914,414 1,760,026 82,646 2,757,086 Residential T 353,233 1,448,314 27,291 1,828,838 Commercial T 561, ,712 55, ,248 Average property assets /sqm 1, , , Residential /sqm 1, , , Commercial /sqm 1, , , , Average rent /sqm/m Residential /sqm/m Commercial /sqm/m Vacancy rate % Residential % Commercial % *) Allocation as commercial or residential is based on the majority use of the building as commercial or residential space. 12 Interim Report 1-6/2015 Segment Report

15 Like-for-like *) Overall rental income continued to rise slightly as a result of the reduction in vacancy rates and higher average rents. In Germany average rents rose by as much as 1.9%. Average rents in Austria decreased by 2.0%. *) The only properties included are those which were part of the hold portfolio at the end of the comparable period and at the end of the reporting period and whose space is unchanged. Hold portfolio (like-for-like) 30/06/ /06/2014 Change Austria Average rent /sqm/m % Vacancy rate % % Rental income T /m 2,024 2, % Germany Average rent /sqm/m % Vacancy rate % % Rental income T /m 8,748 8, % Other countries Average rent /sqm/m % Vacancy rate % % Rental income T /m % Total Average rent /sqm/m % Vacancy rate % % Rental income T /m 11,084 10, % Austria segment Revenues in the Austria segment totalled T 83,162, which was significantly higher than the previous year due to the sharp rise in sales revenue. The margin on sales in Austria was 7.4%. The significant streamlining of the portfolio since the first half 2014 was reflected in a decrease in rental income of 8.5% to T 29,546. Service revenue, which in Austria is generated almost exclusively from servicing conwert s own properties, was at a similar level to the comparable period of the previous year and amounted to T 7,442. Austria segment income statement data (in T ) 1-6/ /2014 Change Rental income 29,546 32, % Proceeds from the disposal of properties 46,175 6,014 - Revenues from property services 7,442 7, % Total revenue 83,162 46, % EBIT 14,458 15, % EBT 5,763 (9,918) - Interim Report 1-6/2015 Segment Report 13

16 At the reporting date the Austria property portfolio consisted of 4,446 rental units with total usable space of 525,269 sqm and 4,273 parking spaces. In terms of usable space, 37.9% of this was residential property and 62.1% was commercial. In the residential sector, which is part of conwert s core portfolio, the vacancy rate fell from 5.4% to 4.2%. In the commercial segment, which should be continuously reduced in line with strategic planning, the vacancy rate declined from 15.3% to 13.5%. Property assets in the Austria portfolio fell by 5.3% to T 914,414 as a result of property sales. Selected portfolio indicators for Austria segment Residential *) 30/06/2015 Commercial *) 30/06/2015 Total 30/06/2015 Total 30/06/2014 Rental units No. 2,576 1,870 4,446 4,511 Parking spaces No ,466 4,273 4,776 Usable space 1,000 sqm Total vacancy rate % Strategic vacancy rate % Initial yield % Average rent /sqm/m Property assets T 353, , , ,664 *) Allocation as commercial or residential is based on the majority use of the building as commercial or residential space. Core market in Austria segment Vienna 30/06/2015 Vienna 30/06/2014 Rental units No. 3,234 3,481 Parking spaces No Property assets T 628, ,197 Usable space 1,000 sqm Share of total portfolio *) % Usable space residential **) 1,000 sqm Usable space commercial **) 1,000 sqm Residential share **) % Commercial share **) % Total vacancy rate % Strategic vacancy rate % Average rent /sqm/m Initial yield % *) Based on usable space **) Based on sqm; allocation as commercial or residential is based on the majority use of the building as commercial or residential space. 14 Interim Report 1-6/2015 Segment Report

17 Germany segment Revenues in the Germany segment rose slightly in the first half of 2015 against the comparable period to T 142,504. Proceeds from the disposal of properties totalled T 45,407, which was significantly higher than the same period of the previous year (1-6/2014: T 29,253). The margin on sales was 5.5%. The smaller portfolio led to a decrease in rental income of 5.5% to T 81,485, even though vacancy rates fell and average rents rose slightly. Triggered by growth in managed and brokered rental units within the Group, service revenue increased somewhat to T 15,611. Germany segment income statement data (in T ) 1-6/ /2014 Change Rental income 81,486 86, % Proceeds from the disposal of properties 45,407 29, % Revenues from property services 15,611 13, % Total revenue 142, , % EBIT 42,593 38, % EBT 21,510 (5,712) - At 30 June 2015 the Germany portfolio comprised 24,631 rental units with total usable space of 1,762,797 sqm and 7,293 parking spaces. Measured by usable space, 88.0% was residential property and 12.0% was commercial. It was thereby possible to achieve a reduction in the commercial share of the portfolio of a further 2.4 percentage points against the previous year. The total vacancy rate shrank both in the residential and commercial segments, falling from 8.8% to 7.7%. Only a limited number of purchases were undertaken. In the second quarter 2015 conwert purchased two residential properties in Leipzig with 19 rental units and four parking spaces. The property assets in the Germany portfolio declined to T 1,760,026 as a result of sales. Interim Report 1-6/2015 Segment Report 15

18 Selected portfolio indicators for Germany segment Residential *) 30/06/2015 Commercial *) 30/06/2015 Total 30/06/2015 Total 30/06/2014 Rental units No. 23, ,631 25,937 Parking spaces No. 5,665 1,628 7,293 8,298 Usable space 1,000 sqm 1, , ,903.2 Total vacancy rate % Strategic vacancy rate % Initial yield % Average rent /sqm/m Property assets T 1,448, ,712 1,760,026 1,783,499 *) Allocation as commercial or residential based on whether the majority of the usable space of the building is used for commercial or residential purposes. Core markets in Germany segment Berlin Potsdam Dresden Leipzig Core NRW *) 30/06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/ 2014 Rental units No. 4,826 5,207 1,671 1, ,630 4,800 3,050 3,521 Parking spaces No , ,022 1,151 Property assets T 405, , , ,336 46,134 45, , , , ,706 Usable space 1,000 sqm Share of portfolio **) % Usable space residential ***) 1,000 sqm Usable space commercial ***) 1,000 sqm Residential share ***) % Commercial share ***) % Total vacancy rate % Strategic vacancy rate % Average rent /sqm/m Initial yield % *) Core NRW includes the cities Wuppertal, Düsseldorf, Ennepetal, Hagen, Mülheim, Remscheid, Velbert and Wülfrath; a property in Cologne was included as of which was sold off in the fourth quarter **) Based on usable space. ***) Based on sqm; allocation as commercial or residential is based on the majority use of the building as commercial or residential space. 16 Interim Report 1-6/2015 Segment Report

19 Other countries segment With a share of 3.2% of usable space of the total portfolio, the other countries segment (Luxembourg, Slovakia, Czech Republic, Ukraine and Hungary) is of minor significance for conwert s earnings. This share will fall sharply after closing the sale of the properties in the Czech Republic. Revenues underwent a year-on-year decline in the first half 2015 and rental income slipped back slightly to T 3,720 as a result of the smaller portfolio. As conwert has already sold off its service company in the Czech Republic in light of the portfolio sale there, limited service revenue was generated in the first half Other countries segment income statement data (in T ) 1-6/ /2014 Change Rental income 3,720 4, % Proceeds from the disposal of properties 932 1, % Revenues from property services % Total revenue 4,769 5, % EBIT 4,471 (6,621) - EBT 1,928 (10,352) - At 30 June 2015 conwert held 819 rental units with usable space of 74,969 sqm as well as 774 parking spaces. In terms of usable space, residential properties accounted for 36.1% and commercial properties for 63.9%. The total vacancy rate stood at 29.3% and was thereby slightly less than the previous year (1-6/2014: 32.2%). The property assets of the other countries portfolio amounted to T 82,646. The sale of properties is being continuously expedited in this segment in order to focus business activities on the core markets of Germany and Austria. Interim Report 1-6/2015 Segment Report 17

20 INTERIM MANAGEMENT REPORT TRANSPARENCY INTERNALLY AND TOWARDS OUR CUSTOMERS CLEAR STRATEGY Our goal is the long-term management and development of residential properties in Austria and Germany. We aim to hold a portfolio consisting of 80% in Germany and 20% in Austria, with a split of 80/20 residential/commercial. 18 Annual Report 2014 Corporate Governance & CSR Unterkapitel

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22 Economic Backdrop and Property Markets incl. Outlook Economic backdrop Eurozone Regardless of the Greece crisis, international economic research institutes have forecast a slight recovery for the eurozone. Gross domestic product is set to increase by 0.5% in the third and fourth quarters of 2015 respectively. Growth in each of the first two quarters 2015 was 0.4%. However, the forecast is subject to the Greece crisis not escalating even further and endangering the stability of the currency union. The institutes expect total economic growth of 1.4% in 2015; it was just 0.9% in (Source: Institute Eurozone picks up despite Hellas drama, article dated 7 July 2015) Austria In the second quarter 2015 the Austrian economy grew by 0.3% against the preceding quarter, against a plus of 0.2% in the first quarter Experts from the Austrian Institute of Economic Research (WIFO) commented on the weak signs of improvement. Domestic demand remained modest in the second quarter, although consumer spending picked up somewhat. The unfavourable performance of gross fixed capital formation slightly hampered growth and exports did not provide any stimulus. Compared to the second quarter 2014, gross domestic product rose by 0.4% in real terms from April to June 2015, just as strongly as from January to March The prospect of tax relief from 2016 has not yet prompted any early purchasing decisions and the situation on the job market is continuing to stifle consumer spending. (Source: Austrian Institute of Economic Research (WIFO), Weak signs of improvement for Austrian economy, press release dated 30 July 2015) Germany According to statements by the International Monetary Fund (IMF) and major German research institutes, the German economy is undergoing a significant upswing. Unemployment has also reached a record low and continues to fall. There are three factors at work here: the low oil price, the weak euro and the government s strategy involving moderate wage policies and Agenda The boom of the German economy has thereby been significantly stronger than recently expected. The IMF increased its growth forecasts for 2015 by 0.3 points to 1.6%, with the German institutes going as far as 2.1% in their spring report. Growth should continue next year with a plus of 1.8%. (Source: Süddeutsche Zeitung: Why the German economy is booming, article dated 17 April 2015) Austrian property market Investment market Following the record year 2014, the Austrian property investment market has so far been at a good, high level in Around 920 mn was invested in Austrian real estate in the first half As at 30 June 2014, the figure was around 1.3 bn (1-12/2014: 2.8 bn). Even though the first half 2015 fell short of the previous year, there are still several high-volume transactions in the pipeline for the second half 2015 and therefore total annual investment is likely to be similar to As is traditionally the case, the second quarter 2015 was stronger than the first. Around 560 mn was invested from April to June 2015, with investors concentrating on high-volume transactions. The most popular investments in the first half 2015 were offices (41.8% of investments), retail property (20.6%), housing (17.4%) and hotels (15.5%). (Source: CBRE Austria: High-volume transactions and portfolio deals dominate property investment market in Austria. CEE investment below level of previous year, press release dated 7 July 2015) Housing market The Vienna apartment building market is in remarkably good shape in The solid upwards trend in prices which has been observed for several years is still ongoing, at the same time as volumes are rising significantly. The main reason for this is the comeback of institutional investors, who had mostly left the field to private investors in the preceding years and are now once again playing a strong role as buyers. (Source: EHL, Current Vienna Apartment Building Market Report 2015) Austria tops the annual ranking within the EU in terms of new housing construction with 5.4 projects started 20 Interim Report 1-6/2015 Economic Backdrop and Property Markets incl. Outlook

23 per 1,000 inhabitants. The constant rise in migration to Vienna, the unbridled run by investors on property which is still seen as a safe haven low interest rates and an optimistic outlook are all reasons why no end to rising prices is yet in sight. (Source: Austria top for housing construction in EU, article dated 8 July 2015) Commercial property market Strong investor interest was also seen in the second quarter 2015, even though the core products on the market seemed to have been bought up in their entirety. Ongoing low interest rates were the reason for the strong demand. There was a decline in yields in the top segment. Pressure continued on prime properties in the office segment with top returns of 4.75%. In the Vienna retail sector returns on shopping centres and retail parks continued to hold steady at 5.0% and 5.75% respectively. (Source: EHL: Buoyant demand in first half-year, article dated 13 July 2015) German property market Investment market The German investment market for commercial property has undergone a positive performance in 2015 so far. Investment volumes stood at around 24 bn in the first half of Transaction revenue was thereby significantly higher than the previous year, rising by around 42%. Compared to the previous quarter, the transaction volume was around one-and-a-half times higher. The significant growth in transaction revenue once more underlines Germany s role as a property market with one of the world s highest levels of demand. Investors appreciate the attractive economic framework and returns on property also play a decisive role. In total around 38% of the transaction volumes were traded as package sales; this corresponds to a 45% increase to 9.2 bn. The rush is set to continue and CBRE has maintained its forecasts that transaction volumes will total around 45 bn in (Source: CBRE Germany, Commercial property investment market at record levels: transaction volumes of 24 billion in first half 2015, press release dated 3 July 2015) Housing market The trade in German residential property remains extremely buoyant. According to an analysis by CBRE, transaction volumes of over 16.9 bn were registered at mid-year 2015 for residential packages and assets consisting of at least 50 residential units. Compared to the same period in the previous year, this marks a rise of almost 9.4 bn or 125%. Corporate takeovers were the dominant factor in transactions in the first half The investment pipeline for the second half of the year is also well-filled and further large-scale transactions have already been seen. Against this backdrop, CBRE forecasts transaction volumes of up to 25 bn in trading residential packages for the full year 2015, which would be significantly higher than the previous record set in (Source: CBRE Germany, Record growth in property investment market continues unabated, press release dated 3 July 2015) Commercial property market Office properties continue to represent the strongest asset class, accounting for around 42% of total volumes with more than 10 bn. They were closely followed by retail property with 9.8 bn or 41%, marking a two-fold increase in transaction volumes against the previous year. The German retail investment market is predominantly characterised by shopping centres and large-scale retail parks, supermarket portfolios and department stores. The market s strong liquidity is also reflected in the top returns in traditional asset classes: for office properties in investment centres yields continued to fall across every top location, while net top returns also remained under pressure for retail properties. The current sharp demand for large-scale retail properties caused a further fall in property yields here. (Source: CBRE Germany, Commercial property investment market at record levels: transaction volumes of 24 billion in first half 2015, press release dated 3 July 2015) Interim Report 1-6/2015 Economic Backdrop and Property Markets incl. Outlook 21

24 Business Performance Total usable space by segment (in 1,000 sqm) 30/06/ Austria Business developments Property portfolio and assets The market environment in the Austrian and German residential sector remains buoyant as a result of the ongoing strong demand for housing. However, the situation on the commercial property market and in CEE is still challenging. 30/06/2014 2,363 2,561 1,763 Germany 75 Other countries 574 Austria 1,903 At 30 June 2015 conwert s property portfolio consisted of total usable space of 2,363,035 sqm (30/06/2014: 2,560,987 sqm) and 29,896 units (30/06/2014: 31,451 units) as well as 12,340 parking spaces (30/06/2015: 14,011 parking spaces). The decline in usable space of 7.7% against the comparable period of the previous year is due to the planned streamlining of the portfolio in every segment. In the first half 2015 conwert sold properties with a total value of T 92,514 at a margin of 6.6% over the IFRS carrying amount. Of this total, Austria accounted for T 46,175 and Germany for T 45,407. Commercial sales generated revenue of T 40,473 with a 4.9% margin in Austria and T 17,094 with a 1.6% margin in Germany. Germany Space by usage type *) (in 1,000 sqm) 30/06/ Other countries 1,777 The sale and purchase of properties and individual units led to a slight change in the composition of the portfolio against the previous year: in terms of total usable space the share of residential property increased to 75.2% (30/06/2014: 73.3%), while the share of commercial property declined to 24.8% (30/06/2014: 26.7%). At 30 June % of total usable space was in Germany (30/06/2014: 74.3%), while Austria accounted for 22.2% (30/06/2014: 22.4%). The other countries segment was responsible for 3.2% (30/06/2014: 3.3%). When the transaction of the Czech Republic portfolio, whose sale was fixed in 2014, is recognised in the balance sheet, this segment will account for less than 2%. Residential 2, Commercial 30/06/2014 1,876 Residential 2, Commercial *) Allocation as commercial or residential is based on the majority use of the building as commercial or residential space. 22 Interim Report 1-6/2015 Business Performance

25 Performance of rents and vacancy rates In the first half of 2015 slightly lower rental income than in the first half of 2014 was achieved, with a decline of 6.4% to T 113,516. The smaller overall portfolio as a result of sales was responsible for this decrease, while the key operating indicators of average rents per square metre and the vacancy rate underwent another positive change. The average rents across the whole portfolio rose slightly year-on-year by 2.0% to 6.37/sqm/m (30/06/2014: 6.24/sqm/m). In the residential sector average rents increased in Austria from 5.82/sqm/m to 6.05/sqm/m; in Germany they were up from 5.44/sqm/m to 5.60/sqm/m. The average rents in the commercial portfolio stood at 8.64/sqm/m at the end of the first half-year (30/06/2014: 8.46/sqm/m). conwert managed to reduce the vacancy rate of the entire portfolio against the comparable period of the previous year from 10.2% to 8.9% as of the reporting date, marking the first time it was below 9.0%. This primarily resulted from the sale of properties with high vacancy rates, as well as the proactive management of portfolio properties. Average rents by segment and usage type *) (in /sqm) 30/06/ /06/ Austria Germany Other Countries 9.45 Residential Commercial Property assets by country and usage type *) (in T ) 30/06/2015 Austria Germany Other countries 561, ,712 55,355 27, ,233 1,448,314 Residential Commercial Austria Germany Other Countries Vacancy rates by usage type *) (in %) Residential 30/06/2014 Austria Germany 616, , ,538 1,429, Commercial Total Other countries 59,333 34,860 30/06/ /06/2015 *) Allocation as commercial or residential is based on the majority use of the building as commercial or residential space. Interim Report 1-6/2015 Business Performance 23

26 Space managed by segment (in 1,000 sqm) 2,534 2,951 2,610 2,991 Property services The property services division provides services in the course of managing the conwert portfolio as well as services for selected third parties. The service business is generally being reduced in order to focus on carefully selected service mandates for third parties, e.g. asset and property management for the DWS property fund in Germany. In Austria the company focuses almost exclusively on managing properties owned by the Group and does not provide any letting or sales services for third parties. No additional service revenues were generated in the other countries segment in the first half of 2015 because of the sale of the service business in the Czech Republic at the end of the 2014 business year /06/ /06/2015 Austria Germany Total At 30 June 2015 conwert managed a total of 53,871 units with usable space of 2,991,378, representing an increase of 3.3% against 30 June 2014 due to the increase in internal services in Germany. 70.6% of the units managed were conwert properties, while 29.4% were third-party properties. In terms of usable space, 72.5% of the conwert properties in Austria are now managed internally. In Germany conwert brokered 2,063 units including parking spaces in the first half of 2015, a similar level to the previous year (1-6/2014: 2,050 units incl. parking spaces). The units brokered for Group properties rose slightly by 3.4%, while units brokered for third parties fell by 6.5%. In Austria, new rental agreements were concluded for 384 units including parking spaces. In the reporting period a total of 962 units were sold, of which 84.8% were in Germany and 14.7% in Austria. 75.3% were sold for conwert, 24.7% for third parties. Rental income by segment 1-6/ / % Austria 71.0% Germany 3.2% Other countries 26.3% Austria 70.3% Germany 3.4% Other countries Revenues Significantly higher revenues of T 209,683 were generated in the first half of 2015 compared to the same period in the previous year (1-6/2014: T 162,031). The 29.4% increase was primarily achieved by doubling sales revenue to T 92,514 (1-6/2014: T 36,284); T 57,570 of this total was generated from selling commercial property. The IFRS margin on total sales was 6.6% and the IFRS profit was T 5,737. Sales revenue of T 46,175 was generated in Austria (1-6/2014: T 6,014). In Germany it was also possible to increase proceeds from the sale of properties to T 45,407 (1-6/2014: T 29,253). In the reporting period a total of 605 residential and 198 commercial units were sold off, along with 728 parking spaces. Rental revenue declined to T 113,516 in the first half 2015 as a result of portfolio streamlining (1-6/2014: T 121,217). Regardless of this, net rental income (NRI) rose to T 74,649 (1-6/2014: T 74,409); the NRI margin increased from 61.4% to 65.8%. The adjusted NRI margin (not including running costs charged to tenants) rose to 87.1% (1-6/2014: 83.2%). 24 Interim Report 1-6/2015 Business Performance

27 Revenue from property services fell in the first half of 2015 to T 3,653 (1-6/2014: T 4,530), as fewer units were managed for third parties in Austria and Germany as of 30 June 2015 compared to 30 June The number of units managed did rise slightly overall, although it declined in Austria mainly because of sales. Service revenue in the other countries segment also fell, as the service subsidiaries in the Czech Republic were sold off at the end of 2014 in light of the property sales in this country. NRI by segment (in T ) 1-6/ /2014 Austria 19,095 20,518 Germany 49,549 48,819 Other countries 2,018 2,009 Group eliminations 3,987 3,063 Group 74,649 74,409 Sales revenue by segment 1-6/ / % Austria 49.1% Germany 1.0% Other countries 16.6% Austria 80.6% Germany Margins on sales revenue 2.8% Other countries (in %) Investment property Property held for sale IFRS margin 1-6/2014 (2.9) / Revenue by segment and business area Austria Germany Other countries Others Group eliminations Group (in T ) 1-6/ / / / / / / / / / / /2014 Change Rental income 29,546 32,293 81,486 86,235 3,720 4, (1,235) (1,420) 113, , % Sales revenue 46,175 6,014 45,407 29, , ,514 36,284 - Service revenue 7,442 7,951 15,611 13, (19,550) (17,394) 3,653 4, % Total revenue 83,162 46, , ,768 4,769 5, (20,785) (18,814) 209, , % Interim Report 1-6/2015 Business Performance 25

28 EBIT (in T ) 63,647 47,135 61,521 Financial performance The significant rise in sales proceeds together with lower administrative costs led to much better operating results in the first half of 2015 compared to the same period of the previous year. In the period under review conwert generated EBIT of T 61,521, which was 30.5% higher than in the comparable period (1-6/2014: T 47,135). EBT underwent a significant improvement and was once again positive at T 29,202, following on from T (25,981)in the first half of The following factors facilitated this improvement: 1-6/2013 *) 1-6/ /2015 EBT (in T ) FFO I (in T ) 29,573 (25,981) 29, /2013 *) 1-6/ / ,837 15,423 25, /2013 *) 1-6/ / The contribution to earnings from the rental business (NRI) rose slightly from T 74,409 to T 74,649 despite lower rental proceeds due to sales. + conwert achieved further cuts in personnel expenses, which were down by 9.3% to T 12,544, and in other operating costs, which fell by 17.5% to T 15,265. The reduction in costs was primarily achieved through measures to improve efficiency. + Fair value adjustments to the property assets resulted in a net gain of T 2, Net finance costs improved significantly to T (32,319) against the first half of 2014 when they stood at T (73,116) and had thereby been T 40,797 higher. The reason for the high costs in the comparable period was the negative non-cash effects, particularly from swaps, as a result of the decline in interest rates in the first half of The performance includes the following factors which had a negative impact on earnings: + As a result of the increased number of sales related to portfolio streamlining in the first half 2015, the contribution to earnings from the sale of properties of T 5,737 was slightly below the comparable period (1-6/2014: T 5,827) despite significantly higher sales proceeds. + Service revenues declined as planned from T 4,530 to T 3,653, caused by a decrease in units managed for third parties and the sale of the service business in the Czech Republic. FFO II (in T ) 27,137 29,012 The Group once again turned a profit after tax in the first half 2015 of T 24,499, following on from a loss of T 23,105 in the first half of the previous year. 18, /2013 *) 1-6/ /2015 *) The interim financial statements as at 30 June 2013 recognised a gain on bargain purchase of 7.5 mn, which was amended to 1.0 mn in the fourth quarter of For interim reporting purposes, recognition of this merger has been adjusted retrospectively. 26 Interim Report 1-6/2015 Business Performance

29 Overview of selected financial performance indicators 1-6/ /2014 Change Rental business Rental income T 113, , % Property expenses T (38,868) (46,808) -17.0% Net income from the rental business T 74,649 74, % Sale of properties Proceeds from the sale of properties T 92,514 36,284 - Expenses from the sale of properties T (86,777) (30,457) - Net income from the sale of properties T 5,737 5, % Revenues from property services T 3,653 4, % Net gains/losses from fair value adjustments T 2,959 (7,083) - Net finance costs T (32,319) (73,116) -55.8% Administrative costs Personnel expenses T (12,544) (13,824) -9.3% Other operating expenses T (15,265) (18,495) -17.5% Total administrative costs T (27,809) (32,319) -14.0% Group earnings EBITDA T 59,191 54, % EBIT T 61,521 47, % EBT T 29,202 (25,981) - Group profit after tax T 24,499 (23,105) - Basic earnings/share 0.28 (0.30) - Diluted earnings/share 0.27 (0.30) - Other indicators Cash profit *) T 25,693 16, % Net rental income (NRI) T 74,649 74, % NRI margin % % Adjusted NRI margin % % FFO I **) (funds from operations before sales income and one-off items)/share % FFO II ***) (funds from operations after sales income)/share % *) FFO I: Earnings before tax (EBT) difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests+ restructuring costs/one-off costs **) FFO II: FFO I + difference between sales and carrying amount of sold properties sales income expenses ***) Cash profit: FFO II actual income taxes paid Interim Report 1-6/2015 Business Performance 27

30 Funds from operations (FFO) and cash profit A significant improvement in EBIT and a reduction in cash interest rate costs were the main drivers for significantly higher funds from operations before sales and one-off items (FFO I) of T 25,738. This corresponds to a 66.9% rise against the comparable period of the previous year (1-6/2014: T 15,423). FFO II, which also includes sales income, increased by 55.4% to T 29,012. The cash profit rose by 59.0% and totalled T 25,693. FFO in detail (in T ) 1-6/ /2014 EBT 29,202 (25,981) Difference between sales and carrying amount of sold properties (5,737) (5,827) Operating expenses of sales income 2,463 2,580 Addition/deduction of revaluation gains/losses (2,959) 7,063 Depreciation and value adjustments Non-cash components of financial income and other non-cash costs ,814 Restructuring costs/one-off costs 1,687 1,135 FFO I *) (excl. sales) 25,738 15,423 Difference between sales and carrying amount of sold properties 5,737 5,827 Operating expenses of sales income (2,463) (2,580) FFO II **) (incl. sales) 29,012 18,671 FFO II **) (incl. sales) excl. cash taxes/cash profit 25,693 16,162 *) FFO I: Earnings before tax (EBT) difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/ losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests + restructuring costs/one-off costs **) FFO II: FFO I + difference between sales and carrying amount of sold properties sales income expenses 28 Interim Report 1-6/2015 Business Performance