LEG Immobilien AG. October 2017

Transcription

1 LEG Immobilien AG October 2017

2 Disclaimer While the company has taken all reasonable care to ensure that the facts stated in this presentation are accurate and that the opinions contained in it are fair and reasonable, this presentation is selective in nature and is intended to provide an introduction to, and an overview of the Company s business. Any opinions expressed in this presentation are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information contained in this presentation. Where this presentation quotes any information or statistics from any external sources, you should not interpret that the Company has adopted or endorsed such information or statistics as being accurate. This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realised from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and supply and demand. The Company has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and the Company does not undertake any duty to update the information and forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. This presentation does not constitute an offer or invitation to purchase or sell any shares in the Company and neither this presentation or anything in it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. 2

3 Key Investment Highlights c. 3.8% Dividend Yield 1) from Stable Residential Cash Flows with Sound Growth Prospects Leading cash flow profitability in German residential industry driven by attractive scale effects in our core markets Significant potential for stable, above average growth (structural organic + external growth) Leading Operating Performance Based on Regionally Focused Platform Regional focus on attractive NRW market basis for sustained outperformance (rent growth %) Favourable demand/supply and high affordability in NRW basis for structural growth Strong beneficiary from net immigration (right product in the right region) Creating Tangible Value from Acquisitions with High Potential for Synergies Acquisition of > 40,000 units since IPO with immediate value contribution and a very low execution risk (FFO per share accretion, no NAV dilution) Regional expertise and broad presence (synergies) in NRW as key success factors; attractive pipeline Leader in Innovation / Successfully Leveraging Value of Customer Base Launched Multimedia, Energy Services and Craftsmen Services businesses as additional earnings drivers Strong Balance Sheet / Long Term Secured Financing at Very Attractive Terms LTV of 45.3% secures defensive profile Average cost of debt of Ø 1.85% with average maturity of c.9 years 2) Secures high visibility for future earnings and dividend growth 1) Based on mid-point guidance 2018, share price as of 10 October 2017 ( 85.31) 2) Incl. commercial paper issue of 200m 3

4 Highlights H Overall company development Acquisition of 2,100 residential units in High-Growth Markets prompts upward revision of earnings guidance Further pipeline for acquisitions in core markets Property valuation: 480.1m total valuation uplift in Q2 (+6.0%) due to improving rental markets Additional positive impact from yield compression in Q expected (+repayment subsidized loans) Issue of commercial papers with a volume of 200m at attractive terms (-0.07%) underpins LEG s strong credit profile Accelerating rent growth on basis of high capital efficiency In-place rent, l-f-l 5.40/sqm (+3.0% total portfolio, +3.7% for free-financed units) EPRA-Vacancy, l-f-l 3.4% (up c.30 bps YOY, rising l-f-l occupancy in H2 expected ) Maintenance/Capex 7.2/sqm (FY-2017 target of 24/sqm) Financials: Margin expansion story fully on track; Further upside for capital values Net cold rent 263.7m (+5.7% YOY from 249.4m) Adjusted EBITDA 193.8m (+7.4% YOY from 180.5m) FFO I (excl. minorities) 148.8m (+8.1% YOY from 137.6m), 2.36 per share (+7.8% YOY from 2.19) AFFO 118.6m (+9.2% YOY from 108.6m) EPRA-NAV (excl. goodwill) per share (+9.4% YTD, +13.5% incl. DPS of 2.76) 4

5 Agenda I. LEADING OPERATING PERFORMANCE Leading operating performance and profitability on basis of a regionally focused business model II. ATTRACTIVE NRW MARKET Metropolitan region benefitting from sound growth prospects; net immigration as key growth driver III. MARKET LEADING PLATFORM WITH EXTERNAL GROWTH POTENTIAL Proven track record for value accretive acquisitions in core markets with high synergies IV. INNOVATIVE VALUE-ADDED SERVICES Value-added for tenants and shareholders V. FINANCIALS: LEADING CASH FLOW PROFITABILITY STRONG BALANCE-SHEET Sound FFO and dividend growth on basis of leading operating profitability and long term secured financing VI. BUSINESS UPDATE & OUTLOOK 5

6 LEG at a Glance Leading residential platform across Germany s largest state Overview One of the largest German residential real estate companies with 127,063 residential units and market leader in the NRW market NRW is one of the largest metropolitan areas in Europe accounting for 22% of German GDP Regional focus bears structural competitive advantages for operating efficiency and performance Key Financial Metrics (H1-2017) Net Cold Rent 263.7m Adj. EBITDA 193.8m FFO I 148.8m GAV 8,778m EPRA-NAV per share 1) LTV 45.3% Key Data (H1-2017) Geographic Reach across NRW Number of units: 127,063 Residential sqm: 8.1m In-place rent (l-f-l): 5.40 /sqm EPRA-vacancy (l-f-l): 3.4% Rent free financed/ restricted units (l-f-l): 5.68/4.74 /sqm Apartment size: 64 sqm Apartments per building: 7 units Number of rooms per unit: 3 rooms Münster Bielefeld Dortmund Duisburg Essen Düsseldorf Wuppertal Cologne Bonn 1) Fully diluted, excluding goodwill (EPRA-NAV (incl. goodwill)) 6

7 I. Leading Performance Strong track record of outperforming German residential market L-f-l In-Place Rent ( /sqm) Successful Rent Management 1) ( ) Germany in-place rent per sqm H L-f-l Vacancy Rate % 3.5% 3.4% LEG in-place rent per sqm unrestricted units 3.1% 2.9% 2.7% 2.5% 2.9% LEG s affordable living product in urban areas well suited to market demand Product ideally tailored to rising demand from 1-2 person households and immigrants H Source: LEG as of FY-2016 and Q ) Sources: LEG, Bundesbank 2) Like-for-like 7

8 I. Leading Performance Portfolio: Attractive combination of yield and growth As of High Growth Markets Stable Markets Higher Yielding Markets Total Portfolio 1) No. of Units 38,940 47,013 39, ,063 % of GAV 44% 32% 22% 100% Gross Yield 5.2% 7.0% 7.5% 6.3% EPRA-Vacancy l-f-l 1.7% 3.3% 5.9% 3.4% In-Place Rent CAGR l-f-l FY-2014 FY-2016 Free Financed Portfolio Rent CAGR l-f-l FY-2014 FY % 2.4% 2.6% 2.7% 3.6% 3.1% 3.1% 3.5% High exposure to attractive economic centers and university cities (e.g. Cologne, Düsseldorf, Münster) Higher Yielding markets attractive cash cows with decent growth profile Source: LEG as of FY-2014 and FY-2016; Q Note: Statistics shown above refer to company data, not to market data. Only residential units shown. 1) Total includes an additional 1,895 residential units located outside NRW. 8

9 I. Leading Performance Strong operational performance across all submarkets Steinfurt Minden- Lübbecke Herford Strong results on the basis of tailor-made management strategies Borken Bielefeld Lippe Munster Gütersloh Coesfeld Warendorf High-Growth Markets (YOY) Kleve Düren Aachen Hamm Wesel Recklinghausen Unna Gelsenkirchen OberhausenHerne Dortmund Bochum DuisburgEssen Euskirchen Rhein-Sieg-Kreis Soest Krefeld Hagen Viersen Mettmann Hochsauerlandkreis Düsseldorf Wuppertal Märkischer Kreis Monchengladbach Remscheid Solingen Rhein-Kreis Neuss Olpe Heinsberg Leverkusen Rheinisch-Bergischer Kreis Oberbergischer Cologne Siegen- Rhein-Erft-Kreis Kreis Wittgenstein Bonn Paderborn Hoxter # of units 38, % In-place rent (sqm), l-f-l % EPRA-Vacancy, l-f-l 1.7% +40 bps Stable Markets with Attractive Yields (YOY) # of units 47, % In-place rent (sqm), l-f-l % EPRA-Vacancy, l-f-l 3.3% +10 bps Total Portfolio Higher-Yielding Markets (YOY) # of units 127, % In-place rent (sqm), l-f-l % EPRA-Vacancy, l-f-l 3.4% +30 bps (YOY) # of units 39, % In-place rent (sqm), l-f-l % EPRA-Vacancy, l-f-l 5.9% +60 bps 9

10 I. Leading Performance Portfolio highly exposed to structural growth markets Geographic Reach (60 km radius) Key Data Kleve Krefeld Viersen Mettmann Düsseldorf Wuppertal Monchengladbach Solingen Rhein-Kreis Neuss Leverkusen Heinsberg Aachen Düren Borken Hamm Wesel Recklinghausen Unna Gelsenkirchen Oberhausen Herne Dortmund Bochum Duisburg Essen Cologne Rhein-Erft-Kreis Euskirchen Rhein-Sieg-Kreis Bonn Coesfeld Steinfurt Münster Hagen Warendorf Hochsauerlandkreis Märkischer Kreis Oberbergischer Kreis Olpe Soest Gütersloh Siegen- Wittgenstein Minden- Lübbecke Herford Bielefeld Lippe Paderborn Hoxter Approx. 93% of LEG s portfolio is located in the catchment area of swarm cities (60 km) and around 64% in the commuter belts of Düsseldorf and Cologne (60 km) NRW is a key metropolitan area in Germany and one of the largest areas in Europe (17.7m inhabitants) with Cologne and Düsseldorf being the most populous cities Many university cities are located in NRW, e.g. Aachen with the largest technical university in Europe Number of 1-2 person households constantly growing in swarm cities and outperforming Germany (2015: 75.6% in Germany) Opposite trend in age structure compared to Germany: share of people under the age of 40 steadily increasing (2015: 42.3% in Germany) and percentage of people above the age of 60 steadily shrinking (2015: 27.4% in Germany) Many large companies are located in growth markets, e.g. Bayer, Bertelsmann, Brenntag, Deutsche Post, Deutsche Telekom, Dr. Oetker, E.ON, Evonik, GEA, Henkel, innogy, Lanxess, Metro, Miele, RWE, thyssenkrupp, Uniper etc. 10

11 I. Leading Performance Well diversified portfolio with attractive reversionary potential High Growth Markets As of LEG NRW 2) No. of Residential Units 38,940 4,084,562 Occupancy Rate (%) 98.3% 97.4% In-Place Rent per sqm ( ) Rent Potential 1) 15% n/a Steinfurt NORTH RHINE- WESTPHALIA Minden- Lübbecke Herford Stable Markets with Attractive Yields As of LEG NRW 2) No. of Residential Units 47,013 2,901,458 Occupancy Rate (%) 96.7% 96.3% In-Place Rent per sqm ( ) Borken Coesfeld Münster Warendorf Gütersloh Bielefeld Lippe Rent Potential 1) 7% n/a Kleve Hamm Wesel Recklinghausen Unna Gelsenkirchen Oberhausen Herne Dortmund Bochum Duisburg Essen Soest Paderborn Hoxter Higher Yielding Markets As of LEG NRW 2) The LEG portfolio offers a 9.4% average rent upside potential 1) Krefeld Hagen Viersen Mettmann Hochsauerlandkreis Düsseldorf Wuppertal Märkischer Kreis Remscheid Monchengladbach Solingen Rhein-Kreis Neuss Olpe Heinsberg Leverkusen Rheinisch-Bergischer Kreis Oberbergischer Cologne Siegen- Kreis Rhein-Erft-Kreis Wittgenstein Aachen Düren Bonn Rhein-Sieg-Kreis No. of Residential Units 39,215 1,902,055 Occupancy Rate (%) 94.1% 95.3% In-Place Rent per sqm ( ) Rent Potential 1) 6% n/a Euskirchen Source: LEG as of Q2-2017, CBRE, Empirica, IT.NRW 1) Market rent (CBRE) compared to LEG portfolio as of ) # of residential units and occupancy rate as of

12 I. Leading Performance Attractive portfolio + operational excellence = strong rent growth L-f-l Residential Rent ( /sqm/month) Rental Growth Drivers 0.1% Cost rent adjustments 0.4% Modernisation % Re-letting Q Q L-f-l Free Financed Rent ( /sqm/month) +2.5% 1.5% Mietspiegel adjustments Q Q Performance of free financed units best proxy for underlying rent dynamics High capital efficiency maintained (growth relative to capital expenditure) Regional focus drives outperformance FY-2016 Well diversified mix of growth drivers (low execution risk) Growth not boosted by overspending (capex) 2017: Accelerating growth from cost rents, expiry of restrictions and new rent tables expected 12

13 I. Leading Performance Well-maintained portfolio tailored to demand Well-Maintained Portfolio 57.8m ( 7.2/sqm) 29.0m 28.8m 59.9m ( 7.2/sqm) 30.2m 29.7m Rising potential for value enhancing capex Excess demand creates headroom for rent increases Leading capital efficiency as key value driver (rent growth relative to capital expenditure) Target return of c.6% on modernisation projects (IRR) H H maintenance capex in m 13.9/sqm 13.7/sqm 12.9/sqm 14.0/sqm 13.8/sqm 16.1/sqm 83.1m 81.9m 76.9m 85.5m 89.1m 114.2m /sqm 149.6m maintenance capex 13

14 Modernisation projects (e.g. Monheim, Cologne) I. Leading Performance Focus on utilisation of value accretive modernisation measures Capital Expenditure 25% maintenance capex FYE-2017 IRR 6% Apartments (40%) Turn costs: Bathroom etc. 75% value enhancing capex Buildings (60%) Modernisation: Balconies Energetic refurbishment 14

15 II. Attractive NRW Market NRW: economic engine in Germany with liquid labour market Key Facts Large German Corporates based in NRW Key metropolitan area in Germany, and one of the largest areas in Europe (17.9m inhabitants) Largest economy: Germany in Europe, NRW in Germany Germany s economic powerhouse generating approx. 22% of German GDP Bielefeld Gutersloh Essen Mulheim/Ruhr Düsseldorf Leverkusen Cologne Bonn About one third of the largest companies in Germany are based in NRW (8 of the DAX30 companies and 18 of Germany s 50 largest companies by revenue in 2014) Robust labour market Decreasing Unemployment in NRW Steadily decreasing rate of unemployment since 2005 (-38%) Highest population density key advantage for efficient property management 13% 12% 11% 10% 9% 8% 12.0% 11.4% 9.5% 8.5% 8.9% 8.7% 8.1% 8.1% 8.3% 7.8% 7.7% 7.4% 7.3% 7% 6% Source: Federal Statistical Office, Federal Employment Agency unemployment rate 15

16 II. Attractive NRW Market NRW: leading position in future industries Highlights Key markets showing sound household growth 1) 16 Direct investments: #1 in Germany for foreign investors 28.5% of direct investments in Germany Chemicals: #1 in Germany, #5 in Europe (sales) NRW generates 30.8% of German sales Biotechnology: #1 in Europe, #9 worldwide (patents) Highest number of biotech patent applications in Europe NRW generates 44.4% of German sales Microsystems Technology: top position 28% of all German players are located in NRW Regional focuses in Aachen, Cologne/Bonn, Münster, Ruhr area with Dortmund as a hotspot (MST Cluster is one of the largest in Europe) Nanotechnology: top position in Germany and Europe More than 200 companies, thereof 50 large companies 220 institutes (of which 9 Fraunhofer, 3 Max Planck and universities) Mobile communication: #1 in Germany NRW companies account for 83% of the German mobile communication market Education: 5 of 10 largest universities located in NRW 2) e.g. RWTH Aachen, one of the largest technical universities in Europe, renowned for engineering, IT and natural sciences Germany Inhabitants +1.7% Households +2.1% Inhabitants +2.3% Households +2.8% Inhabitants +1.8% Households +3.3% Düsseldorf 3,476 units Mönchengladbach 6,035 units Inhabitants +1.8% Households +3.9% Cologne 3,902 units Bonn 2,285 units Dortmund 12,437 units 1) Federal Statistical Office, 2015 vs ) Cologne, Aachen, Münster, Bochum, Duisburg/Essen. Measured by number of registered students. Source: Federal Statistical Office, winter term 2015/16 Inhabitants +2.4% Households +4.6% Gütersloh 1,270 units Inhabitants +2.4% Households +6.9% Inhabitants +2.6% Households +4.8%

17 II. Attractive NRW Market Supply and demand drivers in favour of LEG s product NRW Household Growth ) People Households (m) >2 People Households (m) Residential Ownership Split in NRW (%) 2) Owner Occupied 40% Private 11% Private/Small 38% Professionals 22% 7.0 Cooperatives 6% Public 7% Drivers of Supply and Demand Low home ownership of approx. 43% in NRW 3) (46% in Germany) provides for consistent demand Structural long-term demand growth: 10.3% growth of 1-2-people households expected in NRW ( ). Process driven by decrease of average household size (2.04 in 2014 vs in 2008) Current strong net immigration not yet reflected in long term demographic forecasts High demand for affordable living product. Approx. 50% of households with income of less than 2,000 per month LEG has the right product that addresses needs of majority of households: average net rent of only approx. 324 per apartment per month and 40 years of experience in addressing the needs of immigrant tenants Majority of tenants are 1-2 people households (more than 70%) Church <1% LEG approx.: 1% of total market / 5% of professionals Source: Federal Statistical Office, BBSR, IDN Immodaten, DTZ, NRW, IT.NRW 1) it.nrw; Number of households in millions based on micro census as of ) NRW.Bank, Atlas Wohnen NRW 2010, GdW, Statistical Office 3) Federal Statistical Office, census

18 II. Attractive NRW Market Net immigration expected to remain at a high level Net Immigration to Germany Key Facts ~1.0 m 1) (approx. +80% yoy) NRW ~25% Net immigration, thereof by means of asylum 2) 2016: 60,000 / 2017e: 30, m 2) 0.4 m 2) 2.5 m 2) In 2016, net immigration to Germany amounted to about 0.5 million 2) Deutsche Bundesbank forecasts 0.4 million additional immigrants (net) in 2017 and 2.5 million for In 2016, c.71,000 asylum seekers 3) (gross) were registered in NRW (>25% of all asylum seekers 2) ) Stabilising net immigration expected for the years to come with decreasing share of refugees Immigration is driving overall population growth, triggering additional growth in net new households Additional pressure on affordable housing segment Outperformance of German economy attracts qualified new immigration Liquid labour market and affordable living as pull-factors for NRW e Sources: 1) Interview with director of Federal Agency of Migration and Refugees (Aug 2016) 2) Deutsche Bundesbank 3) Regional government of North Rhine-Westpahlia 18

19 II. Attractive Market NRW population development - many cities just entering upswing phase Cities Entering Upswing Mode Index = End of declining population CAGR % Bielefeld % 0.4% 0.6% 0.7% Mönchengladbach Krefeld Dortmund Essen

20 II. Attractive Market NRW cities showing significant upside potential 31.5% Purchasing power 1) / household Gross rent / household 27.2% % 24.5% Gross rent ratio 24.1% EUR 4, % 18.6% 18.2% 3,828 3,692 3,752 2,971 3,167 3,395 1, Munich* Berlin Dusseldorf Cologne Dortmund Essen NRW Source: CBRE housing market report 2016 (data as of 2015) *Own calculation based on CBRE housing market report 1) Net income pre tax and social insurance contributions and including received transfer payments 20

21 III. Market Leading Platform with External Growth Potential Strong acquisition track record since IPO Creating tangible value Strong volume growth at decreasing overhead cost Recurr. admin costs 35m # of units 150, ,000 90,926 94, , , ,488 50, leads to a significant drop of the admin. costs ratio Recurr. admin costs/ net cold rent Net cold rent 12 % 9 % 6 % 10.2% % % % % 500m 400m

22 IV. Innovative Value-Added Services Leveraging LEG s strong customer base LEG Value-Added Services Strategic Partners Energy Electricity Heating Metering ESP 1) 51% Joint Venture LEG tenants Multimedia TV Internet Telephone Craftsmen services Repair work Wohnservice+ TSP 2) 51% Joint Venture Key objectives Tenant satisfaction Shareholder value Support of seniors Outpatient care To be announced Others to follow 1) EnergieServicePlus GmbH 2) TechnikServicePlus GmbH 22

23 IV. Innovative Value-Added Services Highly compelling financials FFO Contribution Services Launch Multimedia: Jan 2014 Energy Service: Mar 2015 Craftsmen services: Jan 2017 Growth drivers Portfolio growth (acquisitions) New services Third party business 4.6m 6.8m 9m ~ 13m ~ 15m Principles Additional cash flow streams at low risk (operational and financial) Stay focused: selective extension of value chain complementary to letting business 0.0m Value add for tenants and shareholder e 2018e 23

24 V. Financials: High Profitability Financial highlights H Net Cold Rent ( m) Adj. Net Rental and Lease Income ( m) Adj. EBITDA ( m) H H H H H H FFO I ( m) Capex-Adj. FFO I / AFFO ( m) Margin (%) H H Comment Adj. NRI Scale effects + efficiency gains H H H H Adj. EBITDA FFO I AFFO See above + lower admin. costs ratio + higher others See above + lower interest ratio offsetting higher tax rate See above + temporary lower capex ratio 24

25 V. Financials: High Profitability Income statement H million H H Net rental and lease income Net income from the disposal of investment property Net income from the valuation of investment property Net income from the disposal of real estate inventory Net income from other services Administrative and other expenses Other income Operating earnings Net finance costs Earnings before income taxes Income tax expenses Consolidated net profit Higher rental income (+ 14.3m/+5.7%) Rise in staff costs resulting from crafts business offset by decrease in externallyprocured services Adj. NRI-margin rose slightly from 77.6% to 78.1% YOY First-time mid-year portfolio valuation (+6.0%) Acquisition related one-time costs of 34.7m in H Recurring admin. costs slightly increased to 16.2m (- 0.7m YOY) mainly due to an extraordinary item One-time refinancing costs ( 12.0m) Net income from fair value measurement of derivatives (- 42.0m; thereof m from convertible) Slightly lower cash interests ( 40.5m; - 0.8m YOY) Cash taxes (- 3.3m) 25

26 V. Financials: High Profitability FFO calculation H million H H Net cold rent Profit from operating expenses Maintenance (externally-procured services) Staff costs Allowances on rent receivables Other Non-recurring project costs (rental and lease) Recurring net rental and lease income Recurring net income from other services Staff costs Non-staff operating costs Non-recurring project costs (admin.) Extraordinary and prior-period expenses Recurring administrative expenses Other income and expenses Adjusted EBITDA Cash interest expenses and income Cash income taxes FFO I (including non-controlling interests) Non-controlling interests FFO I (excluding non-controlling interests) FFO II (including disposal of investment property) Capex-adjusted FFO I (AFFO) m (+5.7% YOY) Disproportional growth in staff costs mainly due to new crafts business (offset by lower procured services); adjusted for this effect increase of +4.7% m (+6.4% YOY) NRI-margin increased slightly due to disproportionate growth in staff costs and others Acquisition related one-time costs in H Slight increase due to release of a provision in 2016, (number of FTE s decreased) m (+7.4% YOY) EBITDA margin 73.5% vs. 72.4% in H1-16 Lower average interest costs (Q2-17 avg. cost 1.85% vs. 2.09% in Q2-16) 26

27 V. Financials: High Profitability Leading profitability despite short term distortion from restricted units Adj. EBITDA margin m margin % m margin % As reported Gap restricted vs. unrestricted rents 1) ) /sqm: 4.67 vs in 2016, 4.67 vs in 2015 EBITDA as reported distorted by restricted units (compensation for lower rents included in interest result below the EBITDA line) Scenario analysis: closing gap between restricted vs. unrestricted rents; Adjusted EBITDA margin approx. 150 bps higher Earlier exploitation of rent potential due to early repayment of subsidised loans 27

28 V. Financials: Strong Balance Sheet Balance sheet 30 June 2017 million Investment property 8, ,954.9 Prepayment for investment property Other non-current assets Non-current assets 8, ,164.5 Receivables and other assets Cash and cash equivalents Current assets Assets held for sale Total Assets 9, ,435.9 Equity 3, ,436.7 Non-current financial liabilities 3, ,222.3 Other non-current liabilities Non-current liabilities 4, ,092.6 Current financial liabilities Other current liabilities Current liabilities Total Equity and Liabilities 9, ,435.9 Revaluation gains 480.1m Capex 30.2m Additions 28.9m Reclassification m Cash flow from operating activities 107.9m Acquisitions and capex m Dividend m Bond issue + 495m Repayment of subsidised loans m and other bank loans m Commercial paper + 200m 28

29 V. Financials: Strong Balance Sheet LTV 30 June 2017 million Financial liabilities 4, ,774.3 Cash & cash equivalents Net Debt 3, ,607.6 Investment properties 8, ,954.9 Properties held for sale LTV in line with target capital structure (range of 45-50%) after consolidation of acquisitions and dividend payment Yield compression is likely to trigger a further decline during the cycle Prepayments for investment properties Property values 8.752,5 8,039.2 Loan to Value (LTV) in % Pro-forma LTV post conversion in % Significant positive impact on LTV from future conversion of convertible expected (currently -310bps) 29

30 V. Financials: Strong Balance Sheet Post refinancing of subsidised loans and bond issue % Weighted avg. interest (excl. subsidised loans), as of % 936m Variable interest 10.6% 2.2% 1.8% -0.07% 200m 1) 4.7% 1m 1.6% 2.9% 6m 77m 577m 2.2% 386m 3.5% 217m 533m 1.7% 1.9% 419m 428m 362m 1.6% 118m Swaps 15.8% * Fixed interest 73.6% 2) 3) ff 1) Commercial paper 2) Maturity 2021 with investor put option 2019 ( 300 m convertible bond) 3) Payback of corporate bond ( 500 m) *Including commercial paper Key Facts Average debt maturity 9.4 years (9.0 years*) Interest costs Ø 1.95% (1.85%*) Hedging ratio 93.8% (89.4%*) Rating Baa1 (Moody s) Maturities 1-2 years 0.0% (4.7%*) 3-5 years 16.3% (15.4%*) 6-8 years 37.9% (36.2%*) 9 years 45.8% (43.6%*) 30

31 V. Financials: Strong Balance Sheet EPRA-Net asset value 30 June 2017 million Equity (excl. minority interests) 3, ,414.5 Effect of exercising options, convertibles and other rights NAV 4, , m net profit m dividend 14.0m other comprehensive income (derivatives) Fair value measurement of derivative financial instruments Deferred taxes 1) EPRA-NAV 5, ,641.0 Number of shares fully-diluted incl. convertible (m) 2) EPRA-NAV per share in Goodwill resulting from synergies Adjusted EPRA-NAV (excl. goodwill) 5, ,597.2 Adjusted EPRA-NAV per share in Attractive rental yield of 6.3% leaves future upside Value of services business not included in NAV Scenario (incl. crafts buinsess): additional value approx per share (discount rate of 4.0%-6.0%) 3) 1) And goodwill resulting from deferred taxes on EPRA-adjustments 2) Actual number of shares outstanding 63.19m 3) Assumption: expected 2018 FFO, growth rate of 0% 31

32 VI. Business Update Organic and external growth support sound earnings development External growth: Acquisition of 2,100 units in High-Growth markets Locations: mainly Dusseldorf (c.1,500 units) and Neuss (c.460 units, border of Dusseldorf) Purchase price approx. 280m Portfolio with value upside post vacancy reduction (c.20% due to modernisation) Initial yield 4.0% due to temporary high vacancies; attractive reversionary yield of approx. 5.6% Current in-place yield LEG Dusseldorf portfolio 4.7% signals attractive relative value Initial expected FFO contribution 2018: 5m- 7m ( to 0.11 per share, +1.6% to 2.2%), closing July 2017 and January 2018 Financing: no issue of new shares planned for these transactions Portfolio growth set to continue Acquisition pipeline: Smaller and also midsized deals in negotiation process (in LEG core markets) New construction: Potential political tailwind; close monitoring of potential changes of political framework Current status: selective opportunities (on existing land) but no large scale business due to prohibitively high costs Pipeline: two larger projects in planning phase (in Cologne and Essen) Münster ( Weissenburgsiedlung ) in construction phase (c.50 units) Total volume: approx. 800 units, yield on cost >4.5% 32

33 VI. Business Update Capex programme Lifting internal growth potential 10/ sqm 10/ sqm 80m 80m Invest /sqm / sqm 40m 24/ sqm 29/ sqm 29/ sqm n/a 0.5% 0.9% Additional capex Total invest/sqm Additional l-f-l rent growth Additional upside for value enhancing capex measures due to steadily improving market fundamentals Additional investment programme of 200m with significant contribution to l-f-l rent and FFO growth Emphasis on attractive locations in high-growth markets (c.65% of total investment) with significant rent potential (e.g. Münster, Bonn, Monheim in catchment area of Düsseldorf) Strict capital discipline maintained IRR hurdle of 6% Construction work has started in H with first effects on rent development in FY

34 VI. Outlook for Guidance FFO I 290m - 295m / per share (up from 288m - 293m / per share) EBITDA margin ~72% L-F-L rent growth % L-F-L vacancy Investments Dividend ~ -20 bps ~ 24/sqm 65% of FFO I 2018 FFO I 315m - 323m / per share (up from 310m - 316m / per share) EBITDA margin ~73% L-F-L rent growth ~3.0% Investments ~ 29/sqm Mid-term L-F-L rent growth % 34

35 VI. Outlook for Steady expansion of leading profitability FFO I per share ( ) *at mid point e FFO I per share CAGR e*: +13.5% (excl. future acquisitions) 2018e EBITDA Margin 64.3 % 66.5 % 67.3% 69.5% ~ 72 % ~73 % e 2018e 35

36 VI. Attractive Dividends from Robust Cash Flows Diversified and Growing Income Base Rent Acquisitions Downward Pressure on Costs due to Efficiency Opportunities Appropriate Leverage Structure Optimises Risk/Return to Equity Cost Base Interest Cost FFO I ~65% ~35% Total Return Driving Dividend Payment and Growth Dividend Dividend 2016: Based on FFO guidance 3.8% 1) Organic growth target (mid-term) approx. 6% + growth from acquisitions Dividends well covered by AFFO 2) Capital Growth Acquisitions Capex Debt Amortisation 1) Based on mid-point guidance 2018, share price as of 10 October 2017 ( 85.31) 2) Incl. commercial paper issue of 200m 36

37 VI. Attractive Dividends from Robust Cash Flows NAV per share ( ), excl. goodwill Dividend per share ( ) Q

38 LEG Share Information Basic data Well-balanced shareholder structure Prime Standard, Frankfurt Stock Exchange Total no. of shares: 63,188,185 Ticker symbol: LEG ISIN: DE000LEG Indices: MDAX, FTSE EPRA/NAREIT, GPR 250, Stoxx Europe 600 Weighting ( ): MDAX 2.67%; EPRA 2.49% Rating: Baa1 (stable) by Moody s Share price ( , indexed; = 100) Other free float 73.1% BlackRock 11.6% % MFS 9.3% AXA S.A. 3.0% BNP Paribas Investment Partners 3.0% EPRA Germany LEG Source: LEG; shareholdings according to latest voting rights notifications 38

39 Capital Market Financing Corporate Bond Convertible Bond Issue Size EUR 500m 2014/ /2025 Issue Size EUR 300m EUR 400m Term / Maturity Date 7 years / 23 January 2024 Term / Maturity Date 7.2 years / 1 July years / 1 September 2025 Coupon % p.a. Coupon % p.a % p.a. Issue % Initial Conversion EUR EUR Price Price Initial Re-offer Yield % Adjusted Conversion Price EUR (as of 18 May 2017) -- Financial Covenants ISIN WKN Incurrence-based: Net financial debt / total assets 60% Secured financial debt / total assets 45% 1) Unencumbered assets / unsecured financial debt 125% 1) Maintenance-based: Adj. EBITDA / net cash interest 1.8x XS A2E4W8 Investor Put 1 July Issuer Call From 22 July 2019, if the LEG share price exceeds 130 % of the then applicable conversion price From 22 September 2022, if the LEG share price exceeds 130 % of the then applicable conversion price ISIN DE000LEG1CB5 DE000A2GSDH2 WKN LEG1CB A2GSDH 1) After 31 July

40 Financial Calendar Date Report/Event Quarterly Report Q2 as of 30 June / Roadshow London, Bank of America Merrill Lynch Roadshow Frankfurt, Jefferies Global Real Estate Conference Bank of America Merrill Lynch, New York Berenberg & Goldman Sachs German Corporate Conference, Munich Baader Investment Conference, Munich 25./ Capital Markets Day 2017, Düsseldorf Quarterly Report Q3 as of 30 September

41 Contact Investor Relations Burkhard Sawazki Head of Investor Relations Tel: +49 (0) Karin Widenmann Manager Investor Relations Tel: +49 (0) Katharina Wicher Investor Relations Tel: +49 (0) LEG Immobilien AG Phone: +49 (0) Hans-Boeckler-Str. 38 Fax: +49 (0) Düsseldorf, Germany Mail: 41

42 Appendix

43 LEG Management Board Thomas Hegel CEO Eckhard Schultz CFO Holger Hentschel COO Responsibilities Corporate Development New Business / Acquisitions Corporate Communication Legal, Internal Audit & Compliance Human Resources IT Executive and Supervisory Board Office Central Services Finance & Treasury Corporate Finance Investor Relations Controlling & Risk Management Accounting & Tax Portfolio Management Asset and Property Management Rent Management Procurement Capex / Opex Management Integration Energy Services & Repairs Management With LEG In Industry Since 2006 Since 2009 Since 1987 Since 1988 Since 1993 Since

44 Portfolio Structure 30 June 2017 Construction Years Free Financed / Rent Restricted Units 1) After % 6% 11% Until 1949 Rent restricted units 28% 58% % Free financed units Building Types 2) Apartment Size 2) Low Rise 32% Medium sized sqm 28% > 90 sqm 5% <40 sqm 5% sqm 41% High Rise 2% 66% sqm 21% 1) Based on number of buildings. Buildings are measured by entrances. 2) Refers to housing only. 44

45 Portfolio Revaluation: 30 June 2017 Breakdown Revaluation Gains Value drivers Rent development 537 m Discount rate 0 m Others (cost adjustments) - 28 m 509 m Allocation capital growth IAS 40 gains 480 m Capex 29 m Valuation Uplift by Markets Valuation uplift Gross yield High-growth markets +6.8 % 5.2 % Stable markets +5.7 % 7.0 % Higher-yielding markets +4.9 % 7.5 % Total portfolio +6.0 % 6.3 % Reported values still show decent gap to recent market transactions/asking prices Additional valuation uplift in Q4 expected: tightening discount rates positive impact from repayment of subsidized loans (expected gross effect c. 100m, net c.50m) 45

46 Portfolio Sound property fundamentals basis for value growth As of Market High- Growth Markets Residential Units GAV Residential Assets ( m) % of Total Residential GAV GAV/ sqm ( ) In-Place Rent Multiple Multiples, Estimated Rental Values ( ) GAV Commercial/ Other Assets ( m) Total GAV 38,940 3,547 44% 1, x 16.9x 194 3,741 Stable Markets 47,013 2,600 32% x 13.3x 104 2,704 Higher- Yielding Markets 39,215 1,824 22% x 12.6x 60 1,884 Subtotal NRW 125,168 7,971 98% x 14.4x 358 8,329 Portfolio outside NRW 1, % 1, x 15.5x Total Portfolio 127,063 8, % x 14.5x 360 8,475 Other Assets 303 Total 8,778 46

47 Rhein-Erft-Kreis Bonn Düsseldorf Rhein-Sieg-Kreis Gütersloh, district Cologne Münster Rhein-Kreis Neuss Coesfeld, district Rheinisch-Bergischer Kreis Kleve, district Paderborn, district Steinfurt, district Heinsberg, district Aachen, city region Borken, district Euskirchen, district Bielefeld Mettmann, district Leverkusen Soest, district Mülheim (Ruhr) Dortmund Wesel, district Warendorf, district Olpe, district Oberbergischer Kreis Essen Düren, district Viersen, district Solingen Unna, district Siegen-Wittgenstein, district Mönchengladbach Hamm Wuppertal Krefeld Ennepe-Ruhr-Kreis Minden-Lübbecke, district Herford, district Oberhausen Hochsauerlandkreis Lippe, district Bottrop Bochum Recklinghausen, district Märkischer Kreis Höxter, district Herne Remscheid Hagen Duisburg Gelsenkirchen High Quality Portfolio Classification of micro markets High Growth Markets Stable Markets with Attractive Yields Higher Yielding Markets Population Growth % (0.4)% (0.4)% Household Forecast (%) 1) 6.2% (0.6)% (6.1)% Purchasing Power Index 2015 Employment Growth (%) Market Vacancy 2015 (unweighted) % 5.5% 3.8% 2.6% 3.7% 4.7% Sources: inwis, BBSR, Empirica, CBRE 1) Excludes immigration Population Households Buying power Contributors to social insurance Rent Vacancy 47

48 Portfolio Overview Above inflationary rent growth and high occupancy EPRA-vacancy of 3.4% (l-f-l) as of Q Significant rent upside 1) potential with current in-place rents of 5.39/sqm/month (as of Q2-2017), approx. 9% below market rent levels In-place rent for unrestricted units has increased by approx. 3.7% (l-f-l) yoy, outperforming inflation Market (Q2-2017) Residential Units % of total rent Rent /sqm Market rent 3) Rent CAGR last /sqm % to market 1) EPRA-Vacancy 5 yrs (lfl)* Occup. CAGR last 5 yrs* High Growth Markets 38,940 36% % 1.8% 2.7% 6.8% Stable Markets With Attractive Yields Higher Yielding Markets 47,013 36% % 3.5% 1.8% 11.2% 39,215 27% % 6.4% 2.1% -0.8% Total 2) 127, % % 3.7% 2.4% 5.0% Market (Q2-2017) % Subsidised units Rent /sqm EPRA- Vac. (%) Rent CAGR last 5 yrs (lfl)* Occ. change last 5 yrs* % free financed units Rent /sqm EPRA- Vac. (%) Rent CAGR last 5 yrs (lfl)* Occup. CAGR last 5 yrs* High Growth Markets Stable Markets With Attractive Yields 32% % 0.9% 15.3% 68% % 3.7% 3.1% 30% % 0.6% 12.7% 70% % 2.8% 10.7% Higher Yielding Markets Source: LEG, CBRE * As of FY-2016 and FY-2011 Note: Rent change free financed/subsidised is same store. 1) rent upside is defined as the difference between LEG in-place rent and market rent, the latter of which is an indicator of an average rent value that could theoretically be achieved, not implying that an adjustment of the in-place rent to the market rent is feasible, as stringent legal and contractual restrictions regarding rent increases exist. 2) Total includes an additional 1,895 residential units located outside NRW 3) Cf. Footnote 1 for a definition of market rent 48 21% % 0.6% -0.5% 79% % 2.7% -1.0% Total 2) 28% % 0.8% 7.8% 72% % 3.3% 3.6%

49 Portfolio Overview Well-balanced portfolio with significant growth potential Units Gross Asset Value Rental Income 1% 2% 2% By Market 31% 31% 22% 44% 27% 36% 37% 32% 36% High Growth Markets Stable Markets with Attractive Yields Higher Yielding Markets Non-NRW Markets Restricted Subsidised 28% Subsidised 27% Subsidised 26% vs. Unrestricted Freefinanced 72% Freefinanced 73% Freefinanced 74% 49

50 Leading Performance Capex Watch the value traps Measure Life cycle Investment / apartment (in ) IRR at 7% yield on costs Required yield on costs (6% IRR) Rent increase in % Floor covering 15 years 1, % 10.3% 2.6% Bathroom 30 years 5, % 7.3% 8.5% Kitchen 10 years 3,000 negative 13.6% 9.5% Conclusion for LEG: Bottom-up investment approach with strict IRR targets Capital displine is key not overpaying for growth 50

51 Cost Rent: Reversionary Potential Rent Potential Subsidised Units In the following 10 years around 9,000 units will come off rent restriction Units show significant upside to market rents Subject to general legal and other restrictions, the economic upside can theoretically be realised the year after restrictions expire 10 years 75.1% 5 years 10.2% 6-10 years 14.6% Number of Units Coming Off Restriction and Rent Upside # Units 2,673 26,344 1,856 1, * H ff * 2,095 units in Q Spread to Market Rent /sqm /month ff 5 years 2) 6 10 years 2) 10 years 2) In-place rent Market rent 1) Upside potential 3) 49% 19% 24% Upside potential p.a. 3) 6.8m 3.6m 24.7m Source: LEG as of Q ) Employed by CBRE as indicator of an average rent value that could theoretically be achieved, not implying that an adjustment of the in-place rent to the market rent is feasible, as stringent legal and contractual restrictions regarding rent increases exist. 2) 5 years = ; 6-10 years = ; 10 years = 2027ff. 3) Rent upside is defined as the difference between LEG in-place rent as of Q and market rent (defined in footnote 1) as of Q

52 Update on Rent Regulation Free financed units Existing contracts max. 20% (15% in 59 NRW cities) within 3 years; limit: local reference rent 1) after modernization: annual rent can be increased by 11% of modernization costs (modernization charge) New contracts markets without rental cap: no regulation in tense markets 2) the rental cap (Mietpreisbremse) applies: max. 10% on local reference rent 1) Low impact of rental cap on LEG: 23% of free financed units or 17% of total portfolio concerned 15% threshold to be abolished in NRW acc. to new coalition agreement rental cap to be abolished in NRW acc. to new coalition agreement Future changes on rent regulation are likely to depend on the outcome of the German federal elections in 2017 Rent restricted units Cost rent adjustment every 3 years (2017, 2020) 1) Based on rent table (Mietspiegel) or 3 comparable units or expert s report 2) 22 cities in NRW: Aachen, Bielefeld, Bocholt, Bonn, Brühl, Düsseldorf, Erkrath, Frechen, Hürth, Kleve, Cologne, Langenfeld, Leverkusen, Meerbusch, Monheim, Münster, Neuss, Paderborn, Ratingen, Sankt Augustin, Siegburg, Troisdorf 52

53 Thank you for your interest.