NORATIS ENHANCEMENT OF PROPERTY VALUES

Transcription

1 September 2018

2 DISCLAIMER This document is not a securities prospectus, and the information contained therein does not constitute an offer to sell, or a solicitation of an offer to buy, securities of Noratis AG ( Noratis ) in the Federal Republic of Germany or in any other country, specifically not if such an offer or solicitation is prohibited or not approved. The information contained in this document may not be distributed outside the Federal Republic of Germany, specifically not in the United States of America, to US persons (as defined in Regulation S under the United States Securities Act of 1933) or to publications with a general circulation in the United States, unless such distribution outside the Federal Republic of Germany is prescribed by mandatory provisions of applicable law. Any violation of these restrictions may constitute a breach of the securities laws of certain countries, in particular those of the United States of America. Securities of Noratis are not publicly offered for sale outside the Federal Republic of Germany. to be correct. In particular, any statements on acquisitions presuppose the actual signing of the necessary contracts or the successful procurement of the necessary equity and debt capital. The future development and actual results achieved by Noratis and its affiliates are subject to a number of risks and uncertainties, and may therefore differ materially from these forward-looking statements. Many of these factors are beyond Noratis' control and cannot be accurately appraised in advance, including the future economic environment or the actions of competitors and other market players. Noratis does not intend to update its forward-looking statements. This document contains forward-looking statements based on current estimates and assumptions made by the senior management of Noratis. Such statements are not to be understood as guarantee that predictions of this sort will prove

3 NORATIS ENHANCEMENT OF PROPERTY VALUES Listed, specialised developer-trader of residential property portfolios based in Eschborn near Frankfurt am Main Covering all core functions along the value chain (acquisition, technical/ commercial development and sales) with own employees Focus on portfolios with c. 20 up to 1,000 residential units of basic to medium-range standard with potential for development Enhancement of property values in the interest of all stakeholders, from tenants and financing partners to investors Investments across Germany with focus on peripheral regions of metropolitan areas and cities with stable demographic development Preferably housing estates, employee housing and quarters of the 1950s to 1970s; flexibility regarding property conditions

4 AGENDA 1. Company overview Projects Market Financials Strategy and summary Appendix 29

5 Location Riedstadt 1. Company overview

6 1. COMPANY OVERVIEW Long-standing experience in the construction, real estate and financial sector Igor Christian Bugarski CEO/civil engineer Operations l Sales l Legal l HR Since 2011 shareholder of Noratis Long-standing real estate experience (CBRE, DeTeImmobilien) Financing l Controlling l IR l IT Since 2015 at Noratis André Speth CFO/MBA Investment banking background (Morgan Stanley, Deutsche Bank) 6

7 1. COMPANY OVERVIEW Development of existing properties with clear exit strategy for each portfolio Acquisition Focus on housing stocks with potential for development in secondary locations Development Value increase through development measures and active asset management Investment cycle usually 2 to 3 years Reinvestment Reinvestment of disposal proceeds; positioning as attractive dividend stock Sales Disposal through block sales and/or sales of individual apartments 7

8 Retu rn 1. COMPANY OVERVIEW Business model with an attractive risk-return profile combines... + PROPERTY DEVELOPER... the advantages of a property developer with Excess return: through realisation of developer margin upon disposal Potential: reduction of vacancy rates and increase of rents due to development measures Exit orientation: clear definition of development measures and exit strategy for each portfolio PORTFOLIO DEVELOPER NORATIS PORTFOLIO HOLDER... the advantages of a portfolio holder Substance: stable assets with significant hidden reserves Cash flow: recurring cash flows from rents Stability: rents cover both capital and operating costs Risk avoidance: no increase in vacancy rate through tenant-friendly modernisation of the portfolio Risk + 8

9 1. COMPANY OVERVIEW Our strengths along the value chain ACQUISITION DEVELOPMENT SALES Established network with over 4,000 contacts Outstanding access to sellers and brokers with a high number of off-market offers Doubling of the offers received to more than 150,000 residential units since 2015 Specific contact and information management tool Collection and assessment of all incoming offers through the Company s customised IT tool Market information for secondary locations available internally Team with great expertise in planning and managing development measures executed by external partners High specialisation and process standardisation including technical due diligence High cost transparency and planning security Asset management team monitors external facility managers and realises rent potentials Continuous reduction of vacancy rates, increase of rents and improvement of payment behaviour High flexibility and use of local know-how Exit strategy with two distribution channels Block sales Sales of individual apartments Own sales employees on site in case of sales of individual apartments No remaining apartments ( Swiss cheese ) High acceptance and trust of residents No dependency on external sales partners High consulting quality Identification of sales team with both the asset and the Company Transparent and efficient communication with tenants 9

10 Location Erfurt area 2. Projects

11 2. PROJECTS Locations of current and sold projects (units) (1) Current projects Sold projects (1) As of 31 August 2018, units including commercial properties and secured acquisitions; exclusively projects from 2014 onwards mentioned here; (2) Thereof 47 already acquired in

12 Block Retail 2. PROJECTS Track record: all projects concluded successfully (1) Project Acquisition Sales completion Duration (months) Residential units ( ² ) Rental area (in m²) 1. Heddesheim Jan 12 Dec , Neu-Isenburg May 13 Jan Bad Homburg Jan 14 Jul , Ulm Jun 14 Oct , Krefeld I/II Jun 14/Jan 15 Jan 18/Jan 17 43/ , Dormagen V Oct 15 Aug , Koblenz Sep 12 Dec , Steinau Jan 13 Jun , Bad Hersfeld Jan 13 Sep , Friedberg May 13 Dec , Zweibrücken Sep 13 Sep , Mayen Feb 14 Mar (3) 11, Ulm Jul 14 Mar , Bünde Dec 14 Oct , Dormagen I Oct 15 Oct , Dormagen II Oct 15 Jan , Dormagen III/IV Oct 15 Dec , Schwarzenbek Jun 15 Jun ,800 Total 25 1, ,900 (1) As of 31 August 2018, exclusively completed projects from 2014 onwards mentioned here; (2) Units including commercial properties; (3) Thereof 47 already acquired in

13 Retail Block Block New PROJECTS Current stock of c. 2,000 units (1) Project Acquisition Residential units (2) Rental area (in m²) Sales start 1. Zweibrücken Sep (of 24 in total) 1,300 before Großkrotzenburg Aug ,000 in Riedstadt Sep ,200 after Dormagen V Oct (of 88 in total) 900 before Erlensee Sep ,500 after Frankfurt Niederrad Oct ,400 in Trier I Jun 16/May ,200 in Erfurt area Jan ,300 after Rügen (Dranske) Mar ,600 after Rügen (Sagard) Mar ,300 after Gladbeck May ,000 after Frankfurt Bornheim Jul ,900 in Ratzeburg/Mölln Nov ,600 after Frankfurt Fechenheim Dec ,500 after Celle/Königslutter Jun ,700 after 2018 Total as of 30 June ,404 95, Trier II Jul ,300 in 2018 Frankfurt Rödelheim Aug after Frankfurt Ginnheim ( ³ ) expect. Sep ,200 after Ratingen ( ³ ) expect. Dec ,000 after 2018 Total 1, ,400 (1) As of 31 August 2018; (2) Units including commercial properties; (3) Secured acquisition (notarised purchase agreement) 13

14 2. PROJECTS Current portfolio with a book value of 114 m EUR accounted at cost (1) Portfolio overview as of June 2018 Distribution by region (in % based on m²) Number of assets (in units) 1,404 thereof residential (in units) 1,396 thereof commercial (in units) 8 Number of garages and parking Hesse Lower Saxony Mecklenburg-Western Pomerania North Rhine-Westphalia Rhineland-Palatinate Schleswig-Holstein Thuringia Total rental space (in '000 m²) 95.4 thereof residential (in '000 m²) 91.9 Distribution by use (in % based on m²) thereof commercial (in '000 m²) 3.5 Total vacancy (in %) 16.3 In-place rent annualised (in m EUR) Residential use Commercial use Total book value (in m EUR) (1) As of 30 June

15 2. PROJECTS Current pipeline of c. 120 m EUR with c. 1,500 units (1) Incoming offers 2015 to 2017 Competitive advantages Deep market penetration with know-how and network also for small and medium-sized portfolios as well as secondary locations Flexibility regarding portfolio size, location and property conditions Strong market position as a reliable, renowned partner Speed due to size and efficiency of the Company Offer receipts Offer assessment Contracts signed '000 units bn EUR '000 units m EUR 1, units m EUR (2) 45 Standardised testing processes for a short due diligence period with high cost accuracy Period from offer receipt to signature of purchase contract possible within 8 weeks (1) As of 25 September 2018 (on-going update of the projects under review); (2) Limited acquisitions due to high amount of tied-up equity 15

16 Location Großkrotzenburg 3. Market

17 3. MARKET Favourable market conditions for German residential properties Socio-economic development Growth in population and households due to immigration, singularisation and rising demand for space per capita Price increases due to shortage of supply and insufficient construction activity Stable economic growth with a positive trend in the labour market and rising incomes Favourable financing environment with historically low interest rates and insufficient supply of investment opportunities Completed and required construction activities (in '000 units) Completions Permits Demand Residential property market Continuously strong demand for high quality and affordable housing (rental rates below 10 EUR/m² living space per month) Profitable leasing of newly developed apartments not possible below 10 EUR/m² p.m. Increase of construction costs by 30 % from c. 1,300 EUR/m² in 2007 to c. 1,700 EUR/m² in 2017 Further rising construction costs expected due to an increase in regulations Construction costs at the time of permission (in EUR/m 2 ) 1,565 1,478 1,391 1,332 1,262 1, Sources: BBSR, Statistisches Bundesamt 17

18 3. MARKET Stable market segment with sustainable growth potential Market segment Stable trading levels of portfolios with 100 to 800 units compared to the total market with significantly lower volatility Relatively stable trading volumes also during the financial crisis 2009 and 2010 On average c. 22,200 p.a. residential units sold within the segment of small transactions from 2007 to 2017 Residential properties sold by portfolio size (in '000) to 800 Total transaction volume 0 Market potential Sustainable market potential due to aging of a large national housing stock (need for renovation and modernisation) Targeted market segment (construction year between 1919 and 1986) comprising c. 70 % of the existing housing stock Insufficient capital expenditure throughout the nation-wide housing stock to fulfil modern requirements Housing stock by construction year (in %) m units before to to to to to to 2010 after 2011 Sources: BBSR, Statistisches Bundesamt 18

19 Location Frankfurt Niederrad 4. Financials

20 4. FINANCIALS Significant increase of both revenues and earnings Total revenues (in m EUR) Gross sales profit (in m EUR) Sales revenues Rental revenues Sales margin (in %) H H Gross rental profit (in m EUR) H EBIT (in m EUR) EBT (in m EUR) Net profit (in m EUR) 15.2 (1) (2) H H H Accounting according to German GAAP l Revenues primarily driven by portfolio sales l No comparison (financial ratios etc.) to portfolio holders l Stable profitability growth with continuously rising sales margins (1) Before IPO costs 16.7 m EUR; (2) Before IPO costs 13.7 m EUR 20

21 4. FINANCIALS German GAAP accounting does not reflect hidden reserves of the portfolio Bilanzsumme Assets (in m EUR) Aktiva H H Equity and liabilities (in m EUR) Cash and other current short-term assets Shareholders' equity Primarily cash, also includes own bond repurchased (2.9 m EUR) Improvement through operating success and capital raising; hidden reserves not reflected Inventory properties German GAAP accounting of all properties as inventory at cost (trading); hidden reserves not reflected (c. 21 m EUR as of 31 December 2017) Bond Unsecured bond issued before IPO Bank debt Primarily secured and unsecured bank loans, also includes leasing and accrued interest Other assets Other liabilities Non-current assets and prepaid expenses Primarily provisions for pending capex of sales and profit-related tax provisions Total assets Total shareholders' equity and liabilities 21

22 4. FINANCIALS Development of key financing ratios Net LTC (in %) (1) Equity ratio (in %) (2) H H Net debt/ebit (3) EBIT interest coverage ratio (4) H H (1) Net debt divided by book value of properties; (2) Book equity divided by balance sheet total; (3) Net debt over LTM EBIT; (4) LTM EBIT divided by LTM net interest 22

23 4. FINANCIALS Financing structure (1) Financing structure (in m EUR) 86.0 (Total average cost of debt of 2.5 %) Maturity profile of financial liabilities up to 1 year 5.7 Bond 17 % 11.7 Interest rate p.a.: 7.5 % Shareholders and friends & family Issued before IPO over 5 years 27 % 86.0 m EUR 67 % 1 to 5 years 68.6 Unsecured bank debt Average interest rate p.a.: 5,0 % Foreign bank: various tranches with 2 years maturity (pre-ipo engagement) Revolving credit facility Secured bank debt Average interest rate p.a.: 1,6 % Usually regional savings banks Secured by land charges Usually no SPV financing Covenants Unsecured bank debt Loan-to-value Equity ratio Interest coverage rate Covenant test quarterly and yearly (for revolving credit facility) No covenants for secured debt 1 (1) As of 30 June

24 Location Dranske 5. Strategy and summary

25 5. STRATEGY AND SUMMARY Strategic focus to be kept Focused strategy Development of residential property portfolios with a clear exit strategy for each portfolio Revenues primarily driven by portfolio sales, but increasing share of rental revenues High yields compared to portfolio holders and lower risks compared to property developers Continuing growth Growth of the project portfolio Continuous generation of disposal profits by simultaneously selling multiple projects Use of economies of scale with costs rising slower than revenues Proven acquisition profile Investment focus on portfolios up to c. 1,000 residential units Attractive niche with stable trading volumes and room for further growth Transaction processes of smaller portfolios less competitive Sustainable dividends High dividend potential Positioning as attractive dividend stock C. 50 % of annual profits based on German GAAP accounting distributed to shareholders 25

26 5. STRATEGY AND SUMMARY Investment Highlights Focused business model Attractive risk-return profile between portfolio developer and portfolio holder Positioning as dividend stock with c. 50 % of annual profits distributed to shareholders Attractive market segment Market segment with lower volatility (prices and rents) as well as attractive returns Stable trading levels of portfolios with 100 to 800 residential units High growth potential Preferred portfolio size usually too big for private investors and too small for institutional investors Market potential due to aging of existing housing stock; new construction significantly more expensive Scalability of the platform Main platform investments already made; economies of scale are realisable Covering all core functions along the value chain with own employees Experienced management Longstanding track record with solely successfully sold portfolios Excellent market reputation Hidden reserves Hidden reserves in the German GAAP balance as additional stabilisation and portfolio value 26

27 5. STRATEGY AND SUMMARY Capital market information Key data Shareholder structure (in %) ISIN/WKN Ticker symbol DE000A2E4MK4/A2E4MK NUVA 18.5 Igor Christian Bugarski Type of shares Market capitalisation c. 90 m EUR (1) 3,601,897 no-par value ordinary bearer shares Free float Terratis GmbH (Oliver C. Smits) Share capital 3,601, EUR 18.4 Hansa Consulting Initial listing 30 June 2017 Initial issuing price EUR (capital increase for EUR May 2018) Development of share price since IPO (in EUR) (1) Segment Designated sponsor Research Frankfurt Stock Exchange (Scale Segment) ICF BANK AG Independent Research (25 June 2018) buying ; target price: EUR SMC Research (25 June 2018) buying ; target price: EUR Solventis Beteiligungen (08 May 2018) buying ; target price: EUR Jul 17 Sep 17 Nov 17 Jan 18 Mar 18 May 18 Jul 18 Sep 18 (1) As of 25 September

28 5. STRATEGY AND SUMMARY Noratis in numbers at a glance (1) The average annual growth in profit (2014 to 2017) amounting to 121 % Volume of more than 150 m EUR with c. 1,800 units successfully sold since 2014 Established network of over 4,000 contacts Current portfolio of c. 2,000 residential units ( ² ) The acquisition of the Dormagen portfolio in 2015 comprising 755 c.32m EUR proceeds through IPO and capital increase residential units with a renting area of around 50,000 m² as the largest project so far The average project duration from acquisition to disposal amounting to (3) 25 months (1) As of 31 August 2018; (2) Units including commercial properties and secured acquisitions (notarised purchase agreement); (3) Since

29 Location Dormagen 6. Appendix

30 APPENDIX 1 FINANCIALS Consolidated balance sheet Active (in EUR) H A. Fixed assets 508, ,864 84,013 I. Intangible assets 59,293 68,154 2,688 II. Property, plant and equipment 448, ,710 81, Properties 10,335 10,575 11, Other assets, equipment 438, ,135 70,269 B. Current assets 133,647, ,464,916 86,955,462 I. Properties for sale 114,091,760 99,026,763 80,182,030 II. Receivables and other current assets 4,095,051 5,618,503 1,012, Accounts receivable 678,031 1,671, , Other (current) assets 3,417,020 3,947, ,080 III. Securities 2,903,060 3,927,565 0 IV. Cash and cash equivalents 12,558,063 17,892,085 5,761,371 Passive (in EUR) H A. Shareholders equity 42,788,910 29,274,509 6,640,077 I. Subscribed capital 3,601,897 2,920, ,000 II. Capital reserve 31,490,786 16,830,000 2,000,000 III. Retained profit 7,467,152 9,284,852 4,136,984 IV. Non-controlling interests 229, ,657 3,093 B. Provisions 3,028,604 7,273,489 3,356, Tax provisions 608,170 4,355,932 1,635, Other provisions 2,420,434 2,917,557 1,721,362 C. Liabilities 87,852,501 90,204,594 77,429, Bonds 5,715,200 5,946, Liabilities to financial institutions 80,403,206 80,250,007 70,625, Advance payments 8, ,500 5, Accounts payable 1,193, , , Other liabilities 532,372 3,082,477 6,345,951 D. Deferred income 41, ,021 55,493 C. Prepaid expenses 835, , ,180 Total assets 134,991, ,838,425 87,481,654 E. Deferred tax liabilities 1,280, ,811 0 Total shareholders' equity and liabilities 134,991, ,838,425 87,481,654 30

31 APPENDIX 1 FINANCIALS Consolidated income statement in EUR H H Total revenues 20,777,726 33,058,639 67,988, Increase/reduction of inventory property 14,869, ,472 1,760, Other operating income 621,199 81, , Expenses -27,935,993-23,654,477-48,225,795 a) Expenses from sale of inventory property -26,325,131-22,595,081-45,934,405 b) Renting expenses -1,610,862-1,059,396-2,291, Personnel expenses -1,690,036-1,104,737-2,380, Depreciation on intangible fixed assets and property, plant and equipment -76,036-26,692-95, Other operating expenses -1,875,591-2,156,073-3,994, Other interest and similar income 135, , Interest and similar expenses -1,330,415-1,509,764-3,133, Taxes on income and earnings -921,316-2,023,407-3,564, Other taxes -1,441-1,838-2, Profit for the period 2,572,883 3,334,904 8,671, Minority interest -10, , Profit attributable to shareholders 2,562,301 3,334,858 8,664,367 31

32 APPENDIX 2 CASE STUDY Track record in Dormagen demonstrates successful business model ACQUISITION DEVELOPMENT SALES Residential units: 755 Rental area: c. 50,000 m² Construction year: 1965 Acquisition: October 2015 Property condition Buildings: substance diverging from sufficient to good, maintenance backlog Apartments: partly in great need for modernisation Image enhancement and improved living quality of the whole quarter Extensive investments in the building substance Facades, balconies, entrances, staircases Walls, roofs, floor coverings, bathrooms, kitchens, mould removal Optical enhancement of the surrounding grounds Reduction of a 30 % vacancy rate due to capex spending and active management Monthly rents of new leases higher than expected with an increase from 6.50 EUR/m² up to 7.60 EUR/m² Attractive margins generated by both block sales and retail sales First block sale already after 12 months Additional block sales after 15 and 23 months 32

33 APPENDIX 2 CASE STUDY Upgrading the entire residential area: outdoor areas and buildings 33

34 APPENDIX 2 CASE STUDY Renovation work in kitchen, living room and bathroom 34

35 Noratis AG Hauptstraße (0) Eschborn +49 (0) Thank you for your attention!