QUARTERLY FINANCIAL REPORT AS AT 30 SEPTEMBER 2018

Transcription

1 QUARTERLY FINANCIAL REPORT AS AT 30 SEPTEMBER 2018

2 KEY GROUP FIGURES ACCORDING TO IFRS Earnings indicators Unit 01/01/ /09/ /01/ /09/2017 Change in % Rental income in EUR k 166, , Net operating income from letting activities (NOI) in EUR k 147, , Disposal profits in EUR k Net income for the period in EUR k 200, , Funds from operations (FFO) in EUR k 100,397 70, FFO per share 1 in EUR Unit 30/09/ /12/2017 Change in % Balance sheet metrics Investment property in EUR k 3,712,866 3,383, Cash and cash equivalents in EUR k 136, , Total assets in EUR k 4,076,931 3,835, Equity in EUR k 2,047,970 1,936, Equity ratio in % pp Interest-bearing liabilities in EUR k 1,587,478 1,541, Net debt in EUR k 1,450,869 1,340, Net LTV 2 in % pp EPRA NAV in EUR k 2,435,158 2,228, EPRA NAV per share 1 in EUR Key portfolio performance indicators Unit 30/09/ /12/2017 Change in % Property value 3 in EUR k 3,722,121 3,400, Properties number units Annualised in-place rent 4 in EUR k 225, , In-place rental yield in % pp EPRA Vacancy Rate in % pp WALT in years years Average rent in EUR/sqm Total number of shares as at 31 December 2017: m; as at 30 September 2018: m The weighted average number of shares was 73.4 m by 30 September 2017 and m by 30 September Calculation: Net debt divided by real estate assets; for the composition see page 18 3 In line with values disclosed according to IAS 40, IAS 2, IAS 16 and IFRS 5 4 The annualised in-place rent is calculated using the annualised rents agreed as at the reporting date not factoring in rent-free periods. Related links Web reference

3 CONTENTS 02 FOREWORD BY THE MANAGEMENT BOARD 04 TLG IMMOBILIEN SHARES 07 EPRA KEY FIGURES 11 CONSOLIDATED INTERIM MANAGEMENT REPORT COMPANY FUNDAMENTALS ECONOMIC REPORT REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 20 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 23 CONSOLIDATED CASH FLOW STATEMENT 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 25 CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 25 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN 26 B. EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS 28 C. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 D. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 31 E. OTHER INFORMATION 33 FINANCIAL CALENDAR CONTACT PUBLISHING DETAILS Title illustration: office building, Hauptstrasse 129, Eschborn

4 2 FOREWORD BY THE MANAGEMENT BOARD FOREWORD BY THE MANAGEMENT BOARD Dear shareholders, dear Sir or Madam, dear business partners and tenants, As you have surely seen in our company s press releases, as the new members of the Management Board, we have been in charge of the development of TLG IMMOBILIEN since mid-september. In recent years, the company has successfully established itself as a leading commercial real estate platform in Germany. This is also reflected by the positive figures from the first three quarters and our confident outlook for 2018 as a whole. We look forward to leading the company into a sustainably profitable future with our highly motivated employees. We have gained excellent insights into the Group over the past few weeks alone. Given the quality and potential of our properties combined with the solid capital structure of the company, we want to add new chapters to the success story of TLG IMMOBILIEN as a listed company by generating value and paying stable dividends.

5 FOREWORD BY THE MANAGEMENT BOARD 3 In future, we aim to generate an exceptional total shareholder return for our shareholders across economic cycles and asset classes. Our well-balanced property portfolio, the majority of which is located in growing markets such as Berlin, Frankfurt/Main, Dresden and Leipzig, will continue to serve as our platform. As such, we see substantial potential for value growth in our existing, high-quality portfolio in key central locations that are experiencing a persistent scarcity of supply. Furthermore, as in previous years, we will continue to push for strategic, value-increasing acquisitions in our core regions, and will systematically dispose of non-strategic properties as well. The unbroken trend towards greater urbanisation will keep demand for quality office and retail properties high in future. We want to profit more from this than we have done in the past by continuing to invest in the value and quality of our existing properties. We are working hard to assess the potential of existing land and buildings for development and redevelopment. This can include adding new storeys to a retail property or even a large-scale project such as our plans to expand our property portfolio on Alexanderplatz in Berlin, which we announced in mid-october. We see the potential for around 100,000 sqm of additional space in this one element of our portfolio on one of the most famous, highest-quality squares in Germany. A solid financing policy will remain our highest priority in this context. With the associated measures, we will continue to increase our property value which, at over EUR 3.7 bn as at 30 September 2018, has more than doubled since the IPO in late 2014 substantially over the next few years. Our steady focus on high in-place rental yields, low vacancy rates and maximising the remaining terms of rental agreements aims to continue to increase our long-term earnings. Combined with a financing strategy based on local credit services as well as the international capital markets, we will create efficient, balanced financing structures with attractive rates. This will also benefit our shareholders to a reasonable extent in future. We look forward to undertaking and shaping this journey with you. Yours faithfully, Gerald Klinck Chief Financial Officer Jürgen Overath Chief Operating Officer

6 4 TLG IMMOBILIEN SHARES TLG IMMOBILIEN SHARES Positive data from the US economy and job market, a robust ifo Business Climate Index and the promise of the European Central Bank to keep interest rates low until at least the summer of 2019 supported stock markets in the first three quarters of However, growing political uncertainty in Germany, the worsening trade war between the USA and China, weak Purchasing Managers Indices for Germany and Europe and the decision of the European Central Bank to halt its bond-buying programme (quantitative easing) have placed pressure on stock markets. The German stock index DAX therefore declined in the first three quarters of the year and closed at 12, points on 28 September As a result, the DAX decreased by a total of 5.0% compared to its opening price on 2 January The SDAX was volatile in the first three quarters, decreasing slightly by 0.2% between early January and September German real estate share prices experienced positive growth. The FTSE EPRA/NAREIT Germany Index grew by 7.2% in the first three quarters. In contrast, the FTSE EPRA/NAREIT Europe Index declined by 2.7% in the same period. PERFORMANCE OF THE SHARES BY INDEX in % /01/ /11/2018 TLG IMMOBILIEN AG SDAX FTSE EPRA/NAREIT Europe Real Estate FTSE EPRA/NAREIT Germany The shares of TLG IMMOBILIEN reached their highest value on Xetra in the first three quarters at EUR on 17 May The shares closed the reporting period at EUR 22.48, which represents an increase of 1.5% compared to the opening price at the start of the year.

7 TLG IMMOBILIEN SHARES 5 TLG IMMOBILIEN SHARE DATA ISIN/WKN Ticker symbol DE000A12B8Z4/A12B8Z Share capital in EUR 103,270, Number of shares (no-par value bearer shares) as at 28/09/ ,270,697 Indices (selection) Sector/sub-sector Market segment Designated sponsors TLG SDAX, EPRA/NAREIT Global Index, EPRA/NAREIT Europe Index, EPRA/NAREIT Germany Index Real estate Regulated market (Prime Standard) Commerzbank AG, ODDO SEYDLER BANK AG Reporting period high on 17/05/2018 (Xetra) in EUR Reporting period low on 06/02/2018 (Xetra) in EUR Closing price on 28/09/2018 (Xetra) in EUR Market capitalisation in EUR m 2,321.5 SHAREHOLDER STRUCTURE AS AT 30 SEPTEMBER 2018 * 9.25 Government of Singapore Free float Prof. Dr. Gerhard Schmidt Amir Dayan/Maria Saveriadou * Data based on the latest voting rights notifications Government of Singapore: Indirect shareholding as reported for 6 October The government of Singapore is the majority shareholder of GIC Private Limited which held all of the reported voting rights of the company as at the key date. On that date, the total number of voting rights was 94,611,266. Prof. Dr. Gerhard Schmidt: Attributed shareholding as reported for 19 June The shares are held by DIC Real Estate Investments GmbH & Co. Kommanditgesellschaft auf Aktien. On that date, the total number of voting rights was 103,225,855. Amir Dayan/Maria Saveriadou: Attributed shareholding as reported for 14 April The shares are held by Ouram Holding S.à.r.l. On that date, the total number of voting rights was 102,347,838. Free float: Shareholding <5%. The diagram shows the voting rights last disclosed by shareholders according to Sec. 33 and Sec. 34 of the German Securities Trading Act (WpHG), based on the share capital of TLG IMMOBILIEN AG at the time. Please note that the last disclosed number of voting rights might since have changed within the thresholds without the shareholders being obliged to inform the company.

8 6 TLG IMMOBILIEN SHARES COVERAGE BY ANALYSTS Bank Target price in EUR Rating Analyst Date Bankhaus Lampe Hold Georg Kanders 02/11/2018 Baader Bank Hold Andre Remke 31/10/2018 HSBC Buy Thomas Martin 29/10/2018 VictoriaPartners n/a Bernd Janssen 16/10/2018 Commerzbank Buy Tom Carstairs 11/10/2018 M.M.Warburg Hold J. Moritz Rieser 31/08/2018 Kepler Cheuvreux Buy Thomas Neuhold 14/08/2018 J.P. Morgan Neutral Tim Leckie 14/08/2018 Bank of America Merrill Lynch Buy Camille Bonnell 13/08/2018 Berenberg Buy Kai Klose 13/08/2018 Deutsche Bank Hold Markus Scheufler 10/08/2018 UBS Neutral Osmaan Malik 10/08/2018 Kempen & Co Neutral Mihail Tonchev 10/08/2018 Jefferies Hold Thomas Rothäusler 10/08/2018 Source: Bloomberg (as at 2 November 2018) and broker research Bank of America Merrill Lynch started covering the shares of TLG IMMOBILIEN AG in the first quarter of 2018 and NordLB discontinued its coverage in the third quarter. INVESTOR RELATIONS ACTIVITIES TLG IMMOBILIEN AG attended the following national and international conferences in the first three quarters of 2018: J.P. Morgan European Real Estate CEO Conference, London ODDO & Cie ODDO BHF FORUM, Lyon UniCredit Kepler Cheuvreux German Corporate Conference, Frankfurt/Main ODDO SEYDLER 12 th ODDO BHF German Conference, Frankfurt/Main Commerzbank German Real Estate Forum, London UBS Pan European Small & Mid Cap Conference, London Kepler Cheuvreux German & Austrian Property Days, Paris Kempen 16 th European Property Seminar, Amsterdam Berenberg Real Estate Seminar 2018, Helsinki Berenberg and Goldman Sachs Seventh German Corporate Conference, Munich Baader Investment Conference 2018, Munich Bank of America Merrill Lynch Global Real Estate Conference, New York Société Générale PanEuropean Real Estate Conference, London The figures for 2017 were published on 23 March 2018, the first quarterly financial report on 15 May 2018 and the half-year financial report on 10 August 2018 and discussed with investors and analysts in a teleconference. Recordings of the teleconferences and the report documents are available in the Investor Relations section of our website,

9 EPRA KEY FIGURES 7 EPRA KEY FIGURES TLG IMMOBILIEN AG is a member of the EPRA and, as a company listed on a stock exchange, publishes the key figures in line with the Best Practices Recommendations of the EPRA for the sake of transparency and comparability. Overview of key figures according to EPRA in EUR k 30/09/ /12/2017 Change Change in % EPRA NAV 2,435,158 2,228, , EPRA NNNAV 1,998,609 1,827, , EPRA Net Initial Yield (NIY) in % pp EPRA topped-up Net Initial Yield in % pp EPRA Vacancy Rate in % pp in EUR k 01/01/ /09/ /01/ /09/2017 Change Change in % EPRA Earnings 98,018 56,023 41, EPRA Cost Ratio (including direct vacancy costs) in % pp EPRA Cost Ratio (excluding direct vacancy costs) in % pp The increase in the EPRA NAV is due primarily to the increase in equity which in turn was essentially due to the net income generated for the period. Compared to the previous year, the EPRA Cost Ratios decreased as special items resulting from consulting services prior to the takeover of WCM AG, for example, influenced earnings for 2017.

10 8 EPRA KEY FIGURES The reconciliation of the individual EPRA key figures is as follows: EPRA Earnings in EUR k 01/01/ /09/ /01/ /09/2017 Change Change in % Net income for the period 200, ,497 71, Result from the remeasurement of investment property 186, ,089 58, Result from the disposal of investment property Result from the disposal of real estate inventories Tax on profits or losses on disposals Result from the remeasurement of derivative financial instruments and refinancing costs 474 4,873 4, Acquisition costs of share deals 1,938 6,991 5, Deferred and actual taxes in respect of EPRA adjustments 85,591 54,319 31, Non-controlling interests 2, ,307 n/a EPRA Earnings 98,018 56,023 41, Average number of shares outstanding in thousands 1 102,688 73,435 EPRA Earnings per share in EUR Total number of shares as at 31 December 2017: m; as at 30 September 2018: m shares The weighted average number of shares was 73.4 m by 30 September 2017 and m by 30 September EPRA Net Asset Value (EPRA NAV) in EUR k 30/09/ /12/2017 Change Change in % Equity of the shareholders of TLG IMMOBILIEN 2,023,078 1,897, , Fair value adjustment of fixed assets (IAS 16) 11,793 8,807 2, Fair value adjustment of real estate inventories (IAS 2) 1,163 1, Fair value of derivative financial instruments 145 1,813 1,958 n/a Deferred taxes 1 448, ,983 80, Goodwill from deferred taxes 48,901 48, EPRA Net Asset Value (EPRA NAV) 2,435,158 2,228, , Number of shares in thousands 103, ,029 EPRA NAV per share in EUR Adjustment of remaining goodwill 115, , Adjusted EPRA Net Asset Value (EPRA NAV) 2,319,335 2,112, , Number of shares in thousands 103, ,029 Adjusted EPRA NAV per share in EUR The calculation is closely based on the specifications of the EPRA and only neutralises deferred tax assets and liabilities attributable to investment property and derivative financial instruments.

11 EPRA KEY FIGURES 9 EPRA Triple Net Asset Value (NNNAV) in EUR k 30/09/ /12/2017 Change Change in % EPRA Net Asset Value (EPRA NAV) 2,435,158 2,228, , Fair value of derivative financial instruments 145 1,813 1,958 n/a Fair value adjustment of liabilities due to financial institutions/bonds 13,709 28,502 42,211 n/a Deferred taxes 1 450, ,216 80, EPRA Triple Net Asset Value (EPRA NNNAV) 1,998,609 1,827, , Number of shares in thousands 103, ,029 EPRA NNNAV per share in EUR The calculation is closely based on the specifications of the EPRA and only neutralises deferred tax assets and liabilities attributable to investment property, derivative financial instruments and liabilities due to financial institutions (only EPRA NNNAV). EPRA NET INITIAL YIELD (EPRA NIY) AND EPRA TOPPED-UP NET INITIAL YIELD in EUR k 30/09/ /12/2017 Change Change in % Investment property 3,712,866 3,383, , Inventories Properties classified as held for sale 1,151 9,698 8, Property portfolio (net) 3,714,819 3,393, , Estimated transaction costs 262, ,613 17, Property portfolio (gross) 3,976,924 3,638, , Annualised cash passing rental income 225, ,498 13, Property outgoings 25,261 22,617 2, Annualised net rents 200, ,881 10, Notional rent for ongoing rent-free periods 545 1,558 1, Annualised topped-up net rent 200, ,439 9, EPRA Net Initial Yield (EPRA NIY) in % pp EPRA topped-up Net Initial Yield in % pp EPRA Vacancy Rate in EUR k 30/09/ /12/2017 Change Change in % Market rent for vacant properties 8,789 8, Total market rent 242, ,278 16, EPRA Vacancy Rate in % pp

12 10 EPRA KEY FIGURES EPRA Cost Ratio in EUR k Costs pursuant to the consolidated statement of comprehensive income under IFRS 01/01/ /09/ /01/ /09/2017 Change Change in % Expenses relating to letting activities 53,793 36,551 17, Personnel expenses 12,508 8,294 4, Depreciation and amortisation Other operating expenses 12,055 13,564 1, Income from recharged operating costs 34,172 23,312 10, Income from other goods and services 826 1, Other operating income from reimbursements n/a Ground rent EPRA costs (including direct vacancy costs) 43,879 34,254 9, Direct vacancy costs 1,919 1, EPRA costs (excluding direct vacancy costs) 41,960 33,140 8, Rental income 166, ,301 49, EPRA Cost Ratio (including direct vacancy costs) in % pp EPRA Cost Ratio (excluding direct vacancy costs) in % pp

13 CONSOLIDATED INTERIM KENNZAHLEN MANAGEMENT NACH REPORT EPRA 11 CONTENTS 11 CONSOLIDATED INTERIM MANAGEMENT REPORT COMPANY FUNDAMENTALS BUSINESS MODEL OF THE GROUP Organisational structure ECONOMIC REPORT GENERAL ECONOMIC CONDITIONS AND REAL ESTATE MARKETS General economic conditions Economic situation in the sectors Development of the office property market Development of the retail property market Development of the hotel property market POSITION OF THE COMPANY Course of business Financial performance Cash flows Net assets Financial performance indicators REPORT ON RISKS, OPPORTUNITIES AND FORECASTS RISK REPORT OPPORTUNITY REPORT FORECAST REPORT

14 12 CONSOLIDATED INTERIM MANAGEMENT REPORT COMPANY FUNDAMENTALS ECONOMIC REPORT 1. COMPANY FUNDAMENTALS 1.1 BUSINESS MODEL OF THE GROUP ORGANISATIONAL STRUCTURE The business model and the corporate strategy of TLG IMMOBILIEN are based on the following pillars: Portfolio management Thanks to a deep understanding of local markets and real estate, strategic services such as strategic portfolio management and monitoring, valuation and portfolio planning are rendered centrally. Asset management TLG IMMOBILIEN covers significant links in the real estate value chain internally. With the engineering and letting units, asset management is responsible for all measures on the level of the property that influence the value of a property. Transaction management With its many years of expertise, TLG IMMOBILIEN is exceptionally well connected in its core markets. This generates attractive opportunities for the company to grow and chances to sell properties for the best possible prices in line with its portfolio optimisation strategy. Property management Property management bears a decentralised responsibility for the commercial management of the properties, including tenant relations, and is in charge of external facility management. 2. ECONOMIC REPORT 2.1 GENERAL ECONOMIC CONDITIONS AND REAL ESTATE MARKETS General economic conditions In late September, the project group Gemeinschaftsdiagnose of the five leading economic research institutes in Germany drastically reduced its economic growth forecast for This year, the GDP will increase by 1.7% (previously forecast at 2.2%). Compared to the economic growth in 2017, this would represent a decrease of 0.5 percentage points. The researchers forecast growth of 1.9% and 1.8% for 2019 and 2020 respectively. The institutes see the increasingly harsh climate for global trade as the reason for the loss of economic dynamism. This loss will affect exports in particular, which faced declining order volumes for the third quarter in a row. Moreover, significant markets such as Turkey are beset by economic crises, and the risk of a hard Brexit and international trade wars are making businesses hesitant to invest. However, the growth rate remained solid this year due to growing private consumption and the positive development of the job market and will be seen as the main driver of the growth expected in the coming year. For example, the German Institute for Economic Research (DIW) expects the unemployment rate to fall below 5% in 2019.

15 CONSOLIDATED INTERIM MANAGEMENT REPORT 13 ECONOMIC REPORT Economic situation in the sectors According to Savills, the volume of transactions in the commercial property markets was around EUR 42.5 bn in the first three quarters of 2018, which represents an increase of 3% over the previous year. The number of transactions is also at a similarly high level to 2017, which means that the level of dynamism has remained stable. JLL forecasts investments totalling EUR 55 bn for 2018 as a whole, which would be the secondhighest result for the current market cycle. According to the Cologne Institute for Economic Research, the majority of investors expect interest rates to start increasing in 2019, even if they will still be extremely low compared to historical data. Nevertheless, the majority of investors expect prices and rent to continue to rise. The volume of transactions in the seven A-rated locations grew by 27% in the first three quarters of 2018, making up 60% of the total volume of transactions in Germany. Frankfurt/Main was in first place with a volume of EUR 6.9 bn Development of the office property market According to BNP Paribas Real Estate (BNPPRE), the volume of transactions in the office property market was EUR 18.7 bn in the first three quarters of 2018, which represents growth of 11% over the previous year and the highest value since On this basis, the volume of investment turnover for the year as a whole will surpass EUR 23 bn once again. According to BNPPRE, the positive general conditions for office investors will continue into the coming year. It expects the growing rate of employment to support and stimulate user markets. Low vacancy rates in the office segment could slow the overall economic situation yet also have a positive effect on the development of rents Development of the retail property market The retail property market also fared positively. According to BNPPRE, at EUR 8.9 bn in the first three quarters of 2018, the total volume of turnover in this asset class even surpassed the exceptional result of the previous year by 4%. Following the outstanding year 2015, this represents the second-highest value in the past decade. However, it must be noted that this figure was also influenced by the merger of Karstadt and Kaufhof. At EUR 3.9 bn and EUR 4.9 bn respectively, the volumes of portfolio transactions and individual disposals were almost 48% and 7% higher than the long-term average. With growth of 50%, the A-rated locations increased their share of the total volume to more than one third. With regard to the asset classes, specialist retailers and supermarkets dominated the market with a 34% share in the first half of the year. They were followed by commercial buildings with a 27% share. Characterised by the merger of Karstadt and Kaufhof, department stores increased their volume almost sixfold and, as such, have achieved a remarkably significant share of 24%. Shopping centres lost 4.1 percentage points of their share, reaching 14.5% Development of the hotel property market At EUR 2.9 bn in the first three quarters of 2018, the volume of transactions in the hotel property market was just 5% lower than the record value in the previous year. With regard to individual hotel sales, at EUR 2.3 bn, the volume even slightly surpasses the previous year. The dominance of the seven A-rated locations can be seen in this segment as well, as they account for around three quarters of all hotel investments with a share of EUR 2.1 bn. According to BNPPRE, the total volume of turnover could exceed EUR 4 bn once again in 2018 as a whole. This is also reflected by the development of the hotel and restaurant industry. According to the German Federal Statistical Office, the number of 56.2 m overnight stays in the first six months of 2018 surpassed the same period in the previous year by 5%. In this context, the number of German guests grew strongly by 6% to 45.5 m.

16 14 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT 2.2 POSITION OF THE COMPANY Course of business The properties were as follows as at the reporting date: Key figures Total Office Retail Hotel Others Property value (EUR k) 1 3,722,121 1,891,253 1,475, ,024 49,145 Annualised in-place rent (EUR k) 2 225, , ,086 16,718 4,460 In-place rental yield (%) EPRA Vacancy Rate (%) WALT (years) Properties (number) Lettable area (sqm) 1,915, , , ,692 85,679 1 In line with values disclosed according to IAS 40, IAS 2, IAS 16 and IFRS 5 2 The annualised in-place rent is calculated using the annualised rents agreed as at the reporting date not factoring in rent-free periods. The property portfolio of TLG IMMOBILIEN comprises the following asset classes: office, retail, hotel and others. As at 30 September 2018, the portfolio contained 414 properties (31/12/2017: 426) with a fair value (IFRS) of around EUR bn (31/12/2017: approx. EUR bn). Besides acquisitions and the positive effects of asset management, the 9.5% increase in the value of the property portfolio is due essentially to market remeasurements, especially in Berlin. The property values in the individual asset classes developed as follows: in EUR m 3,722 3,401 30/09/ /12/2017 1,891 1,610 1,476 1, Total Office Retail Financial performance As at 30 September 2018, TLG IMMOBILIEN has generated net income for the period of EUR k 200,100. The EUR k 71,603 increase compared to the same period in the previous year is due to the EUR k 58,741 higher result from the remeasurement of investment property and to the EUR k 41,972 higher net operating income from letting activities. The higher expenses for deferred taxes had the opposite effect. Hotel Other

17 CONSOLIDATED INTERIM MANAGEMENT REPORT 15 ECONOMIC REPORT The table below presents the financial performance: in EUR k 01/01/ /09/ /01/ /09/2017 Change Change in % Net operating income from letting activities 147, ,764 41, Result from the remeasurement of investment property 186, ,089 58, Result from the disposal of investment property Result from the disposal of real estate inventories Other operating income 1,636 1, Personnel expenses 12,508 8,294 4, Depreciation and amortisation Other operating expenses 12,055 13,564 1, Earnings before interest and taxes (EBIT) 310, ,008 97, Financial income Financial expenses 23,906 31,836 7, Result from the remeasurement of derivative financial instruments 496 4,873 4, Earnings before taxes 287, , , Income taxes 87,896 57,725 30, Net income for the period 200, ,497 71, Other comprehensive income (OCI) 864 7,992 7, Total comprehensive income 200, ,489 64, Compared to the same period in the previous year, the net operating income from letting activities of EUR k 147,736 increased by EUR k 41,972, due primarily to newly acquired properties of WCM being placed under management and other acquisitions. Personnel expenses were EUR k 4,214 higher than in the same period in the previous year due to the increased number of employees. Additionally, the one-off special payments made in connection with the premature termination of the contracts of the members of the Management Board had an effect, as did a special item resulting from the modification of the long-term incentive scheme. At EUR k 12,055, the other operating expenses were EUR k 1,509 lower than in the previous period. In the same period in the previous year, expenses of EUR k 7,835 were incurred for transactions, especially in connection with the takeover of WCM and the related integration measures, compared to just EUR k 1,748 in the reporting period. Higher general administrative expenses due to the addition of WCM to the platform had the opposite effect. In the reporting period, financial expenses decreased by EUR k 7,930 to EUR k 23,906 compared to the same period in the previous year. This is due primarily to the refinancing measures and the premature repayment of loans in the same period in the previous year which resulted in additional expenses of EUR k 12,964. The interest expenses resulting from higher liabilities in the context of growth had the opposite effect. Of the tax expenses totalling EUR k 87,896 in the first three quarters of the 2018 financial year, EUR k 2,306 is attributable to current income taxes and EUR k 85,590 is attributable to deferred taxes.

18 16 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT Cash flows The following cash flow statement was generated using the indirect method under IAS 7. By 30 September 2018, the proceeds and cash paid in the reporting period have resulted in a decrease in cash and cash equivalents, due primarily to the cash flow from investing activities. in EUR k 01/01/ /09/ /01/ /09/2017 Change Change in % 1. Net cash flow from operating activities 95,049 46,482 48, Cash flow from investing activities 117,495 47,392 70, Cash flow from financing activities 42,421 17,236 25, Net change in cash and cash equivalents 64,867 18,146 46, Cash and cash equivalents at beginning of period 201,476 68, , Cash and cash equivalents at end of period 136,609 50,269 86, In the reporting period, the cash flow from operating activities increased by EUR k 48,567 compared to the previous year. It was affected by the current surpluses from the acquisitions in 2017 and 2018 as well as significantly lower interest and refinancing payments for loans. The negative cash flow from investing activities of EUR k 117,495 is essentially characterised by the higher amounts of cash paid for investments in properties. In the first three quarters of the 2018 financial year, purchase prices were paid for office properties in Mannheim, Hamburg and Eschborn. The negative cash flow from financing activities of EUR k 42,421 is primarily in connection with the payment of the dividend, whereas the taking out of a loan had the opposite effect. The cash and cash equivalents consist entirely of liquid funds Net assets The following table represents the condensed assets and capital structure. Liabilities and receivables due in more than one year have all been categorised as non-current. in EUR k 30/09/ /12/2017 Change Change in % Investment property/prepayments 3,712,883 3,400, , Other non-current assets 191, ,671 3, Financial assets 15,609 14, Cash and cash equivalents 136, ,476 64, Other current assets 19,894 29,903 10, Total assets 4,076,931 3,835, , Equity 2,047,970 1,936, , Non-current liabilities 1,573,707 1,556,459 17, Deferred tax liabilities 358, ,736 85, Current liabilities 96,545 69,993 26, Total equity and liabilities 4,076,931 3,835, ,

19 CONSOLIDATED INTERIM MANAGEMENT REPORT 17 ECONOMIC REPORT The assets side is dominated by investment property including advance payments. Compared to 31 December 2017, the proportion of investment property in the total assets increased from 89% to 91%. In particular, it was affected by the result from the remeasurement of investment property of EUR k 186,830 and the acquisitions totalling EUR k 140,226. The equity of the Group was EUR k 2,047,970 and increased by EUR k 111,410, due primarily to the total comprehensive income generated for the period less the dividend paid in May Compared to 31 December 2017, the equity ratio decreased slightly by 0.3 percentage points to 50.2% FINANCIAL PERFORMANCE INDICATORS FFO development in EUR k 01/01/ /09/ /01/ /09/2017 Change Change in % Net income for the period 200, ,497 71, Income taxes 87,896 57,725 30, EBT 287, , , Result from the disposal of investment property Result from the disposal of real estate inventories Result from the remeasurement of investment property 186, ,089 58, Result from the remeasurement of derivative financial instruments 496 4,873 4, Depreciation and amortisation n/a Attributable to non-controlling interests 1, ,003 0 Other effects 1 2,545 20,962 18, Income taxes relevant to FFO 2,574 3,879 1, FFO 100,397 70,076 30, Average number of shares outstanding in thousands 2 102,688 73,435 FFO per share in EUR The other effects include (a) personnel restructuring expenses (EUR k 0; previous year EUR k 245), (b) transaction costs (EUR k 2,523; previous year EUR k 7,835), (c) refinancing costs/repayment of loans (EUR k 22; previous year EUR k 12,964), (d) income from the liquidation of Wirkbau (EUR k 0; previous year EUR k 82). 2 Total number of shares as at 31 December 2017: m; as at 30 September 2018: m The weighted average number of shares was 73.4 m by 30 September 2017 and m by 30 September FFO is a key performance indicator for the TLG IMMOBILIEN Group. FFO, adjusted for significant unsustainable effects and effects not affecting liquidity, totalled EUR k 100,397 in the reporting period. The considerable increase in FFO by 43.3% or EUR k 30,321 compared to the same period in the previous year is due predominantly to the higher net operating income from letting activities resulting from the acquisition of additional properties and the takeover of WCM. FFO per share was EUR 0.98 and therefore slightly higher than in the previous year despite the increased number of shares resulting from the capital increases in 2017.

20 18 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT Net Loan to Value (Net LTV) in EUR k 30/09/ /12/2017 Change Change in % Investment property (IAS 40) 3,712,866 3,383, , Prepayments towards investment property (IAS 40) 17 17,525 17, Owner-occupied property (IAS 16) 7,347 6, Non-current assets classified as held for sale (IFRS 5) 1,151 9,698 8, Inventories (IAS 2) Real estate assets 3,722,138 3,418, , Interest-bearing liabilities 1,587,478 1,541,692 45, Cash and cash equivalents 136, ,476 64, Net debt 1,450,869 1,340, , Net Loan to Value (Net LTV) in % pp As a ratio between net debt and real estate assets, the Net LTV is a key performance indicator for the company. It was 39.0% in the Group as at the reporting date. This represents a decrease of 0.2 percentage points compared to 31 December 2017, due primarily to the remeasurement of the properties totalling EUR k 186,830. EPRA Net Asset Value (EPRA NAV) in EUR k 30/09/ /12/2017 Change Change in % Equity of the shareholders of TLG IMMOBILIEN 2,023,078 1,897, , Fair value adjustment of fixed assets (IAS 16) 11,793 8,807 2, Fair value adjustment of real estate inventories (IAS 2) 1,163 1, Fair value of derivative financial instruments 145 1,813 1,958 n/a Deferred taxes 448, ,983 80, Goodwill from deferred taxes 48,901 48, EPRA Net Asset Value (EPRA NAV) 2,435,158 2,228, , Number of shares in thousands 103, ,029 EPRA NAV per share in EUR Adjustment of remaining goodwill 115, , Adjusted EPRA Net Asset Value (EPRA NAV) 2,319,335 2,112, , Number of shares in thousands 103, ,029 Adjusted EPRA NAV per share in EUR The EPRA Net Asset Value (EPRA NAV) is another key performance indicator of TLG IMMOBILIEN and was EUR k 2,435,158 as at 30 September Compared to 31 December 2017, the EPRA NAV increased by EUR k 206,646, due primarily to the change in equity resulting from the net income generated for the period less the payment of the dividend. The EPRA NAV per share was EUR 23.58, compared to EUR as at 31 December 2017.

21 CONSOLIDATED INTERIM MANAGEMENT REPORT 19 REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 3. REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 3.1 RISK REPORT TLG IMMOBILIEN is exposed to constantly changing general economic, technical, political, legal and societal conditions that could impede its achievement of its targets or the implementation of its long-term strategies. However, business opportunities can also arise. These risks and opportunities are described in detail in the 2017 annual report. In the first three quarters of the financial year, there were no significant changes in the risk situation since 31 December The existence of the company is currently not considered to be at risk. 3.2 OPPORTUNITY REPORT In the first three quarters of the financial year, there were no significant changes to the opportunities of TLG IMMOBILIEN. Therefore, please see the disclosures in the opportunity report in the consolidated financial statements of 31 December FORECAST REPORT The expected development of TLG IMMOBILIEN in the 2018 financial year was described in detail in the group management report of 31 December That report forecast that the funds from operations for the 2018 financial year would increase to between EUR 125 m and EUR 128 m. Due to acquisitions and the integration of WCM into the processes and structures of the overall Group which has so far proved to be faster and more economically advantageous than expected, FFO is now expected to increase to around EUR 133 m.

22 20 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTENTS CONSOLIDATED INTERIM FINANCIAL STATEMENTS 21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 23 CONSOLIDATED CASH FLOW STATEMENT 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 25 CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 25 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN 25 A.1 INFORMATION ON THE COMPANY 25 A.2 FUNDAMENTALS OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 26 B. EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS 28 C. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 28 C.1 INVESTMENT PROPERTY 29 C.2 EQUITY 29 C.3 SHARE-BASED PAYMENTS 30 D. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 30 D.1 NET INTEREST 30 D.2 RESULT FROM THE REMEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS 30 D.3 INCOME TAXES 31 D.4 EARNINGS PER SHARE 31 E. OTHER INFORMATION 31 E.1 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS 31 E.2 RELATED PARTIES 32 E.3 SUBSEQUENT EVENTS 32 E.4 RESPONSIBILITY STATEMENT

23 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period from 1 January to 30 September 2018 in EUR k 01/07/ /09/ /07/ /09/ /01/ /09/ /01/ /09/2017 Net operating income from letting activities 51,458 34, , ,764 Income from letting activities 70,389 48, , ,315 a) Rental income 56,777 38, , ,301 b) Income from recharged operating costs 13,322 9,063 34,172 23,312 c) Income from other goods and services ,010 1,702 Expenses relating to letting activities 18,931 13,844 53,793 36,551 d) Expenses from operating costs 13,965 10,419 44,116 28,470 e) Maintenance expenses 3,425 2,039 5,482 4,759 f) Other services 1,541 1,386 4,195 3,322 Result from the remeasurement of investment property 3,343 58, , ,089 Result from the disposal of investment property Result from the disposal of real estate inventories a) Proceeds from the disposal of real estate inventories b) Carrying amount of real estate inventory disposed Other operating income ,636 1,021 Personnel expenses 4,748 2,583 12,508 8,294 Depreciation and amortisation Other operating expenses 3,144 6,724 12,055 13,564 Earnings before interest and taxes (EBIT) 47,155 83, , ,008 Financial income Financial expenses 9,885 5,812 23,906 31,836 Result from the remeasurement of derivative financial instruments 4,033 1, ,873 Earnings before taxes 41,595 76, , ,223 Income taxes 12,353 24,674 87,896 57,725 Net income for the period 29,242 51, , ,497 Other comprehensive income (OCI): Thereof will be classified to profit or loss Gain/loss from remeasurement of derivative financial instruments in hedging relationships, net of taxes ,992 Total comprehensive income for the period 29,818 52, , ,489 KONZERNABSCHLUSS Of the net income for the period, the following is attributable to: Non-controlling interests ,307 0 The shareholders of the parent company 28,723 51, , ,497 Earnings per share (basic) in EUR Earnings per share (diluted) in EUR Of the total comprehensive income for the period, the following is attributable to: Non-controlling interests ,307 0 The shareholders of the parent company 29,300 52, , ,489

24 22 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 September 2018 Assets in EUR k 30/09/ /12/2017 A) Non-current assets 3,920,428 3,604,369 Investment property 3,712,866 3,383,259 Prepayments towards investment property 17 17,525 Property, plant and equipment 8,225 8,245 Intangible assets 166, ,923 Other non-current financial assets 15,609 14,914 Other assets 16,823 14,503 B) Current assets 156, ,379 Inventories Trade receivables 13,094 10,188 Receivables from income taxes 1,080 1,913 Other current financial assets 49 2,016 Other receivables and assets 3,718 5,326 Cash and cash equivalents 136, ,476 Non-current assets classified as held for sale 1,151 9,698 Total assets 4,076,931 3,835,748 Equity and liabilities in EUR k 30/09/ /12/2017 A) Equity 2,047,970 1,936,560 Subscribed capital 103, ,029 Capital reserves 1,086,099 1,061,087 Retained earnings 837, ,603 Other reserves 4,219 5,083 Equity attributable to shareholders of the parent company 2,023,078 1,897,636 Non-controlling interests 24,892 38,924 B) Liabilities 2,028,961 1,899,188 I.) Non-current liabilities 1,932,416 1,829,195 Non-current liabilities due to financial institutions 1,134,940 1,120,901 Corporate bonds 400, ,975 Pension provisions 7,721 7,858 Non-current derivative financial instruments 3,612 4,924 Other non-current liabilities 26,781 26,801 Deferred tax liabilities 358, ,736 II.) Current liabilities 96,545 69,993 Current liabilities due to financial institutions 51,885 24,816 Trade payables 19,594 17,169 Other current provisions 9,676 4,049 Tax liabilities 2,587 1,376 Other current liabilities 12,803 22,583 Total equity and liabilities 4,076,931 3,835,748

25 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 23 CONSOLIDATED CASH FLOW STATEMENT CONSOLIDATED CASH FLOW STATEMENT for the period from 1 January to 30 September 2018 in EUR k 1. Cash flow from operating activities 01/01/ /09/ /01/ /09/2017 Net income for the period before taxes 287, ,223 Depreciation of property, plant and equipment and amortisation of intangible assets Result from the remeasurement of investment property 186, ,089 Result from the remeasurement of derivative financial instruments 496 4,873 Increase/decrease ( ) in provisions 5, Other non-cash income/expenses 3,013 1,396 Gain ( )/loss from disposal of property, plant and equipment and intangible assets Increase ( )/decrease in inventories Financial income Financial expenses 23,906 31,836 Increase ( )/decrease in trade receivables and other assets 1,560 1,233 Increase ( )/decrease in trade payables and other liabilities 10,682 2,602 Cash flow from operating activities 115,391 81,653 Interest received Interest paid 20,286 32,352 Income tax paid/received 582 2,997 Net cash flow from operating activities 95,049 46, Cash flow from investing activities Cash received from disposals of investment property 20,819 60,740 Cash received from disposals of property, plant and equipment Cash paid for acquisitions of investment property 136, ,481 Cash paid for acquisitions of property, plant and equipment 196 1,081 Cash paid for investments in intangible assets 1, Change in scope of consolidation Cash flow from investing activities 117,495 47, Cash flow from financing activities Cash received from equity contributions 0 113,292 Dividend payment 84,645 59,340 Cash received from bank loans 56, ,098 Repayments of bank loans 13, ,286 Cash flow from financing activities 42,421 17, Cash and cash equivalents at end of period Net change in cash and cash equivalents (subtotal of 1 3) 64,867 18,146 Cash and cash equivalents at beginning of period 201,476 68,415 Cash and cash equivalents at end of period 136,609 50, Composition of cash and cash equivalents Cash 136,609 50,269 Cash and cash equivalents at end of period 136,609 50,269

26 24 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period from 1 January to 30 September 2018 in EUR k Subscribed capital Capital reserves Retained earnings Other comprehensive income (OCI) Reserve hedge accounting Actuarial gains/ losses Non-controlling interests 01/01/ , , ,094 11,128 2, ,009,503 Net income for the period , ,497 Other comprehensive income (OCI) , ,992 Total comprehensive income for the period ,497 7, ,489 Change in scope of consolidation Dividend payment , ,340 Share capital increase 6, , ,984 Transaction costs associated with the share capital increase, after taxes 0 2, ,692 Capital contribution in connection with share-based payments Change during the period 6, ,121 69,147 7, ,004 30/09/ , , ,241 3,136 2, ,200,507 Equity 01/01/ ,029 1,061, ,603 3,135 1,948 38,924 1,936,560 Net income for the period , , ,100 Other comprehensive income (OCI) Total comprehensive income for the period , , ,964 Dividend payment , ,645 Guaranteed dividend ,360 1,360 Share capital increase in exchange for contributions in kind 1,242 27, ,039 Changes in equity recognised directly in equity , ,754 29,039 Capital contributions/redemptions in connection with share-based payments 0 2, ,785 Other Change during the period 1,242 25,012 98, , ,411 30/09/ ,271 1,086, ,927 2,271 1,948 24,892 2,047,970

27 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 25 CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT 30 SEPTEMBER 2018 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN A.1 INFORMATION ON THE COMPANY TLG IMMOBILIEN AG, Berlin, is an Aktiengesellschaft (stock corporation) in Germany with its headquarters at Hausvogteiplatz 12, Berlin, entered in the commercial register of Berlin under the number HRB B, and is together with its subsidiaries, the TLG IMMOBILIEN Group (short: TLG IMMOBILIEN) one of the largest providers of commercial real estate in Germany. The main activities consist of the operation of real estate businesses and transactions of all types in connection with this, as well as the letting, management, acquisition, disposal and development of office, retail and hotel properties, either itself or via companies of which the company is a shareholder. A.2 FUNDAMENTALS OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS The consolidated interim financial statements of TLG IMMOBILIEN were prepared in condensed form in accordance with IAS 34 (Interim Financial Reporting) and the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB), as adopted by the European Union. The consolidated interim financial statements were prepared in accordance with the rulings of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards. The requirements of IAS 34 (Interim Financial Reporting) were adhered to. The notes are presented in condensed form on the basis of the option provided by IAS These condensed consolidated interim financial statements have not been audited or subjected to a review. The consolidated interim financial statements comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated cash flow statement, the consolidated statement of changes in equity and the notes to the consolidated financial statements. Besides the consolidated interim financial statements, the interim report contains the interim group management report and the responsibility statement. The currency of the consolidated interim financial statements is the euro. Unless stated otherwise, all amounts are given in thousands of euros (EUR k). In tables and references for reasons of calculation there can be rounding differences to the mathematically exactly determined figures. The companies of WCM Beteiligungs- und Grundbesitz-Aktiengesellschaft (WCM) were consolidated into the consolidated financial statements of TLG IMMOBILIEN for the first time on 6 October Therefore, the statement of comprehensive income for the period from 1 January to 30 September 2018 cannot be compared with the statement of comprehensive income for the same period in the previous year. There have been no significant changes to the scope of consolidation since 31 December 2017.