conwert Immobilien Hold (unchanged) Target: Euro (unchanged)

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1 conwert Immobilien Hold (unchanged) Target: Euro (unchanged) 05 May 17 Price (Euro) weeks range / Record year 2016 with Euro 80m FFO I and 50% increase in net profit Hold and TP confirmed Key Data ISIN Reuters AT CONW.VI On 29 March conwert published its 2016 annual report and convinced with record numbers. Revenues remained more or less unchanged at Euro 505m. Despite the constant revenues, operating Bloomberg CWI AV Reporting standard IFRS profit (EBIT) still rocketed by 64% from Euro 181m to almost Euro Market Cap (Euro million) 1, m, strongly driven by a positive revaluation result. Net gains Number of shares (million) Free Float 2.9% from revaluation more than tripled from Euro 66m in 2015 to more Free Float MarketCap (Euro million) CAGR EBT ('16 -'18e) % than Euro 206m due to the effects of yield compression and rent increases. That high result, with the largest increase in value coming Multiples e 2018e from the German residential portfolio, is further proof for the solid Market Cap/ revenues (gross) work conwert is doing in terms of portfolio management and following their strategy with focus on their core markets Germany and Market Cap/ revenues (net) PE-Ratio (not diluted) Dividend Yield 2.1% 3.0% 3.0% 3.6% Austria. EBT even more than doubled to Euro 227m (2015: Euro Price-to-Book-Ratio m). The company s bottom line after minorities climbed by 50% Key Data per share (Euro) e 2018e from about Euro 78m to more than Euro 116m, representing a new Earnings per share (not diluted) Dividend per share (DpS) record high. The cash driven Funds from Operations (FFO I) increased, for the second consecutive year, by about 50% from about Book Value per Share (BVpS) Euro 53m to almost Euro 80m. Therefore, the company met their Financial Data (Euro '000) e 2018e guidance, which they had increased multiple times over the course Total revenues (gross) Total revenues (net) 506, , , , , , , ,055 of For 2017 conwert stated a FFO I guidance between Euro 64m and Euro 74m. t/o rental income 226, , , ,850 t/o net profit from property sale 18,929 14,200 37,519 17,085 The net rental result (NRR) slightly decreased over the period from Net property services revenues 7,665 7,401 7,895 8,120 Euro 149m last year to Euro 139m due to sales, however, the NRR Property expenses -77,289-72,076-61,211-58,785 Net gains fair value adjustments 66, ,883 59,749 33,103 margin increased from 65.8% to 65.9% over the same period, reflecting Operating profit (EBIT) 181, , , ,771 lower vacancy rates and higher rent levels. The average net financial result -80,628-70,378-29,965-29,668 vacancy rate of the portfolio significantly fell from 6.6% to 5.2%. In Pre-tax profit (EBT) 100, , , ,103 IFRS taxation -17, ,344-21,558-16,188 the residential segment vacancy rates were lowered to 2.8%, Net profit after minorities 79, , , ,348 thereby reaching the goal of less than 3%. Average rents increase Shareholders' equity (Euro million) 1,205,936 1,416,075 1,472,718 1,487,445 Property assets (Euro million) 2,692 2,784 2,378 2,482 in the core portfolio by more than 3%, from Euro 9.29/sqm to Euro Total usable space (sqm '000) 2,177 2,042 1,910 1, /sqm. On a like-for-like basis, average rents rose by 2.4% in RoE (pre-tax) 8.9% 17.3% 11.3% 8.4% RoE (after tax) 7.1% 8.9% 9.4% 6.9% the overall portfolio and by 2.9% in the core portfolio. Conwert also strengthened their balance sheet significantly. The equity ratio Main Shareholders Vonovia 93.1% Susquehanna InternationalHoldings LLC 4.0% climbed from 44% to 49%, while the Loan-to-Value ratio was reduced from 51% to 41%, targeting a value below 40% at year-end Net debt further decreased by about 37% to an amount of Financial calendar 1Q 2017 report 31 May 2017 AGM 13 June 2017 about Euro 854m. The EPRA NAV per share increased from Euro to Euro 16.89, a strong plus of more than 8%. The management 1H 2017 report 30 August 2017 will propose a dividend of 60% of FFO I, translating to 50 Cents per share. On the financing side the company managed to Analyst Dipl.-Kfm. Stefan Scharff, CREA lower their average interest rate to below 2%, giving them very cheap means of financing, improving the net financial result by Scharff@src-research.de more than 12%. In September 2016, German residential giant Internet Vonovia has introduced a takeover bid for all conwert shares, with a cash offer of Euro per conwert share. The offer was initially accepted by more than 70% of the shareholders and settlement was on 16 January At present, Vonovia already holds more than 93% of conwert. We confirm the Hold rating which we gave after Vonovia announced the takeover bid, with a target price of Euro 16.16, representing the offer price.

2 Portfolio development and financial keys Portfolio transformation towards core markets and residentials In 2016, conwert sucessfully held on to their strategy to concentrate more and more on the core markets and on residential assets. By doing so, the company signed the sale to HanseMerkur Grundvermögen on 2 November, which will only become effective in 2017, selling about 40% of the remaining non-core portfolio. At the same time, a portfolio was acquired in Duisburg, which increased the residental part of conwert s portfolio significantly from 1.44m sqm to 1.54m sqm. Overall, the useable space of the portfolio was reduced by about 6%, from 2.2m sqm to about 2m sqm. That was mostly caused by sales from the non-core portfolio, which was reduced by almost 36% from 637k sqm to 410k sqm. The commercial part of the core portfolio remained relatively constant over the year. In terms of usable space, about 77% of the portfolio is located in Germany, 22% in Austria, and 1% in other countries. Total asset value grew by 3.4%, core assets by 18% Despite the reduction in usable space, the value of the portfolio still climbed by 3.4% from Euro 2.7b to almost Euro 2.8bn, where the value of the core portfolio climbed by almost 18%, most of the increase coming from the German residential portfolio, while the German non-core portfolio drastically decreased in value due to sales from Euro 318m to only Euro 156m (-51%). In terms of value, about 69% of the portfolio is located in Germany, 30% in Austria and 1% in other countries. The non-core share of the total portfolio value fell to 11%, down from 29% last year. 2 2 SRC Equity Research

3 Slovakian assets fully disposed In the second quarter of 2016, the last property in Slovakia was sold which makes Luxembourg, Hungary and Ukrain the only three reamining countries in the other countries region classified in the non-core portfolio. Significantly improved financial position The company managed to significantly strengthen its financial position in Equity grew by more than 15% and was at Euro 1.45bn at year-end. A big share of that increase came from the conversion of 5.25% and 4.5% convertible bonds which increased share capital to more than Euro 509m, a plus of 13%. As a result, the company s equity ratio climbed to 48.6% from 43.7% last year, not including convertible bonds in the money. At the same time, the LTV ratio declined to 40.8% (2015: 51%) and is now in line with the company s target of a LTV ratio in the low 40% range, and expected to even fall below 40% by Financing costs below 2% conwert Immobilien further managed to reduce their effective interest rate to a considerably low number of below 2%. Before hedging costs, the current average rate is at 1.82%, down from 2.19% in Including the cost of hedging, the rate is at 1.97%, down from 2.32%. Over 70% of debt is actively hedged against interest rate changes. Currently about 58% percent of the loans are financed at a variable rate, while 42% are financed at fixed rates. The average term of all loans is at 5.6 years, with more than Euro 300m due in 2017, and loans are spread across 43 financial institutions. 3 3 SRC Equity Research

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5 31/12 IFRS (Euro '000) e 2018e CAGR '16 '18e Rental income 188, , , , , , , % Proceeds from the disposal of properties held for sale (Trading Portfolio) 136, ,400 60,200 64,620 48,427 77,600 45,120 Expenses from the disposal of held for sale properties (Trading Portfolio) 112, ,700 48,500 52,831 36,024 69,440 38,785 Subtotal Trading Portfolio 24,200 21,700 11,700 11,789 12,403 8,160 6,335 Proceeds from the disposal of investment properties (Hold Portfolio) 273, ,500 73, , , ,100 71,200 Expenses from the disposal of investment properties (Hold Portfolio) 262, ,900 73, , ,470 95,741 60,450 Subtotal Hold Portfolio 10,200 5, ,140 1,797 29,359 10,750 Revenues from property services 27,400 15,200 10,500 7,665 7,401 7,895 8, % Total revenues 625, , , , , , , % Property Expenses 77,600 85,900 86,600 77,289 72,076 61,211 58,785 Expenses from the disposal of held for sale properties (Trading Portfolio) 112, ,700 48,500 52,831 36,024 69,440 38,785 Expenses from the disposal of investment properties (Hold Portfolio) 262, ,900 73, , ,470 95,741 60,450 Subtotal 172, , , , , , , % Gains from fair value adjustments 64,600 68,100 73, , ,406 72,149 38,955 Losses from Fair Value Adjustments (IAS 40) 91,900 59,000 57,200 84, ,523 12,400 5,852 Net gain / loss from fair value adjustments 27,300 9,100 15,900 66, ,883 59,749 33, % Negative fair value adjustments to properties held for sale 9,900 1,600 2, , Depreciation, amortisation and other impairment charges 118,500 1,000 1,200 1,225 1, Other operating income 6,100 10,200 5,200 5,561 5,335 3,685 3,245 Personnel expenses 35,800 32,200 27,200 26,593 30,317 23,200 24,105 Other operating expenses 45,500 45,000 40,400 37,759 43,004 30,900 28,780 Earnings before interest and tax (EBIT) 58, , , , , , , % Interest income on deposits with financial institutions 3,000 2,900 2,800 2, Interest income from derivatives 4,100 8, ,500 1,200 Income from the change in value of ineffective derivatives 0 28,700 3,800 6, Other financial revenues 500 1, Net financial revenues 7,600 41,400 6,900 8, ,110 3,723 Interest expenses on loans and overdrafts 55,700 88,300 82,800 65,913 30,334 27,568 28,154 Expenses from the change in value of ineffective derivatives 48,300 28,000 54,500 22,500 33,933 3,547 3,337 Other financing costs 1,400 1,900 1,200 1,986 8,427 4,210 3,220 Total financing expenses 105, , ,500 90,399 72,694 35,325 34,711 Share of profit from associated companies 1,800 2, ,134 1,660 1,250 1,320 Net financial result 96,000 74, ,500 80,628 70,378 29,965 29,668 Earnings before tax (EBT) 154,600 48,700 9, , , , , % Income tax expense 17,500 35,400 1,000 17, ,344 21,558 16,188 Tax rate 11.3% 72.7% 10.1% 17.3% 45.4% 13.2% 13.0% Net profit before minorities 172,100 13,300 8,900 83, , , ,915 Minorities 4,300 5,800 3,100 3,845 7,231 5,410 5,567 Net profit after minorities 167,800 7,500 12,000 79, , , , % Stock exchange indicators Average number of shares (Basic) 81,496 82,855 82,783 83,747 94,626 98,753 98,753 Earnings per share (Basic) Basic EPRA NAV/ share Dividends per share (Euro) Book Value per share (Euro, not diluted) Key Data Shareholders' Equity (without minorities) 1,018,400 1,066,600 1,045,250 1,205,936 1,416,075 1,472,718 1,487,445 Property assets at period end (Euro million) 2,511 2,868 2,810 2,692 2,784 2,378 2,482 Total usable space (sqm '000) 1,924 2,604 2,473 2,177 2,042 1,910 1,983 RoE (pre tax) 13.7% 4.7% 0.9% 8.9% 17.3% 11.3% 8.4% RoE (after tax) 14.9% 0.7% 1.1% 7.1% 8.9% 9.4% 6.9% 5 SRC Equity Research 5

6 SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstr. 23 D Frankfurt Germany Fon: +49 (0)69/ Mail: scharff@src-research.de Internet: Rating Chronicle Date Rating former share price former target conwert 24/ Nov/ 16 Hold conwert 5/ Sep/ 16 Hold conwert 24/ Aug/ 16 Buy conwert 30/ May/ 16 Buy conwert 30/ Mar/ 16 Buy conwert 22/ Mar/ 16 Buy conwert 1/ Mar/ 16 Buy conwert 25/ Feb/ 16 Buy conwert 16/ Feb/ 16 Buy conwert 12/ Feb/ 16 Buy conwert 25/ Nov/ 15 Buy conwert 20/ Oct/ 15 Buy conwert 26/ Aug/ 15 Buy conwert 28/ May/ 15 Buy Please note: The conwert share price mentioned in this report is from 4 May conwert Immobilien mandated SRC Research for covering the conwert share. Disclaimer 2017: This equity research report is published by: SRC-Scharff Research und Consulting GmbH, Klingerstr. 23, D Frankfurt, Germany (short name: SRC Research). All rights reserved. Although we feel sure that all information in this SRC report originates from carefully selected sources with high credibility, we cannot give any guarantee for accuracy, trueness and completeness. All opinions quoted in this report give the current judgement of the author which is not necessarily the same opinion as SRC- Scharff Research und Consulting GmbH or another staff member. All the opinions and assessment made in this report may be changed without prior notice. Within the scope of German regulative framework the author and SRC-Scharff Research und Consulting GmbH do not assume any liability for this document or its content being used. This report is solely for information purposes and does not constitute a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should obtain personal advice at their bank or investment house and should keep in mind that prices and dividends of equities can rise and fall and that nobody can give a guarantee of the future development of equities. The author of this report and the SRC-Scharff Research und Consulting GmbH commit themselves on a unsolicited basis to having no long or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution or publishing this report and its content as a whole or in parts is only allowed with approval of SRC management written form. With acceptance of this document you agree with all regulations mentioned here and all general terms and conditions you will find at anytime at our website SRC Equity Research