CORESTATE Capital Company Presentation Sept / Oct 2018
Disclaimer This presentation contains forward-looking statements that involve a number of risks and uncertainties. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, as well as uncertainties and contingencies that are subject to change. Actual results can differ materially from those anticipated in the forward-looking statements of CORESTATE Capital Holding S.A. (the Company ) as a result of a variety of factors, many of which are beyond the control of the Company, including those set forth from time to time in the Company s press releases and reports and those set forth from time to time in the Company s analyst calls and discussions. The Company does not assume any obligation to update the forward-looking statements contained in this presentation. This presentation does not constitute an offer to sell or a solicitation or offer to buy any securities of the Company, and no part of this presentation shall form the basis of or may be relied upon in connection with any offer or commitment whatsoever. This presentation is being presented solely for information purposes and is subject to change without notice. Glossary: = Euro; $ = (US)Dollar; (F)Y = (financial) year(s); H = half year(s); M = month(s); Q = quarter(s); % = percentage; a = actual; acc. = according; adj. = adjusted; aggr. = aggregated; approx. = approximately; ca. = circa; e = expected; k = thousand(s); m = million(s); bn = billion(s) CORESTATE Capital HoldingS.A. Page 2
Agenda 1 Business model and investment highlights 2 Operating performance & financials (H1-2018) CORESTATE Capital HoldingS.A. Page 3
A Fully Integrated and Specialized Real Estate Investment Manager Assets under Management 22bn 560 FTEs 41 Offices 7 Countries Market Leader in Real Estate Mezzanine Finance with Fund Volume of > 1.2bn RE AuM in Germany ~ 85% Deal Pipeline > 5.7bn Adj. EBITDA-Margin > 60% CORESTATE Capital HoldingS.A. Page 4
Main Business Drivers Sector consolidation driven by trend to bigger asset managers and increasing regulatory costs (AIFMD) Further on strong, booming German RE market Still underinvested asset allocation to RE (Δ ~15%) Asset light business model with limited general interest rate risks Real Estate Equity Real Estate Debt Wide range of asset classes, services and risk profiles Focus on attractive niches like mid-sized cities or micro-living Multi Boutique Plattform Severe supply demand gap of residential unites in Germany (lack of >1,5m homes) Market leadership by far Focus on big city condominiums Preferred partner for mortgage banks Comprehensive Synergies Diversification in fee streams Ample offer with cross selling potential to clients Strengthened product pipeline Optimization of AuM structure Shared services (back/middle office functions) Solid recurring fee base with superior organic and external growth perspectives Banking regulation led to insufficient financing for RE developments (max. 65% LTV) with structural need for private debt CORESTATE Capital HoldingS.A. Page 5
Comprehensive and Integrated Multi-Boutique Platform Offers Broad Assortment and Further Optionality for External Growth CORESTATE platform enhances Client choice on more products and different risk-return profiles Standardized back and front office processes High quality proposition on products and structures Cross-selling between HFS and RE equity investments Strict set of acquisition criteria drives approach to external growth Product range Equity ü ü Mezzanine Debt potential for external growth Access to new investors Focus on Real estate and complementary AuMs High % of recurring revenues Access to new geography Access to new asset class Cross-selling opportunities EPS accretion Clients Institutional Semi institutional Retail CORESTATE Capital HoldingS.A. Page 6
Strong Recurring Fee Income Streams Providing Stability Types of fees Recognition of fee income Duration Potential repackaging in Real Estate investment lifecycle Sourcing / acquisition Investment / property management Exit / Realisation Acquisition Warehousing Asset and property management Coupon Participation Alignment Capital Sales fees Capital gain and Promote Recurring fee income recognised as percentage of AuM Profit distribution upon transfer of asset into main fund or sale Recurring fee income recognised as percentage of AuM Recurring return participation by HFS above pre-defined return hurdle rate of 7% Recurring fee income from Alignment Capital Investments Profit distribution upon successful sale of fund assets Income recognised upon successful exit of CORESTATE s alignment investments 0-6 months 3-15+ years 0-6 months Target range: >80% of recurring revenue (achieved) Target range: <20% of successbased revenue Recurring Success based CORESTATE Capital HoldingS.A. Page 7
Second Largest Listed European Investment Manager by Real Estate AuM Overview of selected European listed Investment Managers (2) AuM (in bn) 9 49 33 4 25 17 5 22 2 9 11 4 29 6 39 Market capitalisation (1) (in bn) 58 15.2 1.6 3.6 2.9 0.7 EBITDA 2018e (1) (in m) 790 100 175 (3) 1.0 160 na 88 Sufficiently large AuM base facilitating broad market coverage and diversification CORESTATE has been included into the German SDAX index as of 19 March 2018 and has over 600m of free float market capitalisation (4) Market capitalisation about 1bn providing attractive acquisition currency and potential to significantly increase trading liquidity subject to higher free float Considering only Real estate, CORESTATE already amongst largest listed managers in Europe Real Estate Diversified Alternative Assets (1) Capital IQ as of February 2018, EBITDA forecast based on broker consensus (2) DIC Asset runs a hybrid model, including own portfolio, funds and other investments (3) 2018E EBIT estimate (source: equity research) (4) Based on 47.30 per share and 21 m shares outstanding CORESTATE Capital HoldingS.A. Page 8
Ample Room for Growth in European Sector Landscape Acquisition Opportunities for CORESTATE High degree of fragmentation providing consolidation opportunities (1) Number of asset managers by size 47 20 3 6 23 94 > 30bn 10-30bn < 10bn Average AuM ( bn) Real estate managers Concentration of Real estate AuM by top 5 managers (2) Rest 84% Top 5 Managers 16% European Real estate AM market is fragmented: >90 asset managers with AuM below 10bn (1) Financial institutions are refocusing on their core business and are considering the sale of non-strategic assets High and rising regulatory costs impose a meaningful burden on smaller asset managers that lack scale Client demand and market requirements are becoming increasingly sophisticated, giving larger asset managers a competitive edge PWC Global Emerging Real Estate Trends 2018 (1) Property Funds Research and Institutional Real Estate Inc., Global Investment Managers 2016 (2) Includes short-term, intermediate-term, long-term, multisector, high-yield, bank-loan and retirement-income categories CORESTATE Capital HoldingS.A. Page 9
Highly Experienced Management Team Dr. Michael Bütter CEO Lars Schnidrig CFO Thomas Landschreiber CIO & Co-Founder Key Responsibilities Strategy, business development and M&A Organisation & corporate functions Human resources and risk management Key client relations Investor Relations Accounting and consolidation Financing Controlling and reporting Tax and investment structuring Deal sourcing Acquisition structuring Transaction execution Asset disposals Equity raising and client relations Experience >18 years expertise in Real estate and corporate governance Selected experience: currently board member at TLG Immobilien AG and ADO Properties SA; former CEO of Immobilien Scout (Scout24), management board member of Deutsche Annington (Vonovia SE), partner at Hogan Lovells >17 years of CFO experience on board/senior management level Selected experience: Vonovia Finance B.V, Vonovia SE, HypoVereinsbank AG >27 years of executing Real estate transactions Selected experience: Cerberus Capital Management LP, UniCredit CORESTATE Capital HoldingS.A. Page 10
Key Investment Proposition 1 Fully integrated Real estate investment manager with 22bn (1) AuM and diversified product offering 2 Strong recurring fee income streams provide stability 3 Unique sourcing capabilities with 5.7bn pipeline drive superior organic AuM growth 4 Diversified investor base with growing allocation to Real estate provides sustainable fundraising base 5 Accretive external growth opportunities from sector consolidation based on a scalable platform 6 Strong profitability, efficient balance sheet structures and attractive dividend capacity (1) Including HFS, HL and ATOS. Total AuM as per year-end 2017 CORESTATE Capital HoldingS.A. Page 11
Agenda 1 2 Business model and investment highlights Operating performance & financials (H1-2018) CORESTATE Capital HoldingS.A. Page 12
Highlights H1 2018 Operational Performance Attractive organic growth with >5% RE AuMs Solid H1 earnings fully in-line with budgets All acquisitions from 2017 delivered sound results Several new funds/products launched and currently in marketing process Corporate Structure Roll-out of group-wide performance initiative Zugspitze with ancillary projects Goal: quality leadership supported by consistent group standards and internal procedures Comprehensive organizational and process development IT harmonization and complexity reduction on internal functions and structures Strengthening our market position with promising co-operations and partnerships Two additional broker-initiated research coverage with buy recommendation in June CORESTATE Capital HoldingS.A. Page 13
Development of Assets under Management Increasing Real Estate AuMs Strong organic growth in Real Estate AuMs Run-down AuMs reduced as planned Strong Sourcing Pipeline Transaction volumes picking up pace during the course of the year 21.9bn 21.9bn Run-down Aviation 5.7bn 3% +5,6% RE AuMs 4.8bn 3% 6% -0.9bn decrease in non RE AuMs in exclusivity/dd 11% in LOI 15% Other 8% 29% Office 29% 5.7bn Retail Micro apartments Residential 23% 8% 32% 16.2bn 23% 8% 34% 17.1bn under review/identified 74% FY-2017 H1-2018 CORESTATE Capital HoldingS.A. Page 14
Rewarding Innovative RE Products Facing Needs of Urban Living Micro Living: CORESTATE to provide >2.7k new apartments in the next three years Market driver >1.4m single apartments are missing in Germany 1) Rents are up for students/young professionals by 40% since 2011 2) Existing portfolio 5.9k apartments already in operation 155.2k sqm Assets already in operation Assets to come Madrid Düsseldorf Cologne Hamburg Frankfurt Zurich Berlin Munich Vienna 1) Hans-Böckler-Stiftung 2) Survey by immobilienscout24 Seville Valencia Further fields of demand in specialized metropolitan niches with attractive market potential Urgent demand on more urban housing space >700k missing apartments in Germany s Top7 cities alone till 2020 4) Booming residential development projects Financing gap from banks according to regulation (max. 60-65% LTV) HFS, by far the Market Leader, with most comprehensive market knowledge in DACH developments (esp. in residential) Structural shortage of daycare centers in German cities >3,300 daycare facilities for children are needed 3) Set-up of first product with volume: > 100m 30 daycare centers in Germany 5 centers are already operating, 25 to be built by 2020 Guaranteed by municipalities 3) Research Institute IDW 4) Several sources CORESTATE Capital HoldingS.A. Page 15
Real Estate Debt Highly Diversified with Favourable Locations Profile of HFS Mezzanine Funds end of June 2018 Total fund volume > 1,2bn # of financed projects 57 Ø size of mezzanine financing ~ 21m >75% German residential Office 10% Retail 14% Residential 76% Regional break down of current financing (in m ) 203 60% of financing goes to Top7 Cities in Germany 156 134 110 70 58 52 50 50 42 30 122 1) Germany s Top7 cities: Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, Duesseldorf 2) Sources: German Government, regional planning office, Chamber of Industry & Commerce, German Association of Housing Industry CORESTATE Capital HoldingS.A. Page 16
Decent Fee & Earnings Performance in Spite of Transaction Seasonality H1-2018 Revenue Stream (in m ) 26.2 Acquisition related fees Large micro living deal with BVK in Q1 More to come in H2-2018 28.4 1) 67.9 Asset & property mgt. Very stable revenue stream 16.4 Warehousing/ RE operations Will increase further in course of the year due to current sale of large assets 15.1 Alignment capital Main proceeds of 2018 already earned Incl. gains from asset disposal in aviation 0.3 Promote & sales fee Typically in Q4 125.8 Aggregated revenues On a very good path to reach FY targets 1) Coupon participation fee (pro rata temporis) CORESTATE Capital HoldingS.A. Page 17
Financial Figures Fully on Track to Reach FY Targets Key P&L Figures in m H1-2018 Aggr. Revenues 125.8 100% Expenses from RE Investment Mgt. -34.4 27.3% Alignm. Capital/Warehousing Exp. -6.1 4.8% G&A expenses 1) -12.3 9.8% EBITDA 69.1 55% Adj. EBITDA 77.7 61.7% D & A -12.9 10.3% EBIT 56.2 44.8% Financial result -6.7 5.6% Net profit 42.7 33.9% Adj. Net Profit 60.9 48.3% Operating expenditure facing in H1 underlying and precursory deal cost to materialize our pipeline but also increasing client and regulatory needs on reporting, compliance and administration G&A expenses are especially in Q2 mainly driven by extraordinary items Corresponding one-off adjustments for H1-2018 - Zugspitze and ancillary projects (G&A) 1.8m - Board changes/compensations (G&A) 6.7m - Management contracts (D&A) 11.5m - DTA & non-control. interests (Tax/Net Profit) -1.9m Temporarily increasing interest expenditures from 300m bond issuance end of March and later/shifted redemptions of existing loans (after positive hedging effects in Q1 2018) 1) incl. other expenses and other income CORESTATE Capital HoldingS.A. Page 18
Key Debt Figures and Leverage Debt overview as of 30 June 2018 Leverage will be reduced significantly in H2 Bank & other Debt (incl. Ø 100-150m warehousing assets) 776 296 183 >170 Assets in placement process (already signed) Düsseldorf Stadttor Space to let: 29.3k sqm Anchor tenant: Government of NRW Occupancy rate: 100%; WALT: 8.3Y Utrecht: Danone Research Center Single tenant Space to let: 19.9k sqm Occupancy rate: 100% Senior bond 293 593 Kronberg: Palais Multi Tenants Space to let: 12.8k sqm Occupancy rate 100%; WALT: 6.6Y Convertible bond 187 New warehousing assets in Q2-2018 (run-rate for warehousing assets average 100-150m) Total debt Cash Net debt in H2-2018 scheduled debt disposals Bochum City Point Anchor tenants: H&M, DM, Hallhuber Space to let: 10.7k sqm Occupancy rate 83%, WALT: 5.2Y Net Debt adj. EBITDA (LTM)* 3.4x -1.0x * Adj. EBITDA (LTM) = 174.6m from Q3-2017 to Q2-2018; in FY 2017 Coupon Participation Fee was fully booked in Q4 (acc. to former IFRS regime) Rostock EKZ Tenant: EDEKA (cooperative retail group) Space to Let: 40.2k sqm Occupancy rate 100%; lease term >21Y CORESTATE Capital HoldingS.A. Page 19
Outlook More to come in H2-2018 Deleveraging by placements of warehousing assets New funds/products Highstreet VIII (mid-cities) Micro living in Spain and other European countries German opportunity European Value-Add Investment program Specialized Fund for FMCG-assets Expansion of HFS business in selected projects abroad New products for retail investors at Hannover Leasing Financial Outlook 2018 Confirmed Aggr. Revenues * 230-240 Mio. Adj. EBITDA 155-165 Mio. Adj. Net Income 120-130 Mio. * Aggregate Revenues include Revenue from Real Estate Investment Management, Share of Profit and Loss from Associates and Joint Ventures, Dividends from other Alignment Capital and Total Income from Real Estate Operations / Warehousing. CORESTATE Capital HoldingS.A. Page 20
Appendix
Appendix Research and Shareholder Information Average target price c. 68 (100% Buy) +47% +43% 68 66 +66% +56% 77 72 +41% +43% +34% +43% 65 66 62 66 Upside to price target ( 46.25 share price as of 10 Aug 2018) Buy Hold Sell 15 Mar 2018 30 Apr 2018 9 May 2018 19 Mar 2018 13 Mar 2018 9 May 2018 15 Jun 2018 27 Jun 2018 Shareholder structure & important share events Ralph Winter 17.8% Sandra Ketterer 8.9% Norbert Ketterer 9.6% 21,329,417* shares Free Float 63.6% (incl. 4.7% Management) 4 Oct 2016 23 Feb 2017 20 Sept 2017 First Day of Trading c. 23m Capital Increase Share Placement (c. 157m) by Flygon 21 Nov 2017 Placement of Convertible Bond ( 200m) 27 Feb 2018 19 March 2018 Share Placement (c. 20%) by R. Winter and M. Hoensbruch Inclusion in SDAX * As of 30 June 2018 CORESTATE Capital HoldingS.A. Page 22
Appendix Diversified Product Offering with Focus on Germany AuM break down by asset and investor class (1) Other (non- Real Estate) 19% Aviation 3% Real estate debt 30% Real Estate AuM break down by asset class and country Student Housing/ Micro Living 8% Retail 23% DEBT AuM 22bn Other Real Estate 6% AuM 17bn Office 29% EQUITY Real estate equity products 48% Residential 34% BeNeLux 10% Retail 27% Institutional 57% Semi- Institutional 16% Rest of Europe 1% AuM 22bn Switzerland and Austria 4% AuM 17bn Germany 85% Comments Successful steps to reduce run-down Portfolio Focus on profitable core Real Estate Business Broad range of asset classes and Real estate segments providing flexibility and diversification Aviation business profitable and with 3.9 bn fund raising track record since 2008 Other asset types consisting of non strategic products in run-off mode after acquisition of Hannover Leasing Mezzanine debt products provided via HFS Ability to provide broader product offering and capture broader portfolio allocation from clients Comprehensive cross-selling opportunities Notes: (1) Including third party property management mandates. CORESTATE Capital HoldingS.A. Page 23
Appendix Long-dated fund maturity profile Maturities by type of funds (1)(2) 45.6% Mostly run down that is more than offset by acquisition pipeline Run down assets mostly with low margins and very limited earning HFS funds are in evergreen structure 10.6% 1.8% 3.4% 6.5% 5.5% 6.0% 3.2% 3.6% 0.7% 1.8% 7.3% 2.6% 1.4% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2030+ Real Estate Equity Funds Real Estate Debt Funds Aviation Other (Run Down) c. 84% of investment vehicles mature after 2020 Notes: (1) Maturities are defined as the contractual end of the AM contract. It is expected that most of the contracts are renewed or a transfer of the assets into another CORESTATE vehicle takes place. (2) HFS funds maturities considered; excluding third party property management; AuM with no finite maturity are shown in the 2030+ bucket. CORESTATE Capital HoldingS.A. Page 24
Appendix H1-2018 Profit & Loss Statement ( m) H1/2018 H1/2017 Revenue from Acquisition Related Fees 26.2 9.1 Revenue from Asset and Property Management 67.9 14.3 Revenue from Promote and Sales Fees realized 0.3 13.1 Revenue from Real Estate Investment Management 94.3 36.5 Management expenses (34.5) (16.4) Earnings from Real Estate Investment Management 59.9 20.1 Net Rental Income 9.7 1.0 Revenue from Service Charges 0.6 0.5 Net Gain from Selling Property Holding Companies 0.4 5.4 Income from other Warehousing activities 5.7 - Total Income from Real Estate Operations / Warehousing 16.4 6.9 Expenses from Real Estate Operations / Warehousing (6.1) (0.9) Earnings from Real Estate Operations / Warehousing 10.3 5.9 Earnings from Alignment Capital 4.0 - General, Administrative and Other Expenses (13.4) (8.8) Other Income 1.1 0.1 EBITDA 69.3 22.7 Depreciation and Amortisation (12.9) (0.3) EBIT 56.4 22.3 Net Financial Expenses (7) (2.0) EBT 49.5 20.3 Income Tax Expenses (6.7) (0.6) Net Profit for the Period * 42.7 19.7 of which attributable to equity holders 42.3 19.4 * As of 31 March 2018 CORESTATE Capital HoldingS.A. Page 25
Appendix Balance Sheet as of 30 June 2018 ( m) 30.06.2018 31.12.2017 Non-Current Assets Goodwill 556.9 556.9 Intangible Assets 129.8 141.0 Investment in Associates and Joint Ventures 66.6 59.9 Total Non-Current Assets 935.0 915.8 Current Assets Inventories 348.9 268.3 Receivables 45.2 52.8 Cash and Cash Equivalents 183.0 108.8 Total Current Assets 611.8 511.2 Total Assets 1.546.8 1.427.0 Equity Total Equity 568.9 551.4 Long-term Financial Liabilities to Banks 164.6 238.3 Other Long-term Financial Liabilities 509.7 243 Other Non-Current Liabilities 69.6 30.5 Total Non-Current Liabilities 771.8 541.6 Current Liabilities Short-term Financial Liabilities to Banks 101.8 132.3 Other Short-term Provisions 36.1 42.9 Other Short-term Financial Liabilities 0 15.5 Other Current Liabilities 28.2 75.9 Total Current Liabilities 206.2 334.0 Total Equity and Liabilities 1.546.8 1.427.0 CORESTATE Capital HoldingS.A. Page 26
Appendix FY 2017 Profit & Loss Statement 1 2 3 4 ( m) FY 2017 FY 2016 Revenue from Acquisition Related Fees 30.0 9.6 Revenue from Asset and Property Management 52.5 25.3 Revenue from Coupon Participation Fees 53.7 Revenue from Promote and Sales Fees Realised 15.4 5.8 Revenue from Real Estate Investment Management 151.6 40.8 Management expenses (50.8) (23.2) Earnings from Real Estate Investment Management 100.8 17.6 Net Rental Income 9.2 1.1 Revenue from Service Charges 0.9 0.4 Net Gain from Selling Property Holding Companies 13.9 12.2 Total Income from Real Estate Operations / Warehousing 24.0 13.7 Expenses from Real Estate Operations / Warehousing (5.0) (4.0) Earnings from Real Estate Operations / Warehousing 19.0 9.6 Earnings from Alignment Capital 18.3 2.6 General, Administrative and Other Expenses (35.4) (10.0) Other Income 2.0 0.1 EBITDA 104.7 20.0 Depreciation and Amortisation (20.9) (0.3) EBIT 83.8 19.7 Net Financial Expenses (20.8) (2.8) EBT 63.0 16.9 Income Tax Expenses (6.6) (1.3) Net Profit for the Period 56.4 15.6 of which attributable to equity holders 55.7 15.4 Comments 1. Strong increase in Revenues from Real Estate Investment Management providing an attractive and stable source of recurring revenues 2. Showing a recurring income from sale of Warehousing Assets 3. Increase of G&A and Other Expenses is mainly driven by business combination of HL and HFS as well as one-off acquisition related expenses 4. Net financial expenses increase mainly due to the acquisition financing of HFS CORESTATE Capital HoldingS.A. Page 27
Financial Calendar 2018 06 Sep 2018 Capital Markets Day, Frankfurt 14 Nov 2018 Publication Q3 financial report Dates subject to change Investor Contact CORESTATE Capital Holding S.A. CORESTATE Capital Group 4, rue Jean Monnet L-2180 Luxembourg corestate-capital.com Dr. Kai G. Klinger Head of Investor Relations & Capital Markets Phone: +49 69 3535630-106 ir@corestate-capital.com