Colonia Real Estate AG - Investing in Real Estate Opportunities Initiative Immobilien Aktie 12. Oktober 2006 1
Content Highlights of 2006 Company Overview The German Real Estate Market Portfolio Analysis Core Transactions 2006 Residential Real Estate Growth Locations The Stock Outlook Appendices 2
Highlights of 2006 With the acquisition of Resolution and the foundation of CRE Fonds Management GmbH, Colonia Real Estate AG has succesfully positioned itself as a leading integrative real estate investment and asset management group for undervalued and opportunistic properties in Germany Once again, CRE improved all its results in Q2 of 2006 with a group net income of EUR 8.92mn in the first half of 2006 and completed record acquisitions of more than EUR 240mn this year Successful sell of the Victoria -Portfolio for 62mn in Sep 2006 Co-Investor with Oaktree on the acquisition of the Herkules -Portfolio 3
Company Overview: Strategic Acquisitions Acquisition of Resolution offering REAM to third parties - Christoph Wittkop, former Director and Head of Real Estate Transactions at UBS Germany, joined Resolution as CEO - Established 12 year track record and high-quality customer base (Blackstone, Oaktree, UBS etc.) with currently EUR 1.7bn AuM - 24 dedicated professionals with offices in Cologne, Frankfurt, Stuttgart, Munich and Berlin cover all relevant markets Foundation of CRE Fonds Management GmbH in Q1 2006 (CFM) - Mario Liebermann - former MD of Deutsche Bank Real Estate - joined CRE Fonds Management GmbH as Managing Partner - Five dedicated professionals in Frankfurt and Cologne offering closedend or structured fund solutions for institutional and retail investors 4
Company Overview: Nationwide Network Our nationwide office network makes the CRE group a key multi-local REAM in Germany 49 dedicated and experienced professionals in Cologne, Frankfurt, Hamburg, Stuttgart, Munich and Berlin Local expertise and access in all relevant markets in Germany Increasing dealflow and top research capabilities leads to superior performance 5
Company Structure: Entity Structure Old Colonia Real Estate AG Services Investments Resolution CFM Residential Real Estate Retail Real Estate Hotel Real Estate Office Real Estate 100% CRE Wohnen GmbH 99.68% Grasmus Holding B.V. 100% Deutsche Retail AG Retail Parks, small shopping centers 94% CRE Hotel Immobilien GmbH For sale 94% German Office GmbH Co-Investments with Resolution clients 56 % Resolution GmbH AM for 3rd Parties 56% Fonds Management GmbH Target: EUR 500mn new investments in 2006 (EUR 240mn completed) Target: EUR 2bn AuM by 2009 6
Company Overview: Entity Structure NEW Colonia Real Estate AG Services Investments Resolution CFM Residential Real Estate 100% CRE Wohnen GmbH 99.68% Grasmus Holding B.V. Retail Real Estate 100% Deutsche Retail AG Retail Parks, small shopping centers Ready for Sale Hotel Real Estate 94% CRE Hotel Immobilien GmbH For sale Office Real Estate 94% German Office GmbH Co-Investments with Resolution clients 56 % Resolution GmbH AM for 3rd Parties 56% Fonds Management GmbH Target: EUR 500mn new investments in 2006 (EUR 240mn completed) New Target: EUR 4bn AuM until 2009 7
The Different Investment Categories CRE Group covers the entire value chain Risk CFM CRE / Resolution high Development medium Value added Opportunity Core/Core+ low 5 10 15 20 25 Return in % 8
The German RE Market: The bottom is near Various indicators show that the major German office markets are at or near the bottom of the cycle This diagram illustrates where Jones Lang LaSalle estimate each prime office market is within ist individual rental cycle as at end June 2006 Source: Jones Lang LaSalle; July 2006 9
The German RE Market: Real Estate Barometer Excellent property climate Average rent in /m² /month Top rent in /m² /month Trend forecast 104,4 56,7 18,5 14,0 20,0 12,3 20,5 12,3 20,5 11,5 28,0 14,5 Budapest Hamburg Düsseldorf Berlin München Madrid Frankfurt Paris London 28,5 15,8 33,0 13,0 41,2 65,3 Source: IVG Immobilien AG, Cushman&Wakefield Healey&Baker, January 2006 According to the prognosis of the 2006 Real Estate Barometer, Germany will again be among the winners in Europe. 10
The German RE Market: A Sleeping Giant Germany is Europe s biggest Real Estate Market but prices are still under-performing European peers Commercial real estate shows early signs of a recovery with vacancy rates slightly falling Germany s retail market shows strongs signs of recovery Potential for further yield compression and possible introduction of REITs will ease exit through stock listing TOTAL REAL ESTATE VALUES IN EU 1,200 1,000 800 600 400 200 --- 300 250 200 150 100 50 Office Space (41 %) Retail (43 %) Storage (16 %) 1,052 1043 805 345 GER GBR FRA ITA ESP NED BEL Source: Deutsche Bank, LBS, Unternehmensangaben, HVB Global Market Research, 247 HPI s in EU NL IT SP FR DK SE UK DE 91 92 93 94 95 96 97 98 99 00 01 02 03 04 170 63 11
Residential Portfolio Analysis Portfolio Residential Units Sq. Metre m Net Rent m Purchase Price Purchase Price psm m Market Value Vacancy Rate Grasmus 2,780 173,250 8.0 70.0 404 82.8 6.5% Hamburg (pp) 1,587 100,540 5.5 38.2 380 38.2 * 16.2% Bremen 470 26,804 1.0 9.4 351 9.4 * 4.5% Berlin 2,487 148,000 6.7 83.2 562 83.2 * 21.0% Aachen 925 54,706 1.9 18.4 336 21.6 11.0% Cologne 56 5,723 0.6 4.9 856 7.0 s 0.0% 8,305 509,023 23.7 224.1 440 242.2 Total Portfolio Annualized Net Rental Income: 26.6 m Annualized Net Operating Income (NOI): 21.5 m Annualized Net Yield: 8.4% p.a. Annualized Net Yield Residential 8.9% p.a. * = to be revalued pp= partly pending s = sold 12
Portfolio Analysis - Allocation Total Investments have reached EUR 240m in assets CRE and Resolution have around EUR 1.7bn AuM Current annualized net rental income > EUR 26mn Net yield of total portfolio: 8.40% AuM by region East Germany 8% West Germany 92% AuM by asset class AuM by strategy Hotel 9% Value Added 28% Office 7% Residential 84% Opportunistic 72% 13
Herkules Portfolio Transaction 2006 Deka Immobilien Investment GmbH SELLER Colonia Real Estate AG CO-INVESTOR Oaktree Capital Management, LLC LEAD-INVESTOR Resolution GmbH Deal Advisor and exclusive Asset Manager for 100% of the Portfolio S P V Exit IPO Exit REIT Exit TS/ BS 14
Herkules Portfolio Transaction 2006 Ca. 1bn transaction volume 49 commercial properties with around 520.000 sqm Pan German Prime Office Locations across Western Germany in Frankfurt Dusseldorf Hamburg Munich Berlin Cologne Strong added value character Appreciation opportunity due to 22% current vacancy rate Strong momentum - German Office Market is turning to the upside 15
Core Transactions 2006 Bremen - Residential RE Acquisition 03/06 Location: Brake and Nordenham Purchase Price: EUR 6.7m Equipment: 356 units, 58 parking lots Net rent: EUR 0.8mn p.a. / gross yield: 11,94% Hamburg - Residential RE Acquisition 04/06 Location: Elmshorn and Itzehoe Purchase Price: EUR 38.2m Equipment: 1,577 units Net rent: EUR 4.95mn p.a. / gross yield: 12,95% 16
Core Transactions 2006 Capital - Residential RE Acquisition 09/ 06 Location: Berlin Purchase Price: EUR 83.2mn Equipment: 2,487 units + 8 commercial units Net yield: 8,24% Renovation/ Modernization: in 2001 and 2002 for approx. EUR 95mn Vacancy rate: 21% CRE s Asset Management Team plans to reduce vacancy to 11% in the next two years 17
Core Transactions 2006 Schanzenstrasse - Residential Acquisition 06/ 06 Purchase of a vacant office building Location: Purchase Price: Equipment: Düsseldorf - Oberkassel 525 /qm 7.100 qm Residential 110 parking lots Renovation/Modernisation: Vacancy Rate at acquisition: 100% Redevelopment: spring 2007-2008 Conversion into high quality Residential Total Investment 1.300 /qm Net yield: 31% p.a. expected IRR CRE s Asset Management team plans a letting of 100% within 9 month after finishing refurbishment 18
Residential Real Estate Growth Locations CRE s residential portfolio is located in attractive growth areas City ranking in good locations (top 100) Require d annual capital growth Required annual capital growth (Homeowner) Population growth 2003-20 (%) Bertelsmann Ranking required annual capital growth (Landlord) Ranking population growth Total Rank Karlsruhe 1.46% 2.00% 2.20% 2 12 14 1 Bielefeld 1.91% 2.72% 3.60% 13 7 20 2 Erfurt 1.82% 2.58% 2.50% 10 11 21 3 Bremen 1.46% 2.00% 0.70% 4 18 22 4 Hamburg 1.99% 2.86% 2.80% 15 10 25 5 Wiesbaden 1.82% 2.58% 1.30% 9 16 25 5 Düsseldorf 1.65% 2.30% 0.20% 7 19 26 7 Augsburg 2.21% 3.12% 2.80% 18 9 27 8 Bonn 2.24% 3.25% 4.50% 23 5 28 9 Berlin 1.82% 2.58% -0.50% 8 20 28 9 Kiel 1.56% 2.15% -1.90% 5 24 29 11 Source: Die demographische Lage der Nation Berlin Institut / dtv Source: HSBC German Residential Real Estate Report 06.09.2006 Average population growth factor on CRE Portfolio is ø 3.21% Focus on areas with high-long term appreciation and net rent increase potential Average rent is 22% below local benchmark level 19
The Stock Share Price Performance Member of SDAX, EPRA, GPR 250 Market cap Shares outstanding EUR 500mn 15.7mn Ownership structure Cominvest (around 5.0%) and DIT are the largest institutional shareholders Cerberus Group is minority shareholder with a 1.7% stake Management owns 6% through stock option plan with 2 year vesting Free Float 55,20% Peter May 5,73% Fortman Cline Holding 0.81% Swiss Real Estate 38,26% 20
Outlook 21
Investment Prospects CRE continues to invest further to reach more then 500mn total assets at the end of 2006 ( 240mn so far) Successful co-investment on the Herkules -Portfolio Successful sale of 1,500 apartments from Grasmus subsidiary above market value achieved Proprietary focus on residential real estate and retail properties Further Co-Investments with Resolution clients in recovering office market Improvement of annual net rental income to > 40mn p.a. (currently 26mn) by year-end Earnings proceeds 2/3 through investments and 1/3 through 3 rd party AM 22
Asset Management Prospects Asset management for 3rd parties is creating strong recurring revenue streams without the need of high investments and increases value to owners / 3 rd parties Feri Research expects the volume of real estate assets acquired by foreign investors to be in need of professional local REAM to reach EUR 80bn by 2010 The deal pipeline is a potential EUR 1.0bn. Long-term target AuM is EUR 4bn by end of 2009 Crisis of open-end funds and potential initiation of G-REITs drives demand for added-value AM with local expertise and for alternative transparent products (closed-end funds, REITs) 23
Colonia Real Estate - A Unique Opportunity High growth rates with strong operational, strategic and capital markets performance A nationwide specialist network with local access to all relevant regions A favourable market environment and a full deal pipeline A Growth and Value Opportunity as one of the few integrated Real Estate investment firms in Germany at the beginning of the transition of Europe s largest Real Estate Market Colonia Real Estate Investing in Real Estate Opportunities 24
Colonia Real Estate - A Unique Opportunity Thanks a lot for your attendance Contact Colonia Real Estate AG Zeppelinstraße 4-8 50667 Cologne/ Germany Tel: +49 (0)221 7160 710 www.coloniarealestate.com Stephan Rind Christoph Kauter Chief Executive Officier Investor Relations ir@cre.ag 25
Appendices 26
Range of REAM Services Acquisition Fees: 0,5 2% of Transaction Volume Asset Management Fees: 0,25 0,75% of Transaction Volume Incentive Fees: 10 30% of profits above certain hurdle rates 27
Financial Highlights Half Year 2006 Half Year 2006 Full Year 2005 Total Operating Performance 19.6mn 39.9mn Total Operating Income 19.6mn 19.6mn EBIT 14.6mn 12.9mn Group Income 8.9mn 6.8mn Earnings per Share 0.59 / 0.45 0.54 / 0.46* Total Assets 205.2mn 142.3mn Equity Ratio 36.5 % 22.5 % * Adjusted by 6.1% capital increase in March 2006 and 4:1 stock split 28
Financial Highlights Half Year 2006 200 Half Year 06 vs Full Year 05 Financial Comparison in % 150 100 50 0 TOP TOI EBIT Net EPS EPSd TA ER Full Yr 05 Half Yr 06 29
The German RE Market: Real Estate Barometer Budapest Hamburg Duesseldorf Berlin Munich Madrid Frankfurt Paris London 9,00 6,00 3,00 0,00 6,75 5,50 6,00 6,00 5,25 4,50 5,50 4,75 4,50 Returns in top locations in % 750.000 500.000 250.000 0 56.000 95.000 80.000 100.000 141.000 190.000 102.000 644.000 243.000 Space takeups in sqm 11,6 8,0 11,9 9,6 10,5 7,4 17,2 6,8 8,7 20,0 Vacancy rates in % 10,0 0,0 Source: IVG Immobilien AG, Cushman&Wakefield Healey&Baker, January 2006 30
Disclaimer This document contains certain forward-looking statements and information relating to the Colonia Real Estate AG Group that are based on beliefs of its management as well as assumptions made by and information currently available to Colonia Real Estate AG. When used in this document, the words anticipate, believe, estimate, expect, intend, plan and project and similar expressions, as they relate to the Colonia Real Estate AG Group or its management, are intended to identify forward-looking statements. Such statements reflect the current views of Colonia Real Estate AG with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the Colonia Real Estate AG Group to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by the Group s targeted customers, changes in business strategy and various other factors, both referenced and not referenced in this annual report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this annual report as anticipated, believed, estimated, expected, intended, planned or projected. Colonia Real Estate AG does not intend, and does not assume any obligation, to update these forward-looking statements. 31