February 2015
Westgrund AG Overview Geographical focus on Northern and Eastern Germany Köln 6 3 Bremen 31 Frankfurt Hamburg Hannover 24 München WESTGRUND Real estate portfolio based on sqm 6 30 Leipzig Berlin Dresden Real estate company seated in Berlin Supplier of residential real estate Germany only Portfolios mainly in Berlin, Lower Saxony, Northrhine-Westfalia, Saxony, Mecklenburg-Western Pomerania and Thuringia Focus on residential units for households with average to sub-average income Strong growth through acquisitions Lean overheads with 14 employees Listed in prime standard on Frankfurt stock exchange Portfolio data 31/12/2014 31/12/2014 Pro forma 2015 Units 16,880 21,978 Area (000sqm) 1,081 1,384 IFRS value* ( m) 730.9 933.5 Net rental income ( m) 55.5 70.5 Net rental income ( /sqm/month) 4.76 4.72 Vacancy rate () 9.1 9.1 Rental yield () 7.6 7.6 Multiple* (IFRS value/net rental income) 13.2 13,2 * JLL Valuation as of 31/12/2014 2
Strong management team with excellent real estate experience Experienced Management Arndt Krienen Chief Executive Officer (*1966), CEO, member of the board since 2000 Previously with an international company (legal department) with annual revenue of more than 300m Lived in the US for several years and has a strong track record in the real estate industry Sascha Giest Chief Financial Officer (*1976), CFO since 2013 Previously Head of M&A / portfolio strategy with a real estate firm in Berlin Before with JPMorgan and Barclays Capital (real estate financing and securitisation); financing portfolios for Deutsche Annington, Vitus, Babcock and others Lean organisational structure Asset Management (2 Person) Commerclal AM (2 Person) Controlling/ Reporting (2 Person) Arndt Krienen Sascha Giest Acquisition & Financing (2 Person) Assistant (1 Person) Cash Man.& Accounting (2 Person) Investor Relations (1 Person) Qualified in-house team specialized on core functions Focus on Asset Management, Reporting, Financing and Acquisitions Asset management to cooperate with third party property management based on regular reporting and fixed budgets, property management incentivised on success factors Lean and focused organisation guarantees control of overheads Technical AM (2 Person) 3
Clear and simple investment strategy Acquire for growth Manage for profit Residential portfolios Positive cash flow Germany only Mid-size cities and Berlin Minimal invest 5 m Cap rate for rental yield: 8 Solid basic fabric Above average vacancy rates, but no structural vacancies Small capex accepted, but no maintenance backlog Divest non-core or nonperforming parts of the portfolio Renovation/refurbishment to increase rental value Active property management to reduce vacancy rates Property management and maintenance outsourced to external partners to stay costefficient Property management incentivised on success factors 4
Clear and simple investment strategy Targets Avoid risks Achieve stable positive cash flows Cottbus Therefore: No project development No construction No pure commercial property No luxury appartments No portfolio with major maintenance backlog No investment in A-cities (except Berlin) Halle Hannover Leipzig 5
2014 Breakthrough to new dimension New strength through acquisition of Berlinovo portfolio Doubling of net rental income with modest increase in overheads Longterm debt financing with conservative debt/equity mix Capital increase of 140 m successfully placed Further growth 2015 already secured through acquisition of Ajax portfolio comprising 2,695 units Midterm target Further growth to 40,000 units Top Ten of private german suppliers of residential real estate 6
Acquisitions strengthen regional presence in Saxony, Lower Saxony and Berlin As of 31/12/2014 As of 2015 pro forma* Units** NRI m Vacancy Value (IFRS) m Units** NRI m Vacancy Value (IFRS) m Berlin/Brandenburg 5,103 16.7 8.3 225.1 6,544 20.3 6.5 268.8 Thuringia/Saxony/ Saxony-Anhalt 4,155 12.5 10.4 161.7 5,205 15.3 13.2 195.3 Lower Saxony/Bremen*** 4,920 17.1 7.3 238.1 7,508 25.6 7.7 363.3 Mecklenburg-Western Pomerania 1,835 4.6 14.9 51.2 1,835 4.6 14.9 51.2 Rhineland-Palatinate 548 2.9 4.2 43.5 548 2.9 4.2 43.5 Northrhine-Westfalia 319 1.8 6.9 11.3 338 1.8 8.0 11.3 Total 16,880 55.5 9.1 730.9 21,978 70.5 9.1 933.5 Pro-forma 2015 including Berlinovo -Portfolio and Ajax -Portfolio ** Residential and commercial units *** Pro-Forma 2015 includes small portfolio in Schleswig-Holstein as well 7
Acquisitions accelerate growth in 2014/15 25,000 20,000 15,000 10,000 Units 21,978 16,880 CAGR: 107 50 CAGR: 93 40 30 m 80 70 60 NRI (annualised) 55.5 70.5 5,000 1,615 3,376 4,878 20 10 6.7 12.0 17.4 0,000 2011 2012 2013 2014 2015* 0 2011 2012 2013 2014 2015* * Pro-forma 2015 including Berlinovo -Portfolio and Ajax -Portfolio Growing net rental income with stable overheads = Increase in earnings 8
Good track record in reducing vacancy rate and increasing rents after acquisition Berlin - Spandau Berlin - Hellersdorf Wittstock 10,0 4.8 3,3 1,67 13.9 0.44 WITTSTOCK 3.2 3,90 1.3 1,57 9.5 0.41 2013 2014 Vacancy rate 2013 2014 NRI ( m) BERLIN - SPANDAU 2012 2014 Vacancy rate 2012 2014 NRI ( m) BERLIN - HELLERSDORF 2009 2014 Vacancy rate 2009 2014 NRI ( m) Bad Bodenteich Nordenham Ludwigshafen 21,6 1.0 2,08 2,68 BAD BODENTEICH 14.5 1.6 0.26 0.31 NORDENHAM 8,0 4.5 2,65 2.87 LUDWIGSHAFEN 2009 2014 Vacancy rate 2009 2014 NRI ( m) 2009 2014 2009 2014 NRI ( m) 2011 2014 Vacancy rate 2011 2014 NRI ( m) Measures after acquisition: Change of property management Refurbishment of vacant units Reduction of operating expenses Moderate rent increases 9
Good track record of value enhancement of acquired portfolios Location Year of purchase Units NRI ( /m²) at acquisition NRI ( /m²) after acquisition Purchase price ( m) Value ( m) Berlin Hellersdorf 1 2012 270 5.08 5.90 9.5 14.4 Berlin Hellersdorf 2 2012 180 4.69 5.90 7.1 10.2 Fürstenwalde 2012 574 5.07 5.50 17.2 22.0 Halle Alte Heerstr.,Hanoier Str. 2012 310 3.99 4.35 5.7 7.9 Berlin Spandau 2013 1,092 4.76 5.26 44.5 57.6 Berlin Kreuzberg 2013 419 5.40 8.00 16.9 24.5 Rügen 2013 308 4.18 4.80 6.8 8.4 Wittstock 2013 131 4.08 4.65 3.3 4.1 Sachsen und Thüringen 2014 1,274 4.79 5.10 53.0 60.4 Halle 1 2014 806 4.37 5.10 28.7 29.4 Total 5,364 4.64 5.46 192.7 238.9 Rent increase: 17.6 Value enhancement: 23.9 10
Capital increase to finance Berlinovo portfolio successfully completed in 2014 40 m shares placed for 3.50 each, represent a very tight discount to TERP of 5.9 Number of shares outstanding increased from 33.9 m to 74.0 m Market capitalisation more than doubled from 126 m to currently 310 m Free float up from 18.5 to 54.3 Market cap of free float > 170 m Institutional shareholder base significantly broadened with major shareholders from Germany and UK Lechner 10.2 Before capital increase June 2014 Others 18.5 Quartenal Invest 21.6 Free float: 18.5 Shareholder structure Wecken & Cie 49.7 Others; 41.8 Free float according to definition of Deutsche Börse After capital increase 2015 Wecken & Cie; 36.0 Quartenal Allianz GI; Invest; 3.6 Swanepoel; Asset 9.7 3.9 Value; 5.1 Free float: 54.3 11
2014 active on capital markets Measure Date Share price * Pro forma H1 2014 NAV per share ( ) Premium/ discount to NAV Volume ( m) Strike price ( ) Due date Bonus shares 13/06/2014 ratio10:1 3.59 N/A N/A N/A N/A Convertible 23/04/2014 5.0 N/A N/A 19.9 3.14 22/04/2016 Capital increase 19/03/2014 3.40 3.59 (5.3 ) 8.1 N/A N/A Capital increase 09/09/2014 3.50 4.15* (15.7 ) 140.0 N/A N/A Broker coverage increased BUY recommendations only Strong share price performance, up 40 ytd 12
Moderate refinancing requirements midterm Due date debt m 285,0 52.8 40.4 24.3 9.3 14.2 14.4 4.0 0.2 0.0 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 after 24 Low refinancing volumes in next six years Average interest rate of 2.6 percent allows sustainable yield Senior debt against german banks only Diversified among financial institutions, but three major financing partners LTV (31/12/2014): 59 13
Transaction Ajax Portfolio expected to be closed midyear 2015 Further growth ahead Acquisition signed on 30/12/2014 2,695 residential units, 85 commercial units 40 locations, of which 61.4 in Lower Saxony 31.3 in Saxony 5.3 in Thuringia 2.0 in Schleswig-Holstein Acquisition price: 102 m Net rental income 8.8 m Net rental income per sqm: 4.03 Vacancy rate 13 14
Appendix 15
9M YTD: Profits mainly driven by revaluation impact of Berlinovo Consolidated Income Statement (EUR m) 30-Sep-14 30-Sep-13 Change y-o-y Rental income 16.3 10.6 54 Changes in inventories 6.3 3.8 66 Other operating income 0.4 0.1 300 Other income 0.5 0.0 Material expenses -11.8-7.3 62 Personal expenses -1.8-0.9 100 Other operating expenses -2.3-1.7 29 Revaluation results 42.5 9.5 347 Depreciation -0.1 0.0 EBIT 50.0 13.9 260 Financial result -16.0-2.7 493 EBT 34.0 11.2 205 Income tax expenses -5.6-2.1 167 Net profit 28.5 9.1 213 Earnings attributable to minority stakeholder -0.2-0.1 100 Net profit after minorities 28.3 9.0 214 Profit carried forward 39.4 21.6 82 Retained earnings 67.7 30.6 121 Comments Net rental income does not yet include Berlinovo - Portfolio Material expenses mainly consist of property management and maintenance costs Revaluation split: Berlinovo Existing stock Other acquisitions 34.7m 4.4m 3.4m Substantial one-off impact from cost of debt of bridge financing and markto-market adjustments for interest rate swaps (non-cash) Mainly deferred taxes 16
Approx. 50 of Berlinovo -Portfolio already included Consolidated Balance Sheet (EUR m) 30-Sep-14 31-Dec-13 Change y-o-y Intangible assets 0 0 n.m. Investment properties 581.5 230.7 152 Other non-current assets 3.0 1.2 150 Non-current assets 584.5 231.9 152 Other current assets 27.9 9.9 182 Receivables and other current assets 1.9 1.5 27 Cash and cash equivalents 33.9 4.0 745 Current assets 63.6 15.5 310 Total assets 648.1 247.4 162 Equity 256.7 76.1 337 Mandatory convertible bond 17.3 0 Non-current financial liabilities 196.3 102.2 92 Other non-current liabilities 24.9 15.7 59 Non-current liabilities 238.5 117.9 102 Current financial liabilities 111.2 33.9 228 Other current liabilities 41.8 19.5 114 Current liabilities 153.0 53.4 187 Total equity and liabilities 648.1 247.4 162 Comments Including c.50 of Berlinovo -Portfolio; gross figure not taking into account hereditary building rights (reflected with -4.7m under non-current liabilities) Assets held for sale (c. 14m) and service charge receivables Driven by remaining cash from capital increase Includes 14.2m deferred taxes Mainly consisting of debt bridge Includes liabilities held for sale ( 14m), tenant prepayments on service charges ( 14m), remaining transaction and finance costs ( 9m) 17
FFO I amounts to 1.7m Consolidated Funds From Operation (EUR m) 30-Sep-14 Net profit (IFRS) 28.3 (+) Financial results 16.0 (+) Deferred taxes 5.6 EBIT 49.9 (+) Depreciation and amortisation 0.1 EBITDA 50.0 (-) Fair value adjustments of investment properties -42.5 (-) Results from sales -0.5 (-) Results from initial consolidation -0.1 (+) Stock option programme (non-cash) 0.1 EBITDA (adjusted) 7.0 Cash interest -5.2 Cash taxes 0.0 FFO I 1.7 EPRA earnings 1.7 Comments EPRA earnings consider goodwill of 25,000; otherwise identical to FFO I Includes shares from mandatory convertible bond 2014-2016 Weighted average number of shares outstanding (undiluted) 29.9 Shares outstanding (diluted) 33.4 FFO I (per share undiluted) 0.06 FFO I (per share diluted) 0.05 (+) Results from sales 0.5 FFO II 2.3 18
NAV post Berlinovo above 4.00 Comments NAV Derivation (EUR m) 30-Sep-14 31-Dec-13 Equity attributable to shareholders 255.7 75.8 (+) Deferred taxes 14.2 9.8 (+) Fair value of derivatives 5.9 0.9 EPRA NAV 275.7 86.5 Effects from acquisition of remaining Berlinovo -Portfolio Transaction expenses -8.4 Fair Value adjustment (IAS 40) 35.7 Net initial valuation effect 27.2 Interest rate swaps, fully covered by underlying variable loans Pro-forma numbers include all Berlinovo units to be acquired Diluted numbers include additional equity and additional number of shares from Mandatory Convertible Bond Pro-Forma EPRA NAV (incl. Berlinovo -Portfolio) 303.0 Number of shares (undiluted) 73.9 24.1 Number of shares (diluted) 79.6 24.1 Pro-Forma EPRA NAV per share, EUR (undiluted) 4.10 3.59 Pro-Forma EPRA NAV per share, EUR (diluted) 4.03 3.59 19
Examples of Westgrund real estate portfolio Bad Bodenteich Beckum Bremerhaven Chemnitz Halle Beckum Delligsen Heppens Lilienthal Norden Nordenham Riesa Detmold Einbeck Rügen Sundern Verden Wittstock Zwickau Halle Halle Nordenham Riesa Zwickau Döbeln Großenhain Kreiensen Norden 20
Disclaimer and contact These slides do not constitute a prospectus or listing particulars relating to WESTGRUND AG (the Company ). The information in these slides and presentation do not constitute or form any part of, and should not be construed as, an offer or invitation to sell, or issue, or any solicitation of any offer to purchase, subscribe for or otherwise acquire any debt or equity securities in the Company ( Securities ) in any jurisdiction, nor shall they or any part of them form the basis of, or be relied on in connection with, any contract therefore. No reliance may be placed for any purpose whatsoever on the information or opinions contained in these slides and presentation or the completeness, fairness or accuracy thereof. 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