Instone Real Estate Group AG

Quarterly Report • Nov 26, 2019

9M 2019 RESULTS PRESENTATION

26 NOVEMBER 2019

Disclaimer

Table of Contents

01 | Key Achievements

• 02 | Portfolio Overview
• 03 | 9M 2019 Financial Performance
• 04 | Outlook
• 05 | Appendix

Key Achievements

	 Increased volume of new permits to €1,017m and project portfolio to €5.6bn exp. sales volume y-t-d
Operational achievements	 Since 30 June 2019, signed 4 forwards sales with total €815m expected sales volume: "Niederkasseler Lohweg" (Dusseldorf), "Westville" (Frankfurt/Main), "Siemens Areal / Schönhofviertel" (Frankfurt/Main), "west.side" (Bonn)
	 In Q3, launched construction for projects "Schwarzwaldstrasse" (Herrenberg), final section of "Schumanns Höhe" (Bonn), social housing part of "Marie" (Frankfurt/Main)
	 "Schulterblatt Amanda" (Hamburg) + Beethovenpark (1stsect., Augsburg) In Q3, launched sales for projects
	 Adjusted revenues increased by 36% to €302.4m (previous year: €222.5m)
Financial performance & outlook	 Adjusted gross profit margin of 32.7% (previous year: 26.8%)
	 Adjusted EBIT significantly up to €56.7m (previous year: €20.6m)
	 Adjusted Net Income substantially improved to €46.7m (previous year: -€1.7m)
	 FY 2019 outlook confirmed; Despite ongoing sales and construction progress, Q4 revenues and sales volume significantly driven by signed forward sales

Table of Contents

01 | Key Achievements

02 | Portfolio Overview

• 03 | 9M 2019 Financial Performance
• 04 | Outlook
• 05 | Appendix

Development of Project Portfolio

• In 2019 y-t-d approved new projects of total €1,017m expected sales volume

New projects (YTD 2019):

Project	Exp. sales volume	Exp. Units
Hamburg / Rothenburgsort	€182m	716
Herrenberg III / Schäferlinde	€56m	141
Leipzig / Rosa-Luxemburg-Strasse	€116m	330
Nuremberg / Seetor	€103m	199
Nuremberg / Schopenhauerstrasse	€65m	101
Nuremberg / Stephanstrasse	€65m	461
Regensburg / Marina Bricks	€29m	50
Rosenheim / Bahnhofsareal Nord	€22m	151
Erlangen / Kitzmann	€19m	32
Subtotal as of 09/19	€655m	2,181
Bamberg	€73m	227
Augsburg	€51m	102
Nuremberg	€49m	101
Mönchengladbach	€105m	303
Essen	€68m	212
Leipzig	€16m	75
Total as of 11/19	€1,017m	3,201

|

Project Portfolio (as of 30/09/2019)

5.0% 1.8% 3.3%

1

under construction

26,7%

pre construction 5.1%

• Building right for 92% of portfolio completed or in process

"Others" include Wiesbaden, Mannheim, Hannover, Potsdam

Table of Contents

• 01 | Key Achievements
• 02 | Portfolio Overview

03 | 9M 2019 Financial Performance

• 04 | Outlook
• 05 | Appendix

9M 2019 Results of Operations

Results of Operations (€m, adj.*)
	9M 2019	9M 2018	Delta
Revenues	302.4	222.5	35.9%
Project cost	-203.5	-162.7	25.1%
Gross profit	98.9	59.7	65.7%
Margin	32.7%	26.8%
Platform cost	-42.2	-39.1	7.9%
EBIT	56.7	20.6	275%
Margin	18,8%	9.3%
Financial Result	-7.3	-6.7	9.0%
EBT	49.4	13.8	357%
Margin	16.3%	6.2
Taxes	-2.7	-15.5	-82.6%
Tax rate	5.5%	112%
Net income	46.7	-1.7	>100%

• Gross profit margin of 32.7% reflects exceptionally high share of revenue contribution from high margin projects in first nine month 2019

€m	9M 2019	9M 2018
EBIT	46.3	8.3
ppa	6.4	12.3
Non-recurring items	4.0	-
Adj. EBIT	56.7	20.6

• 18.8% EBIT margin driven by strong gross margin and economies of scale
• Tax rate at 5.5% due to recognition of tax loss carryforwards (following approval of a domination and profit transfer agreement with a subsidiary)

*adjusted for ppa and non-recurring items

|

Revenue Recognition (illustrative) Volume of Sales Contracts (illustrative)

| 10 (Revenue recognition under Instone Group's adjusted results of operations, which is the basis of the Company's forecast, will continue to reflect share deals and asset deals in the same way, i.e. equivalent to the requirements stipulated in IFRS 15 irrespective of an expected IFRS IC decision to exclude share deals from revenue recognition over time in accordance with IFRS 15)

Operating Cash Flow Leverage

In € million	9M 2019	9M 2018
EBITDA	59.7	21.0
Other non-cash items	-2.8	-2.8
Taxes paid	-10.2	-10.9
Change in working capital	-78.61	-35.1
thereof new land plot acquisition payments	-93.7	-28.5
Operating cash flow	-32.0	-27.82
Operating cash flow excl. investments	61.7	0.7

¹without changes of business acquisition of S&P Stadtbau

² without reimbursements of IPO costs from former shareholder

In € million	9M 2019	FY 2018
Corporate debt	171.7	66.1
Project related debt	279.8	199.5
Financial debt	451.5	265.5
- Cash and cash equivalents	162.8	88.0
Net financial debt	288.7	177.5
EBITDA (adjusted) (LTM)	88.9	50.2
Net debt/adjusted EBITDA	3.2x	3.5x
Gross corporate debt / adjusted EBITDA less project interest expenses	2.2x	1.6x

Table of Contents

• 01 | Key Achievements
• 02 | Portfolio Overview
• 03 | 9M 2019 Financial Performance

04 | Outlook

05 | Appendix

Confirmed FY 2019 Outlook and Midterm Revenue Guidance

• Increased FY 2019 outlook considering project "Westville"( Frankfurt/Main)
• Adj. gross margin of ~24% assumed to be lower than previous outlook due to forward sale of new large project in Frankfurt/Main. Not considering this project adj. gross margin of ~28% would have been confirmed.

Revenue (adj.) Guidance FY 2019 - 2022

• Midterm revenue guidance fully covered by existing projects

13 | (Revenue recognition under Instone Group's adjusted results of operations, which is the basis of the Company's forecast, will continue to reflect share deals and asset deals in the same way, i.e. equivalent to the requirements stipulated in IFRS 15 irrespective of an expected IFRS IC decision to exclude share deals from revenue recognition over time in accordance with IFRS 15)

Table of Contents

• 01 | Key Achievements
• 02 | Portfolio Overview
• 03 | 9M 2019 Financial Performance
• 04 | Outlook

05 | Appendix

Project Cost

Platform Cost

Q3 2019	€k
Cost of materials	-286,251
Changes in inventories	+87,344
Indirect sales cost	-1,778
Capitalized interest on changes in inventories	-2,804
Total project cost	-203,490

Q3 2019	€k
Personnel expenses	-25,412
Other operating income	+2,388
Other operating expenses	-24,918
Indirect sales cost	+1,778
Non-Recurring Costs1	+3,976
Total platform cost	-42,188

1 including transaction costs from business acquisition and acquisition costs resulting from effects in previous years

|

Income statement (reported) Commentary

In €m	9M 2019	9M 20181
Total revenue	296.4	210.2
Changes in inventories	86.8	24.5
	383.2	234.7
Other operating income	2.4	1.3
Cost of materials	-286.1	-185.2
Staff costs	-25.4	-22.6
Other operating expenses	-22.0	-18.7
Depreciation and amortization	-3.0	-0.4
Earnings from operative activities	49.1	9.1
Income from associated affiliates	0.0	-2.2
Other net income from investments	0.0	2.1
Finance income	1.4	1.0
Finance costs	-11.8	-8.4
Changes of securities classified as financial assets	0.2	-0.1
EBT (reported)	39.0	1.6
Income taxes	-0.6	-11.6
Net income (reported)	38.5	-10.0

• For the nine months to 30 September 2019, the Instone Group significantly increased its year on year revenues to €296.4 million (previous year: €210.2 million). New sales contracts concluded in the nine-months to September 2019 as well as construction progress related to projects in revenue recognition led to a year on year increase in revenues of €86.2 million versus the previous year period. 1
• Cost of materials increased to €286.1 million (previous year: €185.2 million) reflecting land price payments in relation to new as well as previously secured projects and increased construction activities. 2
• Staff costs in the first nine month of 2019 amounted to €25.4 million (previous year: €22,6 million) reflecting the increase in FTEs to 293.0 (previous year: 258.6). 3
• The increase of financing costs compared to the same period of last year, is related to the increase in gross debt. 4
• Income taxes for the first nine months of the current year are about €-0.6 million (previous year: €-11.6 million). The favorable development and corresponding IFRS tax rate reflects the first time recognition of tax loss carry-forwards in fiscal year 2019. 5

¹ Previous year's figure adjusted

Condensed balance sheet Commentary

In €m	30/09/2019	FY 2018
Non-current assets	21.3	2.8
Inventories	547.8	404.4
Contract assets	156.6	158.5
Other receivables	26.6	33.0
Cash and cash equivalents	162.8	88.0
Current assets	893.8	683.8
Total assets	915.2	686.6
Total equity	285.8	246.7
Financial liabilities	321.7	177.7
Other provisions and liabilities	17.3	8.5
Deferred tax liabilities	34.9	32.2
Non-current liabilities	373.9	218.4
Financial liabilities	129.8	87.8
Trade payables	73.6	78.3
Other provisions and liabilities	52.1	55.1
Current liabilities	255.5	482.7
Total equity and liabilities	915.2	686.6

7

9

8

• 6 As at 30 September 2019, inventories increased to €547.8 million (31 December 2018: €404.4 million) construction progress as well as land acquisitions. Approximately €70.1 of inventories are related to the first time consolidation of the activities acquired from S&P Stadtbau.
• Gross contract assets decreased slightly to €459.9 million (31 December 2018: €466.9 million), reflecting deliveries of completed projects. Advance payments received from customers amounted to €310.0 million (31 December 2018: €318.1 million). Capitalised direct sales costs fell to €6.8 million (31 December 2018: €9.7 million). The balance of these items resulted in a moderate reduction in (net) contract assets to €156.7 million (31 December 2018: €158.5 million).
• Short and Long-term financial liabilities increased to €451.5 million as at 30 September 2019 (31 December 2018: €265.6 million) reflecting new land acquisitions and financing of construction progress in our ongoing projects.
• Trade payables decreased to €73.6 million (31 December 2018: €78.3 million).

Condensed cash flow statement Commentary

	In €m	9M 2019	9M 20181
	Consolidated earnings	38.5	-10.0
	Other non-cash income and expenses	7.2	33.5
	Decrease / increase of inventories, contract assets, trade receivables and other assets	-60.3	197.5
	Increase / decrease of contract liabilities, trade payables and other liabilities	-7.2	-208.4
	Income taxes paid	-10.2	-10.9
10	Cash flow from operating activities	-32.0	1.7
11	Cash flow from investing activities	-33.7	2.1
	Free cash flow	-65.7	3.8
	Increase of issued capital incl. contributions to capital reserves	0.0	150.5
	Increase from other neutral changes in equity	0.0	-9.1
	Repayment of shareholder loans / Payout to non-controlling interests	0.0	-28.3
	Cash proceeds from borrowings	392.7	49.4
	Cash repayments of borrowings	-246.4	-82.7
	Interest paid	-5.9	-4.3
12	Cash flow from financing activities	140.5	75.7
	Cash change	74.8	79.5
	Cash and cash equivalents at the beginning of the period	88.0	73.6
	Cash and cash equivalents at the end of the period	162.8	153.2

11

• Operating cash flow for the nine months to 30 September 2019 amounted to €- 32.0 million (previous year: €1.7 million). The number includes approximately €93.7 million in relation to land acquisition payments including for our "City Prague", Stuttgart, "Rote Kaserne", Potsdam, "Garden City", Dortmund, "Wiesbaden-Delkenheim", "Friedberger Landstraße" and "Idsteiner Straße", both Frankurt a.M. , "Kösliner Weg", Hamburg, "Rothensburgsort", Hamburg, "Schäferlinde", Herrenberg projects. 10
  • Investing cash flow is mainly influenced by outflows of €31.8 million for our acquisition of S&P Stadtbau
• Cash flow from financing activities for the first nine months of 2019 amounted to €140.5 million (previous year: €75.7 million). The figure reflects new financings of €392.7 million and repayments for terminated loans of €246.4 million. 12

¹ Previous year's figure adjusted

Financing Structure Provides Basis for Growth

• Corporate level refinancing largely completed
• €200m term loan signed in Q2
• Successful completion of new €98.5m promissory note
• Tax optimisation implemented
• Negotiation re syndicated RCF well advanced

Future growth fully funded

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Project Portfolio Key Figures

In € million	Q3 19	Q2 19	Q1 19	Q4 18	Q3 18	Q2 18	Q1 18
Volume of sales contracts	183.1	69.0	62.8	206.2	104.2	120.0	30.0
Project Portfolio (as of)	5,384.1	5,091.7	4,790.2	4,763.2	3,620.3	3,589.1	3,408.5
thereof already sold (as of)	1,261.1	1,128.7	1,061.1	998.2	971.9	867.8	779.9

In units	Q3 19	Q2 19	Q1 19	Q4 18	Q3 18	Q2 18	Q1 18
Volume of sales contracts	380	120	170	459	245	273	56
Project Portfolio (as of)	12,233	11,628	11,041	11,041	8,924	8,863	8,355
thereof already sold (as of)	2,944	2,684	2,564	2,395	2,283	2,038	1,849

(Unless otherwise stated, the figures are quarterly values)

9M 2019 – Revenue Contribution (Top Projects)

Project	City	Adj. Revenues (€m)
Quartier Stallschreiber Strasse / Luisenpark	Berlin	68.2
Wohnen am Kurpark / Wilhelm IX	Wiesbaden	40.3
Marienkrankenhaus	Frankfurt/Main	34.5
Heeresbäckerei	Leipzig	30.5
City Prag – Wohnen im Theaterviertel	Stuttgart	24.6
Franklin	Mannheim	18.4
Niederkasseler Lohweg	Dusseldorf	18.4
Sebastianstrasse / Schumanns Höhe	Bonn	15.1
Rebstock	Frankfurt/Main	14.9
west.side	Bonn	12.4
Others		25.1
Total		302.4

|

9M 2019 – Volume of Concluded Sales Contracts (Top Projects)

Project	City	Volume (€m)	Units
Niederkasseler Lohweg	Dusseldorf	NA1	221
Quartier Stallschreiber Strasse / Luisenpark	Berlin	55.1	100
Marienkrankenhaus	Frankfurt/Main	40.5	42
Sebastianstrasse / Schumanns Höhe	Bonn	26.6	61
Wohnen am Kurpark / Wilhelms IX	Wiesbaden	23.4	34
Schulterblatt	Hamburg	15.3	67
Theaterfabrik	Leipzig	14.7	50
Schwarzwaldstrasse	Herrenberg	14.7	36
Kantstrasse 55-57 (property)	Leipzig	11.5	4
Marina Bricks	Regensburg	10.0	20
Others		103.12	35
Total		314.9	670

¹ The parties to the contract have agreed not to disclose the purchase price. ²Figure includes volume from project "Niederkasseler Lohweg".

9M 2019 – Construction Launches

Project	City	Exp. Sales Volume (€m)	Units
City-Prag – Wohnen im Theaterviertel	Stuttgart	~110	~250
Sebastianstrasse / Schumanns Höhe	Bonn	~68	~185
Schwarzwaldstrasse	Herrenberg	~48	~115
West.side	Bonn	~35	~115
Marina Bricks	Regensburg	~29	~50
Theaterfabrik	Leipzig	~20	~75
Marie (social housing part)	Frankfurt/Main	~11	~55
Friedrich-Ebert-Strasse	Leipzig	~10	~15
Fregestrasse	Leipzig	~2	~5
Total		~333	~865

Sales Offer as of 30/09/19 (Top Projects)

Project	City	Sales volume (€m)	Units
Marienkrankenhaus	Frankfurt	109.9	92
Beethovenpark	Augsburg	101.4	309
Schulterblatt "Amanda"	Hamburg	77.2	100
Quartier Stallschreiber Strasse / Luisenpark	Berlin	33.6	40
Schwarzwaldstrasse	Herrenberg	33.5	78
Others		~94.4	137
Total		~450.0	756

Project Portfolio as of 30/09/19 (projects >€30m sales volume, representing total: ~€5.1bn)

Project	Location	Sales volume (expected)	Land plot acquired	Building right obtained	Sales started	Construction started
Hamburg
Schulterblatt "Amanda"	Hamburg	Mio 94 €
Kösliner Weg	Norderstedt-Garstedt	102 Mio €
Sportplatz Bult	Hannover	120 Mio €
Rothenburgsort	Hamburg	Mio 182 €
Berlin
Quartier Stallschreiber Straße / Luisenpark	Berlin	236 Mio €
Wendenschlossstr	Berlin	Mio 55 €
Rote Kaserne West	Potsdam	Mio 49 €
NRW
Sebastianstraße / Schumanns Höhe	Bonn	69 Mio €
Niederkasseler Lohweg	Dusseldorf	NA
Dusseldorf Unterbach / Wohnen am Hochfeld	Dusseldorf	Mio 157 €
west.side	Bonn	Mio 186 €
Gartenstadtquartier	Dortmund	100 Mio €

25 |

a) Status as of 30.09.2019 b) Semi-filled circle means that the milestone has yet been achieved for sections of the project (land plot acquisition, start of sales or construction). Concerning the building right the semi-filled circle means that the zoning process has been initiated. No circle for "land plot acquired" means that the land has not yet been purchased but secured by contract.

Project Portfolio as of 30/09/19 (projects >€30m sales volume, representing total: ~€5.1bn)

Project		Sales volume	Land plot acquired	Building right	Sales	Construction
	Location	(expected)		obtained	started	started
Rhine-Main
Wiesbaden-Delkenheim Lange Seegewann ,	Wiesbaden	92 Mio €
Siemens-Areal	Frankfurt	546 Mio €
St Marienkrankenhaus	Frankfurt am Main	210 Mio €
Rebstock 1 2 BF	Frankfurt am Main	50 Mio €
Friedberger Landstraße	Frankfurt am Main	324 Mio €
Elisabethenareal Frankfurt	Frankfurt am Main	58 Mio €
Wiesbaden - Wohnen am Kurpark	Wiesbaden	Mio 103 €
Steinbacher Hohl Frankfurt a. M ,	Frankfurt am Main	Mio 42 €
Gallus	Frankfurt am Main	Mio 41 €
Westville	Frankfurt am Main	Mio 592 €
Leipzig
Heeresbäckerei	Leipzig	122 Mio €
Semmelweisstraße	Leipzig	Mio 73 €
Parkresidenz	Leipzig	250 Mio €
Rosa-Luxemburg-Straße	Leipzig	Mio 114 €

26 |

a) Status as of 30.09.2019 b) Semi-filled circle means that the milestone has yet been achieved for sections of the project (land plot acquisition, start of sales or construction). Concerning the building right the semi-filled circle means that the zoning process has been initiated. No circle for "land plot acquired" means that the land has not yet been purchased but secured by contract.

Project Portfolio as of 30/09/19 (projects >€30m sales volume, representing total: ~€5.1bn)

Project	Location	Sales volume (expected)	Land plot acquired	Building right obtained	Sales started	Construction started
Baden-Wurttemberg
City-Prag - Wohnen im Theaterviertel	Stuttgart	126 Mio €
Franklin	Mannheim	Mio 69 €
Schwarzwaldstraße	Herrenberg	48 Mio €
S`LEDERER	Schorndorf	87 Mio €
Neckartalterrassen	Rottenburg	Mio 140 €
Schäferlinde	Herrenberg	56 Mio €
Bavaria South
Therese	Munich	136 Mio. €
Ottobrunner Straße 90/92	Munich	83 Mio. €
Beethovenpark	Augsburg	147 Mio. €
Bavaria North
Schopenhauerstraße	Nuremberg	65 Mio. €
Stephanstraße	Nuremberg	65 Mio. €
Seetor	Nuremberg	103 Mio. €

27 |

a) Status as of 30.09.2019 b) Semi-filled circle means that the milestone has yet been achieved for sections of the project (land plot acquisition, start of sales or construction). Concerning the building right the semi-filled circle means that the zoning process has been initiated. No circle for "land plot acquired" means that the land has not yet been purchased but secured by contract.

Financial Calendar 2020

March 19, 2020	Publication of annual report 2019
May 28, 2020	Publication of quarterly group statement as of 31 March 2020
June 9, 2020	Annual General Meeting
August 27, 2020	Publication of group interim report as of 30 June 2020
November 26, 2020	Publication of quarterly group statement as of 30 September 2020

Investor Relations Contact

Thomas Eisenlohr (Head of Investor Relations) Instone Real Estate Group AG Grugaplatz 2-4, 45131 Essen T +49 201 45355-365 | F +49 201 45355-904 thomas.eisenlohr@instone.de / investorrelations@instone.de www.instone.de