LEG Immobilien SE

Investor Presentation • Nov 22, 2019

LEG Immobilien AG

15 November 2019 9M-2019 Results

Disclaimer

While the company has taken all reasonable care to ensure that the facts stated in this presentation are accurate and that the opinions contained in it are fair and reasonable, this presentation is selective in nature and is intended to provide an introduction to, and an overview of the Company's business. Any opinions expressed in this presentation are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information contained in this presentation. Where this presentation quotes any information or statistics from any external sources, you should not interpret that the Company has adopted or endorsed such information or statistics as being accurate.

This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realised from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and supply and demand. The Company has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and the Company does not undertake any duty to update the information and forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.

This presentation does not constitute an offer or invitation to purchase or sell any shares in the Company and neither this presentation or anything in it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever.

Agenda

HIGHLIGHTS 9M-2019 I.

• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• BUSINESS UPDATE AND OUTLOOK IV.
• APPENDIX V.

Overall company development: Delivering on key value drivers

 Acquisitions:	Approx. 5,700 units signed (YTD), pipeline of several smaller deals
 Capital growth:	Another valuation uplift of around 3% expected in Q4 (~8% in FY-2019)
 Financing:	Further reduction of avg. interest costs ahead (early redemptions + acquisitions)

Sound rent momentum persists

 In-place rent, l-f-l	€5.82/sqm (+2.9%; free financed units +3.7%)
	3.6%
EPRA-Vacancy, l-f-l	(unchanged YOY)
	€21.88/sqm
Maintenance/Capex	(+7.7% YOY)

Financials: Producing compelling total returns

 Net cold rent	€439.8m (+5.5% YOY from €417.0m)
 Adjusted EBITDA	€330.5m (+8.0% YOY from €305.9m)
 FFO I	€259.1m (+7.0% YOY from €242.2m), FFO per share €4.09 (+6.7% YOY from €3.83)
Pro forma NAV post conversion1 	€100.52 per share (up from €93.40 in FY-2018; +7.6% YTD/ +11.4% incl. €3.53 DPS)
 DPS-2019 (proposal)	€3.60 (rising dividend despite 9.2% higher number of shares)

1) NAV after a simulated, executed conversion of the 2014/2021 convertible which was nearly completed at end of Q3-2019

Agenda

• HIGHLIGHTS 9M-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• BUSINESS UPDATE AND OUTLOOK IV.
• APPENDIX V.

Portfolio Overview

Positive rent development across all submarkets

Total Portfolio¹

	30.09.2019	 (YOY)
# of units	131,135	+0.7%
In-place rent (sqm), l-f-l	€5.82	+2.9%
EPRA-Vacancy, l-f-l	3.6%	0 bps
1) IAS 40 only, IFRS 5 excluded

Strong results on the basis of tailor-made management strategies

High-Growth Markets

	30.09.2019	 (YOY)
# of units	41,497	+0.3%
In-place rent (sqm), l-f-l	€6.51	+3.3%
EPRA-Vacancy, l-f-l	1.9%	-50 bps

Stable Markets

	30.09.2019	 (YOY)
# of units	48,313	+1.6%
In-place rent (sqm), l-f-l	€5.47	+3.0%
EPRA-Vacancy, l-f-l	3.6%	+20 bps

Higher-Yielding Markets

	30.09.2019	 (YOY)
# of units	39,476	+0.2%
In-place rent (sqm), l-f-l	€5.39	+2.2%
EPRA-Vacancy, l-f-l	6.4%	+60 bps

Rent Development

Strong market fundamentals

Performance of free financed units reflects sound underlying fundamentals Rent restricted units: +0.5% year-on-year (like-for-like) High exposure to structural growth markets and respective commuter belts supports strong performance Voluntary commitment to lower modernisation yields has slightly dampening effect

Capex & Maintenance Lifting internal growth potential

1) development excluded

• HIGHLIGHTS 9M-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.

FINANCIAL PERFORMANCE III.

• BUSINESS UPDATE AND OUTLOOK IV.
• APPENDIX V.

Financial Highlights 9M-2019

Margin expansion story continues

FFO Calculation

9M-2019

€ million	9M-2019	9M-2018
Net cold rent	439.8	417.0		 +€22.8m/+5.5%
Profit from operating expenses	-0.9	-3.3
Maintenance (externally-procured services)	-36.9	-37.6
Staff costs	-48.8	-45.2		 Growth in staff costs mainly due to additional FTE's for crafts
Allowances on rent receivables	-5.8	-4.1		services and enhanced capex
Other	-0.3	-7.0		programme
Non-recurring project costs (rental and lease)	2.9	4.7		 Adj. NRI increased by +€25.5m
Recurring net rental and lease income	350.0	324.5		YOY (+7.9%); rising
Recurring net income from other services	3.4	5.6		maintenance costs/inflation more than offset by efficiency
Staff costs	-24.4	-19.6		gains
Non-staff operating costs	-10.9	-10.9 5.8 -24.7		 Rising staff costs only due to one-time effects (severance
Non-recurring project costs (admin.)	12.0
Recurring administrative expenses	-23.3			payments c. €8m)
Other income and expenses	0.4 0.5			 EBITDA increased by +€24.6m
Adjusted EBITDA	330.5	305.9		YOY (+8.0%); recurring admin.
Cash interest expenses and income	-58.4	-58.8		costs slightly decreased
Cash income taxes from rental and lease	-10.0	-4.1
FFO I (including non-controlling interests)	262.1	243.0		 Stable interest expenses (avg. 1.63% vs. 1.71% in 9M-2018)
Non-controlling interests	-3.0	-0.8		despite rising debt volume
FFO I (excluding non-controlling interests)	259.1	242.2
FFO II (including disposal of investment property)	255.9	240.6
Capex-adjusted FFO I (AFFO)	122.6	121.9

FFO Bridge 9M-2019

Cash Effective Interest Expense 9M-2019

€ million	9M-2019	9M-2018
Reported interest expense	92.7	72.0	 Interest expenses related to
Interest expense related to loan amortisation	-29.5	-9.2	extraordinary loan amortisation of €20.2m due
Interest costs related to valuation of assets/liabilities	-0.6	-0.6	to early conversion of convertible (€17.7m) and smaller repayments of
Leasing related interest expense (non-cash)	0.0	-0.7	subsidised loans (€2.5m)
Interest expenses related to changes in pension provisions	-1.9	-1.8
Other interest expenses	-2.1	-0.4
Cash effective interest expense (gross)	58.6	59.3
Cash effective interest income	0.2	0.5	 Interest coverage improved
Cash effective interest expense (net)	58.4	58.8	further (5.7x up from 5.2x YOY)

EPRA-Net Asset Value

Further capital growth ahead

€ million	30.09.2019	31.12.2018	 €486.2m net profit
Equity (excl. minority interests)	5,527.4	4,757.6	 €551.5m equity conversion  -€41.5m change in OCI
Effect of exercising options, convertibles and other rights	86.7	553.9	 -€223.1m dividend
NAV	5,614.1	5,311.5	 -€3.3m IFRS 16 and Others
Fair value measurement of derivative financial instruments	71.5	222.2
Deferred taxes1)	1,281.7	1,132.7
EPRA-NAV	6,967.3	6,666.4
(m)2) Number of shares fully-diluted incl. convertible	69.010	68.824	Comment on pro forma NAV
EPRA-NAV per share in €	100.96	96.86	post conversion This figure incorporates an
Goodwill resulting from synergies	52.7	52.7	equity conversion of the 2014/2021 convertible which
Adjusted EPRA-NAV (excl. goodwill)	6,914.6	6,613.7	was nearly completed at end of Q3 (92.5% and the remainder
Adjusted EPRA-NAV per share in €	100.20	96.10	in October 2019)
Effects from a simulated executed conversion	22.2	-185.7
Pro forma NAV (excl. goodwill) post-conversion	6,936.8	6,428.0
Pro forma NAV post conversion per share in €	100.52	93.40

• Attractive rental yield of 5.3% (thereof free financed portfolio 5.4%) and low value per sqm (€1,295) still reflect an average gap to current transaction prices
• Value of services business as attractive hidden gem not included in NAV
  • Scenario: additional value approx. €5.20-€7.80 per share (discount rate of 4.0%-6.0%)3)

1) And goodwill resulting from deferred taxes on EPRA-adjustments 3) Assumption: expected 2020 FFO, growth rate of 0%

2) Actual number of shares outstanding: 68.6m (30.09.2019), 63.1m (31.12.2018)

Sound property fundamentals basis for value growth

As of		30.09.2019; IAS 40 only, IFRS5 excluded				Market
Market	Residential Units	GAV Residential Assets (€m)	% of Total Residential GAV	GAV/ sqm (€)	In-Place Rent Multiple	Multiples, Estimated Rental Values1)	GAV Commercial/ Other Assets (€m)	Total GAV
High Growth Markets	41,497	4,946	46%	1,798	23.1x	20.0x	236	5,182
Stable Markets	48,313	3,474	32%	1,124	17.4x	16.1x	125	3,599
Higher Yielding Markets	39,476	2,222	21%	932	15.3x	14.3x	65	2,287
Subtotal NRW	129,286	10,642	98%	1,294	19.0x	17.2x	426	11,068
Portfolio outside NRW	1,849	169	2%	1,369	18.8x	17.6x	2	171
Total Portfolio	131,135	10,811	100%	1,295	19.0x	17.2x	428	11,239
Other Assets								237
Total								11,476

1) As of June 30, 2019.

Balance Sheet

Strong balance sheet

€ million	30.09.2019	31.12.2018	 Revaluation €551.6m  Capex €132.4m
Investment properties	11,276.6	10,709.0	 Reclassifications (Disposal) -€178.9m
Other non-current assets	222.6	175.9	 Acquisitions €25.9m
Non-current assets	11,499.2	10,884.9	 IFRS 16 and Others €36.6m
Receivables and other assets	96.2	55.4	 Cash flow from operating
Cash and cash equivalents	382.3	233.6	activities €224.8m
Current assets	478.5	289.0	 Investing activities - €4.7m
Assets held for sale	172.5	20.3	 Financing activities
Total Assets	12,150.2	11,194.2	-€71.4m
Equity	5,549.5	4,783.9
Non-current financing liabilities	4,319.4	4,113.3
Other non-current liabilities	1,618.1	1,382.3	Financing liabilities  Loan proceeds €436.5m
Non-current liabilities	5,937.5	5,495.6	 Repayment of loans
Current financing liabilities	257.8	484.8	-€270.2m
Other current liabilities	405.4	429.9
Current liabilities	663.2	914.7
Total Equity and Liabilities	12,150.2	11,194.2

Low LTV leaves headroom for growth

€ million	30.09.2019	31.12.2018
Financial liabilities	4,577.2	4,598.1
Leasing liabilities (IFRS 16)	32.1	0.0
Cash & cash equivalents	382.3	233.6
Net Debt	4,162.8	4,364.5
Investment properties	11,276.6	10,709.0
Properties held for sale	172.5	20.3
Prepayments for investment properties	4.3	-
Property values	11,453.4	10,729.3
Loan to Value (LTV) in %	36.3	40.7

Strong balance sheet (LTV target: 40-43%) after equity conversion of the 2014/2021 convertible leaves headroom for further growth investments

Potential for further degearing via capital growth

Financing Structure – 30 September 2019

LT financing provides high visibility for future earnings growth

2) commercial paper (€100m)

3) corporate bond (€500m)

4) convertible bond (€400m)

Average debt maturity	years)5 7.3 years (7.4
Interest costs	Ø 1.64% (1.68%)5
Hedging ratio	90.1% (89.9%)5
Rating	Baa1 (Moody's)

5) excluding commercial paper

0-2 years 4.2% (2.1%)⁵ 3-5 years 13.1% (13.3%)⁵ 6-8 years 52.5% (53.6%)⁵ ≥ 9 years 30.3% (31.0%)⁵ Key Facts Maturities

• HIGHLIGHTS 9M-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.

BUSINESS UPDATE AND OUTLOOK IV.

APPENDIX V.

Business Update

Accelerating external growth

Portfolio growth supported by the broadening of the regional scope

• LEG remains net buyer with acquisition of portfolios with c. 5,700 units YTD (thereof 210 newly built apartments)
• Purchase of c. 2,600 units outside of NRW underpins LEG's sourcing capabilities also outside its previous core region
• Bulk of the transactions become effective in 2020; annualised FFO impact of €13-14m (c. €6-7m net after disposals)
• Several smaller deals in negotiations
• Firepower for further acquisitions in 2020 > €400m

Further capital growth ahead

• Expected valuation uplift of approx. 8% for FY-2019 (+5.1% in H1-2019)
• Drivers are yield compression and rent performance

Early refinancing of loans: Extension of maturity profile at lower interest cost

Early loan redemptions planned (volume c. €340m), positive net FFO effect of c. €7m p.a. (one-time cost c. €27m)

Commitment to corporate social responsibility

• Additional foundation planned (capital contribution of €16m); objective: support of preventative measures for tenants
• Voluntary commitment to lower modernisation yields (depending on affordability) and more conservative approach with regard to adjustments from rent tables

Business Update

Residential units	Purchase price	Rent multiple		Price / sqm	FFO p.a.
5,516	approx. €500m	21.7x		€1,433	c. €13m (FY 2020)
Top 5 locations		Units	Federal state		Market segment
Bremen		1,160	Bremen		 stable
Greater Aachen region1		1,094	NRW		 high growth
Oldenburg		912	Lower Saxony		 high growth
Dortmund		269	NRW		 stable
Duisburg		193	NRW		 higher yielding

1) Baesweiler, Alsdorf, Übach-Palenberg

Development Projects²

Residential units	Purchase price	Rent multiple	Price / sqm	FFO p.a.
2103	approx. €38m	26.5x	€2,576	c. €0.9m

2) Dortmund, Bielefeld, Lüdenscheid

3) including 99 subsidised units Outlook

Guidance for 2019 & 2020: higher FFO target

• HIGHLIGHTS 9M-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• BUSINESS UPDATE AND OUTLOOK IV.

APPENDIX V.

Generating Appealing Shareholder Returns

1) For 2017, 2018, Q3-2019 pro forma NAV per share is shown and applied.

Income Statement

9M-2019

€ million	9M-2019	9M-2018
Net rental and lease income	340.2	315.2	 Higher net cold rents (+€22.8m YOY/+5.5%)
Net income from the disposal of investment property	-0.8	-0.7
Net income from the valuation of investment property	551.6	383.5	 Revaluation gains of 5.1%
Net income from the disposal of real estate inventory	-2.0	-1.5
Net income from other services	1.5	3.8	 Admin. costs contain one-off
Administrative and other expenses	-38.0	-31.7	effects e.g. severance payments, higher depreciation due to the adoption of IFRS 16
Other income	0.4	0.6
Operating earnings	852.9	669.2	 Net income from fair value measurement of derivatives -€92.6m; thereof -€91.3m from convertibles (9M-2018: -€49.6m)  Stable cash interests (€58.4m; -€0.4m YOY) despite rising debt volume
Net finance costs	-182.0	-117.9
Earnings before income taxes	670.9	551.3
Income tax expenses	-182.0	-143.6
Consolidated net profit	488.9	407.7	 Cash taxes (-€12.9m); lower expenses for FY 2019 expected

Acquisitions: Leading Management Skills Paying Off

Scalability of platform + cost discipline support value accretive growth

Strong volume growth at overhead cost below FY-2013 level…

…leads to a significant drop of the administrative costs ratio

LEG – Adj. EBITDA Margin

Leading profitability despite short term distortion from restricted units

Adj. EBITDA margin	FY-2018		FY-2017
	€m	margin %	€m	margin %
As reported	405.2	72.3	385.7	72.1
Gap restricted vs. unrestricted rents1)	33.5	73.7	30.1	73.6

1) €/sqm: €4.77 vs. €6.00 in 2018, €/sqm: €4.74 vs. €5.81 in 2017

	EBITDA as reported distorted by restricted units (compensation for lower rents included in interest result below the EBITDA line)
	Scenario analysis: closing gap between restricted vs. unrestricted rents; adjusted EBITDA margin approx. 150 bps higher

Rent revisionary potential

Refinancing of subsidised loans lifting value

Rent Potential Subsidised Units

• In the following 10 years more than 24,000 units will come off rent restriction
• Units show significant upside to market rents
• Subject to general legal and other restrictions, the economic upside can theoretically be realised the year after restrictions expire

697 827 ^{164 36 242} 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 et seq. # Units Number of Units Coming Off Restriction and Rent Upside 1,733 2,166 1,589 c. 8,800 c. 17,000

Spread to Market Rent (in €/sqm/month)

	≤ 5 years2)	10 years2) 6 –	≥ 10 years2)
In-place rent	€4.60	€4.90	€4.90
Market rent1)	€6.48	€6.72	€6.01
Upside potential3)	41%	37%	23%
Upside potential p.a.3)	€10.9m	€22.1m	€10.2m

Source: LEG as of Q3-2019

1) Employed by CBRE as indicator of an average rent value that could theoretically be achieved, not implying that an adjustment of the in-place rent to the market rent is feasible, as stringent legal and contractual restrictions regarding rent increases exist.

2) ≤5 years = 2019-2023; 6-10 years = 2024-2028; ≥10 years = 2029ff.

3) Rent upside is defined as the difference between LEG in-place rent as of Q3-2019 and market rent (defined in footnote 1) as of Q2-2019.

LEG Share Information

Strong outperformance vs. benchmarks including dividends

EPRA Germany LEG

Date	Report/Event
11.03.2019	Annual Report 2018
09.05.2019	Quarterly Statement Q1 as of 31 March 2019
29.05.2019	Annual General Meeting, Düsseldorf
09.08.2019	Quarterly Report Q2 as of 30 June 2019
15.11.2019	Quarterly Report Q3 as of 30 September 2019
20.11.2019	Roadshow London, Bank of America Merrill Lynch
22.11.2019	Roadshow Amsterdam, Kempen
27.11.2019	Roadshow Zurich, UBS
28.11.2019	Berenberg Real Estate Seminar, Paris
03.12.2019	UBS Global Real Estate Conference, London
05.12.2019	Berenberg European Corporate Conference, Surrey/UK

Contact

Investor Relations

Burkhard Sawazki

Head of Investor Relations & Strategic Business Analysis Tel: +49 (0) 211 4568-204 burkhard.sawazki@leg.ag

Karin Widenmann

Senior Manager Investor Relations & Strategic Business Analysis Tel: +49 (0) 211 4568-458 karin.widenmann@leg.ag

40476 Düsseldorf, Germany E-Mail: ir@leg.ag

LEG Immobilien AG Phone: +49 (0) 211 4568-400 Hans-Boeckler-Str. 38 Fax: +49 (0) 211 4568-22 204

Thank you for your interest.