LEG Immobilien SE

Investor Presentation • May 9, 2019

LEG Immobilien AG

9 May 2019 Q1 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 Q1-2019 I.

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

Highlights Q1-2019

Overall company development

 Portfolio valuation:	Mid-year appraisal expected to result in approx. 5% (+€520-550m) valuation uplift
 Disposals:	Sale of c. 2,700 non-core units in advanced stages
 Strategy review (ongoing):	Analysing more opportunistic approach outside NRW (B & C cities) as well as
	potential growth opportunities for new development

Sound rent momentum persists

 In-place rent, l-f-l	€5.71/sqm (+3.1%; free financed units +3.9%)
	3.8%
EPRA-Vacancy, l-f-l	(+10 bps YOY)
	€5.74/sqm
Maintenance/Capex	(+17.1% YOY)

Financials: On track for FY targets

 Net cold rent	€146.3m (+5.6% YOY from €138.5m)
 Adjusted EBITDA	€106.8m (+12.7% YOY from €94.8m)
 FFO I	€84.9m (+14.4% YOY from €74.2m), €1.34 per share (+14.4% YOY from €1.17)
 EPRA-NAV (excl. goodwill)	€98.54 per share (up from €96.10 in FY-2018; +2.5% )
 Pro forma NAV post conversion	€94.37 per share (up from €93.40 in FY-2018; +1.0%);
	NAV after a simulated, executed conversion of the 2014/2021 convertible

Agenda

• HIGHLIGHTS Q1-2019 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 Portfolio
--	-----------------

of units 133,637 +2.6% In-place rent (sqm), l-f-l €5.71 +3.1%

EPRA-Vacancy, l-f-l 3.8% +10 bps

31.03.2019 (YOY)

Strong results on the basis of tailor-made management strategies

High-Growth Markets

	31.03.2019	 (YOY)
# of units	41,362	+0.2%
In-place rent (sqm), l-f-l	€6.40	+3.4%
EPRA-Vacancy, l-f-l	2.1%	-30 bps

Stable Markets

	31.03.2019	 (YOY)
# of units	48,913	+2.8%
In-place rent (sqm), l-f-l	€5.38	+2.9%
EPRA-Vacancy, l-f-l	3.6%	+20 bps

Higher-Yielding Markets
	31.03.2019	 (YOY)
# of units	41,515	+5.1%
In-place rent (sqm), l-f-l	€5.29	+2.8%
EPRA-Vacancy, l-f-l	6.5%	+50 bps

Strong market fundamentals persist Rent Development

Capex & Maintenance Lifting internal growth potential

Lifting growth potential while maintaining high capital efficiency

• HIGHLIGHTS Q1-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.

FINANCIAL PERFORMANCE III.

• BUSINESS UPDATE AND OUTLOOK IV.
• APPENDIX V.

Financial Highlights Q1-2019

Margin expansion story continues

Net Cold Rent (€m)		Adj. Net Rental and		Lease Income (€m)	Adj. EBITDA (€m)
	138.5	+5.6%	146.3	101.2	+11.1%	112.4		94.8	+12.7%	106.8
	Q1-2018		Q1-2019	Q1-2018		Q1-2019		Q1-2018		Q1-2019
		FFO I (€m)		Capex-Adj. FFO I / AFFO (€m)					Margin (%)
								Q1-2018	Q1-2019	Comment
		+14.4%					Adj. NRI	73.1	76.8	Ongoing efficiency gains + lower maintenance ratio
					+5.4%		Adj. EBITDA	68.4	73.0	See above + stable staff costs
	74.2		84.9	52.2		55.0	FFO I	53.6	58.0	See above + lower interest costs
							AFFO	37.7	37.6	See above + higher growth capex

Q1-2018 Q1-2019

Q1-2018 Q1-2019

FFO Calculation

Q1-2019

€ million	Q1-2019	Q1-2018
Net cold rent	146.3	138.5	 +€7.8m/+5.6%
Profit from operating expenses	-1.7	-2.8
Maintenance (externally-procured services)	-13.8	-15.5
Staff costs	-16.1	-15.0	 Growth in staff costs mainly
Allowances on rent receivables	-2.4	-2.4	due to additional FTE's for crafts services and enhanced
Other	-0.6	-2.8	capex program
Non-recurring project costs (rental and lease)	0.7	1.3	 Adj. NRI increased by
Recurring net rental and lease income	112.4	101.3	+€11.2m YOY (+11.1%);
Recurring net income from other services	2.0	2.0	rising cost inflation more than offset by efficiency gains and
Staff costs	-5.6	-5.7	lower maintenance ratio
Non-staff operating costs	-2.9	-3.4
Non-recurring project costs (admin.)	0.8	0.4
Recurring administrative expenses	-7.7	-8.7
Other income and expenses	0.1	0.2
Adjusted EBITDA	106.8	94.8	 EBITDA increased by
Cash interest expenses and income	-19.2	-19.4	+€12.0m YOY (+12.7%)
Cash income taxes from rental and lease	-2.0	-1.0
FFO I (including non-controlling interests)	85.6	74.4	 Lower interest costs: (avg. 1.62% vs. 1.76% in Q1-2018)
Non-controlling interests	-0.7	-0.2	despite rising debt volume
FFO I (excluding non-controlling interests)	84.9	74.2
FFO II (including disposal of investment property)	83.2	73.5
Capex-adjusted FFO I (AFFO)	55.0	52.2

FFO Bridge Q1-2019

Cash Effective Interest Expense Q1-2019

€ million	Q1-2019	Q1-2018
Reported interest expense	25.6	24.3	 One-time effect of €1.2m in Q1-2019 from smaller
Interest expense related to loan amortisation	-5.6	-3.6	repayment of subsidised loans (loan amortisation)
Interest costs related to valuation of assets/liabilities	-0.2	-0.2
Leasing related interest expense (non-cash)	0.0	-0.3
Interest expenses related to changes in pension provisions	-0.6	-0.6
Other interest expenses	0.0	-0.2
Cash effective interest expense (gross)	19.2	19.4
Cash effective interest income	0.0	0.1	 Interest coverage improved
Cash effective interest expense (net)	19.2	19.4	further (5.6x up from 4.9x YOY)

EPRA-Net Asset Value

Transaction prices above portfolio values suggest further upside

€ million	31.03.2019	31.12.2018
Equity (excl. minority interests)	4,677.3	4,757.6	 -€76.1m net loss  €4.2m others
Effect of exercising options, convertibles and other rights	657.4	553.9
NAV	5,334.7	5,311.5
Fair value measurement of derivative financial instruments	350.7	222.2
Deferred taxes1)	1,149.0	1,132.7
EPRA-NAV	6,834.4	6,666.4
(m)2) Number of shares fully-diluted incl. convertible	68.824	68.824	Comment on pro forma NAV
EPRA-NAV per share in €	99.30	96.86	post conversion  This figure incorporates a
Goodwill resulting from synergies	52.7	52.7	simulated, executed conversion of the 2014/2021
Adjusted EPRA-NAV (excl. goodwill)	6,781.7	6,613.7	convertible with a put and a
Adjusted EPRA-NAV per share in €	98.54	96.10	call option in 2019  It is shown to further
Effects from a simulated executed conversion	-286.8	-185.7	increase transparency with regard to potentially dilutive
Pro forma NAV (excl. goodwill) post-conversion	6,494.9	6,428.0	NAV effects
Pro forma NAV post conversion per share in €	94.37	93.40

Attractive rental yield of 5.5% (thereof free financed portfolio: 5.7%) and low value per sqm (€1,206) still reflect decent gap to recent portfolio transactions

• Value of services business as attractive hidden gem not included in NAV
  • Scenario: additional value approx. €4.60-€6.90 per share (discount rate of 4.0%-6.0%)3)

2) Actual number of shares outstanding 63.1m 1) And goodwill resulting from deferred taxes on EPRA-adjustments 3) Assumption: expected 2019 FFO, growth rate of 0%

Portfolio

Sound property fundamentals basis for value growth

1) As of December 31, 2018.

Balance Sheet

Strong balance sheet

€ million	31.03.2019	31.12.2018
Investment property	10,770.0	10,709.0	 IFRS 16 effects €35.8m  Capex €28.9m
Other non-current assets	207.2	175.9	 Reclassifications -€3.7m
Non-current assets	10,977.2	10,884,9
Receivables and other assets	81.2	55.5	 Cash flow from operating
Cash and cash equivalents	267.0	233.6	activities €96.9m
Current assets	348.2	289.0	 Investing activities - €27.4m
Assets held for sale	6.2	20.3	 Financing activities
Total Assets	11,331.6	11,194.2	-€36.1m
Equity	4,700.3	4,783.8
Non-current financing liabilities	4,214.6	4,113.3
Other non-current liabilities	1,439.1	1,382.3	Financing liabilities  Loan proceeds €127.5m
Non-current liabilities	5,653.7	5,495.6	 Repayment of loans
Current financing liabilities	412.9	484.8	-€156.9m
Other current liabilities	564.7	429.9
Current liabilities	977.6	914.8
Total Equity and Liabilities	11,331.6	11,194.2

	LTV

Low LTV leaves headroom for growth

€ million	31.03.2019	31.12.2018
Financial liabilities	4,627.5	4,598.1	 Strong balance sheet with
Leasing liabilities (IFRS 16)	32.2	0.0	LTV at the lower end of the target range (40-45%) leaves
Cash & cash equivalents	267.0	233.6	headroom for growth investments without raising
Net Debt	4,328.3	4,364.5	fresh equity  Potential for further de
Investment properties	10,770.0	10,709.0	gearing via capital growth
Properties held for sale	6.2	20.3
Prepayments for investment properties	9.0	-
Property values	10,785.2	10,729.3
Loan to Value (LTV) in %	40.1	40.7	 Potential impact on LTV from future conversion of 1st convertible (€300m nominal, currently -270bps)
Pro forma LTV post conversion in %	37.4	38.0

Financing Structure – 31 March 2019

LT financing provides high visibility for future earnings growth

1) €300 m convertible bond with investor put option 2019

2) Corporate bond (€500 m)

3) €400 m convertible bond

Key Facts			Maturities
Average debt maturity	7.5 years	0-2 years	1.6%
Interest costs	Ø 1.62%	3-5 years	19.6%
Hedging ratio	91.0%	6-8 years	50.7%
Rating	Baa1 (Moody's)	≥ 9 years	28.3%

• HIGHLIGHTS Q1-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• BUSINESS UPDATE AND OUTLOOK IV.

APPENDIX V.

Business Update (1/2)

Exploring additional growth opportunities

H1-2019 appraisal: Positive outlook for further capital growth

• Property prices continue to rise
• IFRS valuation gain of approx. 5% in Q2 expected (€520-550m)
• Especially B-locations in the commuter belts benefit from positive spill-over effects
• Further yield compression expected also in H2

Disposal program: Sale of non-core portfolio in advanced stages

• Disposals: Expected disposal volume increased to c. 2,700 units given good demand situation
• Portfolio consists of non-core assets (mainly peripheral areas)
• Proceeds are earmarked for growth investments
• Acquisitions: Supply in investment markets is slightly picking up

Exploring additional growth opportunities

Strategy review (ongoing): Exploiting growth opportunities arising from acquisitions and new development

• Acquisitions:
  • Especially B and C cities (dependent on quality of micro locations) offer attractive risk-reward at current stage of the cycle – with LEG providing strong expertise of managing higher yield assets (operating performance & efficiency)
  • Analysing the potential of a more opportunistic approach outside of NRW (attractive locations in catchment areas of A cities; potential for critical scale remains key)
• New development:
  • Acceleration of development activities under review (current pipeline of 1,000 units)
  • Acquisition of land is also an option while availability at reasonable prices and regulatory framework remain critical

Outlook

Guidance for 2019 & 2020

KPI	2019	2020
FFO I*	€338m - €344m	€356m - €364m
L-F-L rent growth	3.0-3.2%	3.2-3.4%
L-F-L vacancy	slightly decreasing
EBITDA margin	~73%	~74%
Investments	~30-32€/sqm	~31-33€/sqm
Dividend	70 % of FFO I	70 % of FFO I

*excl. disposals or future acquisitions

• HIGHLIGHTS Q1-2019 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• BUSINESS UPDATE AND OUTLOOK IV.

APPENDIX V.

Generating Appealing Shareholder Returns

1) For 2017 & 2018, pro forma NAV per share is shown and applied. 2) Proposal to Annual General Meeting.

Income Statement Q1-2019

€ million	Q1-2019	Q1-2018
Net rental and lease income	109,7	98.4	 Higher net cold rents (+€7.8m YOY/+5.6%)
Net income from the disposal of investment property	-0.3	-0.3
Net income from the valuation of investment property	-0.2	0.0
Net income from the disposal of real estate inventory	-0.7	-0.7	 Income relates to disposals; no revaluation as of Q1
Net income from other services	1.4	1.5
Administrative and other expenses	-9.5	-9.4	 Admin. costs stable, despite wage inflation
Other income	0.1	0.2
Operating earnings	100.5	89.7	 Net income from fair value measurement of derivatives
Net finance costs	-139.0	4.7	-€116.0m; thereof -€116.0m from convertibles
Earnings before income taxes	-38.5	94.4	(Q1-2018: €26.5m)  Lower cash interests (€19.2m; -€0.2m YOY) despite rising
Income tax expenses	-18.5	-16.2	debt volume
Consolidated net profit	-57.0	78.2	 Cash taxes (-€2.0m)

Acquisitions: Leading Management Skills Paying Off

Scalability of platform + cost discipline support value accretive growth

Strong volume growth at decreasing overhead cost…

…leads to a significant drop of the administrative costs ratio

Innovation & Value-Added Services

Digitization

Digitization as a technology trend is of tremendous importance for the real estate industry and LEG is headed towards a leading position as a driver of innovation.

Greatest digital achievements

• •Accounting Robot in receivables management increases customer satisfaction as employees focus on customer need instead of repetitive bookkeeping-tasks
• •Success with tenant app, additional 50% active users convinced by extended self-services
• •Streamlining internal processes in maintenance and repair to reduce costs

Current development

• •Substituting written form by phone service to increase customer satisfaction
• •No more phone queues as we call our customers back on demand
• •Monitoring water quality in our apartment houses continuously and automatically through IoT increasing tenant safety and reducing costs

Digitization in the long run

• Further automation of processes
• Development of ecosystems with strategic partners to increase customer satisfaction and retention
• Development of value-add services (disruptive topics)

LEG's Innovation management approach

Internal scope

External scope

• Corporate culture supporting constant development / innovation
• State-of-the-art processes
• Collaboration and communication
• Innovative services and business models
• Extensive network
• Alliances and strategic partnerships
• Transferable innovations and best practices

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 25,000 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

17 697 827 ^{164 37 242} # Units Number of Units Coming Off Restriction and Rent Upside 1,734 2,496 1,589 c. 8,900 c. 17,800

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

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029ff

	≤ 5 years2)	10 years2) 6 –	≥ 10 years2)
In-place rent	€4.69	€4.87	€4.85
Market rent1)	€6.55	€6.71	€5.97
Upside potential3)	39%	38%	23%
Upside potential p.a.3)	€9.97m	€22.48m	€11.87m

Source: LEG as of Q1-2019

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 Q1-2019 and market rent (defined in footnote 1) as of FY-2018.

LEG Share Information

Basic data Well-balanced shareholder structure

• Prime Standard, Frankfurt Stock Exchange
• Total no. of shares: 63,188,185
• Ticker symbol: LEG
• ISIN: DE000LEG1110
• Indices: MDAX, FTSE EPRA/NAREIT, GPR 250, Stoxx Europe 600
• Weighting (31.03.2019): MDAX 2.85%; EPRA 2.89%
• Rating: Baa1 (stable) by Moody's

Share price (30.04.2019, indexed; 31.01.2013 = 100)

Source: LEG; shareholdings according to voting rights notifications

Date	Report/Event
11.03.2019	Annual Report 2018
09.05.2019	Quarterly Statement Q1 as of 31 March 2019
16.05.2019	KeplerCheuvreux German & Austrian Property Days, Paris
20./21.05.2019	Roadshow London, Deutsche Bank
23.05.2019	Kempen European Property Seminar, Amsterdam
24.05.2019	HSBC European Real Estate Conference, Frankfurt
29.05.2019	Annual General Meeting, Düsseldorf
06.06.2019	Deutsche Bank dbAccess Conference, Berlin
19.06.2019	Roadshow Helsinki, Pareto Securities
20.06.2019	Morgan Stanley EEMEA Property Conference, London
09.08.2019	Quarterly Report Q2 as of 30 June 2019
15.11.2019	Quarterly Statement Q3 as of 30 September 2019

Contact

Investor Relations

Burkhard Sawazki

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

Karin Widenmann

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

Benedikt Kupka

Manager Investor Relations & Strategic Business Analysis Tel: +49 (0) 211 4568-286 benedikt.kupka@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.