LEG Immobilien SE

Investor Presentation • Mar 11, 2019

LEG Immobilien AG

11 March 2019 FY-2018 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

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

Highlights FY-2018

Overall company development

 Management changes	Lars von Lackum (CDO) appointed as new CEO (as at June 1), best mutual agreement with Thomas Hegel (becomes Senior Advisor);
	Volker Wiegel appointed as new COO as at June 1
 Disposal program	Portfolios with total volume c. 2,000 units in negotiation phase

Attractive rent momentum persists

 In-place rent, l-f-l	€5.67/sqm (+3.0%; free financed units +3.9%)
	3.3%
EPRA-Vacancy, l-f-l	(+/-0 bps YOY)
	€29.4/sqm
Maintenance/Capex	(+31.3% YOY)

Financials: FY targets reached; strong dividend growth

 Net cold rent	€560.2m (+4.8% YOY from €534.7m)
 Adjusted EBITDA	€405.2m (+5.1% YOY from €385.7m)
 FFO I	€318.6m (+7.9% YOY from €295.3m), €5.04 per share (+7.9% YOY from €4.67)
 Dividend (proposal)	€3.53 per share (up from €3.04 in FY-2017, +16.1% YOY)
 EPRA-NAV (excl. goodwill)	€96.10 per share (up from €83.81 in FY-2017; +15.0% YOY )
 Pro forma NAV post conversion	€93.40 per share (up from €80.90 in FY-2017; +15.4% YOY);
	NAV after a simulated, executed conversion of the 2014/2021 convertible;
	objective is to increase transparency with respect to potentially dilutive NAV effects

Agenda

HIGHLIGHTS FY-2018 I.

PORTFOLIO AND OPERATING PERFORMANCE II.

FINANCIAL PERFORMANCE III.

OUTLOOK IV.

APPENDIX V.

Portfolio Overview

Positive rent development across all submarkets

	Total Portfolio
--	-----------------	--

of units 133,969 +3.0% In-place rent (sqm), l-f-l €5.67 +3.0%

EPRA-Vacancy, l-f-l 3.3% +/-0 bps

31.12.2018 (YOY)

Strong results on the basis of tailor-made management strategies

High-Growth Markets

	31.12.2018	 (YOY)
# of units	41,423	+1.0%
In-place rent (sqm), l-f-l	€6.36	+3.4%
EPRA-Vacancy, l-f-l	2.0%	+30 bps

Stable Markets

	31.12.2018	 (YOY)
# of units	48,965	+2.8%
In-place rent (sqm), l-f-l	€5.35	+2.8%
EPRA-Vacancy, l-f-l	3.0%	-20 bps

Higher-Yielding Markets
31.12.2018	 (YOY)
41,731	+5.5%
€5.26	+2.9%
5.7%	+/-0 bps

Sound underlying rent dynamics Rent Development

Capex & Maintenance Lifting internal growth potential

Lifting growth potential while maintaining high capital efficiency

• HIGHLIGHTS FY-2018 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.

FINANCIAL PERFORMANCE III.

OUTLOOK IV.

APPENDIX V.

Financial Highlights FY-2018

Margin expansion story is set to continue

AFFO 33.6 24.9 See above + higher

growth capex

FY-2017 FY-2018

FY-2017 FY-2018

FFO Calculation

FY-2018

€ million	FY-2018	FY-2017
Net cold rent	560.2	534.7	 +€25.5m/+4.8%
Profit from operating expenses	-4.5	-2.8
Maintenance (externally-procured services)	-51.8	-51.2
Staff costs	-60.3	-55.8	 Growth in staff costs mainly
Allowances on rent receivables	-8.4	-7.2	due to additional FTE's for crafts services and enhanced
Other	-10.4	-12.2	capex program
Non-recurring project costs (rental and lease)	5.8	3.4
Recurring net rental and lease income	430.6	408.9	 Adj. NRI increased by +€21.7m YOY (+5.3%); rising
Recurring net income from other services	7.8	8.7	cost inflation more than offset
Staff costs	-24.8	-22.2	by efficiency gains
Non-staff operating costs	-18.4	-18.5	 Admin. Costs: moderate
Non-recurring project costs (admin.)	9.2	7.4	increase (YOY) despite wage
Recurring administrative expenses	-34.0	-33.3	inflation and additional regulatory requirements
Other income and expenses	0.8	1.4	(below level of 2013)
Adjusted EBITDA	405.2	385.7	 EBITDA increased by
Cash interest expenses and income	-77.2	-80.9	+€19.5m YOY (+5.1%)
Cash income taxes from rental and lease	-5.8	-6.4
FFO I (including non-controlling interests)	322.2	298.4	 Lower interest costs (average
Non-controlling interests	-3.6	-3.1	costs of FY-2018: 1.72% vs. 1.88% in FY-2017) despite
FFO I (excluding non-controlling interests)	318.6	295.3	rising debt volume
FFO II (including disposal of investment property)	318.8	294.1
Capex-adjusted FFO I (AFFO)	139.7	179.8

FFO Bridge FY-2018

Cash Effective Interest Expense FY-2018

€ million	FY-2018	FY-2017
Reported interest expense	109.3	152.3	 One-off refinancing effect of €41m in FY-2017 from
Interest expense related to loan amortisation	-14.0	-57.8	refinancing of subsidised loans (loan amortisation)
Prepayment penalties / breakage costs	-13.5	-9.5	 Release of swaps and fixed
Interest costs related to valuation of assets/liabilities	0.0	-0.4	interest loans (refinancing)
Leasing related interest expense	-0.8	-0.9
Interest expenses related to changes in pension provisions	-2.4	-2.4
Other interest expenses	-0.5	0.0
Cash effective interest expense (gross)	78.1	81.3
Cash effective interest income	0.8	0.4	 Interest coverage improved
Cash effective interest expense (net)	77.2	80.9	further (5.3x up from 4.8x YOY)

EPRA-Net Asset Value

Reported values still below transaction prices; services as hidden gem

Attractive rental yield of 5.5% (thereof free financed portfolio: 5.7%) and low value per sqm (€1,198) still reflect decent gap to recent portfolio transactions

Value of services business 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 63.1FY 1) And goodwill resulting from deferred taxes on EPRA-adjustments 3) Assumption: expected 2019 FFO, growth rate of 0%

Portfolio Valuation FY-2018

Valuation uplifts driven by letting performance and yield compression

Breakdown revaluation gains (€ million)

• Visible catch-up effects with respect to multiple B-cities and commuter towns
• Adjustment of discount rate from 5.3% in FY-2017 to 5.2% (cap rate from 6.3% to 6.1%)

1) Change in Gross Asset Value, l-f-l

Portfolio Valuation FY-2018

Broadbased valuation uplifts continue across market segments

Valuation uplift by markets	(l-f-l), including commercial and	other assets
	Valuation uplift FY-18	Valuation uplift H2-18	Gross yield FY-18
High-Growth Markets	7.5% (15.5% in FY-17, l-f-l)	2.8%	4.5% (4.7% in FY-17)
Münster (6,125 units)	5.3%	1.1%	4.0% (4.1%)
Düsseldorf (5,307 units)	4.7%	1.5%	4.3% (4.2%)
Bielefeld (3,232 units)	13.7%	5.1%	5.4% (5.9%)
Stable markets	10.7% (12.5% in FY-17, l-f-l)	7.6%	6.0% (6.5% in FY-17)
Dortmund (13,596 units)	13.8%	9.2%	5.3% (6.0%)
Essen (3,372 units)	11.3%	8.4%	5.9% (6.5%)
Mönchengladbach (6,444 units)	10.1%	7.6%	6.2% (6.6%)
Higher-yielding markets	6.9% (8.8% in FY-17, l-f-l)	3.2%	6.9% (7.3% in FY-17)
Duisburg (6,907 units)	12.6%	4.5%	6.5% (7.1%)
Bochum (1,626 units)	12.0%	7.5%	5.5% (6.2%)

Increasingly positive momentum in the B-cities including higher-yielding markets

Especially smaller towns in the catchment areas are showing significant uplifts (Ratingen (7.8%; 3,129 units), Erkrath (12.7%; 719 units), Witten (13.5%; 1,558 units))

Total portfolio 8.2% (12.4% in FY-17, l-f-l) 4.2% 5.5% (5.9% in FY-17)

Gelsenkirchen (7,325 units) 3.4% 1.4% 7.0% (7.1%)

EPRA-Net Asset Value

1) Valuation effects derivatives + deferred taxes are added back; 2) Valuation effects with respect to rent receivables and nominal, non-consolidated investments

Portfolio

Sound property fundamentals basis for value growth

1) As of December 31, 2018.

Balance Sheet

Strong balance sheet

€ million	31.12.2018	31.12.2017
Investment property	10,709.0	9,460.7	 Revaluation €800.9 m  Net additions €257.5m
Other non-current assets	175.9	172.3	 Capex €174.0m
Non-current assets	10,884,9	9,633.0
Receivables and other assets	55.5	63.7	 Cash flow from operating
Cash and cash equivalents	233.6	285.4	activities €288.6m
Current assets	289.0	349.1	 Investing activities - €431.9m
Assets held for sale	20.3	30.9	 Financing activities
Total Assets	11,194.2	10,013.0	€91.5m
Equity	4,783.9	4,112.4
Non-current financing liabilities	4,113.3	3,821.4
Other non-current liabilities	1,382.3	1,158.8
Non-current liabilities	5,495.6	4,980.2	 Loan proceeds €392.2m
Current financing liabilities	484.8	478.2	and proceeds from commercial paper €150m  Repayment of loans
Other current liabilities	429.9	442.2
Current liabilities	914.7	920.4	-€252.3m
Total Equity and Liabilities	11,194.2	10,013.0

LTV

Strong credit profile in more volatile financing environment

€ million	31.12.2018	31.12.2017
Financial liabilities	4,598.1	4,299.6	 Strong balance sheet with LTV at the lower end of the
Cash & cash equivalents	233.6	285.4	target range(40-45%) leaves
Net Debt	4,364.5	4,014.2	headroom for growth investments without raising
Investment properties	10,709.0	9,460.7	fresh equity  Potential for further de
Properties held for sale	20.3	30.9	gearing via capital growth
Prepayments for investment properties	-	-
Business combinations	-	2.0
Property values	10,729.3	9,493.6
Loan to Value (LTV) in %	40.7	42.3	 Potential impact on LTV from future conversion of 1st
Pro forma LTV post conversion in %	38.0	39.4	convertible (€300m nominal, currently -270bps)

Financing Structure – 31 December 2018

*Including commercial paper

LT financing secures future earnings growth

1) Commercial paper

2) €300 m convertible bond with investor put option 2019

3) Corporate bond (€500 m)

4) €400 m convertible bond

Key Facts		Maturities
Average debt maturity	7.7 years (7.6 years*)
Interest costs	Ø 1.61% (1.58%*)
Hedging ratio	91.1% (91.3%*)
Rating	Baa1 (Moody's)

0-2 years	0.6% (3.6%*)
3-5 years	20.1% (19.5%*)
6-8 years	52.1% (50.5%*)
≥ 9 years	27.2% (26.4%*)

• HIGHLIGHTS FY-2018 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.

APPENDIX V.

Outlook

KPI	2019	2020
FFO I	€338m - €344m	€356m - €364m
FFO I per share	€5.35 - €5.44	€5.63 - €5.76
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

Steady Expansion of Leading FFO-Profitability

FFO I per share CAGR 2014-2020e*: +11.0% (excl. future acquisitions) FFO I per share (€) *at mid point 2.67 3.04 3.53 4.26 4.67 2013 2014 2015 2016 2017 5.04 2018 5.35 – 5.44 2019e 5.63 – 5.76 2020e

EBITDA Margin

• HIGHLIGHTS FY-2018 I.
• PORTFOLIO AND OPERATING PERFORMANCE II.
• FINANCIAL PERFORMANCE III.
• 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 FY-2018

€ million	FY-2018	FY-2017
			 Higher rental income
Net rental and lease income	418.6	399.4	(+€25.5m YOY/+4.8%)  Higher personnel expenses (+€4.5m) and one-time costs
Net income from the disposal of investment property	-0.9	-1.4	(+€2.4m)
Net income from the valuation of investment property	800.9	1,036.8
Net income from the disposal of real estate inventory	-1.6	-2.3	 Portfolio revaluation resulted in 8.2% appraisal gain (FY
Net income from other services	5.3	6.3	2018)
Administrative and other expenses	-44.8	-41.3	 Recurring admin. costs nearly stable (€34m/+€0.7m YOY), despite wage inflation and
Other income	0.8	1.4	rising costs for regulatory requirements etc.
Operating earnings	1,178.3	1,398.9	 Net income from fair value
Net finance costs	-81.9	-278.6	measurement of derivatives €25.4m; thereof €26.5m from convertibles
Earnings before income taxes	1,096.4	1,120.3	(FY-2017: -€138.2m)  Lower cash interests (€77.2m; -€3.7m YOY) despite rising
Income tax expenses	-249.3	-275.5	debt volume
Consolidated net profit	847.1	844.8	 Cash taxes (-€5.8m)

Attractive NRW Market

Positive demographics with stabilising net immigration

Cities entering upswing mode

2015 2016 2017 2018-2020 Net immigration to Germany NRW ~0.42 m 6) ~25% ~1.0 m 1) (approx. +80% yoy) Sources: 0.5 m 2) 1.2 m 3)

1) Interview with director of Federal Agency of Migration and Refugees (Aug 2016)

2) Federal Statistical Office, press release 13 Mar 2018

3) Deutsche Bundesbank, Monthly Report June 2018

4) Federal Statistical Office, press release 2 Nov 2017

5) Bundesamt für Migration und Flüchtlinge, January 2019

6) Federal Statistical Office, press release 15 Oct 2018

Key facts

• Federal Agency of Migration and Refugees collected data that net immigration of foreigners to Germany amounted to about 0.42 million in 2017, thereof 0.18 million non-EU nationals 6)
• Deutsche Bundesbank forecasts 1.2 million additional immigrants (net) for 2018-20203)
• End of 2016, 1.6 million people seeking protection (incl. asylum seekers) were registered in Germany (+113% vs 2014), the majority living in NRW (27%) 4)
• Stabilising net immigration is already ongoing with decreasing share of refugees (c. -70% asylum seekers 2017 YOY; c. 0.2 million new asylum seekers in 2017)5)
• Immigration is driving overall population growth, triggering additional growth in net new households
• Additional pressure on affordable housing segment
• Outperformance of German economy attracts qualified new immigration
• Liquid labour market and affordable living as pull-factors for NRW

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

EPRA Net Initial Yield FY-2018

€ million	31.12.2018	31.12.2017
Investment properties	10,702.2	9,448.0
Assets held for sale	20.3	30.9
Market value of residential property portfolio (net)	10,722.5	9,478.9
Estimated incidental costs	1,056.9	934.3
Market value of residential property portfolio (gross)	11,779.4	10,413.2
Annualised cash flow from rental income (gross)	564.9	524.3
Non recoverable operating costs	-61.8	-60.4
Annualised cash flow from rental income (net)	508.0	468.0
EPRA Net Initial Yield in %	4.3	4.5

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

145 745 827 ^{164 37 242} 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029ff # Units Number of Units Coming Off Restriction and Rent Upside 1,734 2,729 1,531 c. 8,100 17,760

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

	≤ 5 years2)	10 years2) 6 –	≥ 10 years2)
In-place rent	€4.68	€4.87	€4.84
Market rent1)	€6.52	€6.71	€5.97
Upside potential3)	39%	38%	23%
Upside potential p.a.3)	€10.43m	€22.62m	€11.97m

Source: LEG as of FY-2018

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 FY-2018 and market rent (defined in footnote 1) as of FY-2017.

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 (31.01.2019): MDAX 2.78%; EPRA 2.79%
• Rating: Baa1 (stable) by Moody's

Share price (27.02.2018, indexed; 31.01.2013 = 100)

Source: LEG; shareholdings according to voting rights notifications

Date	Report/Event
11.03.2019	Annual Report 2018
27.03.2019	Roadshow, Deutsche Bank, London
28.03.2019	European Real Estate Conference, Bank of America Merrill Lynch, London
28.03.2019	German Real Estate Forum, Commerzbank, London
09.04.2019	Roadshow, Hauck & Aufhäuser, Zurich
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 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.