Instone Real Estate Group AG

Quarterly Report • Aug 24, 2018

H1 2018 RESULTS PRESENTATION

AUGUST 24, 2018

Disclaimer

H1 2018 wrap-up

Positive business development accelerating in Q2

On track to achieve increased outlook for financial year 2018

Strong project portfolio ensuring sustainable profitable growth

Positive business development

In $\epsilon$ thousands	H1 2017 (reported)	H1 2018 (reported)	IFRS 15 effect	H1 2018 pre IFRS 15	PPA effect	H1 2018 (pre PPA)	H1 2018 pre IFRS 15 $+$ pre PPA
Revenues	47,461	143,917	$-75,471$	68,446	$\blacksquare$	143,917	68,446
Operating performance	91,483	148,407	$-9,106$	139,301	11,249	159,655	150,549
Cost of materials	$-69,806$	$-118,762$	7,476	$-111,286$	$\blacksquare$	$-118,762$	$-111,286$
Cost of sales	$-10,779$	$-3,858$		$-3,858$	$\overline{\phantom{0}}$	$-3,858$	$-3,858$
Gross profit $l$	10,898	25,787	$-1,630$	24,157	11,249	37,036	35,406
Gross profit margin	23.0%	17.9%		35.3%	$\overline{\phantom{a}}$	25.7%	51.7%
EBIT	$-9,554$	1,487	$-1,630$	$-144$	11,249	12,735	11,105
EBIT margin	$-20.1\%$	$1.0\%$		$-0.2\%$	-	$8.8\%$	$16.2\%$
EBT	$-20,109$	$-3,569$	$-1,630$	$-5,199$	11,249	7,680	6,050
EAT	$-18,601$	$-937$	$-1,128$	$-2,717$	7,660	6,072	4,943
EAT (attributable to shareholders)	$-18,757$	$-1,537$	$-1,128$	$-2,999$	6,453	4,582	3,454
EPS (in $\epsilon$ ) 2	$-0.51$	$-0.04$		$-0.08$		0.12	0.09

Development of key balance sheet items

In € million	FY 2017 (reported)	H1 2018 (reported)
Inventories	659.4	377.1
Financial receivables	33.0	0.7
Trade receivables	4.2	137.3
Equity	52.2	243.0
Equity ratio	6.6%	36.5%
Financial liabilities	375.7	184.9
Other provisions	50.5	16.4
Trade payables	275.7	65.8
LTV1	138.0%	47.8%

Source: Company information ¹ Loan = Provisions + financial liabilities – cash & cash equivalents – liabilities to shareholders; Value = Total assets – cash & cash equivalents – trade payables – other liabilities

KPIs – Acceleration in Q2 2018

In € million	Q1 17	Q2 17	Q3 17	Q4 17	Q1 18	Q2 18
Volume of sales contracts	90.8	120.4	88.5	58.4	30.0	120.0
Volume of new permits	0.0	174.2	203.9	128.0	0.0	173.2
Handovers	17.9	25.8	82.5	75.6	30.3	36.5
Project Portfolio (as of)	na	3,039.8	3,374.8	3,410.0	3,408.5	3,589.1
In units	Q1 17	Q2 17	Q3 17	Q4 17	Q1 18	Q2 18
Volume of sales contracts	193	527	189	110	56	273
Volume of new permits	0	555	458	358	0	575
Handovers	18	44	208	190	75	92
Project Portfolio (as of)	na	7,675	8,042	8,390	8,355	8,863

H1 2018 wrap-up

Positive business development accelerating in Q2

On track to achieve increased outlook for financial year 2018

Strong project portfolio ensuring sustainable profitable growth

Increased FY 2018 outlook (IFRS 15 adjusted)

	FY18 outlook Initial (May 2018)	FY18 outlook Update, IFRS 15 adj. (Aug. 2018)
Revenues	€320-330m	€370-400m
Operating performance	>€500m	>€500m	
Volume of concluded sales contracts	>€500m	>€500m	
margin1 Gross profit	~28%	~24%3
Adj.2 EBIT	€42-48m	€48-54m
Adj2 . EBT	€25-30m	€32-37m
Tax rate	Stable at 30%	Stable at 30%	

¹ Pre PPA (expected PPA in 2018: ~€18m) and including sales commissions; ² Pre PPA; ³ Lower margin due to wirte-downs under IFRS 15 regarding three purchase agreements concluded with institutional investors, which will not have any effects on the respective overall projects.

Without application of the accounting standard IFRS 15, the initial outlook would have been confirmed

Ramp-up of revenues in line with planning

planning

• Main revenue contribution in H2 2018 from following projects:

Project	Located	Revenue
Stallschreiber Strasse / Luisenpark	Berlin	~€60m
Heeresbäckerei	Leipzig	~€45m
Marienkrankenhaus	Frankfurt	~€30m
Wilhelm IX	Wiesbaden	~€25m

Also volume of concluded sales contracts ramping up as planned

H1 2018 wrap-up

Positive business development accelerating in Q2

On track to achieve increased outlook for financial year 2018

Strong project portfolio ensuring sustainable profitable growth

Project portfolio remains strong, ensuring profitable growth

• 44 projects with 8,863 units pointing to an overall expected sales volume of €3.6bn
• 92% of sales volume located in key metropolitan regions
• 24% of sales volume already sold
• 25% of sales volume already under construction

Project portfolio data per 30.06.2018

Increased project portfolio driven by new approvals

• Neckartalterassen, Rottenburg (expected sales volume: ~€105m)
• Semmelweisstrasse, Leipzig (expected sales volume: ~€66m)
• Completed projects:
• Freiburg, Leipzig
• Increased expected sales volume:
• Marienkrankenhaus, Frankfurt (+€13m)
• Adjustments in different projects (+€24m)

Project portfolio (projects >€30m sales volume, representing total: >€3.5bn)

Project		Location	Sales volume (expected)	Land plot acquired	Building right obtained	Sales started	Construction started
Hamburg
NMA gesamt		Hamburg	145 Mio €
Straße Essener		Hamburg	Mio 89 €
Schulterblatt		Hamburg	Mio 83 €
Berlin
Quartier Stallschreiber	Straße / Luisenpark	Berlin	232 Mio €
WSS Neubau		Berlin	Mio 119 €
NRW					Full	building	right obtained
Sebastianstraße ,	/ Schumanns Höhe Bonn	Bonn	63 Mio €
Halle 17 - Clouth	Areal	Cologne	Mio 31 €
Niederkasseler	Lohweg	Dusseldorf	72 Mio €				Rental units +
Düsseldorf Unterbach	/ Wohnen im Hochfeld	Dusseldorf	Mio 149 €				commercial unit sold
.side west		Bonn	178 Mio €

14 |

a) Status as per 30.06.2018 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 (projects >€30m sales volume, representing total: >€3.5bn)

Project	Location	Sales volume (expected)	Land plot acquired	Building right obtained	Sales started	Construction started
Rhine-Main			Increased from	€197m
Wiesbaden-Delkenheim Lange Seegewann ,	Wiesbaden	89 Mio €
Siemens-Areal	Frankfurt am Main	Mio 422 €				Launched for sale
Marienkrankenhaus	Frankfurt am Main	210 Mio €
Wohnen an der Straße Lange	Frankfurt am Main	43 Mio €
Rebstock	Frankfurt am Main	Mio 49 €
Friedberger Landstraße	Frankfurt am Main	305 Mio €
Elisabethenareal	Frankfurt am Main	Mio 60 €
Wohnen am Kurpark / Wilhelms IX	Wiesbaden	Mio 95 €
Steinbacher Hohl	Frankfurt am Main	41 Mio €

15 |

a) Status as per 30.06.2018 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 (projects >€30m sales volume, representing total: >€3.5bn)

Project	Location	Sales volume (expected)	Land plot acquired	Building right obtained	Sales started	Construction started
Baden-Wurttemberg						Launched for sale
City-Prag - Wohnen im Theaterviertel	Stuttgart	Mio 115 €
Wohnen am Safranberg	Ulm	49 Mio €
Franklin	Mannheim	Mio 68 €
Schwarzwaldstraße	Herrenberg	34 Mio €
New project S`Lederer	Schorndorf	Mio 70 €
Neckartalterrassen	Rottenburg	105 Mio €
Bavaria
Therese	Munich	Mio 136 €
Ottobrunner Strasse	Munich	83 Mio €
Leipzig
New project Heeresbäckerei	Leipzig	122 Mio €
Semmelweisstrasse	Leipzig	66 Mio €
Parkresidenz	Leipzig	196 Mio €

| 16

a) Status as per 30.06.2018 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.

Filling up the pipeline to ensure future growth

	Exp. Sales volume (€)	Units	Living space (sqm)	Exp. year of completion	Status quo
Rottenburg	~105m	~360	~26,000	2023	 Contract signed
Leipzig	~66m	~210	~14,000	2024	 Contract signed
Hannover	~110m	~280	~23,000	2024	 Part of contracts signed
Augsburg	~220m	~600	~45,000	2025	Consensual purchase agreement in preparation
Metropolitan region Frankfurt	~80m	~230	~17,000	2022	Preferred bidder
Metropolitan region rhine axis	~125m	~330	~25,000	2022/23	Preferred bidder
Metropolitan region Hamburg	~195m	~470	~35,000	2022	Preferred bidder

IFRS 15 adjusted guidance confirms revenue ramp-up

APPENDIX

ADDITIONAL FINANCIAL INFORMATION

Income statement Commentary

In €m		H1 2017	H1 2018
	Total revenue	47.5	143.9
	Changes in inventories	44.0	4.5
1	Operating performance	91.5	148.4

	Other operating income	2.6	0.6
2	Cost of materials	-69.8	-118.8
3	Staff costs	-12.7	-14.4
	Other operating expenses	-21.4	-14.0
	Income from associated affiliates	0.4	-0.1
	Other net income from investments	-0.1	0.0
	EBITDA (reported)	-9.4	1.7
	Depreciation and amortization	-0.2	-0.2
	EBIT (reported)	-9.6	1.5
	Finance income	0.3	0.8
	Finance costs	-11.0	-5.8
	Write-down of long-term securities	0.0	-0.1
4	Finance result	-10.6	-5.0
	EBT (reported)	-20.1	-3.5
	Income taxes	1.5	2.6
	Net income (reported)	-18.6	-1.0

1

• Operating performance consists of booked revenues from realized projects as well as change in inventories due to projects currently ramping up. Due to the first-time adoption of IFRS 15 in 2018 the operating performance includes also revenues from recognitions over time. The increase of operating performance in Q2 2018 compared to the same period of the previous year is mainly the effect of the first-time adoption of IFRS 15.
• The cost of materials in Q2 2018 were significant higher compared to Q2 2017 by aprox. €49 million resulting from the higher work in progress for the projects under construction. In addition, the loss relief of three projects is included in the cost of materials in the amount of approx. €7 million in the second quarter of 2018. 2
• The increase in staff costs in the first quarter of 2018 due to the increased number of employees will continue in the second quarter. 3
• The financial result of €-5 million is much better than in the same period of the previous year. This improvement results from the group's substantially improved capital situation. 4

In €m	FY 2017	H1 2018
Consolidated earnings	-31.0	-1.0
Depreciation and amortization	0.4	0.2
Increase / decrease of provisions	12.5	-32.5
Increase / decrease of deferred taxes	-15.7	16.1
Decrease / increase of equity carrying amounts	1.0	0.1
Decrease/increase other financial assets	0.3	0.0
Other non-cash income and expenses	31.2	13.7
Profit / loss on disposals of property, plant and equipment	0.0	0.0
Decrease / increase of inventories, trade receivables and other assets	-112.3	177.6
Increase / decrease of trade payables and other liabilities	83.4	-162.8
Cash flow from operating activities	-30.2	11.5
Income taxes paid	-4.2	-4.5
Net cash flow from operating activities	-34.5	7.0
Proceeds from disposals of property, plant and equipment	0.0	-0.1
Purchase of property, plant and equipment	-0.5	-0.0
Proceeds from disposals of non-current financial assets	0.0	0.3
Payments for acquisitions of shares in consolidated companies	-22.8	0.0
Receipts from the disposal of subsidiaries	0.1	0.0
Acquisition of non-consolidated subsidiaries	-0.0	0.0
Interest received	0.6	0.6
Cash flow from investing activities	-22.7	0.8
Increase of issued capital incl contributions to capital reserves	0.0	141.4
Payout to non-controlling interests	-0.7	0.0
Cash proceeds from shareholder loans	0.0	0.0
Cash proceeds from borrowings	121.9	58.8
Cash repayments of borrowings	-88.3	-148.8
Interest paid	-14.8	-5.5
Cash flow from financing activities	18.2	46.0

Cash flow Commentary

5

6

7

• The net cash flow from operating activities of Instone Real Estate of €7 million in the first half year of 2018 (2017: €-34.5 million) has no significant impact on the financial position of Instone Group. The high decrease in inventories and trade receivables as well as the decrease in trade payables is mainly a cash-neutral process due to the first-time application of IFRS 15 as of 01.01.2018.
• In the first half year of 2018, the Instone Group made no significant investments or deinvestments. The investing cash flow is therefore almost zero.
• In the cash flow from financing activities in the first half of 2018, three transactions are essential:
• the issue of the new shares resulted in a net cash inflow of around €141 million
• the repayment of the shareholder loan in the amount of approx. €-56 million
• repayments and new loans for project financing with a balance of approx. €-33 million In total, a positive cash flow of €46 million remains.

21 | Source: Audited historical financials, Company information. .

Balance sheet (1/2) Commentary

In €m

	FY 2017	H1 2018
Intangible assets	0.0	0.0
Tangible assets	1.6	1.5
Investments accounted for using the equity method	0.4	0.3
Other financial assets	0.3	0.3
Financial receivables	0.7	0.7
Other receivables	1.0	0.0
Non-current assets	4.0	2.8

659.4 377.1
32.4 0.0
4.2 137.3
15.5 20.0
0.0 0.5
73.6 127.4
785.1 662.4
789.1 665.2

Source: Audited historical financials, Company information.

• 5 The decrease in inventories is essentially the result of the first-time adoption of IFRS 15 for the reporting period from 1 January 2018 to 30 June 2018. Taking this new standard into account, the previously as inventories reported projects with already concluded purchase agreements with customers are now reported as receivables.
• 6 The first-time adoption of IFRS 15 leads to an increase in trade receivables due to the project previously reported as inventories with already concluded customer contracts. However, the increase in receivables is lower than the reduction in inventories, as prepayments received are netted off against trade receivables.

7

Balance sheet (2/2) Commentary

In €m	FY 2017	H1 2018
Share capital	0.0	37.0
Capital reserve	85.4	189.8
Retained earnings / loss carryforwards	-34.3	14.4
Other equity components	-0.3	-0.3
Equity attributable to shareholders	50.7	240.9
Non-controlling interests	1.5	2.1
Total equity	52.2	243.0

Provisions for pensions and similar obligations 4.2 4.5 Other provisions 1.3 1.2 Financial liabilities 241.0 184.9 Other liabilities 0.0 0.0 Deferred tax liabilities 7.7 23.8 Non-current liabilities 254.2 214.5

	Total equity and liabilities	789.1	665.2
	Current liabilities	482.7	207.7
	Income tax liabilities	13.8	13.6
	Other liabilities	9.4	6.9
9	Trade payables	275.7	65.8
	Financial liabilities	134.7	104.9
8	Other provisions	49.2	16.4

9

• Financial liabilities for the period under review were reduced to €289.8 million (2017: €375.7 million). This positive change resulted mainly from the repayment of the shareholder loan amounting to €55.6 million from the proceeds of the new issue of the shares in February 2018. 7
• The short-term provisions has been reduced by €32.8 million, as the deferred transactionrelated costs resulted in payments during the reporting period. These payments were both neutral in terms of profit and liquidity for the Group, as the former sole shareholder exempted the Group from these costs. 8
• Trade payables decreased to €65.8 million in the period under review (2017: €275.7 million). This was primarily due to the first-time adoption of IFRS 15 for the reporting period and the involved offsetting of advance payments received with the trade receivables to customers.

23 | Source: Audited historical financials, Company information.

Equity statement Commentary

In €m	2017 Q2	2018 Q2
1 January	2.7	52.2
Earnings after taxes	-18.6	-0.3
Changes in actuarial profits and losses	0.0	0.0
Total comprehensive income	-18.6	-0.3
Payout to non-controlling shareholders	-0.7	0.0
IPO: issue of shares	0.0	141.4
Other neutral changes	0.0	49.7
	-0.7	191.1

10 11

30 June -16.6 243.0

10

The distinct rise during the first half of 2018 was primarily due to the Company's conversion into a public limited company under Dutch law and the subsequent listing on the Frankfurt stock exchange: The issue of 7,000,000 new shares resulted in a €150.5 million nominal revenue. This gross proceeds are - reduced by the IPO costs of €9.1 million - an increase in equity.

The first-time adoption of IFRS 15 had also an impact on Instone Group's net assets and results of operations during the first half of 2018. The new measuring method for revenue from ongoing project developments resulted in changes recognized directly in equity (€73.8 million) less deferred taxes (€23.7 million). Further neutral changes of €-0.4 million were incurred. 11

26 | Source: Company information

Revenue – Change in inventory 22 Operating performance 22 Cost of materials -22 project gross profit* 0

Illustrative snapshot of operating performance / project gross profit (*excluding sales costs)

Revenue 12 Change in inventory 19 Operating performance 31 Cost of materials -27 project gross profit* 4

A. Example of a project according to the CC method

Revenue and project gross profit realised at project delivery

Revenue 100 Change in inventory – Operating performance 100 Cost of materials -67 project gross profit* 33

Land acquisition		Start of construction (30% sold)		Sale completion (100% sold)		Delivery
In €m		In €m		In €m		In €m
Revenue	–	Revenue	–	Revenue	–	Revenue	100
Change in inventory	22	Change in inventory	27	Change in inventory	56	Change in inventory	–
Operating performance	22	Operating performance	27	Operating performance	56	Operating performance	100
Cost of materials	-22	Cost of materials	-27	Cost of materials	-56	Cost of materials	-67
project gross profit*	0	project gross profit*	0	project gross profit*	0	project gross profit*	33
				Cumulative view of a single project over time
B. Example of a project according to IFRS 15					Revenue and project gross profit realised from start of construction to project delivery
Land acquisition		Start of construction (30% sold)		Sale completion (100% sold)		Delivery
In €m		In €m		In €m		In €m

Revenue 84 Change in inventory – Operating performance 84 Cost of materials -56 project gross profit* 28

Cumulative view of a single project over time

For any questions please contact:

Thomas Eisenlohr

Head of Investor Relations

Instone Real Estate Group N.V.

Baumstraße 25, 45128 Essen

T +49 201 45355-365 | F +49 201 45355-904

Thomas.Eisenlohr@instone.de

Financial calendar / Events 2018:

27 Aug	Roadshow Frankfurt
30-31 Aug	Roadshow London
4-5 Sept	Roadshow London
6-7 Sept	Roadshow New York / Boston
10 Sept	Roadshow Paris
26 Sept	Baader Investment Conference, Munich
November	Publication of Q3 quarterly statement