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LEG Immobilien SE

Investor Presentation May 8, 2018

260_ip_2018-05-08_a7dd8c68-5aef-49e3-9eb6-1e9d19af950d.pdf

Investor Presentation

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CAPTURE CHANCESDRIVE INNOVATION

LEG Immobilien AG8 May 2018

Q1-2018 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 thosepertaining 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.

  • I. HIGHLIGHTS Q1-2018
  • II. PORTFOLIO AND OPERATING PERFORMANCE
  • III. FINANCIAL PERFORMANCE
  • IV. BUSINESS UPDATE AND OUTLOOK
  • V. APPENDIX

Highlights Q1-2018

Overall company development in Q1

  • Portfolio revaluation: positive outlook for H1-2018 appraisal (approx. +4.0% or €370m to €390m)
  • Dividends: Target payout ratio increased to 70% of FFO I (up from 65% previously)

Accelerating rent momentum ahead

  • In-place rent, l-f-l €5.49/sqm (+2.3%); FY-2018 guidance of c.3.0% maintained
  • EPRA-Vacancy, l-f-l 3.3% (+/- 0 bps YOY)
  • Maintenance/Capex €4.9/sqm (+81.5% YOY)

Financials: Higher Q1-2018 maintenance expenses; On track for FY growth targets

  • Net cold rent €138.5m (+5.0% YOY from €131.9m)
  • Adjusted EBITDA €94.8m (-3.1% YOY from €97.8m)
  • Adjusted for higher maintenance (+3.9% YOY)
  • FFO I €74.2m (-1.3% YOY from €75.2m), €1.17 per share (-1.3% YOY from €1.19)
  • Adjusted for higher maintenance (+7.7% YOY)
  • EPRA-NAV (excl. goodwill) €84.34 per share (up from €83.81 at 31st December)

II. PORTFOLIO AND OPERATING PERFORMANCE

Portfolio Overview

Positive rent development across all submarkets

Strong results on the basis of tailor-made management strategies

High-Growth Markets

3
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Stable Markets with Attractive Yields

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Accelerating rent growth aheadRent Development

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(

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3 9 6 8
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Q Q Q Q
1- 1- 1- 1-
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0 0 0 0
1 1 1 1
7 8 7 8
  • Expected low volume of rent adjustments in Q1
  • Strong catch-up effects in coming quarters ahead; especially in H2
  • First major rent increases from enhanced capex program expected in Q3
  • Rent restricted units: +0.2% year-on-year (like-for-like)
  • FY-2018 rent guidance of ~3.0% maintained

Capex & Maintenance Rising value enhancing investments ahead

III. FINANCIAL PERFORMANCE

Financial Highlights Q1-2018

Margin expansion story is set to continue

Income StatementQ1-2018

FFO CalculationQ1-2018

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Cash Effective Interest ExpenseQ1-2018


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EPRA-Net Asset Value

LEG's portfolio well positioned in the cycle; services as hidden gem


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Attractive rental yield of 5.9% leaves upside for capital growth (thereof free financed portfolio: 6.1%)

  • Value of services business not included in NAV
  • Scenario: additional value approx. €3.90-€5.90 per share (discount rate of 4.0%-6.0%)3)

2) Actual number of shares outstanding 63.19m1) 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

As of 31.03.2018

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e
N
R
W
1,
8
0
5
1
4
5
2
%
1,
1
6
3
1
6.
5x
1
5.
5x
2 1
4
6
To
l
Po
fo
l
io
t
t
a
r
1
3
0,
2
0
8
9,
1
2
8
1
0
0
%
1,
0
9
5
1
6.
9x
1
4x
5.
3
6
4
9,
4
9
2
O
he
As
t
ts
r
s
e
To
t
l
a
9,
5
6
4

Balance Sheet

Strong balance sheet

LTV

Strong credit profile leaves headroom for growth investments


i
l
l
io
m
n
3
1.
0
3.
2
0
1
8
3
1.
1
2.
2
0
1
7
F
ina
ia
l
l
ia
b
i
l
i
t
ies
nc
4,
2
8
5.
9
4,
2
9
9.
6
Ca
h
&
h e
iva
len
ts
s
ca
s
q
u
2
8
3.
0
2
8
5.
4
Ne
De
b
t
t
4,
0
0
2.
9
4,
0
1
4.
2
Inv
tm
t p
t
ies
es
en
ro
p
er
9,
5
1
4.
1
9,
4
6
0.
7
Pr
ies
he
l
d
fo
le
t
op
er
r s
a
2
4.
3
3
0.
9
fo
Pr
ts
inv
tm
t
t
ies
ep
ay
me
n
r
es
en
p
ro
p
er
- -
Pr
ty
lu
op
er
va
es
9,
5
3
8.
4
9,
4
9
1.
6
Lo
to
Va
lu
(
L
T
V
)
in
%
an
e
4
2.
0
4
2.
3
fo
%
Pr
L
T
V
t c
io
in
o-
rm
a
p
os
on
ve
rs
n
3
9.
1
3
9.
4

Financing Structure – 31 December 2017

LT financing secures future earnings growth

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

2) Corporate bond (€500 m)

3) €400 m convertible bond

K
F
t
e
y
a
c
s
M
i
i
t
t
a
u
r
e
s
A
d
b
i
t
t
t
v
e
r
a
g
e
e
m
a
u
r
y
8.
1
y
e
a
r
s
1-
2
y
e
a
r
s
0.
1
%
I
t
t
t
n
e
r
e
s
c
o
s
s
Ø
1.
6
%
7
3-
5
y
e
a
r
s
1
8.
4
%
H
d
i
t
i
e
g
n
g
r
a
o
9
2.
9
%
6-
8
y
e
a
r
s
5
1.
5
%
R
i
t
a
n
g
B
1
(
M
d
's
)
a
a
o
o
y

9
e
a
r
s
y
%
3
0.
0

IV. BUSINESS UPDATE AND OUTLOOK

Business UpdateFurther capital growth on the cards

Valuation uplift of some 4.0% in H1-2018 expected

  • Transaction prices reflect continued yield compression
  • IFRS revaluation gains of around 4.0% or €370m to €390m in H1 expected
  • Positive outlook for additional revaluation gains in Q4-2018
  • Widespread upswing in the markets; lower growth in Higher Yielding markets suggests future upside potential

Further increasing financial strength paves way for higher target payout ratio of 70%

  • Target payout ratio increased from 65% to 70% of FFO I (starting DPS for FY-2018)
  • Higher payout reflects the improving financial headroom
  • Lower regular debt amortisation (higher share of unsecured financing and lower volume of subsidised loans)
  • Lower LTV (allows e.g. for partial debt financing of capex investments)

Outlook for 2018 - 2019

2
0
1
8
F
F
O
I

E
B
I
T
D
A
i
m
a
r
g
n

L-
F-
L
h
t
t

r
e
n
g
r
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w
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F-
L

v
a
c
a
n
c
y
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s
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e
n
s

v
D
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d

v
e
n

3
1
5

3
2
3
/

4.
9
9

5.
1
1
h
m
m
p
e
r
s
a
r
e
-
-
3
%
~7
~3
0
%
l
i
h
t
l
d
i
s
g
y
e
c
r
e
a
s
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g
~€
/
2
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0
s
q
m
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%
f
F
F
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o
2
0
1
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F
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i

m
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F-
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t

r
e
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r
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w
I
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t

n
v
e
s
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3
3
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3
4
4
/

5.
3
5

5.
4
4
h
m
m
p
e
r
s
a
r
e
-
-
~7
4
%
~3
5
%
~€
2
9-
3
0
/
s
q
m
M
i
d
t
e
r
m
-
L-
F-
L
h
t
t
r
e
n
g
r
o
w
3.
0
3.
%
5
-

Steady Expansion of Leading Profitability

FFO I per share (€)

V. APPENDIX

Generating Appealing Shareholder Returns

Net Immigration Expected to Remain at a High Level

N
e
t
I
i
t
m
m
g
r
a
G
i
t
o
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e
r
m
a
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y
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c
s
4)
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5 m
Fe
d
l
Ag
f
M
ig
io
d
Re
fu
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le
d
d
t
te
ta

e
ra
e
nc
y
o
ra
n
a
n
g
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s
c
o
c
a
ha
im
ig
io
f
fo
ig
G
d
t
t n
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t
t
te
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m
ra
n
o
re
ne
rs
o
e
rm
a
ny
a
m
ou
n
to
b
t
0.
2
5
i
l
l
io
in
H
1-
2
0
1
7,
t
he
f
0.
1
2
i
l
l
io
a
ou
m
n
re
o
m
n
3)
E
U
t
io
ls
no
n-
na
na
De
t
he
Bu
d
b
k
fo
ts
2.
5
i
l
l
io
d
d
i
t
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l
s
c
n
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s
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re
c
a
s
m
n
a
na

u
4)
im
ig
t
(
t
)
fo
2
0
1
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2
0
2
5
m
ra
n
s
ne
r
En
d
f
2
0
1
6,
1.
6
i
l
l
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le
k
in
io
(
inc
l.
t
t

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m
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p
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ro
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)
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1
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5)
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in
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(
2
7
%
)
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a
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1)
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m
(
8
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%
)
+
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p
ro
x.
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~2
5
% S
b
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ig
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t
t
t
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t
to

a
g
ne
m
ra
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ex
p
e
c
r
y
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o
m
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in
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f r
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(
-7
0
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)
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3)
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4
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>
Im
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in
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l p
la
t
io
t
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m
ra
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t
ig
in
d
d
i
t
io
l g
t
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in
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d
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a
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w
u
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s
A
d
d
i
t
io
l p
f
fo
d
b
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in
t

na
re
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su
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n
a
r
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g
s
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g
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e
n
2
0
1
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Sou
2
0
1
6
2
0
1
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2
0
1
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2
0
2
5
O
fo
f
G
l
i
f
ie
d
t
t
t
t

u
p
e
r
rm
a
nc
e
o
e
rm
a
n
e
c
o
no
m
y
a
ra
c
s
q
u
a
im
ig
io
t
ne
w
m
ra
n
rces
:
1)
Inte
rvie
ith d
irec
tor
of F
w w
Offi
2)
Fed
l Sta
tisti
cal
era
ce,
3)
Fed
l Sta
tisti
cal
Offi
era
ce,
4)
Deu
tsch
e B
und
esb
ank
5)
Fed
l Sta
tisti
cal
Offi
era
ce,
6)
Bun
des
amt
für
Mig
ratio
n un
ede
ral A
f M
igra
gen
cy o
elea
13 M
ar 2
pre
ss r
se
elea
16 J
an 2
pre
ss r
se
elea
2 N
ov 2
017
pre
ss r
se
d F
lüch
tling
e, M
h 20
arc
tion
d R
efug
(Au
g 2
016
)
an
ees
018
018
18 a
nd
Fed
l St
atis
tica
l Of
fice
era
, Ap
ril 2
018
iq
i
d
la
b
ke
d
f
fo
d
b
le
l
iv
ing
l
l-
fa
L
t
t

u
ou
r m
a
r
a
n
a
r
a
a
s
p
u
c
o
rs
fo
N
R
W
r

Acquisitions: Leading Management Skills Paying Off Scalability of platform + cost discipline support value accretive growth

Strong volume growth at decreasing overhead costP

Pleads to a significant drop of the admin. costs ratio

LEG – Adj. EBITDA Margin

Leading profitability despite short term distortion from restricted units

A
d
j.
E
B
I
T
D
A
in
m
ar
g
F
Y-
2
0
1
7
2
0
1
6
€m in
%
m
ar
g
€m in
%
m
ar
g
As
te
d
re
p
or
3
8
5.
7
7
2.
1
3
5
5.
7
6
9.
5
1)
Ga
tr
ic
te
d
tr
ic
te
d
ts
p
re
s
vs
. u
nr
es
re
n
3
0.
1
7
3.
6
2
6.
3
7
1.
0

1) €/sqm: €4.74 vs. €5.81 in 2017, €4.67 vs. €5.56 in 2016

  • 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

Capex Programme Lifting internal growth potential

Strict investment criteria maintained

  • IRR hurdle of 6%
  • Sole focus on Yield on Costs can trigger substantial misallocation of capital (NAV dilution)
  • Construction work for enhanced capex programme started in Q3-2017
  • Improving market fundamentals allow for larger investment volumes
  • Instrument to capture reversionary potential in one step (especially in locations where rental laws prohibit higher one-time rent increases)

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

8 146 745 827 124 40 175 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029ff # UnitsNumber of Units Coming Off Restriction and Rent Upsidec. 8,1001,7372,7301,49417,760

Spread to Market Rent € /sqm /month2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028ff 1.54 1.01 1.902.922.480.79 1.06 1.561.07 1.41 1.30

2)

5 y
ea
rs
2)
6 –
1
0 y
ea
rs
2)

1
0 y
ea
rs
In
lac
t
-p
e
re
n

3
4.
7

3
4.
5

8
6
4.
1)
Ma
ke
t r
t
r
en

6.
4
1

5.
6
1

6.
1
5
3)
Up
i
de
te
t
ia
l
s
p
o
n
%
3
6
%
2
9
%
2
7
3)
Up
i
de
te
t
ia
l p
s
p
o
n
.a.

7.
6m

2.
7m

2
7.
5m

Source: LEG as of Q1-2018

  • 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 = 2018-2022; 6-10 years = 2023-2027; ≥10 years = 2028ff.

3) Rent upside is defined as the difference between LEG in-place rent as of FY-2017 and market rent (defined in footnote 1) as of FY-2017.

Mietspiegel OverviewNew Mietspiegel in 2018

R
l
d
t
e
e
a
s
e
a
e
G
H
i
h-
t
h
g
r
o
w
M
k
t
a
r
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s
S
t
b
l
a
e
M
k
t
a
r
e
s
H
i
h
Y
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l
d
i
g
e
r-
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g
M
k
t
a
r
e
s
T
t
l
o
a
f
P
t
l
i
o
r
o
o
(
Q
)
2
0
1
8
1
3,
5
1
6
i
t
u
n
s
(
fe
)
in
ly
B
ie
le
l
d
ma
3,
9
9
0
i
t
u
n
s
(
)
in
ly
Es
ma
se
n
1,
4
4
9
i
t
s (
u
n
)
De
tm
l
d
o
8,
9
5
5
i
t
n
s
u
2
0
1
8
(
Q
2
)
1,
1
4
2
i
t
u
n
s
3,
1
8
4
i
t
n
s
u
(
in
ly
So
l
ing
)
ma
en
2,
6
6
4
i
t
n
s
u
(
in
ly
He
Do
)
te
te
ma
r
n,
rs
n
6,
6
i
7
5
t
u
n
s
2
0
1
8
(
Q
3
)
2,
4
2
i
5
t
u
n
s
(
in
ly
Bo
)
ma
nn
- 2,
2
8
8
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t
u
n
s
(
in
ly
Re
he
i
d
)
ma
ms
c
4,
8
3
0
i
t
u
n
s
(
Q
)
2
0
1
8
4
5,
7
1
5
i
t
u
n
s
(
f
)
in
ly
D
üs
l
do
ma
se
r
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7
1
5
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t
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n
s
1
T
l
t
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a
1
2,
9
1
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5
t
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7,
t
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6,
2
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3
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t
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2
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5
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3,
2
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3,
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2
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Do
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1
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2
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D
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2
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5,
5
ts
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n
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s
e
n
3,
1
1
7
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ts
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Ha
g
e
n
1,
2
1
2
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ts
u
n
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te
r
n
1,
2
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4
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ts
n
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ts
n
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Re
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d
m
s
c
2,
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1
2
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ts
u
n
S
l
ing
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n
1,
4
9
2
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ts
u
n
Su
b-p
ort
fol
ios
al
inc
lud
so
e
tric
ted
its
res
un

LEG Share Information

Basic dataWell-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 (31.03.2018): MDAX 2.76%; EPRA 2.67%
  • •Rating: Baa1 (stable) by Moody's

Source: LEG; shareholdings according to voting rights notifications

Financial Calendar

D
t
a
e
/
R
t
E
t
e
p
o
r
e
n
v
0
8.
0
5.
2
0
1
8
Q
l
R
Q
1
f
3
1
M
h
2
0
1
8
t
t
u
a
r
e
r
y
e
p
o
r
a
s
o
a
r
c
1
4.
1
0
2
0
1
8
5.
5.
-
R
d
h
L
d
D
h
B
k
t
o
a
s
o
w
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n
o
n,
e
u
s
c
e
a
n
1
0
2
0
1
8
7.
5.
A
l
G
l
M
i
D
ü
l
d
f
t
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Contact

Investor Relations

Burkhard Sawazki

Head of Investor Relations &Strategic Business AnalysisTel: +49 (0) 211 [email protected]

Karin Widenmann

Manager Investor Relations & Strategic Business AnalysisTel: +49 (0) 211 [email protected]

Benedikt Kupka

Manager Investor Relations & Strategic Business AnalysisTel: +49 (0) 211 [email protected]

40476 Düsseldorf, Germany E-Mail: [email protected]

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.

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