LEG Immobilien SE

Investor Presentation • Nov 10, 2017

LEG Immobilien AG 10 November 2017

9M-2017 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.

• I. HIGHLIGHTS 9M-2017
• II. PORTFOLIO AND OPERATING PERFORMANCE
• III. FINANCIAL PERFORMANCE
• IV. BUSINESS UPDATE AND OUTLOOK
• V. APPENDIX

Overall company development

• Acquisition of c.1,400 units (announced end of August), total acquisition volume approx. 3,500 units YTD
• Issue of €400m convertible bond at attractive terms: 8 year maturity, coupon 0.875%, conversion premium 45%
• Portfolio revaluation: estimated gross valuation uplift in the range of c.€450m to €550m in Q4-2017 (net NAV effect €400m to €500m)

Accelerating rent growth on basis of high capital efficiency

• In-place rent, l-f-l €5.43/sqm (+3.3% total portfolio, +4.0% for free-financed units)
• EPRA-Vacancy, l-f-l 3.8% (up c.50 bps YOY)
• Temporary increase due to change of tenant turnover process; FY-outlook: 0 to -20 bps (YOY)
• Maintenance/Capex €13.3/sqm (FY-2017 target of €24/sqm)

Financials: Margin expansion story fully on track

	Net cold rent	€398.4m (+4.5% YOY from €381.3m)
	Adjusted EBITDA	€291.5m (+5.5% YOY from €276.2m)
	FFO I (excl. minorities)	€226.3m (+7.5% YOY from €210.6m), €3.58 per share (+6.9% YOY from €3.35)
	AFFO	€163.6m (-0.1% YOY from €163.8m)
	EPRA-NAV (excl. goodwill)	€74.59 per share (+11.1% YTD, +15.2% incl. DPS of €2.76)

II. PORTFOLIO AND OPERATING PERFORMANCE

Portfolio Overview

Positive rent development across all submarkets

Total Portfolio

Strong results on the basis of tailor-made management strategies

High-Growth Markets

	30.09.2017	 (YOY)
# of units	40,716	+4.3%
In-place rent (sqm), l-f-l	€6.01	+2.9%
EPRA-Vacancy, l-f-l	1.9%	+40 bps

Stable Markets with Attractive Yields

	30.09.2017	 (YOY)
# of units	47,001	+0.6%
In-place rent (sqm), l-f-l	€5.17	+3.4%
EPRA-Vacancy, l-f-l	3.7%	+40 bps

Higher-Yielding Markets 30.09.2017 (YOY) # of units 39,132 -2.9% In-place rent (sqm), l-f-l €5.08 +3.1% EPRA-Vacancy, l-f-l 6.5% +90 bps

Accelerating rent growth underscores strong fundamentals Rent Development

• Strong performance of free financed units best proxy for underlying rent dynamics
• Rent restricted units: +1.5% year-on-year (like-for-like)
• High capital efficiency maintained (growth relative to capital expenditure)
• High exposure to structural growth markets and respective commuter belts (93% of portfolio) supports outperformance

EPRA-Vacancy Development (like-for-like)

Temporary increase due to process changes – Positive outlook for Q4

• Still minor impact from comprehensive reorganisation of operations
• Change of tenant turnover process; integration of new general contractors into the process
• Outlook Q4-2017: L-F-L vacancy ratio 0 to -20 bps YOY
• Positive momentum in Oct/Nov with catch-up effects kicking in

Capex & Maintenance Rising value enhancing investments ahead

III. FINANCIAL PERFORMANCE

Financial Highlights 9M-2017

Margin expansion story continues

Income Statement

€ million	9M-2017	9M-2016	 Higher rental income
Net rental and lease income	302.9	290.8	(+€17.1m/+4.5%)  Rise in staff costs resulting from crafts business offset by
Net income from the disposal of investment property	-1.0	8.3	decrease in externally procured services
Net income from the valuation of investment property	481.1	9.3	 Adj. NRI-margin stable at 77.5% YOY despite some higher maintenance
Net income from the disposal of real estate inventory	-2.2	-1.5	 Mid-year portfolio valuation (+6.0%)
Net income from other services	5.0	2.3	 Acquisition related one-time
Administrative and other expenses	-28.5	-66.0	costs of €40.4m in 9M-2016  Recurring admin. costs slightly increased to €24.3m
Other income	0.6	6.6	(-€0.6m YOY) mainly due to an extraordinary item
Operating earnings	757.9	249.8	 One-time refinancing costs (€12.3m)
Net finance costs	-148.5	-118.8	 Net income from fair value measurement of derivatives (€63.2m; thereof €63.6m from
Earnings before income taxes	609.4	131.0	convertibles)  Slightly lower cash interests (€60.5m; -€1.8m YOY) despite
Income tax expenses	-151.4	-45.0	increase in financial debt
Consolidated net profit	458.0	86.0	 Cash taxes (-€5.1m)

FFO Calculation

9M-2017

€ million	9M-2017	9M-2016
Net cold rent	398.4	381.3	 (+€17.1m/+4.5%)
Profit from operating expenses	-3.1	-0.9
Maintenance (externally-procured services)	-35.0	-44.9	 Disproportional growth in staff
Staff costs	-40.0	-30.2	costs mainly due to new crafts business (offset by lower
Allowances on rent receivables	-5.4	-5.5	procured services); adjusted for
Other	-7.5	-5.0	this effect increase of +3.4%
Non-recurring project costs (rental and lease)	1.3	0.9
Recurring net rental and lease income	308.7	295.7	 +€13.0m (+4.4% YOY)  NRI-margin stable despite
Recurring net income from other services	6.7	4.0	higher maintenance
Staff costs	-16.2	-16.0
Non-staff operating costs	-11.9	-48.1	 Acquisition related one-time
Non-recurring project costs (admin.)	3.8	40.4	costs in 9M-2016
Extraordinary and prior-period expenses	0.0	0.0	 Slight increase due to release
Recurring administrative expenses	-24.3	-23.7	of a provision in 2016
Other income and expenses	0.4	0.2	(number of FTE's decreased)
Adjusted EBITDA	291.5	276.2
Cash interest expenses and income	-60.5	-62.3	 +€15.3m (+5.5% YOY)
Cash income taxes from rental and lease	-3.0	-3.1	 EBITDA margin 73.2% vs. 72.4% in 9M-16
FFO I (including non-controlling interests)	228.0	210.8
Non-controlling interests	-1.7	-0.2	 Lower average interest costs
FFO I (excluding non-controlling interests)	226.3	210.6	(9M-17 avg. cost c.1.85% vs. c.2.10% in 9M-16)
FFO II (including disposal of investment property)	225.2	218.3
Capex-adjusted FFO I (AFFO)	163.6	163.8

FFO Bridge 9M-2017

Cash Effective Interest Expense 9M-2017

€ million	9M-2017	9M-2016
Reported interest expense	88.8	89.6	 One-off refinancing effect of €5.5m in 9M-2017 from
Interest expense related to loan amortisation	-17.4	-16.6	refinancing of subsidised loans (loan amortisation)
Prepayment penalties / breakage costs	-7.5	-4.5	 Release of swaps and fixed
Interest costs related to valuation of assets/liabilities	-0.7	-2.1	interest loans (refinancing); total refinancing costs €12.3m
Leasing related interest expense	-0.8	-1.4
Interest expenses related to changes in pension provisions	-1.8	-2.4
Other interest expenses	0.4	-0.1
Cash effective interest expense (gross)	61.0	62.4
Cash effective interest income	0.5	0.1	 Interest coverage improved
Cash effective interest expense (net)	60.5	62.3	further (4.8x up from 4.4x YOY)

EPRA-Net Asset Value

€ million	30.09.2017	31.12.2016
Equity (excl. minority interests)	3,698.2	3,414.5	 €458.0m net profit
Effect of exercising options, convertibles and other rights	513.6	435.6	 -€174.4m dividend  €14.0m other comprehensive
NAV	4,211.8	3,850.1	income (derivatives)
Fair value measurement of derivative financial instruments	189.9	146.7
Deferred taxes1)	771.2	644.2
EPRA-NAV	5,172.9	4,641.0
(m)2) Number of shares fully-diluted incl. convertible	68.644	68.466
EPRA-NAV per share in €	75.36	67.79
Goodwill resulting from synergies	52.7	43.8
Adjusted EPRA-NAV (excl. goodwill)	5,120.2	4,597.2
Adjusted EPRA-NAV per share in €	74.59	67.15

• Attractive rental yield of 6.2% leaves potential for yield compression
• 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 63.19m 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

As of 30.09.2017

Market	Residential Units	GAV Residential Assets (€m)	% of Total Residential GAV	GAV/ sqm (€)	In-Place Rent Multiple	Multiples, Estimated Rental Values	GAV Commercial/ Other Assets (€m)	Total GAV
High Growth Markets	40,716	3,814	45%	1,417	19.7x	17.1x	198	4,012
Stable Markets	47,001	2,611	31%	864	14.4x	13.5x	104	2,716
Higher Yielding Markets	39,132	1,826	22%	762	13.3x	12.6x	60	1,886
Subtotal NRW	126,849	8,251	98%	1,017	16.1x	14.7x	363	8,614
Portfolio outside NRW	1,894	144	2%	1,129	16.4x	15.2x	2	146
Total Portfolio	128,743	8,395	100%	1,019	16.1x	14.7x	364	8,759
Other Assets
Total								8,870

Balance Sheet

Strong balance sheet

€ million	30.09.2017	31.12.2016
Investment property	8,753.9	7,954.9	 Revaluation gains €480.8m
Prepayment for investment property	62.1	27.3	 Additions €290.3m
Other non-current assets	180.0	182.3	 Capex €62.7m  Reclassification -€34.3m
Non-current assets	8,996.0	8,164.5
Receivables and other assets	273.0	47.7
Cash and cash equivalents	307.6	166.7	 Cash flow from operating activities €194.3m
Current assets	580.6	214.4	 Acquisitions -€329.1m and
Assets held for sale	27.5	57.0	capex -€53.4m  Dividend -€174.4m
Total Assets	9,604.1	8,435.9
Equity	3,721.7	3,436.7
Non-current financing liabilities	3,921.7	3,222.3
Other non-current liabilities	1,027.9	870.3
Non-current liabilities	4,949.6	4,092.6	 Bond issue +€495m
Current financing liabilities	538.3	552.0	 Convertible bond +€400m  Repayment of subsidised
Other current liabilities	394.5	354.6	loans -€190m and other
Current liabilities	932.8	906.6	bank loans -€191.9m  Commercial paper +€150m
Total Equity and Liabilities	9,604.1	8,435.9

LTV

Strong credit profile leaves headroom for growth investments

€ million	30.09.2017	31.12.2016
Financial liabilities	4,460.0	3,774.3
Cash & cash equivalents	487.6	166.7
Net Debt	3,972.4	3,607.6
Investment properties	8,753.9	7,954.9
Properties held for sale	27.5	57.0
Prepayments for investment properties	65.9	27.3
Property values	8.847.3	8,039.2
Loan to Value (LTV) in %	44.9	44.9
Pro-forma LTV post conversion in %	41.8	41.5

• LTV in line with target capital structure (approx. 45%) after consolidation of acquisitions and dividend payment
• Yield compression is likely to trigger a further decline in Q4

Significant positive impact on LTV from future conversion of 1 st convertible expected (€300m, currently -310bps)

Financing Structure – 30 September 2017

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	9.05 years (8.8 years*)	1-2 years	0.0% (3.3%*)
Interest costs	Ø 1.81% (1.75%*)	3-5 years	14.8% (14.3%*)
Hedging ratio	94.4% (91.3%*)	6-8 years	34.5% (33.4%*)
Rating	Baa1 (Moody's)	≥ 9 years	50.7% (49.0%*)

Variable interest 8.7%

Fixed interest 76.7%

*Including commercial paper

20 I November 2017

IV. BUSINESS UPDATE AND OUTLOOK

22 I November 2017

Business Update Strong organic performance + selective external growth

Year-end valuation: Positive impact from yield compression expected

• Gross valuation uplift of approx. €450m to €550m in Q4 expected (net NAV effect €400m to €500m)
• Major valuation driver is a broadbased increase of transaction multiples in NRW
• Post reflection of improving rental forecasts in Q2 valuation
• Yield compression of some 35-40 bps in Q4 expected (rental yield)
• Orange and Stable markets with most upside
• Effect from early repayment of subsidised loans (net NAV effect: c.€60m) included

Acquisitions: Staying selective in tough markets

• Successful acquisition of c.3,500 units YTD with attractive value potential
• Dusseldorf deal (closing July 2017; c.1,800 units and thereof c.1,400 units in Dusseldorf)
  • Vacancy reduced from 20% to 15% within four months
  • Rent growth exceeding expectations
• Investment markets: decreasing supply over the last couple of months, yield compression continues
• Pipeline: a few smaller deals; complex mid-sized deal currently put on hold

Outlook for 2017 - 2019

Steady Expansion of Leading Profitability

FFO I per share (€)

EBITDA Margin

V. APPENDIX

Generating Appealing Shareholder Returns

26 I November 2017

Net Immigration Expected to Remain at a High Level Stabilising net immigration with decreasing share of refugees

Sources:

• 1) Interview with director of Federal Agency of Migration and Refugees (Aug 2016)
• 2) Deutsche Bundesbank
• 3) Federal Statistical Office, press release 2 Nov 2017

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 admin. costs ratio

EPRA Net Initial Yield Q3-2017

€ million	30.09.2017	31.12.2016
Investment properties	8,744.0	7,950.9
Assets held for sale	27.3	57.0
Market value of residential property portfolio (net)	8,771.4	8,007.9
Estimated incidental costs	864.4	789.2
Market value of residential property portfolio (gross)	9,635.8	8,797.0
Annualised cash flow from rental income (gross)	512.3	500.3
Non recoverable operating costs	-70.3	-79.1
Annualised cash flow from rental income (net)	442.0	421.2
EPRA Net Initial Yield in %	4.6	4.8

LEG – Adj. EBITDA Margin

Leading profitability despite short term distortion from restricted units

Adj. EBITDA margin	FY-2016		FY-2015
	€m	margin %	€m	margin %
As reported	355.7	69.5	293.7	67.3
Gap restricted vs. unrestricted rents1)	26.3	71.0	22.5	68.9

1) €/sqm: €4.67 vs. €5.56 in 2016, €4.67 vs. €5.48 in 2015

• 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

Total invest (€/sqm) 2017 2018 2019 2020 2021 €24 ~€29 ~€29-30 ~€30 ~€30

L-f-l rent growth

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 just started
• Improving market conditions allow for larger investment volumes
• Instrument to capture reversionary potential in one step (especially in locations where rental laws prohibit higher onetime rent increases)

Rent revisionary potential

Refinancing of subsidised loans lifting value

Rent Potential Subsidised Units

• In the following 10 years around 9,000 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

Spread to Market Rent € /sqm /month 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028ff 1.69 1.69 0.90 2.79 2.35 0.62 0.90 1.51 1.17 0.09 1.17

	≤ 5 years2)	10 years2) 6 –	≥ 10 years2)
In-place rent	€4.74	€4.37	€4.86
Market rent1)	€6.30	€5.33	€6.04
Upside potential3)	33%	22%	24%
Upside potential p.a.3)	€8.1m	€2.3m	€24.6m

Source: LEG as of Q3-2017

• 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 Q3-2017 and market rent (defined in footnote 1) as of Q3-2017.

Mietspiegel Overview New Mietspiegel in 2017

Release date	High-Growth Markets	Stable Markets	Higher-Yielding Markets	Total Portfolio
2017 (Q1)	4,108 units (mainly Cologne)	17,330 units (mainly Dortmund, Wuppertal)	8,945 units (mainly Herne, Recklinghausen)	30,383 units
2017 (Q2)	6,155 units (mainly Münster)	801 units	8,321 units (mainly Gelsenkirchen)	15,277 units
2017 (Q3)	-	-	263 units	263 units
2017 (Q4) expected	2,956 units (mainly Bocholt)	3,425 units (mainly Solingen)	9,392 units (mainly Duisburg, Dorsten, Herten)	15,773 units
Total 1	13,219 units	21,556 units	26,921 units	61,696 units
Thereof: - Castrop-Rauxel - Cologne - Dortmund - Duisburg - Gelsenkirchen - Herne - Munster - Recklinghausen - Solingen	3,902 units 6,126 units	13,408 units 1,493 units	2,458 units 6,577 units 6,822 units 3,175 units 2,705 units
- Wuppertal		2,127 units		Sub-portfolios also include restricted units

LEG Share Information

• 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 (30.09.2017): MDAX 2.66%; EPRA 2.56%
• Rating: Baa1 (stable) by Moody's

Basic data Well-balanced shareholder structure

Diversification of LEG's funding sources Capital Market Financing

	Corporate Bond		Convertible Bonds
			2014/2021	2017/2025
Issue Size	EUR 500m	Issue Size	EUR 300m	EUR 400m
Term / Maturity Date	7 years / 23 January 2024	Term / Maturity Date	7.2 years / 1 July 2021	8 years / 1 September 2025
Coupon	1.250 % p.a.	Coupon	0.500 % p.a.	0.875 % p.a.
Issue Price	99.409 %	Initial Conversion Price	EUR 62.39	EUR 118.4692
Initial Re-offer Yield	1.339 %	Adjusted Conversion Price	EUR 54.9914 (as of 18 May 2017)	--
Financial Covenants	Incurrence-based: • Net financial debt / total assets ≤ 60% • Secured financial debt / total assets ≤ 45%1) • Unencumbered assets / unsecured financial debt ≥ 125%1) Maintenance-based: • Adj. EBITDA / net cash interest ≥ 1.8x	Investor Put	1 July 2019	--
		Issuer Call	From 22 July 2019, if the LEG share price exceeds 130 % of the then applicable conversion price	From 22 September 2022, if the LEG share price exceeds 130 % of the then applicable conversion price
ISIN	XS1554456613	ISIN	DE000LEG1CB5	DE000A2GSDH2
WKN	A2E4W8	WKN	LEG1CB	A2GSDH

1) After 31 July 2017

Financial Calendar

Date	Report/Event
10.11.2017	Quarterly Report Q3 as of 30 September 2017
13.11.2017	Roadshow Amsterdam, Kempen
15./16.11.2017	Roadshow London, Deutsche Bank
24.11.2017	Roadshow Paris, Société Générale
28.11.2017	Exane Mid Cap Forum, London
11./12.12.2017	HSBC Global Real Estate Conference, Cape Town
11.01.2018	Oddo Conference, Lyon
15.01.2018	UniCredit / Kepler Cheuvreux German Corporate Conference, Frankfurt
08.03.2018	Annual Report 2017

Contact

Investor Relations

Burkhard Sawazki Head of Investor Relations Tel: +49 (0) 211 4568-204 burkhard.sawazki@leg.ag

Karin Widenmann Manager Investor Relations Tel: +49 (0) 211 4568-458 karin.widenmann@leg.ag

Katharina Wicher Investor Relations Tel: +49 (0) 211 4568-294 katharina.wicher@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.