LEG Immobilien SE

Investor Presentation • Aug 10, 2016

LEG Immobilien AG

H1-2016

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

II.I. Portfolio and Operating Performance

III.I.I. Financial Performance

VI.I. Appendix

Highlights H1-2016

Overall company development

• Acquisitions: approx. 2,000 units signed or close to signing YTD
• Higher FFO I-2016 forecast on back of faster execution of efficiency program
• New guidance: €261m-€265m (previously €257m-262m); 2017 unchanged
• EBITDA margin forecast for 2016 raised to 70% (up from >69%)
• Disposal of non-core assets: Significant premiums to book values expected (avg. ~10%)
• Negotiations with potential buyers in advanced stages (high demand for customised products)
• Data points in Higher Yielding markets provide tailwind for year end valuation

Strong letting performance on basis of high capital efficiency

 In-place rent, l-f-l	€5.29/sqm (+2.4% total portfolio, +3.4% for free-financed units) Slight growth acceleration in H2 on the cards
 EPRA-Vacancy	2.8% l-f-l (-40 bps YOY)
 Maintenance/Capex	€7.2/sqm (FY-2016 target of approx. €18/sqm)
	Financials: Margin expansion supports dynamic earnings growth
 Rental income	€249.4m (+16.1% YOY from €214.8m)
 Adjusted EBITDA	€180.5m (+22.5% YOY from €147.4m)

• Strong margin expansion excl. maintenance (c.+470 bps YOY)
• FFO I (excl. minorities) €137.6m (+35.7% YOY from €101.4m), €2.19 per share (+23.0% YOY from €1.78)
• AFFO €108.6m (+27.2% YOY from €85.4m)
• EPRA-NAV (excl. goodwill) €58.15 per share

II.I. Portfolio and Operating Performance

Portfolio Overview

Strong operational performance across all submarkets

Strong results on the basis of tailor made management strategies

	High-Growth Markets
	30.06.2016	 (YOY)
# of units	38,702	+15.3%
In-place rent (sqm), l-f-l	€5.85	+2.5%
EPRA-Vacancy, l-f-l	1.4%	-20 bps

Stable Markets with Attractive Yields
	30.06.2016	 (YOY)
# of units	47,551	+11.5%
In-place rent (sqm), l-f-l	€4.98	+2.3%
EPRA-Vacancy, l-f-l	3.0%	-60 bps

Total Portfolio			Higher-Yielding Markets
	30.06.2016	 (YOY)		30.06.2016	 (YOY)
# of units	129,626	+20.8%	# of units	41,478	+39.8%
In-place rent (sqm), l-f-l	€5.29	+2.4%	In-place rent (sqm), l-f-l	€4.89	+2.1%
EPRA-Vacancy, l-f-l	2.8%	-40 bps	EPRA-Vacancy, l-f-l	5.0%	-40 bps

Attractive portfolio + operational excellence = strong rent growth L-f-l Residential Rent (€/sqm/month) Rent Development L-f-l Free-financed Rent (€/sqm/month) 5.61

5.42

Q2-2015 Q2-2016 Q2-2015 Q2-2016

• Development of free financed units remains best proxy for underlying performance
• High capital efficiency maintained (growth relative to capital expenditure)
• Regional focus as competitive edge

5.29

5.16

EPRA-Vacancy Development (like-for-like)

Attractive portfolio + operational excellence = low vacancies

• Rising occupancy in coming quarters ahead
• Net immigration into Germany fuels demand for affordable housing
• Especially strong momentum in the commuter belts of Düsseldorf/Cologne
• (Mönchengladbach, District of Mettmann)

Capex & Maintenance High quality standards and capital discipline maintained

III.I.I. Financial Performance

Financial Highlights H1-2016

Margin expansion on back of attractive scale effects + cost discipline

Income Statement

€ million	H1-2016	H1-2015
Net rental and lease income	190.4	159.1	 Higher rental income (+€34.6m/+16.1%)  NRI-margin increased from
Net income from the disposal of investment property	0.1	1.2	74.1% to 76.3% YOY despite some higher maintenance
Net income from the valuation of investment property	1.0	-
Net income from the disposal of real estate inventory	-1.3	0.0	 Higher one-time costs (+€35.9m to €37.9m) due to non-capitalised transaction
Net income from other services	1.2	0.1	costs (€34.3m; mainly real estate transfer tax)
Administrative and other expenses	-54.6	-19.8	 Recurring admin. costs slightly decreasing to €15.5m (-€1.2m YOY) despite
Other income	0.2	0.4	significant volume growth
Operating earnings	137.0	141.0	 Lower financing costs (-€59.8 YOY) mainly due to
Net finance costs	-86.4	-146.2	refinancing costs in FY-2015  Lower cash interests
Earnings before income taxes	50.6	-5.2	(€41.3m; -€4.6m YOY) despite portfolio expansion
Income tax expenses	-27.1	-5.1
Consolidated net profit	23.5	-10.3	 Cash taxes (-€1.8m), thereof (-€0.5m) from IAS40 sales

FFO Calculation

H1-2016

€ million	H1-2016	H1-2015
Rental income	249.4	214.8	 +€34.6m (+16.1% YOY)
Profit from operating expenses	-1.5	-1.8
Maintenance	-28.8	-22.8
Staff costs	-19.6	-18.8	 +€31.0m (+19.0% YOY)
Allowances on rent receivables	-3.2	-3.4	 Rising adj. NRI margin
Other	-3.4	-6.7	despite higher maintenance expenses
Non-recurring project costs (rental and lease)	0.6	1.2	 Lower staff costs ratio (7.9%
Current net rental and lease income	193.5	162.5	vs. 8.8% in H1-2015) reflects efficiency gains
Current net income from other services	2.3	1.2
Staff costs	-10.7	-11.2
Non-staff operating costs	-42.7	-7.6
LTIP (long-term incentive program)	0.0	0.1	 One-time costs (€34.3m non capitalised transaction costs
Non-recurring project costs (admin.)	37.9	1.6	including RETT)
Extraordinary and prior-period expenses	0.0	0.4
Current administrative expenses	-15.5	-16.7	 Decreasing admin. cost base in 2016 & 2017 expected
Other income and expenses	0.2	0.4	despite volume growth
Adjusted EBITDA	180.5	147.4	 +€33.1m (+22.5% YOY)
Cash interest expenses and income	-41.3	-45.9	 EBITDA margin 72.4% vs. 68.6% in H1-15 (excl.
Cash income taxes	-1.3	-0.1	maintenance +470bps)
FFO I (including non-controlling interests)	137.9	101.4
Non-controlling interests	-0.3	0.0	 Lower interest charges (end Q2-16 avg. cost 2.09%
FFO I (excluding non-controlling interests)	137.6	101.4	vs. 2.34% in Q2-15)
FFO II (including disposal of investment property)	138.2	102.6
Capex-adjusted FFO I (AFFO)	108.6	85.4

FFO Bridge H1-2016

Cash Effective Interest Expense H1-2016

€ million	H1-2016	H1-2015
Reported interest expense	61.1	113.2	 One-off refinancing
Interest expense related to loan amortisation	-11.8	-20.7	effect of €6.0m in H1- 2015
Prepayment penalties / breakage costs	-4.5	-43.4	 Release of swaps
Interest charges relating to valuation of assets/liabilities	-1.1	-0.5	(refinancing) ~€37m in H1-2015
Leasing related interest expense	-0.7	-0.8
Interest expenses related to changes in pension provisions	-1.6	-1.4
Interest income	0.0	-0.5
Cash effective interest expense	41.3	45.9	 Interest coverage improved further (4.4x up from 3.2x YOY)

EPRA-Net Asset Value

30 June 2016

Attractive rental yield basis for future capital growth

€ million	30.06.2016	31.12.2015
Equity (excl. minority interests)	2,865.9	2,967.8
Effect of exercising options, convertibles and other rights	484.4	427.2
NAV	3,350.3	3,395.0
Fair value measurement of derivative financial instruments	203.7	165.5
Deferred taxes1)	467.3	466.6
EPRA-NAV	4,021.3	4,027.1
(m)2) Number of shares fully-diluted incl. convertible	68.466	67.904
EPRA-NAV per share in €	58.73	59.31
Goodwill, resulting from synergies	39.9	26.4
Adjusted EPRA-NAV (excl. goodwill)	3,981.4	4,000.7
Adjusted EPRA-NAV per share in €	58.15	58.92

• Dividend -€141.9m Capital increase €32.4m

• €23.5m net profit -€13.5m other comprehensive income (derivatives)

• Attractive rental yield of 7.1% leaves headroom for yield compression

• Value of services business not included in NAV
• Scenario: Additional value approx. €2.60 per share at discount rate of 6%3)

2) Actual number of shares outstanding 63.19m 1) And goodwill resulting from deferred taxes on EPRA-adjustments 3) Assumption: growth rate of 0%

Balance Sheet 30 June 2016

Strong balance sheet; further positive impact from year end valuation expected

€ million	30.06.2016	31.12.2015
Investment property	7,430.7	6,398.5	 Additions €1,021.2m
Prepayment for investment property	13.6	203.1	 Capex €29.0m  Reclassification -€18.0m
Other non-current assets	197.7	296.8
Non-current assets	7,642.0	6,898.4
Receivables and other assets	85.3	37.2
Cash and cash equivalents	165.3	252.8	 Cash flow from operating
Current assets	250.6	290.0	activities €89.0m  Dividend -€141.9m
Assets held for disposal	4.9	6.7
Total Assets	7,897.5	7,195.1
Equity	2,900.0	2,985.0	 Equity ratio of 36.7%
Non-current financial liabilities	3,377.7	2,745.6
Other non-current liabilities	747.0	673.7
Non-current liabilities	4,124.7	3,419.3
Current financial liabilities	383.5	496.0
Other current liabilities	489.3	294.8
Current liabilities	872.8	790.8
Total Equity and Liabilities	7,897.5	7,195.1

17 I August 2016

LTV 30 June 2016

Strong credit profile and efficient capital structure maintained

€ million	30.06.2016	31.12.2015
Financing debt	3,761.2	3,241.6
Deferred purchase price liabilities	119.3	0.0	 LTV in line with target capital structure after
Cash & cash equivalents	165.3	252.8	consolidation of acquisitions and dividend
Net Debt	3,715.2	2,988.8	payment  Lower LTV at year end
Investment properties	7,430.7	6,398.5	due to portfolio revaluation expected
Properties held for sale	4.9	6.7
Prepayments for investment properties	13.6	203.1	 Significant positive
Prepayments for acquisitions	-	146.1	impact on LTV from future conversion of
Property values	7,449.2	6,754.4	convertible expected (currently -360bps)
Loan to Value (LTV) in %	49.9	44.2
Pro-forma LTV post conversion in %	44.7	40.4

Financing Structure - 30 June 2016

Long term secured low cost of debt

Average debt maturity:	10.9 years
Interest costs:	Ø 2.09%
Hedging ratio:	92.1%
Rating:	Baa1 (Moody's)

IV.I.I. Business Update and Outlook

Business Update Exploiting additional internal value opportunities

Acquisition of c.2,000 units (in Q2 and Q3) in a more challenging environment

• Grainger deal (approx. 1,100 units) signed in April and another two portfolios with 900 units signed or close to signing in Q3
• Pricing environment is getting tougher; early termination of some negotiations due to wide bid/ask spread
• LEG stays committed to high capital discipline; the three deals still show very attractive yields (6.8%-8.5%)
• Rising supply in H2 expected; acquisition target of 5,000 units appears still realistic (value priority over volume)

Disposal of non core assets provides tailwind for year end valuation

• Disposal of non core portfolios at significant premiums to book values expected (avg. ~10%)
• Customised products; no sale below IFRS value
• Successful capital recycling provides evidence for yield compression also in Higher-Yielding markets
• Disposal volume FY-2016 raised to approx. 4,000 units (up from 2,000-3,000 units) on back of positive market feedback

Business Update Exploiting additional internal value opportunities

Reinforcing internal growth initiatives

• Capex program: Comprehensive bottom-up analysis as response to further improving market fundamentals
• Early repayment of subsidized loans: NAV upside (at least FFO neutrality; medium term upside)
• Analysis expected to be completed by end of Q3

Successful execution of accelerated cost savings program

• LEG's efficiency program progressing well, ahead of schedule
• Upward revision of FY-2016 earnings outlook due to faster execution of cost saving measures
• FFO I-2016: €261m-€265m (up from €257m-€262m)
• EBITDA margin target for 2016 raised to 70% (up from >69%); 72% in 2017 reiterated
• Margin boost underpins the strength of LEG's business model and value potential from acquisitions in core markets
• Objective: Leading EBITDA yield in the German residential industry (on basis of a balanced portfolio composition)

Acquisitions: Leading Management Skills Paying Off Strong acquisition track record since IPO – Creating tangible value

		Closing		30.06.2016		Change
	Units	In-place rent € / sqm	Occupancy	In-place rent € / sqm	Occupancy	In-place rent € / sqm	Occupancy
Portfolio incl. Vitus transaction	27,0131)	4.96	95.2%	5.22	95.7%	0.26 (+5.4%)	~ +50 bp
Vitus portfolio	9,545	4.76	96.1%	5.05	96.4%	0.29 (+6.0%)	~ +30 bp

Operating performance confirms reversionary potential and LEG's management skills

1) Acquisitions since year end 2012; excl. Charlie acquisition (13,570 units)

• Average in-place rents +5.4% (within avg. 20.2 months), rent CAGR of 3.1%
• Vitus NRW portfolio (rent/sqm +6.0%, vacancy -30 bps; within 20 months), rent CAGR of 3.5%

Portfolio development: Strong volume growth at stable overhead cost

Overview Acquisitions FY-2015 / FY-2016

Deal #	Units acquired	Geographic focus	Market	Annual net cold rent	In place rent/sqm	Vacancy rate	Signing	Purchase price	Closing
1	713	Cologne, Leverkusen, Sankt Augustin	High Growth/ Stable	EUR 3.5m	EUR 5.33	2.9%	April 2015	not disclosed	June 2015
2	3,539	Top 2 locations ~60% (Bielefeld, Detmold)	Stable	EUR 14.2m	EUR 5.19	3.6%	November 2015	EUR 225m	January 2016
3	2,037	Duisburg, Essen	Stable/ Higher Yielding	EUR 7.7m	EUR 5.04	6.7%	August 2015	not disclosed	January 2016
4	13,570	NRW (esp. Ruhr area)	Higher Yielding/ Stable	EUR 48m	EUR 4.86	5.3%	December 2015	c.EUR 600m	April 2016
5	1,291	Siegen	Stable	EUR 4.6m	EUR 5.16	17.3%	December 2015	c.EUR 60m	January / July 2016
6	~1,100	Recklinghausen, Herne	Stable/ Higher Yielding	~EUR 4.0m	EUR 4.46	5.4%	April 2016	c.EUR 53m	May 2016
	c.22,000

Outlook for 2016 & 2017

Guidance
€261m - €265m / €4.14 - €4.21 per share (up from €4.09 - €4.17)
2.4 - 2.6%
Stable (FY-15 comparable: c.2.5%)
65% of FFO I

2017
FFO I:	€284m - €289m / €4.50 - €4.57 per share
L-F-L rent growth:	3.0 – 3.3%

Steady Expansion of Leading Profitability

26 I August 2016

Generating Appealing Shareholder Returns

Net Immigration Expected to Remain at a High Level About 25% of all refugees coming to Germany migrate to NRW

Sources:

• 1) Federal Statistical Office (press release 21.03.2016)
• 2) Deutsche Bundesbank
• 3) it.NRW (press release 21.03.2016)

Key Facts

• In 2015, net immigration of foreign nationals to Germany amounted to about 1.1m, of which around 278,0003) came to NRW
• Deutsche Bundesbank forecasts 0.8 million additional refugees by 2017
• Additional pressure on affordable housing segment
• Outperformance of German economy attracts qualified new immigration
• Immigration is driving overall population growth, triggering additional growth in net new households
• Liquid labour market and affordable living as pullfactors

LEG's impact

• At the end of June 2016, LEG let about 1,670 units or ~1.3% of its residential portfolio to refugees, either direct (45%) or via municipalities (55%)
• LEG almost fully let with a vacancy rate of 3.4% scope to let further apartments to refugees is limited
• Upward pressure on rents, limited upside on occupancy

EPRA Net Initial Yield Q2-2016

€ million	30.06.2016	31.12.2015
Investment properties	7,093.1	6,101.6
Assets held for sale	4.9	6.7
Market value of residential property portfolio (net)	7,098.0	6,108.3
Estimated incidental costs	699.5	601.5
Market value of residential property portfolio (gross)	7,797.5	6,709.8
Annualised cash flow from rental income (gross)	508.4	428.1
Non recoverable operating costs	-73.3	-61.4
Annualised cash flow from rental income (net)	435.1	366.7
EPRA Net Initial Yield in %	5.6	5.5

Portfolio

Sound property fundamentals basis for value growth

As of 30.06.2016

Market	Residential Units	GAV Residential Assets (€m)	% of Total Residential GAV	GAV/ sqm (€)	In-Place Rent Multiple	Multiples, Estimated Rental Values (31.12.2015)	GAV Commercial/ Other Assets (€m)	Total GAV
High Growth Markets	38,702	2,586	36%	1,201	17.0x	14.9x	159	2,745
Stable Markets with Attractive Yields	47,551	2,572	36%	773	13.1x	12.1x	98	2,670
Higher Yielding Markets	41,478	1,818	26%	689	12.4x	11.5x	63	1,881
Subtotal NRW	127,731	6,976	98%	859	14.1x	13.1x	320	7,296
Portfolio outside NRW	1,895	123	2%	959	14.4x	13.3x	1	124
Total Portfolio	129,626	7,098	100%	861	14.1x	13.2x	322	7,420
Other Assets								55
Total (incl. Landbank	and DevCo)							7,476

LEG – Adj. EBITDA Margin

Leading profitability despite short term distortion from restricted units

Adj. EBITDA margin		2015		2014
	€m	margin %	€m	margin %
As reported	293.7	67.3	259.3	66.5
Gap restricted vs. unrestricted rents1)	22.5	68.9	21.2	68.2

1) €/sqm: €4.67 vs. €5.48 in 2015, €4.61 vs. €5.33 in 2014

• 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. 160 bps higher

Mietspiegel Overview Expected new Mietspiegel in 2016

Release date (expected)	High-Growth Markets1	Markets1 Stable	Higher-Yielding Markets1	Total Portfolio1
2016 (Q1)	5,461 units (mainly Bielefeld)	4,135 units (mainly Essen, Detmold)	6,670 units (Hochsauerlandkreis, Hagen)	16,266 units
2016 (Q2)	2,286 units (Bonn)	667 units	1,477 units (Bochum)	4,430 units2
2016 (Q3)	4,361 units (mainly Bocholt, Gütersloh)	3,658 units (mainly Wuppertal, Unna)	1,250 units (mainly Herten)	9,293 units
2016 (Q4)	660 units	36 units		696 units
Total 1	12,768 units	8,496 units	9,397 units	30,685 units2

Thereof:
- Bielefeld	4,040 units
- Bocholt	1,412 units
- Bochum			1,477 units
- Bonn	2,286 units
- Detmold		1,724 units
- Essen		2,147 units
- Gütersloh	1,392 units
- Hagen			1,191 units
- Hochsauerlandkr.			5,479 units
- Unna		1,210 units		1 Sub-portfolios also include
- Wuppertal		2,030 units		restricted units 2 Total Portfolio also includes 24
				units non-NRW

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 (30.06.2016): MDAX 3.42%; EPRA 2.70%

• Maturity date: 1 July 2021

• Aggregate principal amount: EUR 300 million
• Initial conversion price:EUR 62.39
• Adjusted conversion price (20 May 2016): EUR 56.8403
• Coupon: 0.50% per annum
• ISIN: DE000LEG1CB5

Share price (01.08.2016, indexed; 31.01.2013 = 100) Convertible bond data

Financial Calendar

Date	Report/Event
10.08.2016	Quarterly Report Q2 as of 30 June 2016
07./08.09.2016	EPRA Annual Conference, Paris
13./14.09.2016	Global Real Estate Conference, Bank of America Merrill Lynch, New York
20.09.2016	Berenberg & Goldman Sachs German Corporate Conference, Munich
21.09.2016	Baader Investment Conference, Munich
29.09.2016	Société Générale Pan European Real Estate Conference, London
09.11.2016	Quarterly Report Q3 as of 30 September 2016

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 Dusseldorf, 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

Appendix Thank you for your interest.