Deutsche Wohnen Se · XETR:DWNI

Deutsche Wohnen — Non-Deal Roadshow (November 2018)

52 slides from Deutsche Wohnen's roadshow presentation, Nov 12, 2018

  1. Slide 1: Deutsche Wohnen SE Company presentation

    Deutsche Wohnen SE Company presentation Based on 9M 2018 results

  2. Slide 2: Agenda

    Agenda 01 Deutsche Wohnen at a Glance 05 Key Investment Highlights 02 German Residential Real Estate Market 06 Appendix 03 Portfolio and Business Segments 04 Key Financials deutsche-wohnen.com 2

  3. Slide 3: Deutsche Wohnen business model Made in Germany

    Deutsche Wohnen business model „Made in Germany“ 1 ~160,000 residential units and ~12,000 beds in Nursing & Assisted Living with Fair Value of EUR ~21 bn 2 Focus on metropolitan areas in Germany, almost 80% of assets in Berlin 3 3rd largest listed landlord in Europe with market cap of ~EUR 15bn 4 Co

  4. Slide 4: Market and sector specific trends underpin the investment case

    Market and sector specific trends underpin the investment case Net immigration and new construction in Berlin1 Berlin with strongest population growth forecast2 Development of residents: Boomtown Berlin 350,000 Change in number of residents 2015 - 2035 (in %) 300,000 289,000 20 Berlin expected to gr

  5. Slide 5: Dynamic transaction market

    Dynamic transaction market Transaction volume in German Residential (EUR bn) Development of rents in Berlin (EUR/sqm/month) Volume in bn Units sold +5% +12% +9% 30 400,000 361,000 11.10 11.65 9.05 10.15 25 2018e: ~17-18 300,000 2015 2016 2017 H1-2018 20 EUR bn Average asking rents in Berlin 16 200,0

  6. Slide 6: High reversionary potential supports NAV growth

    High reversionary potential supports NAV growth Strategic cluster Residential units % of total In-place rent1 Fair value Multiple Multiple Rent potential2 Vacancy (#) (measured by (EUR/sqm/month) (EUR/sqm) in-place rent re-letting rent (in %) (in %) fair value) (x) (x) Strategic core and 161,800 99.

  7. Slide 7: Re-letting rents continue to outpace in-place rents

    Re-letting rents continue to outpace in-place rents DW rent development in Berlin DW development of multiples in Berlin EUR / sqm 30.0x 27.9x 27.1x 10.00 9.04 25.0x 23.7x 7.6x spread 9.00 8.47 8.00 7.60 37% rent 20.0x 18.7x 7.02 potential 6.92 20.2x 20.3x 7.00 16.1x 18.9x 21% rent potential 15.0x 2.

  8. Slide 8: Strong like-for-like development in particular in Berlin

    Strong like-for-like development in particular in Berlin 1 1 Like-for-like Residential In-place rent In-place rent Change Vacancy Vacancy Change 30/09/2018 units 30/09/2018 30/09/2017 (y-o-y) 30/09/2018 30/09/2017 (y-o-y) (#) (EUR/sqm) (EUR/sqm) (in %) (in %) Strategic core and growth regions Lettin

  9. Slide 9: Disposals business remains opportunistic

    Disposals business remains opportunistic Development of privatization business Development of institutional sales business 44% 41% 39% 30% 42% 20% 8% 13% 20% 17% 20,000 95% 2,463 93% 92% 15,000 91% 2,086 91% 14,811 15,133 90% 12,669 10,000 90% 1,564 9,596 1,394 5,000 1,181 2,099 0 85% 2014 2015 2016

  10. Slide 10: Why we target to increase our investment in nursing market

    Why we target to increase our investment in nursing market Increasing demand for nursing Well funded long-term care insurance Strong Robust cash demographic flows trends Fragmented market with need for c. 20 years of experience in nursing Attractive through GEHAG consolidation Growth risk/ return Tr

  11. Slide 11: Nursing identified as attractive driver for further external growth

    Nursing identified as attractive driver for further external growth Facilities Beds Operator  Fragmented market with promising fundamental outlook offers room for (#) (#) consolidation KATHARINENHOF®1 24 2,642  Significant investments needed to absorb required capacity built-up in industry with in

  12. Slide 12: Best in class Nursing and Assisted Living portfolio

    Best in class Nursing and Assisted Living portfolio Uferpalais, Berlin Im Schlossgarten, Brandenburg Wolkenstein, Saxony Wilsdruff, Saxony Quellenhof, Saxony Am Schwarzen Berg, Lower Saxony Garpsen, Lower Saxony Am Auensee, Saxony Oberau, Bavaria Blankenese, Hamburg Zum Husaren, Hamburg Am Lunapark,

  13. Slide 13: Operational and financial improvements drive margins

    Operational and financial improvements drive margins Adj. EBITDA margin (w/o disposals) FFO I margin Avg. cost of debt 81% 2.5% 1.8% 1.6% 1.3% 1.3% 77% 63% 75% 58% 54% 72% 48% 35% 68% 2014 2015 2016 2017 9M-2018 2014 2015 2016 2017 9M-2018  Concentrated portfolio and successful integration of acqui

  14. Slide 14: Strong generation of total shareholder return

    Strong generation of total shareholder return Development of dividend in EUR per share Development of EPRA NAV (undiluted) in EUR per share CAGR 2014-2018e: +18% CAGR 2014-2018e: +24% +8% +15% +8% +37% 0.86 +20% 0.80 +29% 0.74 +23% +29% 35.74 0.54 29.69 0.44 23.02 17.87 1 1 2014 2015 2016 2017 2018

  15. Slide 15: Conservative long-term capital structure

    Conservative long-term capital structure Rating A- / A3; stable outlook Ø maturity ~ 7.9 years  Low leverage, long maturities and strong rating % secured bank debt 68%  Flexible financing approach to optimize financing costs % unsecured debt 32%  LTV at 36.5% as of Q3 2018 (-0.5pp yoy)  ICR (adj

  16. Slide 16: Highlights of business model

    Highlights of business model 01 Resilient and growing residential real estate market in Germany 02 Focused quality portfolio in dynamic growth regions in Germany 03 High quality asset base with high rent and value upside potential 04 Low risk and efficient financing structure 05 Strong and predictab

  17. Slide 17: Appendix

    Appendix

  18. Slide 18: Strong like-for-like development as of 30 September 2018

    Strong like-for-like development as of 30 September 2018 2 2 Like-for-like Residential In-place rent In-place rent Change Vacancy Vacancy Change 30/09/2018 units 30/09/2018 30/09/2017 (y-o-y) 30/09/2018 30/09/2017 (y-o-y) (#) (EUR/sqm) (EUR/sqm) (in %) (in %) Letting portfolio1 155,293 6.56 6.34 3.5

  19. Slide 19: Attractive spread between in-place and re-letting rent multiples

    Attractive spread between in-place and re-letting rent multiples offer further potential for NAV growth FV FV Multiple Multiple Multiple Fair Value Residential units Regions 30/09/2018 30/09/2018 in-place rent re-letting rent in-place rent 31/12/2017 (#) (EUR m) (EUR/sqm) 30/09/2018 30/09/2018 31/12

  20. Slide 20: Current level of rents and prices offer further growth potential

    Current level of rents and prices offer further growth potential Asking prices multifamily housing (in EUR / sqm)1 Asking rents in German top cities (in EUR / sqm)2 DW Berlin DW Berlin (book value) 2,202 3 (re-letting rent) 9.043 +49% Dusseldorf Dusseldorf 3,220 11.15 +29% Berlin Cologne 3,270 11.55

  21. Slide 21: Investments into the portfolio to further accelerate in Q4 2018

    Investments into the portfolio to further accelerate in Q4 2018 9M-2018 9M-2017 Modernization & Maintenance per sqm (annualized) EUR / EUR / EUR m EUR m sqm1 sqm1 29.03 33.37 34.06 ~40 Maintenance (expensed 67.0 8.85 74.1 9.95 through p&l) ~30 22.85 25.21 19.08 Modernization (capitalized on 190.8 25

  22. Slide 22: Almost EUR 1bn acquisitions predominately in Core+ in 2018

    Almost EUR 1bn acquisitions predominately in Core+ in 2018 Berlin Dresden/Leipzig  c. 2,600 units in Berlin  C. 2,700 units  Mostly pre-war buildings (“Altbau“)  Mostly modernized pre-war buildings (“Altbau“) Berlin, Philippistr. Berlin, Cäsarstr. Dresden, Weinbergstr. Leipzig, Kurt-Eisner-Str.

  23. Slide 23: Acquisition track record since 2013

    Acquisition track record since 2013 Main acquisitions Fair Value In-place rent (>1,000 units deal size) in EUR/sqm in EUR/sqm Year Residential units Deal Location At Acquisition 30/09/2018 ∆ At Acquisition 30/09/2018 ∆ # Centuria 5,200 Berlin 711 1,809 154% 4.65 5.81 25% 2013 Larry 6,500 Berlin 842

  24. Slide 24: Portfolio structure – characteristics meeting strong demand

    Portfolio structure – characteristics meeting strong demand In-place rent Apartment size (Ø 60 sqm) Year of construction Rental restrictions (Ø 6.40 EUR/sqm/month) (expiring over time) 30.8% 17.3% 29.0% 11% ~9% 16.2% 16.2% 18% 13.3% 18.3% 9.6% 15.9% 18% 30% 6.2% 5.2% 5.6% 4.4% 5.7% 2.0% 2.7% 23% ~91

  25. Slide 25: The Berlin portfolio at a glance

    The Berlin portfolio at a glance Reinickendorf # 9,719 | 6.60 | 1.2% Pankow # 9,841 | 7.20 | 2.7% Lichtenberg Mitte # 8,792 | 6.57 | 0.9% # 4,556 | 7.00 | 2.3% Friedrichshain- Kreuzberg # 8,195 | 6.30 | 5.2% Spandau # 13,761 | 6.49 | 1.4% Marzahn-Hellersdorf # 14,875 | 5.87 | 0.9% Berlin Charlottenb

  26. Slide 26: Berlin – The place to be!

    Berlin – The place to be! Government Industry Innovation High-tech Tourism Science 2nd best Seat of parliament, Siemens signed biggest performing European • 6,500 technology More than 12.9 million Highest density of government and single investment in startup ecosystem firms arrivals in 2017 researc

  27. Slide 27: Significant scope for rent potential to widen further in Berlin

    Significant scope for rent potential to widen further in Berlin Replacement costs Affordability  Average replacement costs > EUR 3,500 per sqm, pre-dominately driven by  Average DW apartment size of only 60 sqm offers competitive advantage in terms increase of prices for land plots of affordabilit

  28. Slide 28: Demographic trends in Germany underpin rising demand

    Demographic trends in Germany underpin rising demand Increasing share of age groups 65+ and 80+ Ageing population leads to increasing demand for nursing homes 23% 6% 17%  Nursing care market driven by (irreversible) demographic trends - increasing demand for social, medical and nursing services 201

  29. Slide 29: Forecast - required additional nursing home beds by federal state

    Forecast - required additional nursing home beds by federal state Additional demand for care beds by 2030 Additional demand for care beds by 2030 (constant nursing home ratio 2013)¹ (nursing home ratio 2013 +5%)² Schleswig-Holstein Mecklenburg- Schleswig-Holstein Mecklenburg- 16,357 West Pomerania 2

  30. Slide 30: Highly fragmented market structure for nursing home operators

    Highly fragmented market structure for nursing home operators Nursing home operators split by type (# of beds) 5%  Nursing home operator market is very fragmented Non-profit operators  Top ten private operators only c. 12% market share, expected to increase further Private operators 42% 53% Public

  31. Slide 31: Transaction market for nursing home properties

    Transaction market for nursing home properties Nursing homes yield spread significantly above other asset classes in % 8.5 7.5 6.5 5.5 4.5 3.5  Nursing home property market accounts for c. 1.8% of overall commercial real 2.5 estate transaction volume in 2017 2011 2012 2013 2014 2015 2016 2017 Nursi

  32. Slide 32: Overview of elderly care market in Germany

    Overview of elderly care market in Germany Description Payment regulation  Covers all levels of inpatient care  Reimbursement level depending on extend of care required (5 degrees available) Nursing homes  Focus on high care degrees  Long-term care insurance (LTC) covers a monthly allowance, (in

  33. Slide 33: Overview of regulatory environment for nursing homes (1/2)

    Overview of regulatory environment for nursing homes (1/2)  No formal permission (except for building laws) required to set up new nursing homes New homes  Operators entitled to enter into new supply contract with Care Funds (Pflegekassen) as soon as structural requirements for authorization opera

  34. Slide 34: Overview of regulatory environment for nursing homes (2/2)

    Overview of regulatory environment for nursing homes (2/2) Standard daily cost breakdown of nursing homes 15% Nursing services costs  Germany is one of few countries which requires all citizens to have Accomodation & catering either public or private long-term care insurance 25% costs 60% Investmen

  35. Slide 35: Best in class Nursing and Assisted Living portfolio

    Best in class Nursing and Assisted Living portfolio Uferpalais, Berlin Im Schlossgarten, Brandenburg Wolkenstein, Saxony Wilsdruff, Saxony Quellenhof, Saxony Am Schwarzen Berg, Lower Saxony Garpsen, Lower Saxony Am Auensee, Saxony Oberau, Bavaria Blankenese, Hamburg Zum Husaren, Hamburg Am Lunapark,

  36. Slide 36: Deutsche Wohnen's residential portfolio is best-in-class

    Deutsche Wohnen's residential portfolio is best-in-class Siemensstadt, Berlin Hellersdorf, Berlin Carl-Legien-Siedlung, Berlin Südwestkorso, Berlin Oranienkiez, Berlin Hufeisensiedlung, Berlin Dresden Otto-Suhr-Siedlung, Berlin deutsche-wohnen.com 36

  37. Slide 37: Strong letting business

    Strong letting business in EUR m 9M-2018 9M-2017 Income from rents (rental income) 585.0 553.4 Income relating to utility/ ancillary costs 266.7 252.3 Maintenance expenses as a percentage of rental income at 11.5% (9M 2017: 13.4%) Income from rental business 851.7 805.7 Expenses relating to utility/

  38. Slide 38: Attractive margins of disposal business despite revaluations

    Attractive margins of disposal business despite revaluations Disposals Privatization Institutional sales Total with closing in 9M-2018 9M-2017 9M-2018 9M-2017 9M-2018 9M-2017 No. of units 264 571 322 1,603 586 2,174 Proceeds (EUR m) 50.7 83.8 27.9 115.7 78.6 199.5 Book value (EUR m) 35.7 65.1 23.9 9

  39. Slide 39: Increasing FFO contribution from Nursing and Assisted Living

    Increasing FFO contribution from Nursing and Assisted Living Operations (in EUR m) 9M-2018 9M-2017 Total income 73.0 69.4 in EUR m 9M-2018 9M-2017 Total expenses (67.4) (63.1) Nursing & Assisted Living 63.4 60.4 EBITDA operations 5.6 6.3 Other 9.6 9.0 EBITDA margin 7.7% 9.1% Lease expenses1 11.5 11.

  40. Slide 40: Adj. EBITDA margin above 80%

    Adj. EBITDA margin above 80% Development of cost ratio in EUR m 9M-2018 9M-2017 10.9% Earnings from Residential Property Management 500.2 461.6 10.5% 10.0% Earnings from Disposals 13.5 28.5 Earnings from Nursing and Assisted Living 37.6 36.9 9M-2016 9M-2017 9M-2018 Segment contribution 551.3 527.0 C

  41. Slide 41: FFO I per share growth of 10% yoy to EUR 1.03

    FFO I per share growth of 10% yoy to EUR 1.03 in EUR m 9M-2018 9M-2017 EBITDA (adjusted) 488.1 463.8 FFO I margin development Earnings from Disposals (13.5) (28.5) 68.4% 64.8% 0.0 61.6% 62.8% Long-term remuneration component (share based) 1.2 59.6% 57.6% Finance lease broadband cable network 1.7 0.0

  42. Slide 42: EPRA NAV per share +6% versus year end 2017

    EPRA NAV per share +6% versus year end 2017 in EUR m 30/09/2018 31/12/2017 EPRA NAV per share (undiluted) in EUR Equity (before non-controlling interests) 10,434.0 9,888.2 +13% +6% Fair values of derivative financial instruments 1.8 2.0 37.76 35.74 Deferred taxes (net) 3,041.9 2,786.6 31.55 EPRA NAV

  43. Slide 43: Bridge from adjusted EBITDA to profit

    Bridge from adjusted EBITDA to profit in EUR m 9M-2018 9M-2017 EBITDA (adjusted) 488.1 463.8 in EUR m 9M-2018 9M-2017 Depreciation (6.0) (5.2) Interest expenses (74.8) (74.8) At equity valuation 1.2 1.3 In % of gross rents ~13% ~14% Financial result (net) (82.1) (91.4) Accured interest on liabilitie

  44. Slide 44: Summary balance sheet

    Summary balance sheet Assets Equity and Liabilities in EUR m 30/09/2018 31/12/2017 in EUR m 30/09/2018 31/12/2017 Investment properties 21,220.1 19,628.4 Total equity 10,776.4 10,211.0 Other non-current assets 187.2 134.4 Financial liabilities 5,742.1 4,751.1 Derivatives 6.2 3.3 Convertibles 1,714.4

  45. Slide 45: Mechanisms of rent development in dynamic markets like Berlin

    Mechanisms of rent development in dynamic markets like Berlin Current regulations Indefinite rental contracts Freedom of contract at market rent level New letting BUT rental cap at „customary rent“ +10% (so called Mietpreisbremse) Exceptions from rental cap: new construction and extensively refurbis

  46. Slide 46: Guidance 2018

    Guidance 2018 Old Guidance New Guidance FFO I (EUR m) ~470  473-478 Guidance Dividend per share (EUR) ~0.86  ~0.86 - 0.87 LTV 34.5% ~35-40% • Aim to keep current A-/A3 Reported (target range) rating • ~ 3% based on in-place rent in Like-for-like 4.4% ~3% EUR/ sqm rental growth Reported Guidance •

  47. Slide 47: Deutsche Wohnen well positioned in capital markets

    Deutsche Wohnen well positioned in capital markets Share Price Development LTM 45 +16% 40 -10% 35 +2% 30 01.11.2017 01.12.2017 01.01.2018 01.02.2018 01.03.2018 01.04.2018 01.05.2018 01.06.2018 01.07.2018 01.08.2018 01.09.2018 01.10.2018 01.11.2018 Deutsche Wohnen MDAX EPRA Europe Share Free Float an

  48. Slide 48: History of Deutsche Wohnen

    History of Deutsche Wohnen 1924 Foundation 2006 Acquisition of Eisenbahn- 1998 Siedlungs-Geselllschaft and GEHAG Privatisation Fortimo GmbH (Berlin) 1925 Beginning of modern housing development 2013 2010 Takeover of GSW Moving up to Immobilien AG (Berlin) MDAX 1999 IPO Deutsche Wohnen (Frankfurt) 19

  49. Slide 49: Executive Board compensation system – as of 1 January 2018

    Executive Board compensation system – as of 1 January 2018 1 Introduction of Share Ownership Guidelines (SOGs) 2 Conversion of the Stock Option Plan into a Performance Cash Plan Reduction of the plan’s complexity and meeting of investor and proxy advisor expectations SOG 1 Share  Obligation to hold

  50. Slide 50: Management board and areas of responsibilities

    Management board and areas of responsibilities Michael Zahn Lars Wittan Philip Grosse Chief Executive Officer Chief Operating Officer Chief Financial Officer More than 20 years in the firm Since 2007 at Deutsche Wohnen, Since 2013 at Deutsche Wohnen, since 2011 member of the since 2016 CFO managemen

  51. Slide 51: Disclaimer

    Disclaimer This presentation contains forward-looking statements including assumptions, opinions and views of Deutsche Wohnen or quoted from third party sources. Various known and unknown risks, uncertainties and other factors could cause actual results, financial positions, the development or the p

  52. Slide 52: Deutsche Wohnen SE

    Deutsche Wohnen SE Mecklenburgische Straße 57 14197 Berlin Phone +49 30 89786-5413 Fax +49 30 89786-5419 © 2018 Deutsche Wohnen Gruppe

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