Deutsche Wohnen Se · XETR:DWNI

Deutsche Wohnen — 9M 2015 Earnings Presentation

35 slides from Deutsche Wohnen's earnings presentation, Nov 10, 2015

  1. Slide 1: Deutsche Wohnen AG 9M 2015 results

    Deutsche Wohnen AG » 9M 2015 results Conference Call, 10 November 2015 1

  2. Slide 2: Agenda

    » Agenda 1 Highlights 9M 2015 2 Strategic Outlook 3 Efficiency of Deutsche Wohnen Platform 4 Additional Perspectives on Vonovia Offer 2

  3. Slide 3: Highlights 9M 2015

    ‘ ) a Deutsche Wohnen » Highlights 9M 2015 deutsche-wohnen.com

  4. Slide 4: Financial highlights 9M 2015

    » Financial highlights 9M 2015 Financials Operational development In EUR 9M 2015 yoy In EUR 9M 2015 yoy FFO I (after minorities)(a) 228.7m (+38%) NOI letting 360.3m (1.6%) FFO I/share(b) 0.73 (+28%) L-f-l rental growth 3.2% (+0.2pp) (Letting portfolio) FFO II (incl. disposals) 289.5m (+41%) Rent inc

  5. Slide 5: Attractive value creation due to asset management expertise supported by strong market fundamentals

    » Attractive value creation due to asset management expertise supported by strong market fundamentals Strategy cluster Residential units % of total In-place rent(a) L-f-l growth Rent potential(b) Vacancy measured by 30/09/2015 30/09/2015 30/09/2015 fair value EUR/sqm/month in % in % in % Strategic c

  6. Slide 6: Strategic clustering allocates investments to the assets with the highest return expectations

    » Strategic clustering allocates investments to the assets with the highest return expectations (a) (b) Strategy cluster Residential units % of total In-place rent Rent potential Vacancy measured by 30/09/2015 30/09/2015 30/09/2015 fair value EUR/sqm/month Strategic core and growth 143,960 99% 5.85

  7. Slide 7: Deutsche Wohnen's targeted investment approach

    » Deutsche Wohnen's targeted investment approach Hellersdorf Promenade (before) Targeted approach for micro-locations  c. 17,000 units identified (almost entirely in Core+), mainly in dynamic micro locations  Earnings and value accretion:  Focus on portfolios with the highest rent potential (c. 3

  8. Slide 8: Deconstructing l-f-l rental growth

    » Deconstructing l-f-l rental growth Drivers of rental growth Considerations Rental cap Berlin 3.5% 3.1% 0.1%  Rental cap regulations have been in place in Berlin since 0.1% June 2015 2.5% 0.1%  Deutsche Wohnen is actively managing the portfolio; 2.1% there is limited impact on re-letting rents 2.

  9. Slide 9: Disposal business underpins inherent value upside

    » Disposal business underpins inherent value upside (a) Signed with expected closing in FY Privatization Institutional sales 9M 2015 9M 2014 9M 2015 9M 2014 No. of units 1,984 2,037 7,600 2,052 Proceeds (EUR m) 193 162 490 86 Price per sqm 1,388 1,185 942 678 Gross margin 41% 44% 8% 11%  Disposal b

  10. Slide 10: Strategic Outlook

    » Strategic Outlook deutsche-wohnen.com ‘ ) a Deutsche Wohnen

  11. Slide 11: What Deutsche Wohnen stands for

    » What Deutsche Wohnen stands for More than 90% of total portfolio value in 1 Focused quality portfolio in dynamic growth regions in Germany Core+ 2 Strong like-for-like rental growth and tangible NAV upside potential c. 3.5%(a) rental growth expected in 2015 3 Efficiency leadership with best-in-cla

  12. Slide 12: Clear focus on value creation: internal growth, selected bolt-on acquisitions and efficient financing

    » Clear focus on value creation: internal growth, selected bolt-on acquisitions and efficient financing  Strong fundamentals in our residential markets  Clear commitment to continue successful internal growth Internal  Re-letting crystallizing market rents (rent potential > 20% for 75% of letting

  13. Slide 13: Efficiency of Deutsche Wohnen Platform

    » Efficiency of Deutsche Wohnen Platform 13

  14. Slide 14: High rental growth without inflation by capex measures

    » High rental growth without inflation by capex measures Deutsche Wohnen Vonovia Maintenance and modernization Maintenance and modernization as % of total rent: as % of total rent: 23.1% 24.4% ~25% 31.4% 43.8% ~48% 3.5% 3.1% 0.1% ~2.8-2.9% 0.1% 2.5% 2.5% 0.1% 2.0%(b) 0.9% (c) 0.4% ~1.7% 3.4% 3.0% 2.

  15. Slide 15: Deutsche Wohnen with best-in-class EBITDA margin proving operational efficiency

    » Deutsche Wohnen with best-in-class EBITDA margin proving operational efficiency Deutsche Wohnen Vonovia 80% 80% 75.9% 75% 75% 72.2% 71.4% 70% 70% 68.6% EBITDA margin EBITDA margin 68.4% 67.5% 66.3% 65% 66.7% 65% 63.8% 64.2% 60.8% 60% 61.7% 60% 58.4% 57.0% 55.4% 55% 55% 2013 2014 9M 2015 2013 2014

  16. Slide 16: Low cost of debt due to flexible and efficient financing structure

    » Low cost of debt due to flexible and efficient financing structure Deutsche Wohnen Vonovia Rating A- / A3 BBB+ / NA LTV 41% 53%(a) Ø maturity 9.5 years ~7 years % secured bank debt(b) 77% 28% % CMBS - 28% % unsecured debt(c) 23% 44% Ø cost of capital 1.8% ~3.0%(d) LTV: 40-45% LTV: <50% Key financi

  17. Slide 17: Sustainable and strong cash flow generation

    » Sustainable and strong cash flow generation Deutsche Wohnen Vonovia 2014 9M 2015 2014 9M 2015 FFO I after minorities as reported 217.6 228.7 286.6(a) 409.3(a) Mandatory amortization (81.0) (40.9) (45.9)(b) (42.6)(b) Capitalized investments (64.1) (55.6) (200.0)(c) (299.7)(c) Adj. corporate free ca

  18. Slide 18: Yield and value upside at low risk profile

    » Yield and value upside at low risk profile Deutsche Wohnen Vonovia CAGR: CAGR: 1.35 70.7% 1.02 1.00 19.2% FFO I / share(a) 0.40 FY 2013 Q3 2015 FY 2013 Q3 2015 (annualized) (annualized) CAGR: CAGR: Adj. NAV / share 24.7% 18.61 22.85 (3.4)% 21.51 (undiluted)(b) 12.64 FY 2013 9M 2015 FY 2013 9M 2015

  19. Slide 19: Strong management of acquired portfolios

    » Strong management of acquired portfolios At Acquisition As of end of September 2015 Residential Acquisition Acquisition In-place rent Residential In-place rent Rental Multiple Market rent Acquisition Acquisition units value value (EUR/ (EUR/ units (EUR/ growth in-place (EUR/ date multiple (#) (EUR

  20. Slide 20: What Deutsche Wohnen stands for going forward

    » What Deutsche Wohnen stands for going forward 1 Focused quality portfolio in dynamic growth regions in Germany 2 Strong like-for-like rental growth and tangible NAV upside potential 3 Efficiency leadership with best-in-class EBITDA margin 4 Accretive add-on to business model through privatizations

  21. Slide 21: Additional Perspectives on Vonovia Offer

    » Additional Perspectives on Vonovia Offer 21

  22. Slide 22: Claims and reality

    » Claims and reality Vonovia Claims Reality  Deutsche Wohnen is more efficiently managed  EUR 84m of synergies within two years are realistic than Vonovia; very unlike GAGFAH  Synergies not realistic  Rushed portfolio sales announcements and hike in asset values indicate Vonovia realizes the pro

  23. Slide 23: Managing Deutsche Wohnen the "Vonovia way" will destroy value

    » Managing Deutsche Wohnen the “Vonovia way” will destroy value Deutsche Wohnen (9M 2015) Vonovia (9M 2015) FFO impact (EUR m) 75.9% 68.6% Adj. EBITDA ~(47)(b) Margin (a) Adj. EBITDA margin Adj. EBITDA margin ~Ø 3.0%(d) Ø 1.8% Financing ~(13)(c) costs Cost of debt Cost of debt Tax loss carry ~ (10-1

  24. Slide 24: EUR 84m targeted synergies not realistic

    » EUR 84m targeted synergies not realistic EBITDA margin before and after integration ~ 90% 79% Ø Vonovia 77% (a) 76% 76% integration margin: 77% 75% (a) 69% 64% 64% 63% 63% (b) (b) (b) (b) Vonovia DeWAG Vitus GAGFAH Südewo Deutsche Wohnen EBITDA rental margin before integration EBITDA rental margin

  25. Slide 25: Transaction is dilutive for Vonovia shareholders

    » Transaction is dilutive for Vonovia shareholders Accretion / dilution: FFO I per share(a), (b) Accretion / dilution: NAV per share(a), (b) Without Adj. synergies VON synergies Without Adj. synergies VON synergies synergies (EUR 20m) (EUR 84m) synergies (EUR 20m) (EUR 84m) (0.9)% (2.3)% (6.4)% (8.1

  26. Slide 26: Key reasons to vote against proposed transaction

    » Key reasons to vote against proposed transaction  Deutsche Wohnen will be worth less within Vonovia than it is today 1  Shareholders will incur a loss of the premium valuation multiple on FFO  Growth rates will be diluted and superior margins will decline  The risks for Vonovia shareholders fa

  27. Slide 27: Appendix

    » Appendix deutsche-wohnen.com ‘ ) a Deutsche Wohnen 27

  28. Slide 28: EBITDA margin

    » EBITDA margin in EUR m 9M 2015 9M 2014 EBITDA margins 9M 2015 9M 2014 Earnings from Residential Property Management 393.0 385.9 Adj. EBITDA/gross rents 85.0% 77.6% Earnings from Disposals 60.8 38.8 Adj. EBITDA excl. 72.2% 69.4% disposals/gross rents Earnings from Nursing and Assisted Living 12.0 1

  29. Slide 29: IFRS result

    » IFRS result in EUR m 9M 2015 9M 2014 in EUR m 9M 2015 9M 2014 EBITDA (adjusted) 402.2 364.3 Interest expenses (94.9) (138.9) Depreciation (4.1) (4.5) Non-cash interest expenses (2.5) (12.3) At equity valuation 1.5 0.0 (97.4) (151.2) Financial result (net)(a) (96.8) (150.5) Interest income 0.6 0.7

  30. Slide 30: FFO I per share performance

    » FFO I per share performance in EUR m 9M 2015 9M 2014 FFO II development in EUR m EBITDA (adjusted) 402.2 364.3 104.2 205.1 289.5 Earnings from Disposals (60.8) (38.8) At equity valuation 1.5 0.0 Interest expense/ income (94.4) (138.3) 60.8 Income taxes (14.0) (14.4) 38.8 Minorities (5.8) (6.5) + 3

  31. Slide 31: Cash flow creation

    » Cash flow creation EUR m 9M 2015 9M 2014 Δ FFO I(a) 228.7 166.3 62.4 FFO disposals 60.8 38.8 22.0 FFO II 289.5 205.1 84.4 + ∆ CF disposals(b) 347.7 62.6 285.1 - Regular amortization (40.9) (63.7) 22.8 - Capex (55.6) (36.4) (19.2) Corporate Free Cash Flow 540.7 167.6 373.1 Per share 1.72 0.58 1.14

  32. Slide 32: EPRA NAV

    » EPRA NAV in EUR m 30/09/2015 31/12/2014 in EUR m 30/09/2015 31/12/2014 Equity EPRA NAV (undiluted) 6,814.7 5,326.0 6,012.0 4,692.9 (before non-controlling interests) Fair values of derivative Goodwill GSW (535.1) (535.1) 43.7 144.9 financial instruments Adjusted NAV (undiluted) 6,279.6 4,790.9 Def

  33. Slide 33: Details on Vonovia shareholder dilution

    » Details on Vonovia shareholder dilution Dilution of FFO I per share Current capital structure (PF LTV of 51%) Normalized capital structure (PF LTV of 46%) Announced Announced Without @ Assumed Without @ Assumed synergies synergies synergies synergies EUR 20m synergies synergies EUR 20m EUR 84m EUR

  34. Slide 34: 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

  35. Slide 35: Deutsche Wohnen AG Pfaffenwiese 300 65929 Frankfurt/Main

    Deutsche Wohnen AG Registered Office Berlin Office Pfaffenwiese 300 Mecklenburgische Straße 57 65929 Frankfurt/Main 14197 Berlin Phone: +49 30 897 86 5413 Fax: +49 30 897 86 5409 © 2015 Deutsche Wohnen AG 35

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