Deutsche Wohnen Se · XETR:DWNI

Deutsche Wohnen — 9M 2016 Earnings Presentation

48 slides from Deutsche Wohnen's earnings presentation, Nov 15, 2016

  1. Slide 1: Deutsche Wohnen AG 9M 2016 results

    Deutsche Wohnen AG » 9M 2016 results Conference Call, 15 November 2016 1

  2. Slide 2: Agenda

    » Agenda 1 9M 2016 results 2 Investment update & Outlook 3 Q&A 2

  3. Slide 3: 9M 2016 results

    ‘ ) a Deutsche Wohnen » 9M 2016 results deutsche-wohnen.com

  4. Slide 4: Financial highlights 9M 2016

    » Financial highlights 9M 2016 Operational development KPIs In EUR m 9M 2016 YoY In EUR m 9M 2016 YoY NOI letting 414.6 +15.1% FFO I (after minorities) 301.4 +31.8% NOI margin 78.8% +2.6ppt in EUR/ share1) 0.89 +21.9% Like-for-like rental growth 3.2% +0.1ppt FFO I margin 57.3% +9.0ppt Vacancy rate 1

  5. Slide 5: Portfolio update 9M 2016 – attractive reversionary potential

    » Portfolio update 9M 2016 – attractive reversionary potential Strategic cluster Residential % of total In-place rent1) Rent potential2) Vacancy Fair value Multiple Multiple units measured by 30/09/2016 30/09/2016 30/09/2016 30/09/2016 in-place market fair value EUR/sqm/month in % in % EUR/sqm rent

  6. Slide 6: Strong like-for-like development in Berlin

    » Strong like-for-like development in Berlin 1) 1) Like-for-like Residential units In-place rent In-place rent Change Vacancy Vacancy Change 30/09/2016 number 30/09/2016 30/09/2015 y-o-y 30/09/2016 30/09/2015 y-o-y EUR/sqm/month EUR/sqm/month in % in % Core+ 123,344 6.11 5.91 3.5% 1.5% 1.6% -0.1pp G

  7. Slide 7: Strong earnings and cash contributions from letting

    » Strong earnings and cash contributions from letting in EUR m 9M 2016 9M 2015 Significant reduction of operational cost items (in % of rental income) Rental income 526.1 473.1 Non-rec. exp.& rent loss Maintenance Other Personnel Non-recoverable expenses (6.2) (9.4) 23.8% -2.6pp Rental loss 21.2% (4

  8. Slide 8: Growing prices as demonstrated by disposal business

    » Growing prices as demonstrated by disposal business Disposals Privatization Institutional sales Total with closing in 9M 2016 9M 2015 9M 2016 9M 2015 9M 2016 9M 2015 No. of units 1,061 1,479 2,544 6,951 3,605 8,430 Proceeds (EUR m) 125.5 145.8 175.5 447.1 301.0 592.9 Book value 89.9 103.2 156.5 41

  9. Slide 9: High profitability from nursing operations and assets

    » High profitability from nursing “operations” and “assets” Operations (in EUR m) 9M 2016 9M 2015 in EUR m 9M 2016 9M 2015 Total income 52.4 49.9 Nursing 41.5 39.7 Total expenses (47.1) (45.9) Living 4.9 4.6 EBITDA operations 5.3 4.0 Other 6.0 5.6 EBITDA margin 10.1% 8.0% in EUR m 9M 2016 9M 2015 Le

  10. Slide 10: Strong operating performance of the nursing business

    » Strong operating performance of the nursing business High occupancy rate is a good proof point for Strong revenue growth operational excellence Revenues (EURm) Occupancy rate 98.7% 96.1% 96.1% 97.2% 68.2 67.2 ~70 59.9  German occupancy rate: ̴ 85% 2013 2014 2015 9M 2016 31/12/2013 31/12/2014 31/1

  11. Slide 11: Nursing homes - portfolio overview

    » Nursing homes - portfolio overview Existing nursing business: Assets and operating business1) # of places Assisted Facilities Nursing Total Area Occupancy Fair Value Katharinenhof Region living # # # (sqm) rate (30/06/2016) # Greater Berlin 12 1,072 370 1,442 84,250 98.0% Saxony 7 436 39 475 21,83

  12. Slide 12: Significant step up in EBITDA margin

    » Significant step up in EBITDA margin in EUR m 9M 2016 9M 2015 Development of cost ratio 11.6% Earnings from Residential Property Management 444.7 393.0 Earnings from Disposals 46.4 60.8 10.0% Earnings from Nursing and Assisted Living 13.7 12.0 Segment contribution margin 504.8 465.8 9M 2015 9M 201

  13. Slide 13: Operational improvements drive FFO growth

    » Operational improvements, acquisitions and lower interest expenses drive FFO growth in EUR m 9M 2016 9M 2015 FFO per share development in EUR EBITDA (adjusted) 451.4 402.2 1.03 Earnings from Disposals (46.4) (60.8) 0.92 At equity valuation 1.5 1.5 0.14 0.19 + 22% Interest expense/ income (78.6) (9

  14. Slide 14: Steady increase of EPRA NAV per share

    » Steady increase of EPRA NAV per share in EUR m 30/09/2016 31/12/2015 EPRA NAV per share (undiluted) in EUR Equity (before non-controlling interests) 7,062.5 6,653.5 25.10 23.01 + 9% Fair values of derivative financial 60.0 44.8 17.86 + 29% instruments Deferred taxes (net) 1,349.5 1,064.1 EPRA NAV

  15. Slide 15: Conservative long term capital structure with 1.6% interest costs

    » Conservative long term capital structure with 1.6% interest costs Rating A- / A3; stable outlook  Low leverage, long maturities and best in class rating LTV 41.7% ICR1) 5.7x  Flexible financing approach to optimize financing costs Ø maturity 8.5 years  No significant maturities until and includ

  16. Slide 16: Investment update & outlook

    » Investment update & outlook 16

  17. Slide 17: More than EUR 7bn value potential for Deutsche Wohnen

    » More than EUR 7bn value potential for Deutsche Wohnen with at least EUR 2.2bn value uplift expected for total year 2016 Value potential (EUR bn, incl. capex)1)  Transactional evidence in Berlin for average quality assets points towards: In-place rent multipliers (entire portfolio) 19.1x 23.5x 25.

  18. Slide 18: Berlin has huge catch up potential versus European metropolitan areas

    » Long-term Berlin has huge catch up potential compared to other German and European metropolitan areas Residential price per sqm (existing stock) Top City ranking in real estate survey 2017 8,000 8,500 Rank City Rents Capital Values 6000 5,000 1 Berlin 5000 4,100 4000 2 Hamburg 2,700 2,900 3000 2,6

  19. Slide 19: Investments in best micro locations as accelerator for rental and value growth

    » Investments in best micro locations within Core+ regions as accelerator for rental and value growth Quality1) 1. Rent potential 2. Value potential Targeted Mid term market Location Pre Post Pre Post Pre capex Targeted capex Units capex expectation cluster capex capex capex capex EUR/sqm EUR/sqm EU

  20. Slide 20: New construction pipeline – capitalizing on land bank

    » New construction pipeline – capitalizing on land bank New construction pipeline Total Construction Rent Market investment costs Market value Market rent Rent multiple value Location cluster Units (EUR m) (per sqm) (per sqm) (per sqm/month) (EUR m) on cost multiple New construction 1,800 380 2,500

  21. Slide 21: Bolt-on acquisitions: Residential and Nursing

    » Bolt-on acquisitions: Focus on selected value enhancing acquisitions but at lower pace compared to past years  No attractive acquisition opportunities in the listed segment  Acquisition of quality portfolios with strong anchor in Residential Core+ markets, however more challenging as expected de

  22. Slide 22: Executive summary: Key strategic priorities

    » Executive summary: Key strategic priorities to accelerate rental and value growth Focus Highlights 1  Capex program increased to EUR 1bn  Improve quality for top locations to for 30,000 units by 2021 Investments crystallize rent and value growth  Reversionary potential post capex existing stock

  23. Slide 23: NAV guidance increased for 2016

    » NAV guidance increased for 2016 Guidance 20161) 2015 9M 2016 Comments Old New  Based on transactional evidence at least EUR 2.2bn expected to be realized for 2016 (EUR 0.7bn already EPRA NAV per realized with H1 2016) 23.01 25.10 >26 ~30 share (undiluted)  Excluding changes in goodwill impairmen

  24. Slide 24: Q&A

    » Q&A deutsche-wohnen.com vr) a Deutsche Wohnen 24

  25. Slide 25: Appendix – nursing segment presentation

    » Appendix 1 – nursing segment presentation 25

  26. Slide 26: Overview of German nursing market

    » Overview of German nursing market Care dependent people by age groups Overview of market segments 50 46.2% 45 2.6m care dependent people 40 35 1.86m (71%) 0.76m (29%) 30 outpatient care inpatient care 25 21.0% 20 thereof 1.25m provided c.13,000 nursing 15 by relatives facilities 9.8% 10 4.1% 3.3%

  27. Slide 27: Key demographic trends in Germany

    » Key demographic trends in Germany Ageing population leads to increasing demand Increasing share of age groups 65+ and 80+ for nursing homes 5%  Nursing care market driven by (irreversible) 23% 15% demographic trends - increasing demand for social, medical and nursing services 2013  Main reasons

  28. Slide 28: Outlook for German nursing market

    » Outlook for German nursing market Estimated number of people Probability of need of care Forecast for inpatient care in need of care (m) by age group (%) (# of beds in m) 70 1,2 3.4 3.2 60 1,0 Probability of need of care (%) 2.9 2.6 50 2.4 0,8 2.1 40 0,6 30 0,4 20 10 0,2 0 0,0 1999 2001 2003 2005

  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 Schleswig-Holstein 16,357 Mecklenburg- 23,403 Mecklenburg- West Po

  30. Slide 30: Market structure – nursing home operators

    » Market structure – nursing home operators Nursing home operators split by type (# of beds)  Nursing home operator market is very fragmented  Top ten private operators only account for c. 13% of overall market (measured by number of beds) Non-profit operators  Non-profit and public operators man

  31. Slide 31: Market structure – nursing home properties

    » Market structure – nursing home properties Nursing homes yield spread significantly above other asset classes  Nursing home property market accounts for c. 1-3% of overall commercial real estate transaction 7,5 volume 6,5  Nursing home properties offer attractive yields at 5,5 low risk: 4,5  Fu

  32. Slide 32: Overview of regulatory environment in Germany (1/2)

    » Overview of regulatory environment in Germany (1/2) Standard daily cost breakdown of nursing homes  Germany is one of few countries which requires all citizens to have either public or private long-term 15% care insurance Nursing services costs  Care Funds (Pflegekassen) provide a cost cover for

  33. Slide 33: Overview of regulatory environment in Germany (2/2)

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

  34. Slide 34: Deutsche Wohnen nursing business at a glance

    » Deutsche Wohnen nursing business at a glance Legal structure of DW nursing business  Beginning of 2015, the operational business of Katharinenhof was transferred into a partnership Family office structure (partner)  Deutsche Wohnen has a 49% stake; fully 100% 49% consolidated 51%  51% partner i

  35. Slide 35: Portfolio details pro forma recent acquisition

    » Portfolio details pro forma recent acquisition Assets & Operations versus Assets only Distribution by operators Assets & Operations Pro-Seniore 4% 10% 8% Assets only - WALT <10 Katharinenhof (DW Group) 40% years 46% 35% Assets only - WALT 10- 42% Korian (Phoenix & Casa 15 years Reha) 15% Assets on

  36. Slide 36: Portfolio images (1/2)

    » Portfolio images (1/2) Uferpalais Uferpalais Im Schlossgarten Wolkenstein 36

  37. Slide 37: Portfolio images (2/2)

    » Portfolio images (2/2) Heinrich-Lassen Am Lunapark Wilsdruff Uferpalais Wilsdruff Wilsdruff 37

  38. Slide 38: Competitive strength and strategy

    » Competitive strength and strategy  Accelerate internal growth by further specialization of facilities on dependency needs (e.g. dementia) Significant internal  Enhancement of product offering (combination of outpatient care and day-care with existing growth potential nursing facilities)  Active

  39. Slide 39: Overview of Pegasus acquisition (1/2)

    » Overview of “Pegasus” acquisition (1/2)  28 nursing (c. 3,700 places) and  Facilities of high quality in good locations assisted living facilities (c. 400 Object of predominantly in West Germany places) with 180k sqm purchase  Only assets acquired, not the  Good market positioning from a price

  40. Slide 40: Overview of Pegasus acquisition (2/2)

    » Overview of “Pegasus” acquisition (2/2) Pro Seniore Residenz (Oberau, Bavaria) Pro Seniore Residenz (Kempten, Bavaria) Pro Seniore Residenz (Radolfzell, Baden-Württemberg) Sozialkonzept Cäcilienhof (Garbsen, Lower Saxony) 40

  41. Slide 41: Successful Pegasus acquisition will drive earnings growth further

    » Successful Pegasus acquisition will drive earnings growth further EBITDA contribution of nursing business (EUR m) FFO I contribution of nursing business (EUR m) ~26 ~ 43 ~23 ~36 ~17 ~13 13.7 10.4 Total Existing portfolio Existingacquisition Pegasus portfolio Pegasus Acqusition Pro-forma EBITDA Tot

  42. Slide 42: Appendix – general section

    » Appendix – general section 42

  43. Slide 43: Focused and increasing investments into the portfolio

    » Focused and increasing investments into the portfolio 9M 2016 9M 2015 EUR m EUR m Maintenance 64.4 58.9 (expensed through p&l) Modernization 83.5 55.6 (capitalized on balance sheet) Total 147.9 114.5 Total EUR/ sqm1) 20.09 16.77 Maintenance and capex will increase in the course of the year to EUR

  44. Slide 44: Bridge from adjusted EBITDA to profit

    » Bridge from adjusted EBITDA to profit in EUR m 9M 2016 9M 2015 in EUR m 9M 2016 9M 2015 EBITDA (adjusted) 451.4 402.2 Interest expenses (79.3) (94.9) Depreciation (4.6) (4.1) In % of rents ~15% ~20% At equity valuation 1.5 1.5 Non-cash interest expenses (9.9) (2.5) Interest income 0.7 0.6 Financia

  45. Slide 45: Summary balance sheet

    » Summary balance sheet Assets Equity and Liabilities in EUR m 30/09/2016 31/12/2015 in EUR m 30/09/2016 31/12/2015 Investment properties 13,481.7 11,859.1 Total equity 7,315.5 6,872.0 Other non-current assets 630.7 614.3 Financial liabilities 4,466.7 3,780.4 Deferred tax assets 346.4 325.5 Converti

  46. Slide 46: The Berlin portfolio at a glance

    » THE BERLIN-PORTFOLIO AT A GLANCE Reinickendorf Pankow # 9,365  5.99  1.7% # 9,205  6.47  1.7% Mitte Friedrichshain-Kreuzberg # 3,338  6.11  1.1% # 7,766  5.96  2.2% Lichtenberg # 8,718  6.04  1.4% Spandau # 13,689  5.87  1.7% Marzahn-Hellersdorf # 14,875  5.35  1.1% Charlottenburg-Wi

  47. Slide 47: 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

  48. Slide 48: Deutsche Wohnen AG contact details

    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 5419 © 2016 Deutsche Wohnen AG

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