Deutsche Wohnen Se · XETR:DWNI

Deutsche Wohnen — FY2017 Earnings Presentation

50 slides from Deutsche Wohnen's earnings presentation, Mar 23, 2018

  1. Slide 1: Full year results 2017

    Deutsche Wohnen SE » Full year results 2017 Conference Call, 23 March 2018 1

  2. Slide 2: Table of content

    » Table of content 1 Highlights 2017 2 Portfolio & valuation update 3 Financials 4 Guidance 5 Appendix 2

  3. Slide 3: Highlights FY 2017

    » Highlights FY 2017 Strong operating business  Record l-f-l rental growth of 4.5% for letting portfolio, for Berlin even 5.3% (overdelivery of guidance)  Adjusted EBITDA (excl. disposals) up c. 9% to EUR 574m  FFO I per share up 8% (undiluted) and 18% (diluted) with FFO I margin up almost 4pp Ca

  4. Slide 4: Strongest like-for-like rental growth in history

    » Strongest like-for-like rental growth in history 2) 2) Like-for-like Residential units In-place rent In-place rent Change Vacancy Vacancy Change number 31/12/2017 31/12/2016 y-o-y 31/12/2017 31/12/2016 y-o-y EUR/sqm EUR/sqm in % in % Strategic core and growth regions Core+ 131,258 6.49 6.20 4.8% 1

  5. Slide 5: Total value uplift of EUR 2.4bn, 15% capital growth on a l-f-l-basis

    » Total value uplift of EUR 2.4bn, 15% capital growth on a l-f-l-basis Components of valuation uplift1) (EUR bn) Like-for-like % of portfolio Key regions valuation (based on FV) uplift FY-2017 0.4 18.9 2.0 Core+ 92% 15.3% Greater Berlin 78% 16.8% 1.0 0.2 Rhine-Main 6% 7.1% 15.5 (0.3) Rhineland 2% 7.

  6. Slide 6: Positive outlook based on continued high reversionary potential

    » Positive outlook based on continued high reversionary potential Residential FV FV Multiple Multiple Multiple Reversionary Regions units 31/12/2017 31/12/2017 in-place rent re-letting rent re-letting rent Potential (#) (EUR m) (EUR/sqm) 31/12/2017 31/12/2017 31/12/2016 Core+ 140,445 17,425 2,000 25

  7. Slide 7: More than EUR 8bn value potential for residential portfolio

    » More than EUR 8bn value potential for residential portfolio Multiple Underlying Fair Value Fair Value Description rent (EUR m) (EUR/sqm) (EUR m) Current Portfolio 25 x 767 ≙ 18,864 EUR 1,886 • Fair Value of residential portfolio as of 31-Dec-2017 (31-Dec-2017) • Based on difference of achieved re-

  8. Slide 8: 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-  Average DW apartment size of only 60 sqm offers dominately driven by increase of prices for land plots competitive advantage in terms of affordabi

  9. Slide 9: Strong earnings and cash contributions from letting

    » Strong earnings and cash contributions from letting in EUR m FY-2017 FY-2016 Maintenance (EUR per sqm) Rental income 744.2 704.5 10.5 9.5 9.6 Non-recoverable expenses (9.3) (9.8) Rental loss (6.4) (6.4) Maintenance (104.7) (94.5) 2015 2016 2017 Others (11.0) (7.4) Earnings from residential propert

  10. Slide 10: Focused and increasing investments into the portfolio

    » Focused and increasing investments into the portfolio FY-2017 FY-2016 Modernization & Maintenance per sqm EUR / EUR / 16.51 19.98 24.92 33.37 ~ 45 EUR m EUR m sqm sqm Maintenance (expensed 104.7 10.52 94.5 9.63 through p&l) ~35 Modernization 22.85 (capitalized on 227.4 22.85 150.0 15.29 15.29 bala

  11. Slide 11: Disposal business reflects increase in house prices

    » Disposal business reflects increase in house prices Disposals Privatization Institutional sales Total with closing in FY-2017 FY-2016 FY-2017 FY-2016 FY-2017 FY-2016 No. of units 707 1,235 2,142 3,073 2,849 4,308 Proceeds (EUR m) 106.0 146.1 202.6 208.2 308.6 354.3 Book Value 81.5 105.0 169.6 184.

  12. Slide 12: Increasing EBITDA contribution from Nursing and Assisted Living

    » Increasing EBITDA contribution from Nursing and Assisted Living Operations (in EUR m) FY-2017 FY-2016 in EUR m FY-2017 FY-2016 Total income 93.4 70.1 Nursing 72.4 55.7 Total expenses (86.2) (63.3) Living 8.7 6.5 EBITDA operations 7.2 6.8 Other 12.3 7.9 EBITDA margin 7.7% 9.7% in EUR m FY-2017 FY-2

  13. Slide 13: Attractive acquisition in nursing segment signed

    » Attractive acquisition in nursing segment signed  7 nursing (685 places) facilities Object of  Only assets acquired, not the purchase operating business  Purchase price: EUR 64m Pricing & deal  5.7% gross yield structure  Asset deal Lease  EUR 3.7m p.a. revenues Margins  Expected EBITDA mar

  14. Slide 14: Continued improvement of EBITDA margin underscores operational efficiency

    » Continued improvement of EBITDA margin underscores operational efficiency in EUR m FY-2017 FY-2016 Development of cost ratio 11.8% Earnings from Residential Property Management 612.8 586.4 10.9% 10.5% Earnings from Disposals 50.3 54.3 Earnings from Nursing and Assisted Living 48.0 16.8 2015 2016 2

  15. Slide 15: FFO I margin increased by 400bps

    » FFO I margin increased by 400bps in EUR m FY-2017 FY-2016 FFO I per share development in EUR EBITDA (adjusted) 624.3 581.7 % +18% +8% change Earnings from Disposals (50.3) (54.3) 1.23 1.23 Long-term remuneration component 1.14 1.4 2.2 1.04 (share-based) At equity valuation 3.0 2.0 Interest expense

  16. Slide 16: Conservative long-term capital structure

    » Conservative long-term capital structure Rating A- / A3; stable outlook  Low leverage, long maturities and strong rating Ø maturity ~ 7.9 years  Flexible financing approach to optimize financing costs – unencumbered assets increased to > EUR 4.5bn % secured bank debt 66%  LTV at 34.5% as of YE

  17. Slide 17: Significant increase of EPRA NAV per share by 20%

    » Significant increase of EPRA NAV per share by 20% in EUR m 31/12/2017 31/12/2016 Equity (before non-controlling interests) 9,888.2 7,965.6 Fair Values of derivative financial 2.0 47.0 instruments Deferred taxes (net) 2,786.6 2,004.4 EPRA NAV (undiluted) 12,676.8 10,017.0 EPRA NAV per share (dilute

  18. Slide 18: 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 2013-2017: +24% +8% CAGR 2013-2017: +25% +20% +37% 0.80 +29% 35.74 +23% 0.74 +29% 29.68 +29% +23% 0.54 23.02 0.44 17.87 0.34 14.51 2013 2014 2015 2016 20

  19. Slide 19: Delivery on 2017 guidance and outlook for 2018

    » Delivery on 2017 guidance and outlook for 2018 FY-2017 FY-2018 FFO I ~425 432.3  Approximately EUR 470m (+9%) (EUR m) Guidance Reported  Approximately EUR 0.86 per share Dividend per share 0.80  Based on 65% pay-out ratio from FFO I and (EUR) 0.78 current shares outstanding Guidance Reported ~3

  20. Slide 20: Appendix

    » Appendix deutsche-wohnen.com ‘ ) a Deutsche Wohnen 20

  21. Slide 21: A. Residential letting business

    A. Residential letting business 21

  22. Slide 22: Deutsche Wohnen's residential portfolio is best-in-class

    » Deutsche Wohnen's residential portfolio is best-in-class Südwestkorso, Berlin Siemensstadt, Berlin Otto-Suhr-Siedlung, Berlin Oranienkiez, Berlin Hellersdorf, Berlin Carl-Legien-Siedlung, Berlin Hufeisensiedlung, Berlin Dresden 22

  23. Slide 23: Portfolio update 2017 – attractive reversionary potential

    » Portfolio update 2017 – attractive reversionary potential Strategic cluster Residential % of total In-place rent1) Re-letting rent Rent potential2) Vacancy units measured by Fair Value EUR/sqm/month EUR/sqm/month in % in % Strategic core and growth 159,331 99.7 6.41 8.16 27.1 2.0 regions Core+ 140

  24. Slide 24: Portfolio valuation changes by cluster

    » Portfolio valuation changes by cluster FV FV Multiple in-place FV FV Multiple Multiple market Regions 31/12/2016 31/12/2016 rent 31/12/2017 31/12/2017 in-place rent rent EUR m EUR/sqm 31/12/2016 EUR m EUR/sqm 31/12/2017 31/12/2017 Strategic Core and growth 15,280 1,603 21.7 18,799 1,897 24.7 19.0

  25. Slide 25: Portfolio structure – characteristics meeting strong demand

    » Portfolio structure – characteristics meeting strong demand Apartment size Ø 60 sqm Year of construction < 40 sqm, 30.8% >= 75 sqm, 11% 29.0% 18% 18.3% 40 to < 55 15.9% 65 to < 75 sqm, 30% sqm, 18% 5.7% 0.4% 55 to < 65 <= 1918 1919 - 1950 - 1970 - 1980 - >= 2000 sqm, 23% 1949 1969 1979 1999 Rental

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

    » Berlin – The place to be! Government High-tech Science • 6,500 technology Seat of parliament, firms Highest density of Innovation Tourism government and • 15,000 IT students researchers and 2nd best professional • Forecast 2020: academics in Germany performing European More than 12.9 million assoc

  27. Slide 27: The Berlin Portfolio at a glance

    » The Berlin Portfolio at a glance Reinickendorf Pankow # 9,410  6.44  1.8% # 9,778  6.98  2.5% Mitte Friedrichshain-Kreuzberg # 4,560  6.80  2.3% # 8,005  6.18  4.4% Lichtenberg # 8,700  6.43  0.6% Spandau # 13,773  6.32  2.0% Marzahn-Hellersdorf # 14,874  5.74  0.7% Charlottenburg-Wi

  28. Slide 28: 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 30x 27.1x 9.00 8.47 23.7x 25x 8.00 7.60 6.8x spread 7.02 31% rent 18.7x 6.92 potential 20x 7.00 6.54 16.1x 20.2x 14.4x 18.9x 17% rent 15x 6.00 potential 6.46 1.3x 15.7x

  29. Slide 29: Current level of rents and prices offer significant growth potential

    » Current level of rents and prices offer significant 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) 2,090 (re-letting rent) 8.46 +16% Dusseldorf +27% Berlin 2,548 9.83 Berlin Dusseldorf 2,647 10

  30. Slide 30: B. Disposal business

    B. Disposal business deutsche-wohnen.com ‘ ) a Deutsche Wohnen 30

  31. Slide 31: Disposals business remains opportunistic

    » Disposals business remains opportunistic • Development xxx of privatization business Development of institutional sales business 20,000 95% 2,400 44% 41% 39% 30% 20% 8% 13% 20% 2,086 92% 2,100 15,000 91% 91% 90% 14,811 1,800 10,000 12,669 90% 1,564 1,394 9,596 1,500 1,181 5,000 1,200 2,099 0 85% 9

  32. Slide 32: C. Nursing and Assisted Living business

    C. Nursing and Assisted Living business 32

  33. Slide 33: 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 Lunapar

  34. Slide 34: Nursing and Assisted Living segment

    » Nursing and Assisted Living segment Nursing identified as attractive driver for further external growth Assets including operations  Fragmented market with promising fundamental outlook offers Facilities Beds Occupancy room for consolidation Region Managed by owner1) # # rate  Significant invest

  35. Slide 35: Nursing and Assisted Living on the operational and asset side

    » Nursing and Assisted Living on the operational and asset side Assets & Operations / Katharinenhof Assets / Pegasus Total No of facilities 23 No of facilities 28 No of facilities 51 No of beds 2,556 No of beds 4,132 No of beds 6,688 EUR m FY-2017 FY-2016 EUR m FY-2017 FY-2016 EUR m FY-2017 FY-2016

  36. Slide 36: D. Investments

    D. Investments deutsche-wohnen.com ‘ ) a Deutsche Wohnen 36

  37. Slide 37: EUR 100m p.a. investments in the apartment itself

    » C. EUR 100m p.a. investments in the apartment itself Key characteristics of re-letting capex Refurbished apartments allow for >30% rent increase  Improving quality of the apartments, mainly by renovation of bathroom, floor renewal, kitchen  Create state of the art apartments  Main driver is flu

  38. Slide 38: Investment in the building and outdoor facilities

    » Investment in the building and outdoor facilities Key characteristics of capex programme Refurbishment provides significant quality upgrade  Comprehensive renovation to upgrade buildings towards quality of new construction  Capex stock currently 30,000 units in Core+ locations  Investments main

  39. Slide 39: Acquisition of high quality properties in 2017

    » Acquisition of high quality properties in 2017 6,000 residential units in Core+ locations  Total purchase price: EUR 980m / EUR 2,240 per sqm  Units predominantly in hot spot micro-locations with significant rent potential (30-50%) Berlin  Mainly popular age cluster “Altbau” – well demanded for

  40. Slide 40: 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 31/12/2017 ∆ At Acquisition 31/12/2017 ∆ # Centuria 5,200 Berlin 711 1,803 154% 4.65 5.67 22% 2013 Larry 6,500 Berli

  41. Slide 41: E. Financials

    E. Financials deutsche-wohnen.com ‘ ) a Deutsche Wohnen 41

  42. Slide 42: Profit & Loss statement

    » Profit & Loss statement in EUR m FY-2017 FY-2016 Earnings from Residential Property 612.8 586.4 Management Earnings from Disposals 50.3 54.3 Earnings from Nursing and Assisted 48.0 16.8 Living 2017: Thereof EUR (23.4m) provision for acquisition Corporate expenses (81.3) (73.7) related tax payments

  43. Slide 43: Bridge from adjusted EBITDA to profit

    » Bridge from adjusted EBITDA to profit in EUR m FY-2017 FY-2016 in EUR m FY-2017 FY-2016 EBITDA (adjusted) 624.3 581.7 Interest expenses (100.2) (106.2) Depreciation (7.4) (6.4) In % of rents ~13.5% ~15.1% At equity valuation 3.0 2.0 Non-cash interest expenses (18.7) (18.7) Interest income 0.7 1.3

  44. Slide 44: Operational and financial improvements drive margins

    » Operational and financial improvements drive margins Adj. EBITDA margin (w/o disposals) FFO I margin 77% Avg. cost of debt 75% 3.2% 2.5% 1.8% 1.6% 1.3% 72% 58% 54% 48% 68% 35% 66% 31% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017  Concentrated portfolio and successful integration of  Early a

  45. Slide 45: Summary balance sheet

    » Summary balance sheet Assets Equity and Liabilities in EUR m 31/12/2017 31/12/2016 in EUR m 31/12/2017 31/12/2016 Investment properties 19,628.4 16,005.1 Total equity 10,211.0 8,234.0 Other non-current assets 134.4 108.6 Financial liabilities 4,751.1 4,600.0 Derivatives 3.3 - Convertibles 1,669.6

  46. Slide 46: F. Corporate Governance

    F. Corporate Governance deutsche-wohnen.com ‘ ) a Deutsche Wohnen 46

  47. Slide 47: 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 (CEO) (COO) (CFO) More than 20 years in the firm Since 2007 at Deutsche Wohnen, Since 2013 at Deutsche Wohnen, since 2011 member of the sinc

  48. Slide 48: Executive Board compensation system – as of 1 January 2018

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

  49. Slide 49: 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

  50. Slide 50: Deutsche Wohnen SE contact details

    Deutsche Wohnen SE Mecklenburgische Straße 57 14197 Berlin Phone: +49 30 897 86 5413 Fax: +49 30 897 86 5419 © 2018 Deutsche Wohnen SE

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