Deutsche Wohnen Se · XETR:DWNI

Deutsche Wohnen — H1 2018 Earnings Presentation

54 slides from Deutsche Wohnen's earnings presentation, Aug 14, 2018

  1. Slide 1: H1 2018 results

    Deutsche Wohnen SE » H1 2018 results Conference Call, 14 August 2018 1

  2. Slide 2: Agenda

    Highlights Market and Portfolio Financials Appendix » Agenda 1 Highlights 2 Market and Portfolio 3 Financials 4 Appendix 2

  3. Slide 3: Highlights H1 2018

    Highlights Market and Portfolio Financials Appendix » Highlights H1 2018 Strong operational business  L-f-l growth strong at 4.5% for the total portfolio, 5.3% in Berlin  Continued high rent potential of >30% across portfolio  Good growth in core business letting, leading to improved NOI margin o

  4. Slide 4: Concentrated portfolio with high reversionary potential

    Highlights Market and Portfolio Financials Appendix » Concentrated portfolio with high reversionary potential Residential % of total In-place rent1) New-letting rent Rent potential2) Vacancy Strategic cluster units (measured by 30/06/2018 30/06/2018 30/06/2018 30/06/2018 (#) fair value) (EUR/sqm/mon

  5. Slide 5: Strong like-for-like rental growth

    Highlights Market and Portfolio Financials Appendix » Strong like-for-like rental growth 1) 1) Residential In-place rent In-place rent Vacancy Vacancy Like-for-like Change Change units 30/06/2018 30/06/2017 30/06/2018 30/06/2017 30/06/2018 (y-o-y) (y-o-y) (#) (EUR/sqm) (EUR/sqm) (in %) (in %) Strate

  6. Slide 6: Value uplift of EUR 680m mainly reflects widening of rent potential

    Highlights Market and Portfolio Financials Appendix » Value uplift of EUR 680m mainly reflects widening of rent potential Residential FV FV Multiple Multiple Multiple Fair Value Regions units 30/06/2018 30/06/2018 in-place rent re-letting rent in-place rent 31/12/2017 (#) (EUR m) (EUR/sqm) 30/06/201

  7. Slide 7: L-f-l valuation uplift of almost 5% in Berlin

    Highlights Market and Portfolio Financials Appendix » L-f-l valuation uplift of almost 5% in Berlin Components of valuation uplift1) (EUR bn) % of Like-for-like portfolio valuation Key regions (based on uplift FV) H1-2018 0.1 Core+ 93% 4.3% Greater Berlin 78% 4.6% 0.6 Rhine-Main 6% 3.4% Rhineland 2%

  8. Slide 8: Investments into the portfolio accelerate

    Highlights Market and Portfolio Financials Appendix » Investments into the portfolio accelerate H1-2018 H1-2017 Modernization & Maintenance per sqm (annualized) EUR / EUR / up to EUR m EUR m 25.27 33.37 28.66 sqm1) sqm1) 45 Maintenance (expensed 44.0 8.76 49.7 10.05 up to through p&l) 35 22.85 15.21

  9. Slide 9: Strong letting business

    Highlights Market and Portfolio Financials Appendix » Strong letting business in EUR m H1-2018 H1-2017 Income from rents (rental income) 387.3 366.5 Income relating to utility/ ancillary costs 162.3 180.7 Income from rents up 5.7% mainly on the back of rent increases and smaller acquisitions Income

  10. Slide 10: Disposal business delivers attractive margins

    Highlights Market and Portfolio Financials Appendix » Disposal business delivers attractive margins Disposals Privatization Institutional sales Total with closing in H1-2018 H1-2017 H1-2018 H1-2017 H1-2018 H1-2017 No. of units 179 305 322 1,502 501 1,807 Proceeds (EUR m) 34.4 40.9 26.2 110.2 60.6 15

  11. Slide 11: Stable EBITDA contribution from Nursing and Assisted Living

    Highlights Market and Portfolio Financials Appendix » Stable EBITDA contribution from Nursing and Assisted Living Operations (in EUR m) H1-2018 H1-2017 in EUR m H1-2018 H1-2017 Total income 47.9 45.9 Nursing & Assisted Living 41.7 39.8 Total expenses (44.9) (41.7) Other 6.2 6.1 EBITDA operations 3.0

  12. Slide 12: Attractive acquisitions of facilities in nursing segment signed

    Highlights Market and Portfolio Financials Appendix » Attractive acquisitions of 30 facilities in nursing segment signed  Assets and operations:  30 nursing facilities with ~4,700 beds Object of  Almost 90% in metropolitan areas  13 facilities with ~2,700 beds in Hamburg purchase  Minority part

  13. Slide 13: Overview of signed nursing facilities

    Highlights Market and Portfolio Financials Appendix » Overview of signed nursing facilities P&W, Moosberg, Hamburg P&W, Alsterberg, Hamburg P&W, Farmsen, Hamburg P&W, Lutherpark, Hamburg Casa Reha Niddaauen, Frankfurt a. M. Kursana Villa, Frankfurt a. M. Kursana Villa, Königstein Kursana Villa, Wies

  14. Slide 14: Robust growth of EBITDA margin to 82%

    Highlights Market and Portfolio Financials Appendix » Robust growth of EBITDA margin to 82% in EUR m H1-2018 H1-2017 Development of cost ratio Earnings from Residential Property Management 331.3 306.3 10.9% 10.6% Earnings from Disposals 9.9% 9.0 20.5 Earnings from Nursing and Assisted Living 23.8 24

  15. Slide 15: FFO I per share growth of 11% yoy to EUR 0.70

    Highlights Market and Portfolio Financials Appendix » FFO I per share growth of 11% yoy to EUR 0.70 in EUR m H1-2018 H1-2017 FFO I margin development EBITDA (adjusted) 326.7 311.2 63.5% 65.5% 69.8% 58.1% 60.2% 64.2% Earnings from Disposals (9.0) (20.5) Long-term remuneration component 0.0 1.2 (share

  16. Slide 16: EPRA NAV per share increased by almost 5% in H1-2018

    Highlights Market and Portfolio Financials Appendix » EPRA NAV per share increased by almost 5% in H1-2018 in EUR m 30/06/2018 31/12/2017 EPRA NAV per share (undiluted) in EUR 35.74 +5% 37.42 Equity (before non-controlling interests) 10,244.3 9,888.2 29.68 31.42 +14% +6% Fair values of derivative fi

  17. Slide 17: Conservative long-term capital structure

    Highlights Market and Portfolio Financials Appendix » Conservative long-term capital structure Rating A- / A3; stable outlook  Low leverage, long maturities and strong rating Ø maturity ~ 7.7 years  Flexible financing approach to optimize financing costs % secured bank debt 67%  LTV at 33.8% as o

  18. Slide 18: Appendix

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

  19. Slide 19: Nursing & Assisted Living – Sector update

    » Nursing & Assisted Living – Sector update

  20. Slide 20: Why we target to increase our investment in nursing market

    Highlights Market and Portfolio Financials Appendix » Why we target to increase our investment in nursing market Increasing demand for nursing Well funded long-term care insurance Strong Robust cash demographic trends flows Fragmented market with c. 20 years of experience in need for consolidation A

  21. Slide 21: Nursing identified as attractive driver for further external growth

    Highlights Market and Portfolio Financials Appendix » Nursing identified as attractive driver for further external growth Facilities Beds  Fragmented market with promising fundamental outlook offers room Operator # # for consolidation  Significant investments needed to absorb required capacity bui

  22. Slide 22: Solid funding base supported by strong demographic trends

    Highlights Market and Portfolio Financials Appendix » Solid funding base supported by strong demographic trends Healthcare expenditure increasing in Germany Care dependent people by age groups With >11% of GDP Germany is among top healthcare spenders in Europe 66.1% 344 313 277 39.7% 195 21.1% 9.9%

  23. Slide 23: Demographic trends in Germany underpin rising demand

    Highlights Market and Portfolio Financials Appendix » Demographic trends in Germany underpin rising demand Ageing population leads to increasing demand Increasing share of age groups 65+ and 80+ for nursing homes 6% 23%  Nursing care market driven by (irreversible) 17% demographic trends - increasi

  24. Slide 24: Forecast - required additional nursing home beds by federal state

    Highlights Market and Portfolio Financials Appendix » 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-Hols

  25. Slide 25: Highly fragmented market structure for nursing home operators

    Highlights Market and Portfolio Financials Appendix » Highly fragmented market structure for nursing home operators Nursing home operators split by type (# of beds)  Nursing home operator market is very fragmented 5%  Top ten private operators only c. 12% market share, Non-profit operators expecte

  26. Slide 26: Transaction market for nursing home properties

    Highlights Market and Portfolio Financials Appendix » Transaction market for nursing home properties Nursing homes yield spread significantly above other asset classes % 8.5  Nursing home property market accounts for c. 1.8% of 7.5 overall commercial real estate transaction volume in 6.5 2017 5.5 

  27. Slide 27: Overview of elderly care market in Germany

    Highlights Market and Portfolio Financials Appendix » Overview of elderly care market in Germany Description Payment regulation  Reimbursement level depending on extend of care  Covers all levels of inpatient care required (5 degrees available) Nursing  Focus on high care degrees  Long-term care

  28. Slide 28: Overview of regulatory environment for nursing homes (1/2)

    Highlights Market and Portfolio Financials Appendix » 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 s

  29. Slide 29: Overview of regulatory environment for nursing homes (2/2)

    Highlights Market and Portfolio Financials Appendix » 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 either public or private long-term care 25%

  30. Slide 30: Best in class Nursing and Assisted Living portfolio

    Highlights Market and Portfolio Financials Appendix » 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

  31. Slide 31: Sustainability at Deutsche Wohnen

    » Sustainability at Deutsche Wohnen

  32. Slide 32: Strategic sustainability targets (1/2)

    Highlights Market and Portfolio Financials Appendix » Strategic sustainability targets (1/2) Strategic targets Examples of operationalized targets  Establish sustainability committee  Strategic management of sustainability activities  Integration of long term sustainability targets in management

  33. Slide 33: Strategic sustainability targets (2/2)

    Highlights Market and Portfolio Financials Appendix » Strategic sustainability targets (2/2) Strategic targets Examples of operationalized targets  Replace outdated heat generation plants with modern systems  Save 20,000 t of CO2 emissions from 2022  Reduce the portfolio of oil-fuelled properties

  34. Slide 34: Focus on energy efficiency

    Highlights Market and Portfolio Financials Appendix » Focus on energy efficiency Energy intensity of the residential units (in kWh/sqm) ~ 75% ~ 25% 26% 22% 21% German average 17% (160 kWh/ sqm) 8% 6% >75 (A/B) 75-100 (C) 100-130 (D) 130-160 ( E) 160-200 (F) >200 (G/H)  Given our continued attention

  35. Slide 35: Portfolio and financials

    ‘ ) a Deutsche Wohnen » Portfolio and financials deutsche-wohnen.com

  36. Slide 36: Current level of rents and prices offer significant growth potential

    Highlights Market and Portfolio Financials Appendix » 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) 2,186 (re-letting rent) 8.97 +49% Dusseldo

  37. Slide 37: Re-letting rents have outpaced in-place rents

    Highlights Market and Portfolio Financials Appendix » Re-letting rents have outpaced in-place rents DW rent development in Berlin DW development of multiples in Berlin EUR / sqm 8.97 30.0x 27.1x 27.8x 9.00 8.47 23.7x 25.0x 7.60 7.6x spread 8.00 7.02 36% rent 18.7x 6.92 potential 20.0x 7.00 16.1x 20.

  38. Slide 38: Significant scope for rent potential to widen further in Berlin

    Highlights Market and Portfolio Financials Appendix » 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 la

  39. Slide 39: Attractive spread between in-place and re-letting rent multiples

    Highlights Market and Portfolio Financials Appendix » Attractive spread between in-place and re-letting rent multiples offer further potential for NAV growth Residential FV FV Multiple Multiple Multiple Fair Value Regions units 30/06/2018 30/06/2018 in-place rent re-letting rent in-place rent 31/12/

  40. Slide 40: Strong like-for-like development as of 30 June 2018

    Highlights Market and Portfolio Financials Appendix » Strong like-for-like development as of 30 June 2018 2) 2) Like-for-like Residential In-place rent In-place rent Change Vacancy Vacancy Change 30/06/2017 units 30/06/2018 30/06/2018 (y-o-y) 30/06/2018 30/06/2017 (y-o-y) (#) (EUR/sqm) (EUR/sqm) (in

  41. Slide 41: Bridge from adjusted EBITDA to profit

    Highlights Market and Portfolio Financials Appendix » Bridge from adjusted EBITDA to profit in EUR m H1-2018 H1-2017 in EUR m H1-2018 H1-2017 EBITDA (adjusted) 326.7 311.2 Interest expenses (47.8) (49.8) In % of gross rents ~12% ~14% Depreciation (4.0) (3.5) Non-cash interest expenses (6.6) (11.9) A

  42. Slide 42: Summary balance sheet

    Highlights Market and Portfolio Financials Appendix » Summary balance sheet Assets Equity and Liabilities in EUR m 30/06/2018 31/12/2017 in EUR m 30/06/2018 31/12/2017 Investment properties 20,719.8 19,628.4 Total equity 10,582.3 10,211.0 Other non-current assets 181.3 134.4 Financial liabilities 4,

  43. Slide 43: Disposals business remains opportunistic

    Highlights Market and Portfolio Financials Appendix » 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% 1,5

  44. Slide 44: Acquisition track record since 2013

    Highlights Market and Portfolio Financials Appendix » 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

  45. Slide 45: Operational and financial improvements drive margins

    Highlights Market and Portfolio Financials Appendix » 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  Concentrat

  46. Slide 46: Strong generation of total shareholder return

    Highlights Market and Portfolio Financials Appendix » 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% 0.5

  47. Slide 47: Guidance unchanged in H1-2018

    Highlights Market and Portfolio Financials Appendix » Guidance unchanged in H1-2018 FY-2017 H1-2018 Reported Guidance in H1-2018 confirmed FFO I ~ 470 432.3 • Operational performance (EUR m) Reported Guidance Dividend per • Based on 65% pay-out ratio from share 0.80 ~ 0.86 FFO I and current shares (

  48. Slide 48: Deutsche Wohnen's residential portfolio is best-in-class

    Highlights Market and Portfolio Financials Appendix » 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 48

  49. Slide 49: Portfolio structure – characteristics meeting strong demand

    Highlights Market and Portfolio Financials Appendix » 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

  50. Slide 50: The Berlin portfolio at a glance

    Highlights Market and Portfolio Financials Appendix » The Berlin portfolio at a glance Reinickendorf Pankow # 9,402  6.58  1.3% # 9,813  7.15  2.6% Mitte Friedrichshain-Kreuzberg # 4,558  6.95  2.4% # 8,005  6.28  5.2% Lichtenberg # 8,700  6.51  1.1% Spandau # 13,768  6.45  1.4% Marzahn-

  51. Slide 51: Berlin – The place to be!

    Highlights Market and Portfolio Financials Appendix » 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 Germ

  52. Slide 52: Executive Board compensation system – as of 1 January 2018

    Highlights Market and Portfolio Financials Appendix » 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 p

  53. Slide 53: 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

  54. Slide 54: 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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